In 2023, the overall scale of Japan’s retail apparel market reached ¥8.3 trillion, 103.7% year-on-year, exceeding the previous year’s results for three consecutive years. Although the market size shrank from about ¥9 trillion before the COVID-19 pandemic to about ¥7.5 trillion during the pandemic, it has been on an upward trend after bottoming out in 2020. The Group also increased both revenue and profits in the fiscal year ended March 2024, mainly due to stable demand for fashion following the normalization of socioeconomic activities.

By sales channel, department stores and specialty stores, which struggled during the COVID-19 pandemic in 2020, have been showing signs of recovery following the previous year. Physical stores achieved a remarkable increase in sales due to greater demand for daily wear associated with more outing opportunities and a recovery in demand for occasional items following the resumption of events. On the other hand, e-commerce that had thrived significantly during the COVID-19 pandemic, saw a slowdown in growth because of a rebound.

In these situations, major apparel companies are being divided into two groups: those that have recovered from the COVID-19 pandemic and are taking risks and tackling new challenges, and those that have lagged behind in recovery and are proceeding with structural reforms. The former are developing new brands and new business types. These new brands have a higher price range compared with previous brands, which is expected to fuel demand for high-quality fashion. On the other hand, the latter are improving management efficiency or withdrawing unprofitable brands.

The overall scale of Japan’s retail apparel market is expected to recover to the pre-COVID-19 level in the coming years. While the market size is expected to gradually shrink in the long term due to the effects of an aging population with a declining birthrate and a declining population, the market contraction is likely to be contained for the time being since unit sales prices have been rising due to soaring raw material and logistics costs and an increase in personnel costs. Moreover, if per capita spending on apparel increases due to the continuation of the upward trend in wages, the market size may expand.

According to a survey by the Ministry of Economy, Trade and Industry (METI), the e-commerce market for domestic product sales in 2023 was 14.6 trillion yen, up 4.8% from the previous year and accounting for 9.4% of net sales. Of this total, e-commerce sales of clothing and miscellaneous items amounted to ¥2.6 trillion, an increase of 4.8% from the previous fiscal year, and accounted for 22.9% of net sales. The percentage of Clothing and miscellaneous items in the merchandise e-commerce market was 18% and have become one of the main categories in the merchandise e-commerce market followed by Foods and beverages, etc. and Home appliances and AV equipment.

In 2020 and 2021, the e-commerce market for clothing and miscellaneous items expanded greatly in response to the COVID-19 pandemic. However, in 2022 and 2023, this trend subsided and the market experienced moderate growth. In 2023, while people gradually went back to physical stores as a result of increased outings following the Japanese government’s shift of COVID-19 to a Class 5 infectious disease, apparel companies were promoting OMO initiatives that integrate physical stores and e-commerce sites. This is transforming the roles of physical stores and e-commerce sites, and these changes are expected to continue.