IA's

Fashion Promotions Index

Nov '22

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At Impact Analytics, we track publicly available data on an ongoing, bi-weekly basis to analyze promotions offered by leading retailers and brands in the apparel and footwear divisions. This holiday season, and like other years during the pandemic, companies are now met with a new challenge – inflation.  This pressure has led consumers to prioritize the purchase of essentials and reduce their discretionary spending. According to the latest NPD report released in July 2022, apparel and footwear sales declined as much or faster in the second quarter than in the first quarter. In such scenarios where consumers have already curtailed their discretionary spending based on their income levels, promotions have become an important lever to drive store and web traffic.

Apparel prices have been on the rise due to a significant increase in input costs. The latest Consumer Price Index data shows that unadjusted prices have increased 5.5% year over year. However, with retailers saddled with very high inventory levels, up nearly 30-40% year over year, destocking will be a priority to avoid obsolescence. We expect the intensity and depth of promotions to remain elevated in the coming days, perhaps even at the expense of margins.

IA’s Fashion Promotions Index measures two metrics – ‘depth of promotion’ and ‘breadth of promotion’. While promotion depth is measured as the average promotion for all products in a given category; promotion breadth is the proportion of products for which promotion is offered under a given category. It analyzes the trends in the promotion breadth and depth across departments, categories, and price points.

Based on their selling price, products are grouped into 4 quartiles, Q1 through Q4, with Q1 being the group with the least expensive products and Q4 being the group with the most expensive products.

Footwear

Promo depth dipped by ~10% in early November after an increase across categories during September and October. Promotion depth for sandals and hiking shoes has surpassed July levels (up ~10% and 5% respectively). It has dipped sharply for boots (down ~30% from the October highs). The depth of promotion across price points increased during early October. It has been stable across menswear and womenswear, up 6% and 7.5% respectively.

After a sharp dip in late October, promo breadth increased across categories during early November. The average promotion breadth peaked during mid-July, coinciding with the Amazon Prime Day event, followed by a drop of nearly 50% by the end of August. As retailers look at the extended holiday season to reduce their inventory, it has more than doubled from August levels for all categories. Promo breadth has increased across price points with Q3 and Q4 at 1.25x and 2.5x July levels. After a steady decrease during July and August, men’s and women’s wear have seen promo breadth almost doubling during September and early October. However, compared to men’s wear which is down 11% over July levels, promo breadth for women’s wear is up 60% as of November.

Apparel - Athleisure

Depth of promotions for Athleisure is down ~8% compared to July. While promotion depth for joggers and sweatpants has remained stable, it has decreased by 18% and 14% for hoodies and sweatshirts, and t-shirts respectively. For shorts, it increased by 17%. While promotion depth decreased by 30% for the highest priced products (Q4), it increased by ~3% for the lowest priced items (Q1). It has been stable across the months for women’s and men’s apparel.

After a huge upswing in September, when the breadth of promotions nearly doubled compared to August, the overall breadth of promotions remained elevated in early October. After a brief dip, it has again risen and is up more than 17% as compared to early July levels. While it increased by ~80% for the shorts category, it has increased between 10% to 15% for joggers and t-shirts. The breadth of promotion for highest priced products (Q3, Q4) saw a significant increase in November and surpassed Prime Day (July) levels (up 35%). It has also recovered for the lowest priced products, albeit at a slower pace (up 4%).

Apparel - Regular wear

The extent of promotion depth varies across departments. After increasing consistently throughout October, promo depth decreased by ~10% in early November. While the depth of promotion for outerwear has been above early July levels, it remains ~15% lower in other departments. For bottom wear, after a steady decline through mid-September, it has recovered by ~33%, driven by a ~40% increase for jeans and a 13% increase for shorts. Depth of promotion for top wear, which had dropped by 23% in early August due to a 37% decline in shirts, has recovered and is now down only 12% (as of early October). Socks saw a 63% increase in promotion depth in mid-July which declined in August. It has again started inching towards its mid-July peak. Promotion depth, which was down ~10% in mid-September, has recovered to 95% to 99% of early July levels for high-priced products (Q3, Q4). For Q1 and Q2 as well,  it has recovered to 85%-90% of early July levels from ~73% level seen in mid-September.

Promo breadth continued to remain stable and elevated in early November. In early July, promotion breadth fell 53% for top wear, due to a 60% decline in the shirt category and a 50% decline in the t-shirt and polo shirt categories. It is now back up to 94% of July levels. The Outerwear category recovered significantly in September after falling nearly 40% in August and continues to remain above July levels. Loungewear had briefly dropped in late August but has staged a smart recovery, remaining at nearly 2.2 times its July level during October and November. While the breadth of promotion for menswear remained stable over the months (up 6% over early July levels), womenswear which had recovered from the lows of August has again started trending lower (down 15% over July levels)

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