T H E U K FA S H I O N R E P O R TDig i ta l Cha l lenges and Tact ics ,

F rom Fast Fash ion to Luxury

2018

THE UK FASHION REPORT | 2

INTRODUCTION

2018 has started with tough retail conditions.

The industry has battled with rising rents on the high street,

declining real wages for consumers, and turbulent weather

conditions.

The list of fashion retailers announcing store closures, or worse

going into administration, continues to grow - from House of

Fraser and Next to Jacques Vert.

Another key challenge (and opportunity) for fashion brands is

the migration from offline to online, with the past year seeing

accelerated growth in online activity and sales.

In this report, we detail: • Top fashion players and risers driving online growth

• Key challenges that fashion retailers and brands face

• Recommendations and tactics to overcome these challenges

Actual Projected

600 M

500 M

400 M

300 M

200 M2016 2017 2018

THE UK FASHION INDUSTRY

Total Online Visits

Peak period surged, with visits in

November growing by 31% YoY

Visits in April-June also

increased by 20%+ YoY

PART ONE

THE PAST YEAR

ONLINE PERFORMANCE BY FASHION TIERS

PART TWO

KEY CHALLENGES

DISCOUNTING, OFFLINE AND LOYALTY

PART THREE

TOP RECOMMENDATIONS

DIGITAL TACTICS FOR RETAILERS AND BRANDS

WHAT’S INSIDE

For over twenty years, Hitwise has been a leading

online measurement and audience targeting

business.

With our unique digital insights and powerful

modelling tools, clients are able to segment, reach

and activate their prospective customers.

Sample size3 M+ online panelists

1.5 M+ mobile devices

Data depth160 M searches monthly

18 K+ audience attributes

Data frequencyHourly insights

to yearly trends

PART ONE

THE PAST YEAR

ONLINE PERFORMANCE BY FASHION TIERS

THE UK FASHION REPORT | 5

FAST FASHION ACCOUNTS FOR 66% OF ALL TRAFFIC

Each fashion tier has seen different levels of success over the past year.

The Fast Fashion Tier Fast Fashion was the largest segment by far, with 66% of

all fashion traffic in H2/H1 2018. As weather conditions

improved in April-June 2018, this tier also experienced a

significant rise of 30% YoY.

The Mid TierThe Mid Tier has seen consistent YoY growth across each

month, following a similar pattern to the previous year.

The Premium & Luxury TierThe Premium and Luxury Tier accounts saw impressive

results towards the end of 2017. Online visits grew by 32%

in the second half of the year, which included a 41% rise in

September and 31% rise in November.

MONTHLY ONLINE VISITS

MONTHLY GROWTH YoY

July 17 Sept 17 Nov 17 Jan 18 Mar 18 May 18

50%

40%

30%

20%

10%

0

July 17 Sept 17 Nov 17 Jan 18 Mar 18 May 18

400 M

300 M

200 M

100 M

0 M

Fast Fashion

Fast Fashion

Mid

Mid

Premium

Premium

Fast Fashion has risen rapidly in Spring 2018

Fast Fashion has the largest share, at 66%, of total online fashion traffic

Premium Tier drove growth in the second half of 2017

THE UK FASHION REPORT | 6

LUXURY BRANDS SOARED IN H2 2017

The second half of 2017 saw top luxury brands reach impressive online growth.

This included traditional luxury houses like Gucci and

Louis Vuitton, and etailers like Matches Fashion, Far

Fetch and Net-A-Porter.

How has Gucci grown by 131% YoY?

Bringing on a new creative director in 2015, Gucci has

transformed its brand into a hip and digitally-focused

leader.

From hoodies and fanny packs, to collaborations with

designers like Harlem tailor Dapper Dan, Gucci has

successfully lured the luxury millennial.

Online channels have also evolved. Video has become

key to Gucci’s digital marketing, with traffic from

YouTube rising by 65% in June YoY.

THE PREMIUM & LUXURY TIERFastest Risers in H2 2017

Luxury brands, particularly Gucci, saw impressive growth toward the end of 2017.

Luxury retailers like Matches Fashion also grew by double digits.

