Budget Fashion Takes Over The US
By: James Flippin · October 18, 2022 · Reading Time: 3 minutes
Thanks to record-high inflation, US consumers are more price-conscious than ever. The past year’s surge in prices has generally left consumers with reduced spending power. In particular, apparel prices are up 5.5% year-over-year. As a result, more US consumers are choosing to shop with overseas budget retailers.
Retailers like Primark, Shein, and GU (FRCOY) offer prices that can be up to four times cheaper than US alternatives. These stores use a variety of techniques to offer the lowest prices possible. For example, Primark doesn’t advertise or even sell clothes online. This allows the company to save on costs and pass these savings on to its customers.
Now, these retailers want an even bigger piece of the US retail pie.
Riding on their success of the past year, Primark and Shein are making a bigger push to expand into the US.
Primark plans to increase its US store count from 13 to 60 by 2026. Meanwhile, Shein is addressing complaints surrounding long shipping times by opening a new US distribution center. This will allow it to offer faster shipping to US customers.
However, these companies will still have to compete with US budget retailers like Forever 21 (SPG), Zara, and H&M (HNNMY), which are also experiencing stronger sales.
As consumers shift their spending habits, slightly pricier outlets like Gap (GPS), Kohl’s (KSS), and Target (TGT) are left sitting on unsold inventory.
The shift in consumer preference toward fast fashion retailers is creating a massive imbalance between supply and demand for more expensive outlets. Typically, the best way for these retailers to unload their unsold inventory is to offer steep discounts.
In a much-needed pricing win, US consumers can expect most US retailers to start offering discounts in order to compete with overseas chains. This is especially true with the holidays around the corner.
Cash-strapped consumers are opting for price over quality. This change in consumer behavior could force Gap and others to respond by slashing prices.
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