Expanding your online fashion business globally

Fashion is one of the most dynamic and competitive global market verticals. How can merchants expand successfully to new markets – and what role do payments play?

The so-called “retail apocalypse” caused by the Covid-19 pandemic has forced merchants to move their businesses online for wider customer reach while also increasing store closures and brand bankruptcies, making the industry harder to predict.


So what’s in store for the fashion industry in the next few years? And how can fashion e-commerce businesses successfully survive and thrive amidst existential change?


This guide covers the most important statistics, trends, and strategies shaping the fashion industry in 2023 and beyond, giving merchants an updated outlook on how to expand e-commerce business across this vertical in the years to come.



Table of contents:

Fashion E-Commerce: Industry Insights and Expansion Opportunities

How to Improve Your Fashion E-Commerce Business: 8 Proven Practices

Looking Ahead: The Future of Fashion E-Commerce

Summary: Why Payments Matter in Fashion

Global business guide fashion e-commerce PayU cover image

Fashion e-commerce: Industry insights and expansion opportunities

Industry outlook

Let’s start with some general insights into the fashion e-commerce sector: it’s the largest B2C e-commerce market segment, with a global size estimated at US$ 871.2 billion in 2023.


Experts predict that it will grow further at +11.5% per year and reach a total market size of US$1,501.3 billion by the end of 2027.


PayU’s research confirms this rapid pace of growth. According to data from our Next Frontier report, fashion experienced 55% year-on-year growth between 2019 and 2020 alone. Based on transactions on our global payment platform, India, Indonesia, Poland, Turkey, and Mexico were among the top 6 countries that registered the highest consumer spending across this sector in 2021.


When it comes to the fashion industry’s segments, apparel makes the largest category in fashion e-commerce, with 2.5 billions users in 2023.



Key trends

Which regions lead the way when it comes to spending on apparel? It’s all about Europe, Asia, and the Americas. In Asia, the projected  online fashion revenue  is set to account for nearly 600 billion U.S. dollars by 2025. Of  overall fashion retail sales worldwide, nearly 21 percent are e-commerce transactions.


Just like in other verticals, the time lag between product discovery and acquisition is a pain point for customers who continue to expect better experiences, as they don’t like to wait too long for their fashion products to be delivered. Therefore, their demand for a seamless online shopping experience from browsing to shipping has led to brands’ increased dependence on effective supply chain management, including logistics and delivery services that enable digital trade.


Another important industry trend is the seasonality of sales throughout the year (with peak online shopping days like Black Friday or Cyber Monday, as well as fashion weeks) which has prompted merchants to plan for always-on promotional campaigns to both create and capture demand all year round.


Additionally, it is fair to believe that virtual dressing rooms in the metaverse are the future of e-commerce. This allows customers to try on clothes in a virtual environment, creating a more immersive and interactive shopping experience.

Impact of Covid-19

The Covid-19 pandemic had a massive impact on every e-commerce sector, and fashion is no exception. 


When governments enforced lockdowns in March 2020, 27% of US consumers said that they planned to spend “somewhat” or “a lot” less on luxury and fashion products. 


Despite this, McKinsey called the pandemic the “perfect storm for fashion marketplaces.”,  as more and more fashion brands continued to shift their efforts online and identify new ways to communicate, engage and interact with their customers. Many e-commerce stores reported a 30%+ growth in gross merchandise value.

PayU fashion

How to Improve Your Fashion E-Commerce Business: 9 Proven Practices

1. Expand your reach to global customers

Besides expanding the delivery and logistics chain/ practices across borders with trustworthy partners, merchants should offer payment methods that create the lowest possible friction for new global customers. By providing multiple global and local payment methods, businesses can improve their conversion rates in both domestic and international markets. 


The fashion industry has one of the highest cart abandonment rates across industries, amounting to 88.57% in 2022 globally. By offering relevant payment options at checkout, merchants are able to appeal to a broader audience and ensure a seamless shopping experience and customer loyalty. An important aspect to keep in mind is that the available payment options should be featured at checkout in such a way as to help users easily recognize them and navigate to the payment method of their choice.


Within the fashion vertical, many shoppers are interested in flexible and convenient forms of online payments such as BNPL, installment-based payments, and card-based payments. For example, installment payments in fashion – one of the most popular payment methods in many emerging markets – can help merchants reach more customers, while achieving incremental sales increases of up to 20%.


That’s why merchants need to focus on providing online shoppers with convenient ways to pay and closely monitor fashion market trends and changing shopper behavior, while constantly adapting to this fast-changing industry.



2. Optimize your store for mobile

Mobile commerce is a key channel for merchants who sell to Gen Z and Millennials, with these two groups converting via mobile twice as much as other generations. 


Merchants need to offer shoppers payment methods they prefer as part of a mobile-friendly user experience – for example, when they’re browsing a catalog on their phone or checking new products on a tablet. To increase mobile conversion rates, merchants should ensure that their payment page design is well-optimized and the checkout experience is just as user-friendly on mobile as on desktop. 


With consumers spending more and more time on mobile devices of different types and sizes, it makes sense to implement a responsive design approach, where there’s only one user interface, but it fits itself into different screens according to a set of universal, predictable rules.


It’s also very important to keep in mind that all payment options should never be crammed into a single screen, even the largest one. If there’s more than 7-9 payment options, these should be organised into groups (e.g. card-based options, bank transfers, delayed payments etc.).


Global payment solutions like PayU help merchants create a checkout page that meets consumer needs and optimizes the checkout experience, while offering a wide range of online payment methods to suit any market.



