Entering the European market for knitwear

What are the requirements for niche markets?

The following niche categories offer opportunities for knitwear manufacturers. The required qualities, styles and quantities may differ from mainstream production. This means you need to adjust your manufacturing and sourcing setup if you want to be profitable.

Animal friendly knitwear

European buyers that offer ‘sustainable’ styles focus on different topics, ranging from supply chain transparency and animal welfare to organic production and recycled yarns. Animal welfare can be guaranteed, for instance, by the Global Animal Partnership standards. For wool, the TextileExchange offers the responsible wool standard (RWS).

Recycled knitwear

Another niche is the use of recycled fibres. Knitwear is the only product group that can be made from 100% recycled post-consumer waste (cotton and wool). Styles made from wool and cashmere are recycled, for example, by Filpucci or Reverso. There are challenges. Recycled yarns can nap, which creates a (potentially undesirable) casual look and feel. The finest possible gauge for such yarns is 12 gauge. Determining the content (and the chemicals used) is also difficult when using post-consumer waste, so testing is needed.

Mixed media

Luxurious styles that combine knitting techniques and materials (mixed media) are a growing niche in the European market. Combining techniques such as intarsia with high-quality blends like cotton, silk and cashmere can make a pullover look almost like a piece of art. Other mixed media styles combine knitted panels with woven panels (for instance, silk and cashmere for the luxury market or acrylic and polyester for lower markets).

2. Through what channels can you get knitwear on the European market?

For many European fashion brands and retailers, knitwear is a basic product group. This does not mean you should randomly approach potential buyers. First, you need to determine what market segment fits your company best and through what channel(s) you want to sell your product. Be aware that different countries have different preferences. French and Italian end customers appreciate the softness and quality of cashmere, while Dutch and German consumers prefer machine washable garments, for instance.

How is the end-market segmented?

European knitwear buyers can best be classified by price/quality level.

Table 2: Knitwear market segmentation

Consumer type	Price level	Fashionability	Material use	Order quantities
Luxury consumer	Very high retail prices	Highly fashionable, unique designs	Luxury materials like wool and cashmere. Complex patterns	Low order quantities
Fashion-conscious consumer	High retail prices	Styles in line with latest trends	High-quality, natural fibres and blends	Low to medium order quantities
Practical consumer	Medium retail prices	Practical, fashion-conscious designs	Medium-quality, machine washable materials like acrylic, wool and cotton	High order quantities
Price-conscious consumer	Low or very low retail prices	Basic and functional styles	Medium to low- quality, machine washable synthetic materials and cotton	High order quantities

Luxury consumers

High fashion consumers shop at luxury brands and retailers such as Paul Smith and brands such as Missoni or Moschino. These consumers expect their knitwear to represent an exclusive brand image and the latest fashion trends. Knitwear brands in the luxury market require top-quality materials and manufacturing, the latest technical innovations and highly comfortable designs. This market is growing.

Fashion-conscious consumers

In the upper-middle market, lifestyle brands such as Carlo Colucci or Boggi cater to fashion-conscious consumers. These companies sell collections created around a brand image and natural materials and offer a good-quality product for a mid-to-high-level price. Products must have the technical look of a high-end product, but retail prices are substantially lower than in the luxury consumer market. This market is growing.

The middle market: practical consumers

Practical consumers shop in the middle market, where brands and retailers such as Marc O’Polo sell functional and fashionable items. The focus is on washability, durability, fit and medium-quality materials. Buyers may require sustainable fabrics. Order quantities are high, retail prices low to medium. This segment is under pressure.

Price-conscious consumers

The budget market includes companies such as Primark and River Island, which cater to the price-conscious knitwear consumers. Design and technical innovation are less important, but the apparel item needs to give the impression that it is fit for its purpose and in line with the latest fashion trends. Prices are low and competition is heavy in this market segment, both in retail and manufacturing. This market is consolidating.

Through what channels does a product end up on the end-market?

Always try to find out whether you are dealing with a brand, a retailer, an intermediary or some other type of buyer. Every buyer has a different sourcing and sales strategy, and different challenges. Adapt your pitch accordingly.

