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July 18 2016 JULY 18 2016 In advance of Fung Global Retail & Technology’s “Breakfast with The Disruptors” event, held at the PROJECT New York menswear conference on July 18, Fung Global Retail & Technology and First Insight partnered to analyze the results of customer surveys on men’s apparel and accessories. The surveys were conducted between 2013 and June 2016. First Insight was founded in 2007 and is a cloud-based technology company that tests consumers’ reactions to new products on the market across many categories. The company uses predictive analysis to determine which trends, price points and design attributes resonate with consumers. For this report, Fung Global Retail & Technology and First Insight analyzed customer surveys that were conducted between 2013 and 2016 on nine categories, 19 brands and more than 17,000 items in the men’s apparel and accessories market at major retailers and wholesalers, and found that: • Men’s underwear was the only category of the nine that had an increase in average price; from 2013 through June 2016, the average price in the category grew by 34%. According to Euromonitor International, overall sales of men’s underwear in the US grew by 9% from 2013 to 2015, and new brands are successfully entering the category by accommodating customer preferences and customizing underwear in terms of performance, comfort, fit and style. • In eight out of the nine menswear categories analyzed, prices fell; the average decline was 27.8% over the period. Accessories, sweaters and swimwear experienced the most dramatic declines, with prices falling between 30% and 48%, on average. These decreases are consistent with what we have seen in retail overall— continued downward pricing pressure due to fast fashion, value shopping, off-price offerings, cheaper labor and more efficient manufacturing processes. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY 1 DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. JULY 18 2016 • Between 2013 and June 2016, the number of accessories items that First Insight was requested to test more than doubled, reflecting the growth in the men’s accessories market: Euromonitor estimates that category sales grew by 3% in 2015, to $15.3 billion. • Men are beginning to experiment more with accessories, and the category’s e-commerce sales are growing, partially because shoppers do not usually need to try on accessories—they can easily purchase them online without fearing they will not fit. Accessories are easy add-on purchases, too. Men’s Underwear Prices Have Increased First Insight’s data reveal that, over the past three years, underwear is the only men’s apparel category that showed a significant increase in average price, up 34%. According to Euromonitor, from 2013 through 2015, the men’s US underwear market grew by 9%, from $4,806 million to $5,226 million—whereas the total apparel industry saw only a 5% increase during the period. What happened to the men’s undergarment industry that led to this price growth? The design revolution started with Calvin Klein in the 1980s, and John Varvatos furthered it with his famous boxer brief in 1992. Since then, an increasing number of brands have entered the category, innovating in the areas of comfort, performance technology and style/luxury: • Comfort: Tommy John was founded in 2012 and its tagline is “Uncomfortable underwear is the problem. Tommy John is the solution.” The company surveyed customers and found that 100% of the men surveyed admitted to making embarrassing adjustments to their underwear at least once throughout the course of the day. In response, Tommy John created products using comfortable, proprietary fabrics that provide innovative fit and functionality to eliminate the need for adjustments. • Performance technology: Underwear brand Naked makes seam- free underwear from X-Static, silver-infused fabric that the company says “doesn’t stink.” Founder Joel Primus was inspired to create the brand when he was shooting a documentary in South America. He ran out of underwear, and he purchased a pair from a street vendor and discovered the softness of Pima cotton. • Style/luxury: 2(X)IST is a performance men’s underwear brand targeting self-purchasing millennials; its products feature bold colors and patterns. 2(X)IST hosts an annual fashion show to promote new product offerings and uses social media to connect with its target customer. Another factor that has influenced category growth is that millennials and older men have started shopping for themselves more often in recent years. Men’s perception of fashion has changed, and men are making more of their own apparel purchases in the US. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY 2 DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. JULY 18 2016 Prices in Other Men’s Categories Have Fallen From 2013 through early 2016, eight out of the nine menswear categories First Insight analyzed showed a decrease in the overall average test price; the average decrease was 27.8%. The graph below shows the average test price for the period. Figure 1. Average Price of Tested Items (USD) $60 $56 $54 $50 $47 $39 $40 $38 $37 $30 $20 $10 $0 2011 2012 2013 2014 2015 2016 Source: First Insight Men’s accessories experienced the steepest price declines during the period, falling by 52.4%, followed by sweaters (down 44.1%), swimwear (down 39.6%) and woven tops (down 34.9%). Knit tops, shorts, and pants also declined, though to a lesser extent, falling by 39.7%, 39.2%, and 14.3% respectively. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY 3 DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. JULY 18 2016 The only category whose average price increased over the period was underwear. Fast fashion, a search for value, off-price brands, outlets and consignment are all driving consumer prices down and changing the retail landscape. Additionally, offshore manufacturing and more efficient apparel- manufacturing techniques are contributing to lower prices. Today’s consumers are more price conscious and selective about paying full price for items. However, according to Barclays, even though retail prices were lower overall last year, menswear sales grew by 24%, whereas womenswear sales grew by only about 5%. This may suggest that consumers were making higher-volume purchases. First Insight found that knit tops, outerwear, shorts, sweaters, underwear and woven tops are all trending up in terms of consumers’ willingness to pay close to full price for them. Consumers are much less willing to pay full price for accessories, pants and swimwear, and often will wait for a sale before purchasing those categories. Men’s Accessories MarKet Is Growing First Insight reported that the number of accessories items—including belts, hats, scarves, sleepwear, slippers, socks and ties—that clients request it test has more than doubled in the past three years. The graph below shows accessories’ share of all items First Insight has tested since 2011; the company assists its client brands in determining how customers will respond to their individual products. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY 4 DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. JULY 18 2016 Figure 2. Share of Accessories Items Tested by First Insight as Percent of Total Items Tested 14% 12% 12% 11% 10% 8% 6% 4% 4% 2% 2% 1% 0% 0% 2011 2012 2013 2014 2015 2016 Source: First Insight OUTLOOK The men’s accessories category is experiencing growth and facing opportunities as more men begin to experiment with fashion. Athleisurewear has positively influenced the trend, and sales of gloves and scarves increased by 5% in 2015, while sales of hats/caps grew by 2%. According to Euromonitor, the men’s apparel and accessories market is expected to grow at a CAGR of 1% (at constant 2015 prices) through 2020. E-commerce is a growing, promising channel for accessories retailers because consumers can purchase many items in the category without having to worry about whether they will fit. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY 5 DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. JULY 18 2016 Deborah Weinswig, CPA Managing Director Fung Global Retail & Technology New York: 917.655.6790 Hong Kong: 852.6119.1779 China: 86.186.1420.3016 deborahweinswig@fung1937.com Erin Schmidt Research Associate HONG KONG: 10th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: 852 2300 2470 NEW YORK: 1359 Broadway, 9th Floor New York, NY 10018 Tel: 646 839 7017 LONDON: 242–246 Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0)20 7616 8988 FBICGROUP.COM DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY 6 DEBORAHWEINSWIG@FUNG1937.COM US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. .
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