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Senior Analyst – UK
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With a background in computational biology, Rueben Scriven joined Interact Analysis two years ago and leads the warehouse automation and on-highway commercial vehicle research areas. Rueben has spoken at some of the leading industry events and moderated several panel discussions on the topic of commercial vehicle electrification. He’s also appeared on CNBC to provide insight on the global electric bus market.

Market research company Interact Analysis’s series of insights based on their deeply researched report on the automation industry continues with a look at the apparel sector. Last week we looked at general merchandise, a strong growth area – and considered the advantages that brick-and-mortar retailers have when it comes to same-day delivery. Apparel presents a somewhat different picture…

Covid-19: a sledgehammer to the apparel market

The COVID-19 pandemic has hit the apparel industry hard. In April 2020 apparel sales in the USA were down 86% compared to the same month the previous year, as the virus spread, stores closed, or people just kept away. Nobody wants to try on clothes that might have been touched by a virus carrier. Data from the Advance Monthly Retail Trade survey describes an overall drop in sales by clothing and clothing accessories stores in the first 8 months of 2020 as being 34.9% down on the same period in 2019. We also see some interesting trends within this if we look into the data more deeply. For example, male clothing sales in August 2020 were only 57% of what they had been in August 2019. Yet female clothing sales in August 2020 were at 73% of what they had been in August 2019. Although it is difficult to say why this is the case.

As a consequence, apparel retailers are cutting back on investment as they wait to see the full impact of the pandemic. This will have an impact on warehouse automation revenues in the sector, relative to our previous 2019 forecast.

2020; the virus; quick solutions on the warehouse floor

Though Interact Analysis has revised its predictions for automation revenues down in the apparel sector, it’s not all bad news. Online apparel sales surged during the pandemic, as e-commerce boomed during lockdowns. The growth in online sales prompted retailers to look for quick fixes to lubricate clogged distribution chains, slowed down by heightened demand and the fact that warehouse workers were either off work ill, or self-isolating. Many retailers have gone for short-term automation solutions which are quick to install, and relatively cheap to purchase, as opposed to capital-intensive fixed infrastructure solutions. GAP, for example, and American Eagle Outfitters both invested in Kindred SORT robots which are used to sort and consolidate orders. American Eagle Outfitters installed 26 additional robots in 2020 whilst GAP purchased 73 additional units to bring its fleet to 106.

Europe: online apparel retailers move east

While there has been a boom in short-term automation solutions in apparel warehouses, another more retrograde pattern is emerging in Europe: a move towards cheap labour rather than automation. Many West European online apparel retailers are shifting their distribution centres to Eastern Europe, to take advantage of cheaper labour rates, rather than staying put and investing in automation solutions. It is true this is a long-term trend that was already happening before COVID – an example of this is Zolando which is building its third distribution centre in Poland this year, and Zolando’s new site is one of the biggest fulfilment sites in the country. Nevertheless, there is no doubt that a European trend to build less automated distribution centres in areas with cheaper labour is being significantly increased by COVID-19. This is not necessarily a trend we expect to see replicated in North America as the geography and populations do not lend themselves to it so readily as in Europe.

Overall, the market for warehouse automation in direct-to-consumer apparel warehouses is forecast to decline with a CAGR of -0.8% between 2019 and 2024. This is in stark contrast to warehouse automation in omni-channel apparel facilities in EMEA, which deliver online customer orders as well as replenish retail stores, which is forecast to grow with a CAGR of just under 7% during the same period.

Is there reason for optimism in the future?

Our work shows that the warehouse automation market for apparel is forecast to grow with a CAGR of 6.9% over the next five years, despite the problems experienced in 2020. This is still high; however, we don’t see the exponential growth predicted for warehouse automation verticals such as grocery and general merchandise. Will growth speed up after 2024? If you want an answer to that, Interact Analysis will provide it in good time.

This is the second of a series of insights looking at different elements of the warehouse automation market. Next week, we’ll be looking at food & beverage, so please stay tuned!

In the meantime, to continue the conversation about warehouse automation, get in touch with our lead analyst on the topic – Rueben Scriven: Rueben.Scriven@InteractAnalysis.com

Posted by Rueben Scriven

Graduating from Durham University with a first-class degree in Biochemistry, Rueben is leveraging his background in science and computer modelling by joining our growing analyst team.