• If you want to target European end consumers, try selling via platforms such as Alibaba, Wish, Amazon or Wolf & Badger for small independent brands. Most online consumers can be found in countries in Europe’s northwest. You will need to invest in a web shop, stock, order management and customer service. Your biggest challenges will be return policies and a lack of brand awareness.
• The growing second-hand market in Europe is served by online platforms such as vestiairecollective.com, vinted.com, depop.com, or national websites such as marktplaats.nl (the Netherlands).
• Online multi-brand retailers such as Zalando, Asos and Yoox sell existing knitwear and other brands and often develop their own private collections, mostly value brands. They can detect market interest very fast and will immediately react upon sales data. Usually, such companies will place a small test order first. If the item is selling well, they will place the actual production order. Fast delivery is a must.
• If you want to sell to retailers, the biggest names in knitwear are retailers such as Inditex and H&M. Next to big chains, most knitwear is sold in boutique shops that can be found in almost every European city. These shops sell existing brands, but some also order products specially developed and manufactured for them. This market level is less competitive and relatively easy to enter.
• Apparel brands typically develop a collection 6-9 months in advance. You will need a large sample room, as brands require salesman samples (SMS) of each collection style. Every salesman sample needs to be current: meaning it must look exactly like the product will in the shop, with branded hangtags and accessories. It may take many months before orders are placed.
• Intermediaries such as agents, traders, importers and private label companies will sell your product on to buyers up the value chain. They are extremely price focused and require flexibility in quantities and qualities. Some are located near or in the production countries and primarily do sourcing and logistics, such as Fashion Linq. Others, such as Fully Fashion, work from Europe and also do market research, design and stock keeping. Their service level determines the commission rate they charge.

Figure 4: Apparel market value chain

What is the most interesting channel for you?

As you move higher up the value chain, your margin will increase, but so will the service level that your buyer will require from you. When you have little experience with exporting to Europe, intermediaries and brands are likely the best starting point.

Intermediaries

Agents or traders/importers/private label companies are the most adventurous type of buyer and are usually the first to investigate new sourcing destinations and factories. By working for this type of buyer, you will have access to many different buyers up the value chain, and you can learn how to service them by following their instructions.

Online

Online multi-brand retailers such as Zalando, Asos, Lyst or Yoox sell apparel brands and develop their own private collections, mostly value brands. They can detect market interest very fast and will immediately react upon sales data. Usually such companies will place a small test order first. If the item is selling well, they will place the actual production order. Fast delivery is a must.

Brands

Few European fashion brands specialise in knitwear, but for many brands, knitwear is a basic product group. There is usually more room for price negotiation with brands (especially in the higher market segments), but your service level also needs to be higher than what intermediaries would require from you.

Retail

Most large European fashion retailers sell knitwear collections and are used to doing business with manufacturers in developing countries. It can be very difficult to start a business relationship if you do not meet all the mandatory requirements such buyers have. Besides delivering a good-quality product for a competitive price, your service level needs to be very high. Retailers may lack professional expertise on knitwear, so advice on product quality and development is highly appreciated.

3. What competition do you face on the European knitwear market?

Knitwear is manufactured worldwide, so you will likely face stiff competition in this market. The most important ways to create a competitive advantage over manufacturers in other countries are yarn sourcing, technical knowledge, product development, service level, flexibility, efficiency and beneficial trade agreements.

Which countries are you competing with?

Country	Strengths	Challenges
China	Technical innovation, high efficiency, excellent customer service, high flexibility and the local availability of yarns and trims.	Increasing labour, transport and production costs, human rights concerns and no General Scheme of Preferences (GSP) that removes import duties to the EU.
Bangladesh	Factories with fully automated knitting machines, specialised in cotton and wool. The country is increasingly developing added value products including cashmere. Bangladesh benefits from the GSP.	Less flexibility than in China. Although yarns are increasingly spun locally, Bangladesh still imports many materials.
Turkey	Close to Europe, which results in very short lead and transport times. Produces low to high-quality apparel in many categories; offers high flexibility and has a European business culture. Manufacturers accept payment in euros.	Turkish prices are structurally higher than many Asian countries. Currently, they are rising still further due to inflation.
Cambodia	Cambodia supplies good-quality products at a competitive price level. Many factories in Cambodia have been set up by foreign investors, who also supply their expertise.	An inexperienced and relatively small workforce works against Cambodia. Social compliance concerns and political repression caused Cambodia to lose its duty-free GSP status in 2020.
India	India grows its own cotton and has a large industry of yarn and fabric making. India is focused on manufacturing knitwear items made from cotton and cotton blends and is highly flexible on quality, MOQ and design.	Human rights concerns in cotton, yarn and fabric production. Some dye houses may not comply with EU standards.
Vietnam	Vietnam’s apparel industry has developed a large capacity and a high efficiency level, thanks to investments from mainly Chinese factory owners looking to benefit from the low production costs and a new upcoming free trade agreement with the EU.	High MOQs, a lack of local spinning, accessories and trims and in general a lack of capacity (especially in the factories that operate in the north and south of the country exporting to the US).

