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Fashion, luxury and lifestyle news aggregator – July 2022

Posted: 25/07/2022

Pressure on weekly food shop drives supermarkets to focus on value ranges

In May 2022, inflation in the UK reached 9.1%, a level which has not been seen for over 40 years. Prices of essential everyday items including pasta, bread and crisps are among the worst affected, and the average household’s annual spend on groceries is expected to rise by almost £400. In the context of wider pressures on the cost of living, particularly energy and fuel prices, consumers are moving away from brand name ranges and increasingly choosing more affordable own brand and value ranges.

Value ranges have been in the public eye this year. February saw Asda’s decision to stock its Smart Price range in all Asda stores following the poverty campaigner Jack Monroe’s call to ensure low income shoppers can access the range.

According to research by Kantar Media, supermarkets have seen a 12% increase in sales in their value ranges, with more modest increases for own name ranges and a decrease in sales of branded products. According to this research, Aldi and Lidl have benefited as a result of their large own name ranges and reputation for providing value for money. However, even value ranges have seen price increases due to a number of unpredictable factors including the conflict in Ukraine, which has disrupted the supply of grain and sunflower oil worldwide.

Consumers are also taking more drastic efforts to limit costs. Lord Rose, chairman of Asda, reported in June that some customers have been asking cashiers to stop scanning their groceries at the £30 mark. Customers are more conscious than ever of the price they are paying and willing to shop around. Asda has launched a new budget range called 'Just Essentials' that is set to cover 300 product lines by the end of 2022 and intended as a replacement for its 'Smart Price' range. So far, other supermarkets are yet to announce any significant changes.

Meanwhile, an innovative strategy comes from online only discount retailer Motatos which launched in the UK in June. The Swedish company sells discounted branded goods such as those which are short-dated or otherwise in surplus. However, these goods only include those which can be stored and shipped at ambient temperature, so fresh meat, fruit and vegetables will not be available.

The government has announced that it will be making cash payments to 8 million households to ease the pressure on cost of living. However, the pressure on retailers to maintain competitive value ranges is likely to continue for some time.

Fast fashion begins its slow fall

Fast fashion experienced a relative boom during the pandemic. As a result of the lockdowns, high street shops across the UK were forced to close, leaving customers to shop online, which reports suggest as many as 70% of people now prefer. Internet based retailers such as Missguided, Pretty Little Thing and its parent Boohoo all flourished under these circumstances. Most of these brands operate entirely online apart from seasonal ‘pop-up’ events and some partnerships with supermarkets like ASDA.

This trajectory ended last month when Missguided announced it had entered into administration. Reports have largely put this down to a 'softening consumer confidence' in the market as well as rising inflation and the cost of living. A key demographic, 18-24 year olds, have been critical in this movement away from fast fashion. Recent trends indicate that one of the key concerns for these consumers is sustainability, bolstered by the growing awareness of the issues surrounding fast fashion supply chains.

This concern has led some fast fashion partners to look elsewhere. For example, ITV’s reality show, Love Island, recently announced eBay as 2022’s fashion partner. The show had previously partnered with fast fashion brands including Missguided and I Saw It First. With the new partnership, Love Island is hoping to showcase the power of ‘pre-loved fashion’. Executive producer of Love Island, Mike Spencer, said: “We are thrilled to be pairing up with eBay this year as our pre-loved fashion partner. As a show we strive to be a more eco-friendly production with more focus on ways in which we can visibly show this on screen.”

While Missguided may not have adapted in time, its competitors are clearly taking note of sustainability’s current popularity among consumers. Fast fashion company Shein announced a $15 million pledge for textile workers in Ghana earlier this month and H&M recently announced that it has joined backers of a $250 million fund aiming to speed up efforts to cut carbon emissions within the fashion industry. These efforts highlight the ever-increasing importance of sustainability within the fashion sector, and the ways in which these brands continue to appeal to the environmentally conscious demographic.

Retailers affected by rising rates of returns

ASOS has recently reported that a significant increase in return rates is responsible for its latest profit warning, as inflationary pressures are affecting consumer purchasing behaviours. It is not the only retailer to raise such concerns and many fast fashion brands are having to process a significant number of unwanted items.

New trends such as “wardrobing” (returning worn purchases) and “bracketing” (ordering numerous sizes and returning the ones that do not fit) are contributing to this, as well as the uptake in ‘Buy Now Pay Later’ (BNPL) services which have made purchases and returns easier (see below).

Retailers are feeling the financial effects, particularly the impact of higher returns on increased warehousing and delivery costs and having to clear the returned stock. Returns affect the profits of online fashion retailers as the processing is largely manual and items are often marked down when resold.

In response, some retailers including Zara, Uniqlo, Next and Sports Direct have introduced a charge for online returns. Back in 2019, ASOS and Harrods blocked shoppers who they believed were wardrobing. It will be interesting to monitor this trend to see whether the return fees have an impact of the number of products purchased and returned, and whether more retailers take notice and follow suit.

Buy Now Pay Later (BNPL)

BNPL is a form of short-term financing that allows consumers to receive the items they have bought immediately and pay in full up to 30 days later or to split the cost into monthly payments. Klarna, one of the most popular providers used in the retail industry and the biggest in the UK, became the fourth largest private fintech company in the world in 2020. The uptake of BNPL has been largely by young consumers, with 42% of those aged 16-24 in the UK having used BNPL services in 2021.

On the one hand, BNPL options provide financial flexibility and have made fashion more accessible. For Vestiaire Collective, an online marketplace for preowned luxury fashion, BNPL has helped to reach broader audiences. Faced with large price tags for luxury goods, consumers are encouraged by BNPL as a means to enjoy a purchase without the hefty down payment.

However, critics point to the risks associated with making debt easier than ever. Reportedly, one in 10 shoppers who used BNPL services have been chased by debt collectors and regulators are now being urged to crack down. The government has announced that interest free BNPL credit agreements will be regulated by the Financial Conduct Authority (FCA).

It is easier than ever to buy into fast fashion but whether access to BNPL options will simply exacerbate the existing problems of over-consumption in the retail industry remains to be seen.

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