Visits to Luxury Brands

Visits to Luxury Retailers

Gucci

Supreme

Michael Kors

Chanel

Louis Vuitton

Matches Fashion

Far Fetch

Net-A-Porter

Flannels

Mr Porter 31%

45%

48%

49%

56%

71%

76%

97%

98%

131%

THE UK FASHION REPORT | 7

FAST FASHION POSTS IMPRESSIVE GROWTH IN H1 2018

After a successful 2017, Fast Fashion brands continue to grow in 2018.

In particular, teen fashion players, like Shein, Oh Polly,

Nasty Gal and PrettyLittleThing, have catapulted and

captured the summer fashion rush.

How has Shein seen an incredible 744% rise?

Operating for ten years now, Shein offers the latest

fashion trends at ultra-cheap prices. The past year has

seen an enormous push for the Chinese company to go

international, using search and social channels to do so.

Shein has seen significant growth from Google,

with clicks rising by 32% in June YoY. These clicks

predominantly came from Google Shopping and

aggressive bidding on generic product searches.

Compared to April-June last year, the etailer has

successfully attracted traffic from summer favourites like:

“cheap bikinis”, “beach kimonos” and “festival clothes”.

THE FAST FASHION TIERFastest Risers in H1 2018

Visits to Pure Online Players

Visits to High Street Brands

Not all brands with high street presence are suffering, with Select Fashion and Quiz Clothing seeing large online growth.

Select Fashion

Quiz Clothing

Peacocks

Next

George at ASDA 28%

35%

40%

66%

87%

Shein has seen impressive growth since the start of the year.

Shein

Oh Polly

Nasty Gal

Dress Lily

PrettyLittleThing 96%

155%

158%

446%

744%

THE UK FASHION REPORT | 8

But it’s not all good news for fashion brands online.

A number of global high street labels have experienced

lack-lustre results over the first six months of the year.

Top high street brands, like Urban Outfitters, Massimo

Dutti and Zara, have seen flat results in 2018.

A number of American labels have also started the year

with worrying performances. Brands like Abercrombie &

Fitch, Forever 21 and GAP have announced store closures

or plans to downsize operations in the UK.

What does the past year’s data tell us?

Certain brands and tiers, particularly fast fashion and

luxury, have accelerated in 2018. But not all fashion

retailers and brands are seeing success online.

In the next chapter, we look at why this is the case.

SELECT HIGH STREET BRANDSH1 2018 YoY

Urban Outfitters

Massimo Dutti

WhiteStuff

GAP UK

The White Company

Zara

COS

Jack Wills

Abercrombie & Fitch

Forever 21-18%

-9%

-7%

-4%

-3%

-2%

-2%

-1%

0

1%

A number of global high street brands have seen flat or even declining online results.

SOME GLOBAL HIGH STREET BRANDS STRUGGLED IN 2018

PART TWO

KEY CHALLENGES

DISCOUNTING, OFFLINE AND LOYALTY

THE UK FASHION REPORT | 10

THE DISCOUNTING DILEMMA

Promotions throughout peak period – has this become a customer expectation?

Let’s see by looking at searches for discounts,

promotions and sales over October-December.

In the beside chart, we can see that December is still

the key month for discounting. But this has grown YoY

in October and November, particularly for Mid (10% and

9%, respectively) and Premium (13% and 15%) tiers.

Expectations for Fast Fashion have also shifted, with

searches in October growing by 9%, and declining by 6%

in December.

Customers are expecting discounts and this won’t fade away in 2018. Retailers need to keep track of online

activity; monitoring searches and competitor promotions

over peak period.

SEARCHES FOR DISCOUNTS & SALESSHARE BY FASHION TIER

Fast Fashion Mid Premium

October November December

16%

12%

8%

9%* 3%

-6%

10%9%

2%

13%15%

4%

* Data labels show the % difference in share of searches YoY

December is still the top month for people seeking discounts. But searches in October & November have grown, particularly for Mid and Premium tiers.

THE UK FASHION REPORT | 11

THE RETAIL APOCALYPSE

The “retail apocalypse” – is it real or is it hype?

