Explore the Merchandising Strategy for Sustainable Cotton Apparel in the U.S. Retail Market

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Explore the Merchandising Strategy for Sustainable Cotton Apparel in the U.S. Retail Market

By Camryn Leon-Kelly and Sheng Lu, University of Delaware - 05/29/2019

U.S. consumers’ increasing awareness of the environmental impact of the fashion industry has created a fast-growing retail market for “sustainable cotton apparel.” It is not difficult to find clothing made with cotton that claims to be eco-friendly or produced in a sustainable way these days. However, the characteristics of the U.S. sustainable cotton apparel market remain largely unknown to us, such as who is selling, how large the market is, and what merchandising strategy is commonly adopted by retailers.

To help fashion brands and retailers gain more insights into the sustainable cotton apparel businesses, in this article, we took a detailed look at the merchandising strategy for related products in the U.S. retail market. By using EDITED, a big-data tool for the fashion industry, we analyzed the product assortment and pricing information of over 90,000 fashion retailers and their 300,000,000 fashion apparel products at the stock-keeping unit (SKU) available in the U.S. retail market. In our study, “sustainable cotton apparel” is defined as those apparel items that use cotton AND explicitly mention any of the following keywords in their product description, including “eco-friendly,” “environmental-friendly,” “sustainability,” “sustainable,” and “organic.”

The results from EDITED show that the U.S. sustainable cotton apparel market has been growing tremendously in recent years. As an indication of retailers’ increased enthusiasm, the amount of sustainable cotton apparel available in the U.S. retail market surged by 743.7 percent from 17,031 SKUs in 2016 to 1430,683 SKUs in 2018, much faster than the growth of regular cotton apparel in the market over the same period (Table 1). Nevertheless, sustainable cotton apparel overall remains a niche product in the U.S. retail market, accounting for only 1.6 percent of the total cotton apparel carried by U.S. fashion brands and retailers in 2018.

The results from Table 2 also show that U.S. fashion brands and retailers mention “organic cotton” (41.3 percent), “sustainability” (36.2 percent) and “eco-friendly” (17.7 percent) most often in the product descriptions for sustainable cotton apparel. By comparison, the keywords “sustainable” and “environmental-friendly” are used less frequently.

Additionally, contrary to the common perception that sustainable cotton apparel is sold by high-end or luxury retailers at a premium price only, the results from EDITED indicate that more than 80 percent of sustainable cotton apparel sold in the United States actually targets the mass and value market. More specifically, in the mass and value market, Walmart was the top seller of sustainable cotton apparel in 2018, followed by Zappos and Moosejaw, whereas in the luxury and premium market, Nordstrom and RueLaLa carried the most sustainable cotton apparel items (Table 3). However, with only a few exceptions such as Patagonia and RueLaLa, sustainable cotton apparel overall remains a niche product even for these top sellers, accounting for less than 2 percent of their total cotton apparel assortment. 

Product Assortment Strategy

The results from EDITED show that U.S. fashion retailers adopt unique product assortment strategies for sustainable cotton apparel compared with regular cotton apparel items.

 

Table 4 Product Assortment of Sustainable Cotton Apparel versus Regular Cotton Apparel in the U.S. Retail Market (2016-2018)

Product categories

Sustainable cotton apparel

Regular cotton apparel

Sustainable vs. regular cotton apparel

Tops

66.3%

62.3%

+4.0%

Bottoms

8.8%

14.3%

-5.5%

Apparel accessories

8.2%

4.0%

+4.2%

All-in-ones

4.5%

2.5%

+2.0%

Dresses

2.8%

4.8%

-2.0%

Nightwear

2.3%

2.3%

0.0%

Outerwear

1.7%

3.4%

-1.7%

Underwear

1.5%

3.0%

-1.5%

Suit-sets

1.5%

1.1%

+0.4%

Hosiery

1.2%

1.5%

-0.3%

Swim

0.1%

0.2%

-0.1%

Data source: EDITED (2019)

 

First, compared with regular cotton apparel items, sustainable cotton apparel is more concentrated on tops (66.3 percent), apparel accessories (8.2 perdent), and All-in-ones (11.1 percent) in the U.S. retail market. Meanwhile, there are notably fewer sustainable cotton apparel in the categories of bottoms, dresses, outwear and underwear than regular cotton apparel items (Table 4). The specific reason can be explored further.

Table 5 Color Assortment of Sustainable Cotton Apparel versus Regular Cotton Apparel in the U.S. Retail Market (2016-2018)

Colors

% used in sustainable cotton apparel

% used in regular cotton apparel

Sustainable vs. regular cotton apparel

Blacks

15.8%

18.4%

-2.6%

Blues

12.8%

14.7%

-1.9%

Greys

12.8%

9.5%

+3.3%

Greens

11.2%

7.9%

+3.3%

Whites

10.3%

10.1%

+0.2%

Navies

7.4%

9.0%

-1.6%

Reds

5.3%

6.0%

-0.7%

Neutrals

4.2%

3.3%

+0.9%

Purples

3.9%

3.2%

+0.7%

Pinks

3.3%

5.6%

-2.3%

Data source: EDITED (2019)

 

Second, regarding color assortment, compared with regular cotton apparel, sustainable cotton apparel tends to use more greys and greens but less black dye (Table 5). Because green is often regarded as the color of earth, psychologically consumers may view apparel products in green as “more sustainable” than darker colors such as black. However, according to textile scientists, textiles using black dye can be produced in an environmental-friendly way, whereas green dye may still contain hazardous material. The choice to produce more sustainable cotton apparel in green can be more about appealing to psychology than the actual environmental impact.

