Table of contents
The European fashion brands market comprises businesses involved in the design, production, marketing and sale of fashion items, both directly (D2C) and indirectly (through third-party retailers) to end-consumers. Identified brands mostly sell both footwear and apparel, although we also identified a group of pure-play footwear brands. Accordingly, we segmented the European market of general fashion brands in line with players’ price positioning: (i) mass market, (ii) premium and (iii) luxury, while appending product-focused (iv) footwear segment.
The European landscape has an overall fragmented nature, with the market for luxury fashion being an exception. Specifically, the luxury sector is dominated by multinational conglomerates (e.g. Kering, LVMH), even despite the considerable presence of smaller independent brands. This is illustrated by the fact that the top-10 luxury brands account for >50% of global market sales. Across all identified verticals, synergistic benefits from e.g. centralised warehousing and administrative capabilities as well as a stark competitive landscape are expected to further drive consolidation.
Sponsors-led interest has been moderate, with >40% of identified European assets being backed by financial sponsors (April 2023). The main detractors for investors are the industry’s seasonality and cyclicality paired with the transactional nature of sales. On the upside, bottom-line margin improvements on the back of D2C sales, opportunities stemming from the usage of data analytics to predict consumer behaviour and stable long-term underlying demand for clothing are the main factors persuading sponsors to invest in fashion brands.
ESG topics mainly concern environmental and social matters. The fashion sector is one of the biggest emitters of greenhouse gases in the world with fast-fashion models being the norm (except for luxury brands), entailing overproduction, extended supply chains and low durability. In order to decrease their carbon footprint, brands need to lower product volume, extend their products’ lifecycle, improve sourcing processes and introduce second-hand offerings. From a social perspective, working conditions and employee safety in subcontractors’ facilities as well as fair buying practices are top of executives’ minds
According to Statista (October 2022), the European apparel market will generate ~$484.2bn revenue in 2023 and is projected to grow to ~$530.1bn by 2027, exhibiting a CAGR of ~2.3%
The European footwear market is anticipated to account for ~$87.2bn in sales in 2023, with the expectation to reach ~$99.9bn revenue in 2028 (~2.8% CAGR; Statista, March 2023)
Bain & Company (January 2023) valued the global personal luxury goods industry at ~€353bn in 2022, forecasting it to reach ~€540-580bn by 2030 (~5.5-6.4% CAGR)
Rising e-commerce adoption in the global fashion industry, with penetration rates expected to grow from ~47% in 2020 to ~60% by 2024, primarily driven by increased smartphone usage. Consequently, brands can boost their direct-to-consumer propositions and thereby remove margin-consuming middlemen from the value chain (Common Thread, March 2022)
Growth opportunities in emerging market segments on the back of stable underlying demand for clothing and footwear. Whereas the share of European household spending on clothing is set to normalise following an all-time low during the pandemic, loungewear and “homeware” sales will remain above pre-COVID-19 levels (CBI, June 2021)
Identified discount and luxury brands are positioned to benefit from further demand polarisation. Discount brands can capitalise on cost-conscious consumers shifting to value-for-money retail, while luxury players enjoy resilient appetite for their higher-priced discretionary fashion items (McKinsey & Company, November 2021; Kroll, September 2022)
Rising importance of implementing sustainability initiatives, driven by both regulatory and social pressure (Deutsche Welle, March 2022; Bain & Company, October 2022), may curb sales and cap profit margins (interviews by Gain.pro). Specifically, lower product volumes and/or enhanced second-hand/rental offerings would effectively lower sales, whereas higher logistics and shipping costs may jeopardise healthy bottom-lines (interviews by Gain.pro)
Industry-wide shift from mass marketing to more individualised marketing concepts through social media. With the most influential advertisers typically partnering up with renowned brands, identified small- to mid-market players face limited upside from this shift given their capped marketing reach (interviews by Gain.pro)
Increasing prevalence of sophisticated counterfeits (+1.8% EU import 2013–2016), with total trade in fakes representing ~25% of the global luxury goods market (OECD, March 2019; Harvard Business Review, May 2019). The nearly indistinguishable visual attributes and more affordable prices of counterfeits challenge the value-add of luxury brands’ authenticity
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