The Future of Fashion Trade

Martin Kits, Head of Business Policy and Advocacy at the Svensk Handel held a seminar on Wednesday during Fashion Week Trade. We have summarised what Martin presented and the discussion afterward, such as important trends in trade and the future of retail in Sweden. 

The focus was, among other things, on changing rental conditions, the rapidly growing second hand market, the threat of piracy on global platforms, and an overview of the economic situation of retail. 

Rental developments and their impact on retail

Over the past three years, retail stores have seen a steady increase in rents. With the rent index now expected to be at a lower level, the Swedish Trade Federation believes that this will be a positive development for the retail sector, as it may result in lower rents, which can benefit store owners and give them better conditions. 

Interest in second hand is growing

Another clear trend is the strong growth in second hand goods. In May 2023 alone, the Swedish second hand market had a turnover of SEK 471 million. It is clear that interest in second hand goods, especially in fashion, has exploded. Today, six out of ten consumers buy fashion items second hand. Two factors driving this trend are price and uniqueness – shoppers are attracted by the possibility of finding unique garments at a lower price.

Although the second hand market has grown, the largest market in retail is still the first-hand market. It is therefore important that brands continue to develop their products and collections as they have a great opportunity to gain a large market share. 

The question was raised whether growth in second hand will slow down as the economy improves. There is a likelihood that the growth rate may decrease as price sensitivity decreases, but at the same time, there is an interest in sustainable consumption. If the first-hand market is functioning with sustainable and quality products, the second hand market can also continue to function with positive development. 

Many shops today work with a combination of first and second hand markets. There are many opportunities to sell good quality products that can then also be sold second hand, and why not in the same shop. 

An economic problem with the sale of second-hand products is that they are currently taxed twice, as 25% VAT is charged each time a product is sold, even though it has already been taxed previously. After four sales, the VAT can amount to the original value of the product, source Svensk Handel. 

E-commerce is growing 

E-commerce flourished during the pandemic, but this has made it difficult to measure its real growth. Despite this, e-commerce has remained stable and even increased slightly this year. In particular, certain segments of e-commerce are booming, with nicotine, pharmacy and beauty products being particularly prominent.

But despite these successes, trade faces other major challenges, not least linked to piracy and illegal trade via Chinese platforms. Piracy costs the Swedish economy around SEK 5 billion annually. This is largely because many of these products do not comply with European chemical laws and other regulations, making it difficult for authorities to monitor and intervene. Swedish authorities are actively working to find solutions, but it is a complex and challenging issue, says Martin. 

What does the future hold for fashion retail?

There is no doubt that the retail sector, both physical and online, is facing some changes. With increasing competition from alternative sales channels, strong growth in budget-friendly second hand, and problems with piracy, operators will have to adapt to meet consumer expectations. Stronger brands seem to be a key factor for future success. 

The growing second-hand market also requires a good first-hand market. This creates room for new business opportunities with combined stores and e-commerce. Stronger brands seem to be a key factor for future success. 

It seems that we are now on the way up again,’ Martin concludes.