Additionally, U.S. fashion retailers overall prioritize sustainable cotton apparel for women’s wear. The results from EDITED indicate that close to 60 percent of sustainable cotton apparel available in the U.S. retail market was women’s wear compared with 54 percent for regular cotton apparel between 2016 and 2018. This result echoes some previous studies, which suggest that females, in general, purchase more clothing than males and are more conscious of sustainability when shopping. That being said, sustainable cotton apparel for men’s wear is a sizable and lucrative market and should not be ignored.

Pricing Strategy

 

Table 6 Average Price of Sustainable Cotton versus Regular Cotton Apparel in the U.S. Retail Market (2016-2018)

Mass and value market

Category

Sustainable cotton apparel

Regular cotton apparel

Sustainable vs.

regular cotton apparel

Dresses

$83.09

$48.51

71.3% higher

Tops

$23.55

$19.98

17.9% higher

Bottoms

$76.45

$34.38

122.4% higher

Outerwear

$163.09

$82.15

98.5% higher

All In Ones

$95.12

$20.17

371.6% higher

Underwear

$39.52

$15.26

159.0% higher

Hosiery

$17.69

$11.88

48.9% higher

Nightwear

$39.62

$27.86

42.2% higher

Swim

$57.53

$28.45

102.2% higher

Product Sets

$95.74

$22.11

333.0% higher

 

Luxury and premium market

Category

Sustainable cotton apparel

Regular cotton apparel

Sustainable vs.

regular cotton apparel

Dresses

$284.23

$285.81

0.6% lower

Tops

$105.78

$119.79

11.7% lower

Bottoms

$163.76

$144.16

13.6% higher

Outerwear

$481.62

$548.58

12.2% lower

All In Ones

$271.77

$112.65

141.3% higher

Underwear

$49.89

$35.30

41.3% higher

Hosiery

$27.27

$23.84

14.4% higher

Nightwear

$114.41

$64.70

76.8% higher

Swim

$88.86

$94.20

5.7% lower

Product Sets

$388.68

$147.72

163.1% higher

Data source: EDITED (2019)

Regarding pricing strategy, sustainable cotton apparel overall is priced relatively higher than regular cotton apparel in the U.S. retail market. This is particularly the case for clothing that focuses on the mass and value segments of the market, as shown in Table 6. The higher retail price for sustainable cotton apparel could be the result of a mix of factors, such as using more expensive raw materials such as organic cotton, higher marketing and promotional expenses, and consumers’ lower price sensitivity toward sustainable cotton apparel products.

However, Table 6 also suggests that the difference in selling price for sustainable cotton and regular cotton apparel is less obvious in the luxury and premium segments of the market. For several product categories such as dresses, tops, outwear and swimwear, the average retail price for sustainable cotton apparel was even lower than for regular cotton items. It is likely that luxury and premium fashion retailers do not see a good match between “sustainability” and their business models, therefore adopted no unique pricing strategy for “sustainable apparel” as a distinct product category.

On the other hand, less sustainable cotton apparel was sold with a discount than regular cotton apparel in the U.S. retail market. Between 2016 and 2018, on average, around 34 percent of sustainable cotton apparel was sold at markdown prices versus 64 percent for regular cotton items in the U.S. retail market. More specifically, as shown in Table 7, except bottoms, sleepwear and swimwear, all other product categories we examined had around 2 percent – 33 percent less sustainable cotton apparel discounted compared with regular cotton apparel in the U.S. retail market. Besides, as shown in Table 8, of those products that were discounted, the average markdown percentage for sustainable cotton apparel was slightly lower than regular cotton apparel in the U.S. retail market between 2016 and 2018. The difference in markdown percentage for dresses (6.8 percent lower) and hosiery (8.4 percent lower) was more significant, however.

Overall, the different discount practice echoes the previous finding that there is an overall higher selling price for sustainable cotton apparel in the U.S. retail market. The findings also confirm that U.S. consumers are willing to pay more for sustainability. 

Conclusions

In summation, our analysis shows that U.S. fashion retailers adopt a unique merchandising strategy for sustainable cotton apparel that differs substantially from regular cotton apparel items. As a growing number of companies branch into the sustainable cotton apparel businesses, it will be interesting to watch how intensified market competition and increased supply of related products will continue to shift the dynamics of this growing and exciting market.

 

Camryn Leon-Kelly is an undergraduate research assistant and Sheng Lu is associate profiessor at the University of Delaware.