Sarah Quinlan

In what has evolved into an energized and sobering look at the retail market at the annual summit, Sarah Quinlan’s presentation opened with the senior vice president of market insights at MasterCard Advisors telling attendees that it is “time for the real world.”

Quinlan’s analysis of the retail landscape noted a fashion apparel market that was on the ropes in September with steep declines across the globe. But there were bright spots amid the declines: luxury and e-commerce apparel sales in the U.S. rose in the month while Australia showed another consecutive month of apparel gains.

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MasterCard’s retail sales index is derived from 160 million transactions per hour that is fed into an algorithm. Quinlan said even as September was a challenging month for apparel — especially in the U.S., “overall, the American consumer is the strongest in the world.”

Quinlan said U.S. shoppers in the market are “confident and consistently spend,” and for September, year-over-year retail sales (minus autos and gas) showed a robust 4.8 percent gain, “which was solid growth,” she said.

In the U.K. total retail sales rose 3.3 percent and was fueled by a post-Brexit market fraught with deflationary pricing that is attracting tourists from the U.S., France and Russian. In Japan, Quinlan said there was reason to be concerned over the 0.7 percent decline in retail sales, which is the fifth consecutive month of declining sales.

In Hong Kong, the climate is worse as total retail sales experienced its 14 consecutive month of declines with a 4.5 percent drop for September. “The slowdown in China is real,” Quinlan said. “This consumer is gone.” By contrast, Australia’s retail market is strong, and the country experienced a 3.1 percent total retail sales gain for the month. “Consumers there are shopping no matter what is happening,” Quinlan said, adding that apparel sales in Australia rose 5.2 percent in September.

This compares to an anemic 0.3 percent gain in apparel sales at U.S. specialty stores and sales at department stores that dropped 4 percent in September. In the U.K., apparel sales dropped 5.1 percent, Quinlan said noting that “there has been no recovery in clothing sales over the summer.”

In Japan, apparel and accessories year-over-year sales declined 7.5 percent while Hong Kong eked out a 1.2 percent gain in September. Another bright spot globally was e-commerce sales in the U.S., which rose 13.3 percent in September.

Overall, apparel is struggling Quinlan said, but was quick to note that consumers are not “walking around naked.” They are making apparel purchases, “but they are doing it as replacement.”

“We don’t buy what we don’t need,” she said adding that consumer spending is going toward experiences, which is why airlines, hotels and restaurants are seeing higher sales. The other opportunity is with smaller apparel chains. Quinlan said because consumers want more unique products, they’re shopping at smaller stores. Quinlan added that 42 percent of all U.S. apparel sales were garnered by retailers with $15 million of annual sales or less.

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