DENIM JEANS – A A LONG AND RICH HISTORY
Blue Jeans were born in San Francisco during the gold mining era of 1873. If Levi Strauss had failed to notice the potential demand for strong and sturdy pants, denim jeans would probably not have evolved into a historic legend. Today jeans have become an indispensable item as it is available in all varieties looks and washes to suit any attire. What began as a sturdy work dress for coalminers took the world by storm after Hollywood gave it a cool factor in 1950s. Today jeans are worn by everyone from the plumber to the working class to the president and also the fashion industry. No matter the age or gender, jeans have become a wardrobe quintessential for the U.S consumers.
OVERVIEW
Denim jeans are a cornerstone of the American wardrobe. Jeans have rooted themselves in American culture. Consumer fondness for denim jeans stems from their durability and versatility. Due to longer life span of denim jeans, consumers find a greater value in this product compared to other clothing. Hence, the “Denim Jeans industry” holds an advantageous position over other types of apparel products even under unfavorable economic conditions. Even though the global economic crisis had a strenuous impact on the U.S apparel industry, the overall denim industry has regained its momentum faster as compared to other segments in the apparel industry. In fact import statistics show that the denim jeans industry in the U.S had been virtually unaffected and remained competitive. This ensures that denim jeans will continue to hav e a place in consumer’s closet as it has become b ecome a necessity. However the rise in cotton price in 2010 and the cost cutting measures (thinner fabrics, change in fiber content, etc.) have caused significant performance issues and dissatisfaction among consumers. Denim Jeans are preferred by almost all the Americans mainly because of their longevity, fit and comfort. With limited disposable income the consumers have become pragmatic in their shopping approach and as a result the cost cutting measures had affected the sale of denim jeans due to durability issues.
U.S DENIM JEANS MARKET
According to various sources denim jeans represent an estimate $60 billion global market at retail price. U.S consumes about 30% of World denim jeans production. Being such an enormous market, figures related to U.S are of great interest. One such figure that has often surfaced in various newspapers and articles is about the Per Capita consumption of Jeans in U.S There have been various figures ranging from 1-7. 1 -7. We try and a nd analyze to get a holistic view v iew in this regard. Key point to keep in mind is that almost all of the jeans consumed in the U.S is imported from outside. Premium denim jeans are an exception as they are mostly produced in US. However due to high pricing, their share of total volume of jeans consumed in U.S is quite low. According to a report by Cotton Incorporated, 98% of denim d enim jeans available at US retailers in 2010 were imported.
The market value has been calculated after researching several reports by various market research organizations and Cotton Incorporated Retail Monitor survey amongst other sources. Average retail prices of denim jeans vary each year. Market research firm NDP GROUP estimated an average retail price of $24.41 in 2010 and $25.43 in 2011. According to Cotton Incorporated Retail Monitor Survey the average price for a pair of jeans in 2011 was $37 and in 2010 it was $35. Information from various blogs suggest an average price in the range of $25-$35 for the last couple of years. For simplicity an average price of $25 is used for this study. The import values statistics have been sourced from U.S. Department of Commerce Office of Textiles and Apparel. 98% of denim jeans available at U.S retail stores in 2010 were imported. The remaining contributes to the premium U.S denim industry. According to NDP GROUP only 1% of jeans sold in U.S in 2011 cost more than $50. This shows the share of domestically produced jeans in the total volume of sales is very low. This has been taken into account and the average price of domestically produced denim jeans is approximated at $50. After all these considerations we arrive at the following figure:
Denim Jeans Market Value at Retail ($ Billions)
14.59
2008
14.8
2009
15.72
2010
13.3
12.93
2011
2012
13.44
2013
Denim recently celebrated its 141st year since its inception. Due to technological advancements and love for good quality denim, the denim jeans industry has come a long way. However one change has not been received well by the U.S consumers – the the substitution of cotton for synthetic fibers on account of the rise in cotton price in 2010. This is evident from the drop in market value for U.S denim jeans industry in the year 2011. On average, shoppers expect a pair of jeans to last about five years, according to Cotton Incorporated lifestyle Monitor Survey. Thus durability and comfort are an intrinsic part of the decision for purchasing jeans. The market did not react well when this was compromised.
Nevertheless the rise in jean imports and sales thereafter, in spite of the rise in in average price for a pair of denim jeans demonstrates the long standing love affair of the American culture and denim jeans and establishes that jeans is an integral part of the consumer’s closet. closet. Consumers find a better value for a product they know will last longer, therefore price is not the main factor in the denim jeans purchase decision. It has become essential for brands to capitalize on this trend and provide good quality denim jeans to meet consumer expectations.
US DENIM WARS – IMPORT IMPORT STATISTICS
U.S is the highest consumer of denim jeans in the world. Since its inception jeans have come a long way and have become everything from a casual outfit to a fashion statement. US import market for denim jeans is extremely competitive and is dominated by China, Mexico and Bangladesh which together contribute more than 50% of total imports by volume. Denim jeans import in US (Qty.)
Total imports (Men/Boys & Women/Girls jeans) (billion units)
2008
2009
2010
2011
2012
2013
561.41
569.30
604.90
511.51
497.66
517.03
Source: U.S. Department of Commerce Office of Textiles Textiles and Apparel. (OTEXA)
Country Wise Quantity Imported By U.S In 2008 MEXICO 23%
OTHERS 38%
BANGLADESH 10%
CAMBODIA 5% PAKISTAN 4%
EGYPT 6%
CHINA 14%
China’s share in the total volume of denim jeans imports has risen from 14% in 2008 to 30% in 2013. Mexico and Bangladesh have mainted their significant share in the total imports to U.S.
