As the apparel industry evolves post-recession, the industry fundamentals are changing. The Amazon Effect, rising labor costs, growing complexity, and slowing growth make this a very different market than 2010. In Table 1 we show the contrasts in 2010-2016 across the value chain. Note that average growth for apparel retailers for the period of 2010-2016 was 7%, but when 2016 is compared to 2010, growth is down 1%. Margin and inventory performance are in decline and there is a slight improvement in employee productivity. The same trend is true for apparel manufacturers. As a result, there is a greater need for manufacturing automation, supply chain visibility, warehouse redesign/automation, and improving transportation costs. Supply Chain maturity in most apparel companies lags the industry. As a result, investment in supply chain technologies offers promise. In the peer group, Carter's is the industry leader making the Supply Chains to Admire list for 2016. For more insight into Carter's story, reference their video from the 2017 Supply Chain Insights Global Summit.
Table 1. Value Chain Snapshot
In Figures 1 and 2 we share the orbit charts of both the apparel manufacturer and the apparel retailer. The tables give perspective for the peer group and the relative performance.
Figure 1. Year-Over-Year Shifts for the Apparel Manufacturer at the Intersection of Inventory Turns and Operating Margin
To understand an industry, in the analysis there has be a careful selection of the peer group. In Table 2 we share the peer group and relative performance for a group of apparel manufacturers. A major issue for apparel manufacturers is the rise in complexity, with slowing growth rates, making the need for greater agility in the supply chain. Note that the growth rates for manufacturers were higher than those of the retailers.
Table 2. Apparel Peer Group Performance
In Figure 2 and Table 3, we share the trends of the apparel retailer. With a huge hangover from the Amazon Effect, there is a precipitous slide in performance.
Figure 2. Orbit Chart for Apparel Retailers for the Period of 2010-2016
Table 2. Industry Peer Group Performance for the Period of 2010-2016