Fashion continues paving the way for e-commerce

Fashion is the biggest product category in e-commerce. But it is, due to its selective nature, also highly vulnerable. And with a global pandemic, looming economic crises and brick-and-mortar stores on lockdown, Fashion is all the more exposed. It is no surprise that every industry professional wonders what the impact of the corona outbreak on Fashion really is. What are the drivers of growth? And how satisfied are consumers? What dimensions do Fashion merchants need to navigate in the new e-commerce landscape of today? AfterPay Insights decided to find out.

Since the corona outbreak, AfterPay Insights’ research has indicated that Fashion – while decreasing initially – has increased overall since end of March. Underlying this growth are two key developments. First, we see that online Fashion merchants have succeeded in attracting consumers who previously purchased Fashion offline. A result is that the socio-demographic profile of online Fashion Shoppers has broadened, now also encompassing relatively more males and families with kids, as well as consumers living in city suburbs and mid-sized towns.

Second, existing Fashion Shoppers have started shopping online more, leading to a slight increase in Fashion volume, although these numbers do fluctuate over time.
Our research also shows that Fashion Shoppers conduct twice as many online purchases compared to non-Fashion Shoppers (and half Fashion Shoppers’ purchases are within Fashion).

Fashion merchants are to a large extent responsible for shaping consumers’ expectations of the online e-commerce experience as a whole.

It is commonly known that Fashion is at the forefront of innovation when it comes to digitalization and creating a cutting-edge customer experience. Fashion sets the bar, and this means that consumers who shop in Fashion - specifically ‘heavy fashion shoppers’ - typically are more demanding, also when they shop in other categories than fashion. It is then no surprise that Fashion Shoppers are also less satisfied with Fashion merchants’ performance, in particular with delivery and customer service. And because online shoppers have not been able to use physical channels in their overall purchase journey, the inspirational phase for example has been restricted to online having put even higher demands on webshops to deliver on all aspects in the purchase journey.

Fashion is the biggest product category and has grown significantly

In Germany, Fashion was hit negatively directly following the corona outbreak but then outgrew overall e-commerce growth and hit a high by the end of April with a +53% growth in number of purchases. Since then the rate of growth slowed down to end up at +28% by the end of May and stands for 16% of all online purchases.

And in The Netherlands, the Fashion curve shows a similar shape, but it is amplified and where the peak was hit during the first half of May at +101% growth and has since declined to +54% growth by the end of May, accounting for 20% of all online purchases.

Fashion growth in Norway differs, as we still see a growth in Fashion during the second half of March up to +61% in number of purchases vs before the corona outbreak. The development we see is undoubtedly affected by at what phase countries are when it comes to easing virus spreading restrictions as well as how far into the summer season Fashion sales has developed in the different countries. At the end of May, Fashion stands for 22% of all online purchases in Norway.

From a socio-demographical perspective, the Fashion Shopper persona is female, aged 18-44 with kids at home. She is a student or holds a full-/part time job. Even though the Fashion Shopper group has broadened somewhat, there are still no significant differences between online Fashion Shoppers and non-Fashion Shoppers when it comes to where consumers live or disposable income.

Fashion e-commerce growth is driven by inflow of new consumers and existing shoppers buying more

There are two main forces at play affecting the growth of Fashion purchases. First, the growth of online Fashion Shoppers; in our analytics we have measured this in terms of the share of all online shoppers that have made at least one online purchase within Fashion during the past two weeks. And second, the volume of online Fashion purchases among Fashion Shoppers (which can be interpreted as the share of total Fashion purchases conducted online); we measured this as the average number online Fashion purchases that these Fashion Shoppers have done during the past two weeks.

In the infographic above, we can understand the cause and effect relationship between the two growth levers and the outcome in terms of growth in total number of Fashion purchases. Take Netherlands as an example. Here, both share of Fashion Shoppers and average number of purchases made by Fashion Shoppers increased up until the first half of May resulting in a total growth in number of Fashion purchases of +101% compared to the situation before the corona outbreak. But in the second half of May, total Fashion growth declined to +54% compared to before the corona outbreak. The share of Fashion Shoppers was still at the same basic level as the first half of May (horizontal axis) – but the average number of purchases in Fashion decreased (vertical axis) and that is the main contributor to this drop in total Fashion purchases from +101% to +54% in the Netherlands.

