2 GLOBAL CONSUMER DEMAND FOR
WOOL
The Australian wool industry has entered a period of
irreversible change and one of the most significant factors has been the
change in the nature of consumer demand for apparel during the 1990's.
Initially, poor retail sales in major consuming countries were
attributable to a global recession in the early 1990's, but as economic
growth recovered to moderate levels, it became apparent that apparel
demand in many countries was continuing to be depressed.
By 1998, we have learned that some very important shifts
in consumer behaviour towards apparel purchases have occurred. The global
consumer is living in an environment where there is less job security,
less leisure time, more options for income expenditure and an ageing
population with greater emphasis on funding an early retirement and a
prolonged period of retirement. The implications for the wool industry are
significant.
Consumer Expenditure
The amount of real personal income allocated to
discretionary consumer expenditure has declined in most countries (US
& UK being exceptions) over the past decade. Moreover, apparel's share
of that expenditure is being eroded as consumers choose to direct more of
their income to travel, home electronics and other recreational
activities. In Germany, for example, the proportion of household
expenditure spent on clothing and footwear by higher income earners has
declined from 9·4% to 6·7% in the ten year period (Figure 1).
The permanency of these trends toward reduced outlays on
apparel is still being debated, but one undisputed conclusion is that
greater product innovation in the apparel sector would assist in
generating more consumer interest in apparel purchases.
Product Features
Part of that product innovation for wool will involve an
increased shift from formal wear (wool's stronghold) to smart casual and
relaxing leisure wear (Figure 2). Surveys by The Woolmark Company have
shown that consumers in wool's target market still wish to look good and
feel confident in their business clothes, but they wish to exercise
greater freedom of choice than is offered by coats, suits and skirts.
Other product features being sought by consumers which
will impinge on wool's long-term suitability as a textile fibre include:
- Softness - handle and next-to-skin comfort;
- Lightweight - average weights of both worsted and woollen fabrics
have declined by up to 15% over the past 10 years;
- Easy care - has assumed greater priority in order to create more
time for leisure.
Consumer Perceptions of Wool
One of wool's most significant assets in fibre
competition has been its image as a warm, natural fibre with a traditional
place in men's and women's apparel. The advantage for wool conveyed by
that image is fading for three principal reasons:
- An increasing proportion of consumers has less knowledge of wool's
natural attributes. They have always known and take for granted the
availability of a full range of synthetic fibres.
- Some of wool's negative perceptions (eg. the prickle factor) have
gained more prominence.
- Although wool's image as a natural fibre is still a positive, its
value could be discounted by adverse publicity relating to chemical
residues and animal welfare.
Price Sensitivity
An important characteristic of the apparel retail market
has been the increasing sensitivity of consumers to listed retail prices.
By the mid-90's listed apparel prices in Japan were down nearly 15% and in
Europe by almost 10% (Figure 3). Furthermore, consumers are increasingly
waiting for sales - in 1996, over 60% of apparel purchases in the US were
at sales, 50% in Germany.
The impact on retailers has been predictable. They have
imposed strict price limits on manufacturers and have endeavoured to
contain the uncertainty of consumer behaviour by placing limited opening
orders and allowing early consumer response to dictate follow-up orders.
The Global Market
End consumption of wool in emerging markets has increased
by around one third in the past 10 years and now represents roughly 40% of
wool's global market. However, that increase has served to replace the
dramatic slump in wool consumption in Eastern Europe and the former USSR.
Consumption in the developed countries still represents over 55% of the
total (Figure 4).
Realisation of the full potential for wool in the
developing world (eg. China, India) poses a significant challenge for
wool. Apart from the significant trade barriers to be surmounted in many
of those countries, the markets are extremely sensitive to economic,
cultural and environmental factors. Product innovation in those countries
will be a high priority. The long-term implications for wool caused by the
serious down-turn in the economies of some Asian countries cannot be
assessed at this stage. However, the immediate impact will be to
substantially reduce the rate of growth of consumer demand for textile
fibres in the Asian region.
Key Issues
- Increasingly selective consumers of apparel are demanding
product innovation suited to their changing life styles
- The consumer market is very price sensitive causing downward
pressure on prices of textile products.
- Consumers assess a product on its ability to satisfy their
requirements and are less swayed by pre-conceived images of fibre
values.
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