Some 51% of shoppers bought fashion online from their smartphones in the last 12 months, with usage soaring by 10 percentage points since 2020, meaning that consumers are now almost equally as likely to purchase from smartphones as from desktops/laptops.

The cost-of-living crisis will constrain demand for fashion in the short term as most of the market is discretionary and therefore exposed to consumers cutting back spending. Online fashion sales have already dropped back in 2022, declining by 6.1% to £31.4bn, following soaring online usage during the pandemic, particularly during lockdown periods, with the market entering a period of consistent decline in 2022 as more demand returns to stores. A less restricted environment for other consumer-facing sectors, such as travel and music festivals, will bring opportunity for the release of some demand for fashion during the summer, particularly among younger consumers.

For the youngest Gen Zs, who are the most confident about their finances over the next year, fashion remains a priority, with 51% planning to spend more on buying clothes over the next three months from May 2022. While many of these consumers will continue to favour buying clothes and footwear from low-priced fast fashion retailers and pureplays, there is growing awareness about the impact on the environment and a pushback from some in this generation is likely to turbo-charge the second-hand and rental/subscription markets. Here the desire to refresh wardrobes in the face of financial pressure combined with strong eco-led buying behaviours will be powerful, leading to further growth for traditional (eBay) and new-wave (Depop and Vinted) second-hand platforms and larger brands who are increasingly moving into this space online, such as Levi’s, which has launched its own online platform for vintage, and H&M, which has added a pre-loved offer to its website.

The rising rate of returns, exacerbated by heightened online shopping as a result of the pandemic, remains a threat to fashion retailers, as it is very costly for businesses financially and environmentally. Almost six in 10 shoppers have returned fashion items purchased online in the last 12 months, rising to 78% of young females aged 16-24, with half of female shoppers struggling to find the correct sizes when buying clothes/footwear online. In response to the high rate of returns, we have seen several fashion retailers including Zara and Next introduce charges for returns, but retailers are also investing in fit solutions to help consumers buy the correct sizes from the start.

• How will the cost-of-living squeeze impact the online fashion market?

• How the online fashion market grew during COVID-19 and forecasts as the market matures.

• How and where people have bought fashion online in the last 12 months and the growth in smartphone purchasing.

• Changes in shopping behaviours when buying fashion online in the last year and demand for enhanced deliveries and wider range of products.

• What can retailers do to help consumers find the correct size/fit when buying clothes online?

At the start of 2020, COVID-19 caused massive economic disruption, and UK GDP fell by 9.4% over the course of the year. There was further severe disruption throughout 2021, but the economy did make up much of 2020’s lost output, and the Office for National Statistics estimates that UK GDP grew by 7.5% in 2021.

In its March 2022 Economic and Fiscal Outlook report, the Office for Budget Responsibility revised its forecast for growth in UK GDP to 3.8% for 2022, down from the 6% forecast in October 2021. This more pessimistic outlook has been driven by the sharp rise in inflation and the impact it will have on consumer spending. CPI reached 6.2% in February 2022 and is expected to continue to rise for much of the year. The OBR forecasts CPI to peak at 8.7% in Q4 2022 and average 4% over 2023, still double the Bank of England’s inflation target.

Rising prices will lead to a historic drop in real incomes and put consumer spending under pressure. This is reflected in the OBR’s latest forecast for 5.4% growth in household consumption in 2022, 4.4 percentage points lower than it projected in October. Mintel’s tracker data shows that an increasing proportion of consumers across Europe are concerned about the impact of rising prices on their household finances and there are signs of consumers already taking a more cautious approach to spending.

There is more positive news in the labour market. The unemployment rate for the three months to January 2022 was 3.9%, while provisional payroll data for February 2022 indicated that there were 29.7m employees in the UK, up 662,000 on pre-COVID-19 levels. The OBR expects unemployment to remain relatively level at around 4.1% for the duration of its five-year forecast period. There is, however, still the prospect of long-term scarring on employment, especially in the more exposed retail and hospitality sectors, and data on the self-employed and economic inactivity are less positive than the headline unemployment rate.

The human cost of the conflict in Ukraine, including the horrifying number of civilian deaths and injuries and the growing migration crisis, is at the forefront of consumers’ minds. However, the economic impact is also a growing concern. In particular, soaring energy prices and the impact of sanctions will have a strongly inflationary impact. Even before the conflict in Ukraine, Mintel’s consumer confidence tracker showed that sentiment was slipping, and it will almost certainly fall further over the coming months.

The conflict in Ukraine means that the economic outlook is particularly uncertain, and the OBR has made it clear that it is too early to gauge the full impact it will have on national economies. As such, independent forecasts are very likely to change rapidly throughout the year as the situation changes.

For the purposes of this Report, Mintel has used the following definitions for online fashion:

• Clothing for men, women and children, including both underwear and outerwear.

• Footwear, including shoes, boots and any other type.

• Fashion accessories such as handbags, scarves and costume jewellery.

The market is defined as all purchases where transactions are made through the retailer’s website, or through a marketplace, rather than by other ordering methods, even if the product is viewed online prior to purchase.