The key driver for online Fashion growth is that consumers who previously purchased Fashion offline, have now shifted to also purchasing Fashion online. The share of online shoppers who have purchased in Fashion during a two-week period has grown steadily from 18% to 28% in The Netherlands, from 18% to 25% in Germany and from 14% to 20% in Norway.

However, the average number of Fashion purchases done by Fashion Shoppers has fluctuated more over time. Across all countries and measurement points, Fashion Shoppers have done between 1,3 and 2,2 Fashion purchases during a two-week period. This fluctuation is likely due to different timings, such as timing of summer Fashion sales across the different countries as well as the fact that different countries are easing corona restrictions.

‘Shopping frequency’ is a factor within the ‘Fashion Shopper’ segment

When we look at shopping frequency within the Fashion Shopper segment, we see that different types of Fashion Shoppers exist. Bear in mind that the Fashion Shopper groups are defined purely based on the number of purchases done within Fashion during a two week period. This is different to the previous blogs, where we defined the shopper groups based on the total number of purchases online across all categories during a two week period.

Heavy Fashion Shoppers (4+ online fashion purchases per two weeks) are dramatically over-represented among women (75%) and in particular among younger women as 38% of all ‘heavy Fashion Shoppers’ are women aged 18-34. Almost 50% have families with young kids at home. But ‘heavy Fashion Shoppers’ do not differ significantly when it comes to where they live, what they do for a living or their disposable income.

Medium Fashion Shoppers (2-3 online fashion purchases per two weeks) have a similar profile as the heavy Fashion Shoppers’, but not quite as distinct and these comprise a slightly older group of consumers.

Light Fashion Shoppers (1 online fashion purchase per two weeks) have a socio-demographic profile that is more like an average online shopper. But they are slightly over-represented among women and under-represented among online shoppers aged 55+.

Non-Fashion Shoppers (no online fashion purchases per two weeks) are over-represented among males and aged 55+. Based on this they comprise a larger share of retired people also having a slightly lower disposable income.

As more consumers have started buying Fashion online, the socio-demographic profile of online Fashion Shoppers has broadened over time. The new shoppers having entered online Fashion are relatively more males, families with kids and living in city suburbs and mid-sized towns.

‘Heavy’ and ‘Medium’ Fashion Shoppers stand for 65% of online Fashion purchases
A relatively small number of consumers is driving the growth of online fashion purchases. ‘Heavy Fashion Shoppers’ stand for about 25% of all online Fashion purchases, and ‘Medium Fashion Shoppers’ account for about 40% of purchases. This means that Heavy and Medium Fashion Shoppers as a group represent 10% of all online shoppers in the population, and stand for 65% of all Fashion purchases.

Abovementioned volume driving segments have grown continuously since the corona outbreak across all three countries. But by the second half of May, their shares have decreased slightly in The Netherlands and Germany, but are slightly up in Norway. This is in line with what we identified earlier: the average number of Fashion purchases among Fashion Shoppers has decreased in the Netherlands and Germany at the end of May but has increased slightly in Norway.

Fashion Shoppers behave like ‘normal’ online shoppers in other e-commerce categories

Fashion is the single most important category driving e-commerce purchases as a whole. This is because Fashion Shoppers average about twice as many online purchases over time compared to non-Fashion Shoppers.

Online Fashion Shoppers conduct about 50% of all their online purchases within the Fashion category, and the remaining 50% in other categories. And this pattern is similar across all three countries. This also means that Fashion Shoppers to a large extent form their expectations and demands on merchants from their experiences in the Fashion category.

Looking at Heavy Fashion Shoppers specifically, these conduct around 70% of all their online purchases within Fashion. The corresponding figure among Medium Fashion Shoppers is around 50% and among Light Fashion Shoppers 37%.

Do ‘Fashion Shoppers’ have specific demands of online fashion merchants?

