Abstract
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Executive summary
Clothing and footwear impacted by macroeconomic performance
The macroeconomic conditions of high unemployment and high inflation rates, as
faced by the Mexican consumers, had a direct impact on the sector' s
performance; the sector experienced the lowest growth rate of the period from
2003 to 2008 both in terms of value and volume. The increase of unemployment
generated an overall lower residual income; as a consequence of the consumer
limiting their purchases of clothing and footwear products. Not only the
actual macroeconomic performance had an impact on the market but also
consumers are facing an uncertain situation in 2009. Another factor affecting
the market is the consumer confidence index decrease; this index has dropped
to its lowest level since its creation in 2003.
Imported products change the market structure
The increasing percentage of imported products entering Mexico has caused a
change in the market structure (formal vs. informal) of the sector; in this
sense domestic manufacturers have complained against the government because of
the relatively easy process in which clothing and footwear products are
imported into Mexico. The problem with these imported products is that even
though they are imported legally, paying the correspondent taxes and duties,
most of them are marketed in the informal market in small non-legally
established stores located in large flea markets at a local level. Most of the
retailers established in these markets do not report their incomes to SAT
(Servicio de Administracion Tributaria, Fiscal Management Service). These
sales have affected the market structure shifting the consumers' purchases
from the formal market to the informal market.
Clothing accessories not affected by macroeconomic conditions
Mexican consumers are becoming more involved in global fashion trends; as a
consequence the clothing accessories subsector has maintained a growing trend
regardless of the overall sector slowdown. The growth of clothing accessories
is also supported by the fact that consumers are finding an economic solution
to increase the number of outfits by using new clothing accessories together
with their previously purchased clothes, without purchasing new ones. Although
the clothing accessories subsector does not represent a large share of the
sector it is expected to increase as consumers follow new fashion trends.
Catalogue sales emerge as self employment option
Catalogue sales were already in the market before the period of high
unemployment rates. With a large increase in the unemployment rate, the
catalogue sales have increased during 2008 and they are expected to play a key
role to sustain the market during 2009. Catalogue sales are direct sales made
by an independent distributors who offers the manufacturers' products through
a catalogue; typically the distributor pays a small fee for the catalogue. The
distributor performs the order, collect and delivery processes. There are a
large number of companies using this strategy offering consumers a large
variety of products through their catalogues at affordable prices since they
do not pay large store operation costs. The time of delivery is relatively
short since the distribution strategies allow them to deliver the products to
the final customers in less than two weeks.
Sector expects recovery by mid-2010
The expected performance of the sector will be characterised by a strengthened
presence of domestic brands, since imported products are already becoming more
expensive because of the exchange rate increase. Not only the increase in the
acquisition price is increasing but also the international transportation and
logistics costs affect the imported products presence in the domestic market.
The expectations for economic recovery has been a major concern for all
consumer related market analysts, the strategies of domestic manufacturers
have concentrated on developing innovative products in terms of design and
materials, domestic manufacturers are trying to increase their sales to
international markets given the temporary weakness of the domestic market, the
effects of these innovations are expected to have a positive impact on the
domestic market once the products are consolidated in the international market.
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