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Inside the Economics of Your Underwear

Underwear is a $110 billion market. Which companies are most successfully getting into our bras and briefs?
Naomi Campbell in Agent Provocateur's Spring 2015 campaign | Source: Agent Provocateur
  • Kate Abnett

LONDON, United Kingdom — Outside the Victoria's Secret Store on New Bond Street in London, a line of sheepish looking men are texting, avoiding eye contact and pretending not to notice the pink winged corset in the window they are leaning against.

Inside is an explosion of lace, frills, fragrances and cosmetics — an absolute shrine to getting undressed, decked out like a boudoir with black-lacquered walls and hundreds of glittering mirrors. Framed photographs of the Victoria's Secret Angels are on display like family portraits, while headset-wearing shop assistants dart through the throngs of female shoppers.

Victoria’s Secret, the largest underwear retailer in the US, has transformed lingerie shopping from a chore into a blockbuster experience. And a visit to a VS store is a lesson in just how far the lingerie market has come in the last decade. According to data provided by Euromonitor, the global underwear market was worth just over $110 billion in 2014.

The underwear industry operates much the same way as the clothing industry. Some companies, like Agent Provocateur, design and distribute their own underwear, but many operate licensing agreements. Stella McCartney, for example, will design the products in collaboration with a company like Bendon Group, which owns the licenses for Stella McCartney and Heidi Klum Intimates. Bendon then makes the products in its network of production facilities and puts them on sale in its retail partners, as well as, say, Stella McCartney's own stores.

And much like the clothing industry, most underwear is made in Asia. In part, because it’s cheaper. But also because the technical skills and machinery needed to make underwear — in particular, to make lingerie — don’t exist at scale elsewhere.

A few luxury brands make their own — like La Perla, which has a specialist lingerie factory attached to the company's HQ in Bologna, Italy — but this can hike the price and production time. A Bendon-made bra takes nine months to go from design to shop floor. Agent Provocateur bras (which are made in North Africa, Europe or Asia) take up to a year. A La Perla bra takes at least 12 to 15 months.

In the US and Europe, a few big companies, including L Brands (which owns Victoria’s Secret), Hanes (which owns Wonderbra and Playtex), Triumph International and Calzedonia Group hold the lion’s share of the underwear market. In a cultural quirk that sets it apart from the US and Europe, the UK’s underwear market is led by high street retailer Marks & Spencer, which holds a 26 percent market share.

In Asia, the market is much more fragmented. Asian underwear companies often do a dual business in selling under their own brand name and manufacturing for international labels. Chinese label Cosmo Lady, for example, is also a lingerie material supplier to Victoria’s Secret, while Japan’s Wacoal Holdings Corp runs its own label and produces intimates for brands including DKNY.

But in recent years, new trends and technologies — from performance materials to start-ups that sell underwear subscriptions — have shaken up the underwear business. The first thing to know: the thong is a thing of the past.

“The big surprise is young women moving to full coverage panties and migrating away from the thong,” said Marshal Cohen, chief industry analyst at NPD Group, a market research firm. “The new younger consumer is demanding comfort,” said Bernadette Kissane, apparel and footwear associate at Euromonitor, of the reason behind this shift.

The popularity of sweatpants (a loose style that makes VPLs a non-issue), innovation in ‘seamless’ materials, as well as a shift in young women’s attitudes to dressing for comfort as well as style, have contributed to a big increase in sales of fuller-bottomed briefs and decline in sales of thongs. Last year, thong sales dropped by 7 percent, while sales of fuller underwear bottoms grew 17 percent, according to NPD Group.

“After the explosion of thongs as the fashion shape of the ‘90s, today less than one in ten of the knickers we sell is a thong,” said Soozie Jenkinson, head of lingerie design at Marks & Spencer. The same trend is true of the luxury lingerie market. “We sell more briefs than thongs,” concurred Garry Hogarth, CEO of Agent Provocateur.

Women are also opting for comfort up top. “There has been a real trend towards non under-wired lingerie,” said Nancy Szachno-Dressel, lingerie buyer at department store John Lewis, where non-wired bras now comprise 40 percent of bra sales, up 32 percent year-on-year.

Men are also reshaping the market. As menswear booms, the male consumer is also taking more interest in what’s happening underneath his clothes.