Country Wise Quantity Imported By U.S In 2013 OTHERS 22%
MEXICO 23%
CAMBODIA 3% PAKISTAN 4% EGYPT 4%
BANGLADESH 14%
CHINA 30%
PER CAPITA EXPENDITURE
Now in order to calculate the per p er capita expenditure on o n jeans j eans we take a more realistic approach and calculate the potential consumers in the age group 5 and above.
Market Market value at retail (estimated in $ billion) Population in billion (age>4) Total consumption of jeans (approx. (approx. i n million) Per Capita consumption Per Capita Expenditure
2008
2009
2010
2011
2012
2013
14.59
14.80
15.73
13.30
12.94
13.44
283.82
286.53
289.14
291.46
293.91
295.14
572.64
580.69
617.00
521.74
507.61
527.37
2.02
2.03
2.13
1.79
1.73
1.79
$51.43
$51.66
$54.39
$45.63
$44.02
$45.55
Population source: OECD statistics
Thus we see that on an average every American consumes almost 2 jeans per year. The per capita consumption declined after 2010 but it has regained and is showing a positive trend. This is mainly on account of the quality of denim jeans being restored. Revival of the U.S economy, falling unemployment rates have also lead to an increase in the disposable income thus increasing the denim jeans purchases.
MARKET SHARE
Denim, a fabric which was mainly considered to be meant for “low class” people in 1960’s, is known as a symbol of fashion and style today. The durability, rough and casual look of the fabric gives it an unparalleled position in the fashion industry. Denim jeans has become an essential part of everybody’s wardrobe, retaining its title as “every day” wear since last 4 decades. There has been a drastic change in the trend and the composition compo sition of U.S. jeans market since 1960’s. Since then various styles of jeans has emerged, ranging from boot-cut to slim fit, giving birth to the term “designer jeans” jeans”. The denim jeans market is highly competitive industry that caters to a myriad of customer segments and at the same time targets the niche markets. Because of the large number of competitors and no restriction on entry, the industry has a monopolistic structure. In the last decade many new brands have entered the market. But there are a few firms that stand out. V.F. Corp. one of the largest apparel and footwear manufacturer, has various jeans brands under its name, among which lee and wrangler are the best sellers. The company has 70% share in men’s bottom and a 40% share in women’s bottom. But the company faces strong competition from sellers like Levis Strauss, Calvin Klein, The Gap, Old Navy etc. Levis made a revenue of $4.61 billion as of December 2013, maintaining a market share of 21%. The market has witnessed the entry of many premium brands in the last few years. Brands like Seven for all mankind, True Religion, Kate spade and Diesel have turned out to be the major players in this segment. The growing disposable income of Americans and brand consciousness among its citizens is making it possible for the premium denim jeans maker to survive and rather grow. The spike in annual sales for global luxury brand True Religion in 2011 illustrates the strong demand for luxury denim and the fact that jeans are no longer merely considered as casual wear. But the premium denim market — denim priced at $75 and above, which accounts for 7 percent of — denim all denim sales, is down 18% compared to last year, according to NPD. This calls for some alluring changes in the technologies. The companies try to cover almost all retail channels to make denim jeans ubiquitous. The retailer network spans all key distributional channels - mass merchants, specialty stores, dep artment stores, national chains and more. To remain competitive in the market many companies also use u se multiple channels to source and sell their products. Further analyzing the distribution channel reveals that specialty stores have witnessed an increase in their sales in women segment and a similar pattern has been observed in departmental stores in 2012. Mass merchants like Walmart, saw some improvements in its sales as well as share. According to Cotton Incorporated Lifestyle Monitor almost 43% of Americans buy their jeans from mid-tier department stores like J.C. Penney, Kohl’s
Corp etc. Given the tremendous potential of e-commerce, apparel marketers are making increased investments in internet retailing, with a two-pronged strategy. Improving the overall online shopping experience, from browsing to buying, is aimed at reducing consumers' hesitation and improving shopper satisfaction. Moreover, in order to spread brand awareness, companies like Levis, Lee and Wrangler etc. invests heavily in advertising campaigns on TV, magazines, online and Radio. Besides marketing they also indulge in promotion activities, public relations, direct marketing etc. The supply chain within the U.S. premium denim market has been mostly concentrated within Southern California.
LOOKING FORWARD
Denim jeans have come a long way and are interestingly treated as both a casual attire and a truly global fashion item. The comfort style and versatility jeans offer make them suitable for any occasion. The market value for denim jeans has been on the rise since 2005. As jeans can be manufactured cheaply and efficiently in emerging markets, the share of imports has been increasing outstandingly. In fact according to various sources 98% of denim jeans available in 2010 were imported. The financial crisis reduced the consumer’s appetite for premium denim jeans and the sales of domestically produced high end denim jeans plummeted to astonishingly low levels. However the total market value of U.S denim jeans during the recession were almost unaffected. As a matter of fact, imports from developing countries were on the rise proving that jeans are an essential part of everyday life. However the cost cutting measures of substituting synthetic fibers for cotton did not go well with the consumers and it resulted in a fall in market value for denim jeans in 2011. But the denim jeans purchases picked up pace gradually showing the consumer’s yearning for good quality denim jeans. Thus it has become imperative for brands to capitalize on this trend and match up to ability standards. The sales of high end denim jeans which had doomed after the consumer’s dur ability economic instability is also showing signs of improvement due to increase in disposable income and growing brand consciousness. Even though U.S is the largest consumer of denim jeans in the world , the sturdiness of denim jeans industry during unfavorable economic conditions and subsequently, rising demand for high end denim jeans shows the potential for growth and proves that the long journey of denim jeans industry in the U.S is here to stay. Thus it has been rightly said:
“Jeans represent democracy in fashion.” -
Giorgio Armani
