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Is pureplay fashion reaching the limits of success?

Last week, online specialists Asos and Boohoo announced yet more impressive results in what is now becoming a familiar story of growth. 

Asos’ shares took a hit, caused by warnings over profitability and concerns about the effect of a strong pound, but the overall story was positive with retail sales up 43% in the UK.  Boohoo posted an even better 63% rise in revenue.     

There are few retailers that can match this performance, however the overall picture for pureplay retailers – those which operate exclusively online – is one of slowing growth and shrinking market share.  Pureplay fashion retailers are growing at 12%, slower than they were last year and behind the overall online market growth of 15.3%.  They account for a quarter of all online sales, but their share of this channel is starting to get smaller. 

Individual retailers like Asos and Boohoo are successful because they found a niche in which they can dominate.  Pureplay outlets that sell more own-label items can offer them at very competitive prices, as Boohoo has done. This focus on price has attracted a huge following from young shoppers, with over half of Boohoo’s growing shopper base aged 25 or under.  But operating within a small area also puts limits on growth.

One obvious way to expand would be to stock more brands and appeal to a wider audience – and this is something Asos has done really well.  The problem with growing out of a niche is the direct competition faced from the online platforms of well-established retailers.  The majority of growth in the online market this year is coming from high street retailers which are looking to offset declining store sales.  They are also taking advantage of a click and collect market that has grown by 52% in the past six months.

Taking on these big players isn’t a lost cause, but it’s certainly more difficult to find opportunities. So while pureplay’s growth has been impressive, expect the sector as a whole to continue to slow down this year.

Ian Mitchell is head of fashion at research firm Kantar Worldpanel.


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