Study: top 10 own 70% of apparel biz - discount clothing stores - Industry Overview

DSN Retailing Today, Oct 27, 2003 by Mike Troy

TAMPA, FLA. -- Discount apparel retailers have achieved dramatic market share gains during the past decade, and although the top 10 players already account for 70% of a market valued at $70.2 billion, Americans' fondness for inexpensive clothing ensures leading operators will achieve further gains.

That is the key finding of a landmark study conducted by Chain Store Guide, a division of Lebhar-Friedman. Analysts at the information services firm examined 123 retailers operating 40,000 stores in 346 markets throughout the United States and used a proprietary financial forecasting model to determine the sales of each retailer by market.

"There are some very strong players in the discount apparel market and the top 10 companies are adding stores at more than five times the rate of the apparel industry as a whole," said Chain Store Guide product development manager Deborah Scruggs. "The majority of consumers are uncomfortable paying top dollar for non-necessities. But discounters are offering fashionable, quality merchandise at affordable prices consumers feel they can justify."

Discount apparel retailers had begun to make strides during the past decade toward improved quality, better presentation and through the use of technology were able to shorten product development cycles to offer more fashionable assortments. When the economy began to soften in 2000, discounters were positioned to gain a larger share of their existing customers' apparel budget while they also attracted new value-conscious customers.

"The economic downturn of the past few years helped accelerate market share gains for discount apparel retailers," Scruggs said. "However, now these companies are offering licensed, brand and designer merchandise, such as Isaac Mizrahi with Target and Thalia in Kmart. The combination of improved quality, attention to fashion and value pricing is a powerful one that will keep customers coming back no matter how well the economy performs."

With the forces that have allowed discount apparel retailers to achieve market share gains expected to remain in place, there is opportunity for leading operators to gain additional share in the overall apparel market as well as the more narrowly defined discount apparel market, according to Chain Store Guide. The parameters the company used to define the discount apparel market were based largely on pricing strategy as opposed to a retailer's approach to brands or store location. As a result, the discount apparel market includes such obvious companies as Wal-Mart, Target and Kmart. In addition, brand-oriented companies such as Ross, T.J. Maxx and Marshalls were also included due to their heavy discount emphasis. However, mall-based chains such as JCPenney and Sears were not considered discount apparel retailers and neither was Kohl's since it employs a promotional pricing strategy and are viewed as a traditional department store.

If traditional department stores and other upscale retailers are included, the size of the total apparel market is an estimated $182 billion, of which the $70.2 billion discount apparel market represents less than 40%. So, even though the top 10 discount apparel retailers have a commanding share of the market as defined by Chain Store Guide, the much larger opportunity is to gain market share from outside the discount sector--especially if discount formats are able to increase their penetration of urban markets where their market share is limited.

The $70.2 Billion Discount Apparel Market

Wal-Mart                    24.6%
Other                       29.6%
Value City Dept. Stores      1.7%
American Eagle Outfitters    1.9%
Burlington Coat Factory      2.7%
Charming Shops               3.2%
Ross                         3.8%
Kmart                        6.1%
Old Navy                     7.8%
Target                       8.4%
T.J. Maxx/Marshalls         10.1%

Source: Chain Store Guide

Note: Table made from pie chart.