2018 has seen announcements of massive store closures; many claiming the “death of the high street”. Turbulent weather conditions have

been critical to this, with the Beast from the East dampening retail footfall. The largest disparity between footfall and online growth was in

March, when average temperatures dropped by 3.5° YoY.

Retailers have since played catch up, reaping the benefits of summery weather and key events like the Royal Wedding and World Cup.

Brands need to maintain this momentum into the second half of 2018.

RETAIL FOOTFALL VS. ONLINE ACTIVITYYoY Change by Month

Retail Footfall

Retail OnlineJan 18 Feb 18 Apr 18Mar 18 May 18

5.3%

-1.6%-0.5%

-3.3%

-0.4%

-6%

5.1%

7.1% 6.5% 6.1%7.5%

-0.9%

Jun 18

With the largest drop in temps, March had the biggest disparity between online and offline.

Online continues to drive growth for the retail industry.

Footfall has recovered as weather improved, but still on the decline YoY.

THE UK FASHION REPORT | 12

LOYALTY IN QUESTION

Customer loyalty – does it still exist?

Customers are shopping around and looking at different brands, as seen in the following chart. The number of people visiting all top

five sites across fashion tiers have grown, particularly for premium (rising by 128%) and luxury brands (rising by 48%).

Understand where else your customers go, particularly as we approach the critical Q4. In the next chapter, we review tactics to

overcome these key challenges.

VISITORS TO TOP FIVE FASHION SITES

TOP TEEN SITES TOP PREMIUM SITES TOP LUXURY SITES

Audience Size in Q4 2017

in visitors of all five sites

in visitors of all five sites

16%in visitors of all

five sites

128% 48%

PART THREE

TOP RECOMMENDATIONS

DIGITAL TACTICS FORRETAILERS AND BRANDS

THE UK FASHION REPORT | 14

DIFFERENTIATE DISCOUNT SEEKERS VS. STANDARD SHOPPERS

Consumers are expecting discounts earlier in the year; brands are also starting their promotions earlier.

To get ahead, brands need to differentiate their discount

shopper from their standard shopper. The following chart shows

this breakdown for Zara.

In Q4, 11% of Zara’s visitors went on to make a purchase. Out

of Zara’s purchasers, 17% had searched for a discount before

entering to Zara’s site.

Zara’s discount seekers were more likely to use Google and

YouTube. Whereas, Zara’s standard shoppers were more likely

to enter its site from Gmail, Instagram and Pinterest.

How can Zara use these insights?

To target the discount seeker, Zara could promote their sales

on YouTube. Or, they could use Instagram to feature their latest

collections to engage with their standard shopper.

ZARA – VISITORS, PURCHASERS& DISCOUNT SEEKERS

Audience Size in Q4 2017

17% of Zara’s purchasers actively searched for a discount or sale, before entering Zara’s site.

2.05 millionunique users

225,030(11% of visitors)

37,380(17% of purchasers)

VISITORS

PURCHASERS

DISCOUNTPURCHASERS

THE UK FASHION REPORT | 15

UNDERSTAND YOUR COMPETITIVENESS BY LOCATION

House of Fraser Visitor Share & Conversion Rate

London

Birmingham

Edinburgh

Cardiff

Milton Keynes

Plymouth

Doncaster

Telford

Hull

Bournemouth

1.

2

3.

4

5.

6.

7.

8.

9.

10.

10.1%

3.7%

2.2%

1.9%

1.2%

1.1%

1.1%

1.0%

0.9%

0.7%

City Visitor

1.

2

3.

4

5.

6.

7.

8.

9.

10.

8.8%

8.4%

7.8%

7.7%

7.5%

7.0%

6.1%

5.9%

5.7%

4.7%

Milton Keynes

Telford

Hull

Cardiff

London

Doncaster

Bournemouth

Edinburgh

Birmingham

Plymouth

City

House of Fraser attracts a high share of visitors from Birmingham and Edinburgh, but these cities aren’t converting as well as others.

To increase sales, the retailer could analyse the brand and product interests by city, then feed these into localised product and promotional activity.