"In the last five years I've seen an explosion in the amount of men's underwear brands," said Joel Primus, who founded men's underwear label Naked in 2010. Born out of a trip hiking up Machu Picchu, Naked has pushed into the fast-growing men's performance underwear category, pioneering seam-free briefs to wear under slim pants and sport-friendly styles made from x-static sliver-infused fabric that, frankly, "didn't stink when you wore it."

“The biggest drivers we're seeing are performance and luxury,” said Primus. “Guys want their underwear to perform, first and foremost, and then style is important. Colour, prints — something that speaks to their own sense of fashion.” New York label 2(x)ist is another performance underwear player aimed squarely at the “self-purchasing millennial guy.” According to chief executive Tom Speight, underwear “must round out his active lifestyle” and, to this end, “synthetic fabrications and moisture management properties show no signs of letting up.”

But as women’s briefs get bigger, men’s are becoming, well, briefer. Boxers (a fitted short) now have the biggest share of the men’s market at nearly 40 percent. And while briefs sales also grew 23 percent in the year ending September 2014, loose boxers declined 14 percent.

Even more than most clothing categories, underwear is all about the fit. Marks & Spencer alone employs 6,000 bra fitters who fit 150,000 customers every month. Somewhat surprising, then, is the massive growth of the online lingerie market, which is forecast to grow 18.2 percent from 2014 to 2019, according to market research firm Research and Markets.

“Buying lingerie online was unthinkable 10 years ago,” said Ambika Zutshi, chief executive of Fashionbi, a fashion and luxury research firm. “Today, this industry offers comprehensive size guides online, good delivery and customer-care services — and a great alternative to consumers feeling uncomfortable while shopping for intimates.”

“We see online as a great way for customers to repeat purchase their favourite lingerie,” agreed Szachno-Dressel of John Lewis, where online sales of lingerie have increased 207 percent in five years — helped, in part, by services like specialist online bra-fitting videos.

Indeed, online solves the tricky business of stocking bras in all sizes (there are over 100) and taps the customer habit of repeat buying the same basic items — a retail quirk also being exploited by MeUndies and Manpacks, two start-ups that sell subscription packs of underwear. Other start-ups taking advantage of the growing online market for underwear include New York start-up Adore Me, which drops a new lingerie collection each month, and Ten Undies, which sells full-bottomed styles for women online.

But perhaps the biggest revolution in the business of briefs is the entrance of new competitors from outside the underwear space. Fast fashion giants like Topshop, H&M and Forever 21 have all launched their own lingerie lines, bolstered by collaborations like H&M's David Beckham 'Bodywear' collection. "We can see that our customers in all markets really appreciate these collaborations," said Andreas Löwenstam head of menswear design at H&M, of the partnership.

Such collections have got the big brands concerned. Millennial shoppers are better acquainted with these stores than with lingerie specialist brands or department stores. And underwear has traditionally been less trend-led than clothing and made at a slower pace — until now.

"Lingerie collections have evolved to mirror the breadth and pace of seasonal ready to wear collections," explained Lydia King, buying manager at Selfridges. To shorten its time to market, Victoria Secret has put its panties on what CEO Sharen Turney has described as a "speed programme." Bendon, too, is moving to a vertically integrated supply chain like the one pioneered by Zara, to match new product to customer demand, at speed.

“This requires speed, innovation, value, and service,” said Justin Davis-Rice, chief executive of Bendon Group, of serving the modern underwear consumer. “Key players such as ourselves are evolving to deliver this through integrated supply chains… This way the consumer pulls through what they demand instead of suppliers pushing product that consumers don’t want.”

But for traditional underwear behemoths, their biggest weapon against these new competitors is brand. Calvin Klein reports logo-driven styles as one of its biggest drivers of growth — helped by a celebrity-fuelled Instagram campaign. "The success of the #mycalvins campaign popularised the notion of displaying one's underwear waistband," said Cheryl Abel-Hodges, president of The Underwear Group, PVH Corp, which controls Calvin Klein Underwear.

But brand power is not limited to waistbands. Victoria’s Secret has transformed a product once hidden for modesty’s sake into the world’s most watched catwalk show. And as clothing labels like H&M push into underwear, the major underwear brands push back. Victoria’s Secret is the king of categories, with lines in everything from sportswear to cosmetics. In five years, Agent Provocateur swimwear has grown to 12 percent of the business, and the company has also launched lingerie-inspired clothing.

“More lingerie is shown now than it was before, with bras and corsets worn under jackets, and as outerwear,” said Garry Hogarth. “I think we really are a luxury fashion brand.”

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