The outlook for Canada’s apparel industry is getting brighter, although challenges remain. Like the United States, Canada was significantly impacted by the COVID-19 pandemic, with many retailers closed for months due to government shutdowns and manufacturers plagued by supply chain disruptions. However, Canada’s apparel market is rebounding and expected to see strong growth over the next several years.
Canada’s Apparel Industry
Canada’s apparel industry has a rich history. In the 1970s and 1980s, some of the world’s top designers and the country’s textile and clothing industries were also booming well into the 1990s, with 70% of the textile and clothing products consumed in Canada manufactured locally.
In 2005, the Canadian government removed import quotas on clothing and textiles, pursuant to World Trade Organization agreements signed 10 years prior. The change resulted in an influx of less expensive foreign-made apparel, which made it more difficult for the Canadian apparel- manufacturing industry to compete. While some segments of the industry contracted, others pivoted to remain viable. For instance, many apparel manufacturers have transitioned toward niche markets, producing luxury clothing as well as specialty garments such as sportswear and protective clothing. In fact, Canada is still home to some of the most highly-regarded technical textile manufacturers in the world.
Canada also still has a large apparel market that includes popular brands, including Lululemon Athletica and Canada Goose, as well as top designers, such as Sid Neigum and Hayley Elsaesser. Several “slow fashion” brands have also made names for themselves by designing and producing their products in Canada, including Anne Mulaire, Encircled and Thief & Bandit. Canada also represents one of the world’s largest women’s clothing markets, with a market volume of $20.69 billion USD in 2022.
Apparel Market Quickly Rebounding from COVID-19
Unfortunately, Canada’s apparel industry was not left unscathed by the economic turmoil of the past several years. Retail sales of apparel plummeted by more than 23% in 2020 in the wake of the COVID-19 pandemic. Fortunately, much like the United States, sales of clothing and footwear rebounded in 2021, as retail stores reopened and consumer demand increased. Trendex North America reported that the industry saw a year-over- year gain of 16.2% last year.
In 2022, revenue in the entire apparel industry stands at $37.52 billion USD, according to Statista. The apparel market is predicted to grow, with a volume growth of 5% in 2023. Overall, the apparel market is expected to sustain annual growth of 3.9% from 2022 to 2026. According to Trendex, the industry will see annual gains of 14.8% in 2022, 5% in 2023, 2.9% in 2024, 1.5% in 2025 and 1.8% in 2026.
Canada’s luxury apparel sector has not recovered as quickly as the rest of the industry. Given that the slow recovery can be attributed to the lack of foreign tourism, retail sales of luxury apparel are expected to rebound as COVID-19 travel restrictions are further relaxed. However, the increasing demand for secondhand luxury goods among Canadian consumers may also inhibit growth.
The Canadian Apparel Industry Still Faces Uncertainty
Barring the emergence of a new COVID-19 variant, the worst of the COVID-19 pandemic appears to be behind us. However, the Canadian economy faces many of the same challenges. The Canadian economy faces many of the same uncertainties that we are dealing with in the United States, including the impact of the war in Ukraine, rising fuel costs and ongoing supply chain issues. As consumers are becoming more cautious about discretionary spending on clothing to focus on other necessities, retail sales of apparel are likely to slow down.
Canadian apparel companies must also contend with worldwide inflation. The costs of shipping, textile raw materials, labor and energy, all continue to skyrocket. Accordingly, companies must make the difficult decision whether to absorb rising costs or pass them on the consumers. Supply chain disruptions and shipping delays also remain a concern for businesses, with too many fashion companies still facing one- to two-month delays. Future COVID-19 lockdowns in China also have the potential to cause additional supply chain headaches for Canadian apparel companies that rely on Chinese suppliers.
Even if demand increases, Canada faces a lack of skilled workers, with cutters, sewers and pressers not being replaced as older generations retire. As a result, Canadian firms often find it difficult to compete with foreign manufacturers, which can offer both skilled laborers and lower costs.
Key Takeaway
While Canada’s apparel industry has faced challenges in recent years, it recovered quickly from the impact of the COVID-19 pandemic and is poised for continued growth over the next several years. By moving into niche markets and producing quality apparel closer to home, manufacturers and designers are well-positioned to fuel a revival.
Howard D. Bader is a NYC attorney who serves as general counsel for clients in a wide range of industries on an international scale. With over three decades’ worth of legal experience, he has represented clients in numerous legal matters, including commercial litigation, intellectual property, bankruptcy, creditor’s rights and mergers and acquisitions, as well as numerous corporate transactions and business law matters.
Howard D. Bader
hbader@sh-law.com
(212)784-6926
sh-law.com