Birmingham

Telford

Plymouth Bournmouth

London

Milton Keynes

Doncaster

Hull

Edinburgh

House of Fraser By City of Store Closure

This is paramount if you are looking to migrate your offline audiences online. Out of the cities with planned store closures, House of Fraser

attracts a higher share of online visitors from London, Birmingham and Edinburgh. But in terms of conversion (i.e. visits that lead to a purchase),

Edinburgh and Birmingham were amongst the lowest.

If House of Fraser wanted to increase conversions and sales in Birmingham and Edinburgh, the retailer could firstly identify which brands these

visitors are interested in. House of Fraser could then update their product assortment or feature these products in upcoming promotions to drive

conversions.

Conversion

THE UK FASHION REPORT | 16

UNDERSTAND WHERE ELSE YOUR CUSTOMERS GO

Shoppers are browsing and comparing across sites – so, how can brands keep their “loyalists” exclusive?

Fashion brands can do so by understanding where else

their customers go and why.

The beside chart looks at exclusive visitors of the top

five luxury brands (i.e. only visit the brand, and not the

other four sites).

In April-June, Mulberry saw the largest drop in exclusive

visitors at 14% YoY, with Chanel receiving the largest

uplift from Mulberry YoY.

Through search and channel tactics, Mulberry could then

identify why they are losing their customers to Chanel

and devise ways to win them back.

(Find out how in the Hitwise Super Customers report)

MULBERRY VS. COMPETITOR OVERLAPApril-June YoY Change

I exclusively visit ...

I visit Mulberry and...

Gucci Only

Louis Vuitton Only

Burberry Only

Chanel Only

Mulberry Only

+9%

-5%

-5%

-9%

-14%

Chanel

Louis Vuitton

Gucci

Burberry

+14%

+2%

-1%

-16%

Gucci was the only luxury brand to growin exclusive visitors

Mulberry saw the largest decline in exclusive visitors

Chanel received the biggest uplift from Mulberry visitors

SUMMARYA number of challenges are top of mind for fashion retailers

and brands in 2018. These include:

- The Discounting Dilemma: Customers are searching and

expecting discounts earlier in the year.

- The Retail Apocalypse: Although the “death of the high

street” is seemingly overhyped, the online channel has

become the key source of growth for the industry.

- Loyalty in Question: And as online grows, customers

are shopping around on multiple sites; making “exclusive”

customers are a rarity.

But certain brands like Gucci and PrettyLittleThing are

finding success online.

The key lies in understanding your customers - where

else do they go online, what are their brand and product

interests, and what proportion are searching for discounts -

and devising digital tactics to acquire and grow them.

Sources by page

Chapter 1: Hitwise. Fashion Industry = Custom list of top 150 Fast Fashion, Mid and

Premium Tier Brands and Retailers, based on average pricing on standard attire.

Page 4: Hitwise. Fashion Industry = Top 10 domains in Hitwise Apparel & Accessories

Industry (ex. Multi-category retailers, Footwear, Accessories, Kids Wear Only)

Page 10: Hitwise, Search = Searches with the term discount, sale or promotion leading

to each fashion tier. Period = 12 rolling weeks to 30-Dec-2017 YoY.

Page 11: Hitwise’s Shopping & Classifieds industry and Springboard footfall data, as

reported in the BRC.

METHODOLOGY

LEARN HOW TO GROW AND ENGAGE YOUR FASHION AUDIENCES

CONTACT US TODAY

will help you uncover hidden customer opportunities online.

FIND OUT HOW

Page 14: Hitwise. Visitors / Purchasers = people who visited or purchased on Zara’s site.

Discount Purchasers = people who searched for a discount, sale or promotion before

entering Zara’s site, and made a purchase. Period = 13 weeks to 30-Dec-2017.

Page 15: Hitwise. Visitors and Conversion Rates to House of Fraser’s site in selected

cities. Period = 4 weeks to 30-June-2018 YoY.

Page 16: Hitwise. Visitors to top five luxury sites (exclusive and shared audiences). Period

= 12 weeks to 30-June-2018 YoY.