E-commerce Apparel Market Trends

Growth Drivers

• Government investment in digital infrastructure and broadband expansion: Public investment in digital infrastructure is a primary driver of market demand by expanding addressable online consumer bases. The government continues to allocate substantial budgets toward broadband access, mainly in the rural and underserved regions, directly increasing online retail participation. The Political Economy of Communication 2024 data indicates that the largest investment in broadband accessibility reached USD 65 billion, mainly in broadband deployment in low-income nations to increase the digital retail penetration, mainly for apparel, which relies on visual browsing and frequent repeat purchases. Moreover, the manufacturers and distributors for apparel, the investments translate into sustained growth in online order volumes, wider geographic reach, and greater demand predictability.

• Expansion of government supported digital payments and financial inclusion: The government-led financial inclusion initiatives are stimulating the market demand by enabling secure digital transactions at scale. The apparel is highly sensitive to payment accessibility due to high transaction frequency and return cycles. According to the World Bank Group June 2022, nearly 76% of the adults globally had a digital transaction account in 2021, supported by public payment infrastructure and regulatory reforms. Further, India experiences a rapid growth in UPI transactions, directly supporting the online retail growth, including apparel. For the B2B apparel sellers, this driver improves the conversion rates by lowering cash on delivery dependence and enables scalable direct-to-consumer and marketplace-led sales models across the emerging and developed markets.

Region Wise Digital Payment Usage

Source: UNCTAD June 2022

• Government backed SME digitalization programs in apparel manufacturing: The public funding programs supporting SME digitization are expanding the supplier base for e-commerce apparel. Government’s view apparel as a high employment sector suitable for digital export enablement. The World Bank and UNIDO support digital transformation programs for textile SMEs, enabling participation in online B2C and B2B platforms. In India, the Ministry of MSME funds digital onboarding and e-commerce integration for apparel units under national competitiveness schemes. These initiatives increase the online product availability and sourcing diversity. For global buyers and marketplaces, this expands supplier choice while lowering procurement risk. Apparel brands benefit from faster vendor onboarding and diversified sourcing through government-enabled digital ecosystems.

Challenges

• Logistics, fulfillment, and high return rates:  Efficient low-cost logistics are non-negotiable, yet reverse logistics for high return rates cripple profitability. Apparel has high return rates compared to other categories. Zalando talked about this by investing a huge amount in logistics tech, including AI for size recommendations to reduce returns. Now suppliers must build similar systems or partner with other companies, adding complexity and cost, which is a significant barrier to achieving the positive unit economics from the outset.
• Platform dependency and algorithmic governance: Relying on Amazon, Filpkart and Tmall creates vulnerability. These platforms control visibility via opaque algorithms and can launch competing private labels. Amazon’s Amazon Essentials directly competes with its suppliers. Further, the platform fee structures often take a percentage of the sale compress margins. A seller report indicated that the Amazon sellers cite rising fees as their top challenge, forcing brands to balance the platform sale with direct channel investment.