Fashion Industry Outlook: 25% of Sales Through E-Commerce by 2020

• BCG and Zalando survey 90 global fashion brands for new study
• Platform business is driving e-commerce growth in Western Europe
• Companies are investing considerably more in online marketing

BERLIN, DECEMBER 6, 2018 // More consumers than ever are buying fashion online. Already, 20% of the surveyed brands' trade volume is online. This share is expected to grow to 25% by 2020, and indications are strong that it will not stop there. Accordingly, marketing budgets are increasingly moving online. This is one insight from the joint study Dressed for Digital: The Next Evolution in Fashion Marketing by the strategy specialist Boston Consulting Group (BCG) and Zalando Marketing Services (ZMS), the marketing unit of Zalando, Europe's leading online platform for fashion and lifestyle. Ninety global fashion brands were surveyed.

"Even today, online retailing at the surveyed companies is growing three times as fast as the brick-and-mortar business. This trend shows no sign of slowing down," says Jessica Distler, BCG partner and fashion industry expert. 

Platforms Are Now Indispensable to E-Commerce

Currently, the share of sales on company-owned online channels and on industry platforms is balanced, but by 2020 most revenue will be earned through platforms. Sales on online marketplaces are growing particularly strongly, at 12% annually. Company-owned online shops are growing one-third less quickly. "Companies that already have strong e-commerce are increasingly opening up their own shops on platforms, where they are making two-thirds of their online sales," says Dr. Andreas Antrup, Managing Director, Zalando Marketing Services.

Personalization Is Key to Success

Many of the surveyed companies responded to the rise of e-commerce by realigning their marketing strategies and shifting the lion's share of their budgets to online channels. At 43%, this is the largest single media budget item. On average, over 60% of the pot is spent online. "This marketing consists mainly of paid social media, search engine optimization, and retail media for promotional activities," explains Antrup. "While most spend significantly more money on digital marketing, they still leave much potential untapped. None of the study participants has achieved real excellence in this field," adds Distler.

Online retailing offers brands many opportunities. Unlike stationary sales, the online channel can be used by merchants for a highly individualized customer approach. The study shows that sales growth of 15% can be achieved with mature, personalized digital marketing strategies. But so far, only 13% of companies have correspondingly customized email, social media posts, and screen ads for individual customers. “To keep their customers coming back and remain successful, brands should individualize their communication to the greatest extent possible—in all channels," says Distler.

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