Which companies are you competing with?

Neo-Concept is a Hong Kong-based company with a reputation of being a design-driven knitwear apparel manufacturer. The company started doing business with buyers in France such as Joseph and Agnes B and developed a reputation of being exceptional in innovation and product development. Its current manufacturing setup has expanded to Cambodia and Vietnam, enabling them to service buyers in every part of the value chain and price/quality segment.

Cobalt is a knitwear manufacturer with international offices on several continents. Inhouse spinning and manufacturing has made Cobalt 1 of the largest knitwear manufacturers in Hong Kong. The company can service a large variety of buyers.

JM Knitwear is a knitwear manufacturer founded in India in 2008. The company offers a large variety of pullovers and other styles, including made-to-measure. JM focuses on premium materials, including Italian Merino, Scottish cashmere, British Lambswool, Indian Cotton and recycled cotton mix yarns, man-made & synthetic yarns and blends with low MOQ & quick turnround times. JM caters to the European market, primarily the UK.

Which products are you competing with?

Knitwear items such as pullovers and cardigans are a staple in many European fashion brands’ collections and end consumers’ wardrobes. This product category is growing (at the expense of woven styles) and only faces (some) competition from sweatshirts and from within the category.

Sweatshirts

Flat-knit styles are represented in the collections of almost every European fashion brand. Within this style, heavy-knit sweaters face some competition from sweatshirts (in line with the rise of comfortable loungewear and sporty styles).

Jersey T-shirts

Fine knits (gauges 14 and 16) are hard to manufacture, delicate and trend driven. They can face competition from T-shirts (including long-sleeves). A company that has a well-developed collection in basic knitwear including fine gauges is Massimo Dutti.

4. What are the prices for knitwear on the European market?

The factory price of your product (in fashion industry jargon, your ‘FOB price’: Free On Board) is influenced by many factors, such as the cost of materials, the efficiency of your employees and your overhead and profit margin. For a step-by-step guide on how to calculate the FOB price of an apparel item, see this CBI study on cost-price calculation.

The average cost breakdown of your FOB price should look like this:

Note that the cost price of knitwear is often calculated based on the weight of the item, as the yarn makes up a substantial part of the cost. The percentages may differ per factory and per order. Some factories accept lower profit margins during off-season periods, or when order volumes are high. In addition, the percentages for labour versus fabrics may differ, depending on the efficiency and wage level of the workforce and the price of the materials. Efficiency goes up and material prices go down when producing large volume orders.

Retail pricing

The retail price of a knitwear item is on average 4-8 times the FOB price (this is called the ‘retail markup’). It follows that the FOB-price is on average 12,5-25% of the retail price of the product. Exceptions do occur. In the budget market, some large European retail chains may only double the FOB price mark up. Retailers mark up the FOB-price by 4-8 times because they need to account for (among other things) import duties, transport, rent, marketing, overhead, stock keeping, markdowns, VAT (15-27% in EU-countries).

Source: Eurostat

According to Eurostat’s 2022 comparison of retail prices for apparel in Europe, of the top-3 European importers of apparel and footwear, France has the highest price level at 105.4 points compared to the European average of 100, followed by Germany (98.7), and Spain (84.8). Denmark is the EU member state with the highest price point (134.4), and Switzerland is the most expensive European country for apparel (141.5).

Price development

Online commerce and a strong budget segment have made low prices the norm for European consumers. However, a stronger focus on sustainability and rising costs for materials, production (due to global political instability) and shipping have put manufacturers, suppliers and buyers under significant price pressure. Inflation in Europe has fallen slowly in 2023, but remains higher than normal.

Frans Tilstra and Giovanni Beatrice for FT Journalistiek carried out this study on behalf of CBI.

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