Fashion Shoppers are slightly more demanding than non-Fashion Shoppers. A pattern that is consistent across The Netherlands, Germany and Norway is that Fashion shoppers have a significantly higher demand on merchants when it comes to flexible return options. Even though this is not the biggest need (only 15-20% of Fashion Shoppers express this as important), it is overall the 6th most important demand that these shoppers place on merchants.

In the Netherlands, aside from flexible return options, Fashion shoppers here also express a higher need regarding flexible payment options.

Fashion shoppers in Germany really differentiate themselves regarding flexible return options, as the difference between ‘all shoppers’ and Fashion shoppers regarding this aspect is quite dramatic.

In Norway, Fashion shoppers do not only demand more flexible return options and more flexible payment options, but they also are more price sensitive looking for lowest price websites to a higher extent than the average online shopper.

Our earlier deep-dive regarding how online shoppers perceive the concept of ‘Security’, being a top demand that consumers place on online merchants, revealed that merchants’ return policy is important for consumers to perceive a website as secure. In light of this, Heavy Fashion Shoppers’ large demands on ‘flexible return options’ becomes an even more important area to focus.

Are Fashion Shoppers satisfied with online merchants’ performance in May?

Compared to the average online shopper, Fashion Shoppers are overall significantly more satisfied with the ‘return process’, even though this (as we concluded above) also is the one area where Fashion shoppers have higher expectations. But on the other hand, Fashion shoppers are generally less satisfied with Fashion merchants when it comes to shipping & delivery (incl. fast delivery time) as well as customer service.

In The Netherlands, Fashion shoppers are less satisfied with Fashion merchants ‘shipping & delivery (incl. fast delivery time) compared to the general online shopper satisfaction with this aspect (highlighted in red). But Dutch Fashion shoppers are significantly more satisfied with Fashion merchants’ return process and Heavy/Medium Fashion shoppers are significantly more satisfied with Fashion merchants’ having products in stock (highlighted in green). 

German Fashion shoppers rate the satisfaction with their Fashion purchases in the basic same way as Dutch Fashion shoppers, i.e. lower scores compared to the average shopper on shipping and fast delivery (highlighted in red) and a relatively higher satisfaction with the return process (highlighted in green). The difference being that German Fashion shoppers are less satisfied with Fashion merchants’ having products in stock. Also, the general level of Fashion merchant satisfaction is lower among Fashion shoppers in Germany compared to in the Netherlands.

And what stands out in Norway is that Fashion shoppers are relatively more satisfied with the return process (highlighted in green) and at the same time relatively less satisfied with the customer service (highlighted in red). Also, the satisfaction gap between Heavy/medium Fashion shoppers and Light Fashion shoppers is large in Norway, i.e. Light Fashion shoppers in Norway are very satisfied in general – with the exception of the area of customer service.

How will Fashion develop?

Without a doubt, we can say that crises like the COVID-19 pandemic lay bare the need for change. Although Fashion is already a progressive industry that continuously evolves and innovates, the global pandemic accelerates digitalization and innovation even faster. But what everyone in the industry really wants to know, is what the longevity of the changes in consumer behavior are. Will growth persist? What will be the lasting impact? Is this really the ‘new normal’?

We see significant changes in consumers’ e-commerce behavior in Fashion over the past months and we can partly connect these to the global pandemic. Still there are other perspectives when looking ahead. First of all, seasonality is a hugely important factor when looking at Fashion. Second, as lockdowns are eased and society opens up, visits to and sales in brick-and-mortar Fashion stores are likely to pick up again. Another result of lighter restrictions will also result in increased travel, a factor that is likely to influence Fashion (e-commerce) as well. A looming economic crisis – and increasing unemployment rates - will potentially erode consumer confidence and lead to cuts on spending. And with Fashion’s discretionary nature, the industry is particularly vulnerable here. Finally, as some consumers change their lifestyle and shift priorities, consumers’ attitudes about their general consumption levels may change.

We will continue our research throughout the summer, so that we can connect the dots between the developments in Fashion over the past months, and abovementioned influential factors. Stay tuned as we will revisit the subject of Fashion in August.

What is next?

Coming up over the next few weeks are a deep dive into the e-commerce category Groceries, followed closely by Media & Entertainment and Electronics & Telecom. Stay with us for more interesting e-commerce insights!