The premium end of the market is set to overtake the value sector as the biggest battle ground for market share, according to market analyst Verdict.
In its latest report UK Clothing 2010: Issues & Opportunities, Verdict showed that premium retailers had gradually increased market share by value over the last five years, from a 21.4% slice of the market in 2004 to 22.7% in 2009, when the UK clothing market was worth £35.3bn, and predicted that the increase would continue on an upward curve.
While value retailers increased market share at a faster rate over the period - from 20.5% of the market in 2004 to 26.7% in 2009 - Verdict said this growth was likely to slow because value retailers needed scale to survive, meaning only a few big players such as the supermarkets, and the likes of Primark, Matalan and Peacocks can operate successfully in this segment.
The report added that rising manufacturing costs would lead to price inflation and added that this, coupled with a change in consumers’ attitudes to high consumption and waste, would also slow growth in the value sector.
As the premium and value ends of the market increased their share, the middle market continued to see its share shrinking each year as it was squeezed at both ends by the value and premium segments. The midmarket had 50.6% of market share in 2009, down from 58.1% in 2004.
Verdict’s lead retail analyst Maureen Hinton said: “Demographic and social trends favour distinctive fashion and brands, while the demand for better service and quality is increasing. This provides a major opportunity for middle market retailers such as Marks & Spencer and Next.”
She added: “Rather than be squeezed further, midmarket retailers should take this opportunity to offer consumers value by replicating premium ranges and experiences at lower price points – in effect challenging the premium segment. By stretching their price architecture upwards midmarket retailers can offer a premium value offer – affordable luxury.
“This will move them away from value retailers who will continue to chip away at the bottom end of the midmarket as they in turn find new ways to stretch their own price architecture to compensate for falling volumes and higher sourcing costs. That said, they will have to produce credible sub-brands and enhance the premium experience with good customer service”.