3. Win the game in your region

Another smart move merchants can make is to adjust payment methods to the local market. Working with a global payment provider who can process payments locally helps to increase the percentage of transactions submitted to the cardholder’s bank. 


By acquiring payments locally, merchants benefit from higher card authorization rates, lower interchange fees, and faster settlement. Businesses adopting a locally-focused acquiring approach will also avoid international fees and costs and see higher payment approval rates. 


An international transaction involves the interaction of different acquiring banks, payment processors, and payment method providers – many of which are unique to specific markets. That’s why a global solution that integrates these diverse payment layers is so important for helping merchants to reach full market potential.


For example, one leader in online footwear and accessories in EMEA transformed its traditional business model and achieved a 100% year-on-year growth in sales by implementing a payment platform that smoothly combines local and global operations.

Overview of global and local online payment methods offered via PayU Hub

4. Manage and reduce return rates to maintain profitability

In the online fashion industry, return rates average around 30%. But they can go as high as 50% – which can be crushing. Merchants can reduce their current return rates by adopting Big Data strategies and analyzing customer shopping behavior in detail to understand the reasons behind the high return rate.


Another method is offering fast refund functionalities or specific payment features. For example, PayU offers an instant refund service in Romania, a refund management feature in Poland), and functionalities such as partial capture and partial refund.


While this won’t prevent payments from being refunded altogether, fast or instant refund capabilities do at least capture returns before they happen by preventing unwanted products from being shipped out in the first place.



5. Use data to your advantage

Getting a comprehensive view of payments data from across the world can be challenging. A unified analytics platform, on the other hand, allows merchants to track payment performance in real-time and quickly identify areas requiring optimization. Teams no longer have to jump between multiple platforms to gather data and generate reports. 


Such a sophisticated analytics dashboard can offer a full overview of global payment transactions regardless of the complexity of the company, the number of countries in which it operates or the multiple payment providers they work with. 


Using PayU’s advanced payment analytics module for example, merchants can integrate and analyze payment data from around the world to find hidden insights from the payment journey and use them to optimize sales and revenue. Our advanced analytics tools allow merchants to keep track of payment approval rates by card country, currency, payment method, and issuing bank.


Understanding these trends and data-driven insights could mean the difference between a sale and a missed opportunity due to cart abandonment or worse, a declined payment.



6. Optimize approval rates

Another way for online fashion merchants to save money on processing fees is to work with a global provider that has smart routing capabilities. By routing transactions through different providers, merchants can optimize approval rates and lower transaction fees. A top clothing manufacturer for which PayU processes payments in two markets, Hungary and Croatia, recently saw their approval rates increase by 10% by setting new routing flows.


How does it work? Merchants can ensure that online payments deliver the best possible business outcome by using a good routing engine provider. A quality routing engine should also include the ability to retry declined payments if one of the receivers fails to process the payment transaction.


Another important aspect is handling declined transactions. What happens if the provider fails to process the payment? One option for merchants is to re-route a failed transaction through another provider, thus salvaging a sale that otherwise would not have gone through.


Other best practices for optimizing approval rates include local acquiring, partial captures, and follow-up orders.



7. Keep your online store secure

If a merchant wants to optimize payments, they should look for a payment provider that employs the latest payment security features. Two great examples are 3D Secure 2 and network tokenization. 


  • 3D Secure 2 is an authentication protocol to improve the exchange of online transaction data and protect consumers, helping merchants lower fraud rates, while delivering a better payment experience. A top multi-brand fashion merchant increased approval rates by 4.2% thanks to the PayU 3DS optimization strategy, leading to an estimated 50,000 saved transactions worth $950,000 in TPV.


  • Network tokenization allows for even more security than ordinary tokenization and drives higher approval rates. Tokens used in this method achieve higher approval rates and capture higher transaction volume by avoiding lost and/or expired card declines. All the while, they provide more information and greater visibility to card issuers during authorization.


As more consumers make purchases online, fraud will continue to be one of the biggest challenges within the e-commerce space. Merchants can use technology to master the balancing act between security and convenience.


The first step for merchants is typically to implement strategies to manage risk and block potentially fraudulent transactions. Businesses can use relatively conservative fraud detection systems that help to keep some fraudulent transactions at bay.


But the risks are often high, and the costs can run into the thousands. 


By choosing a payment solution provider with a more sophisticated approach to payment security, merchants bundle advanced fraud protection into their payment offering. PayU’s fraud rates in Europe (0,02%) are 5 times less than the market benchmark – helping merchants ensure that credit card numbers and other sensitive customer data are protected from unauthorized access, while still maintaining high approval rates on legitimate payments. 



8. Adopt a social commerce strategy

Millennials and Gen Z are a particularly important segment for e-commerce brands in the fashion industry. Social media, influencers and celebrities play an integral role in the e-commerce strategy of many online fashion brands today. It’s no wonder that social media still remains so relevant from a commercial perspective – industry experts predict the value of social commerce sales worldwide from 2021 to 2026 to almost triple.


Taken together, millennials and Gen Z now represent more than 40 percent of the United States population. Gen Z’s preferences increasingly shape the e-commerce landscape as a whole. And with most millennials now in their 30s, this generation is starting to carry significant buying power throughout the world.



9. Integrate sustainability into your strategy

In today’s global fashion e-commerce landscape, integrating sustainability into strategies is of utmost importance. Brands must effectively manage and communicate about sustainability to meet the expectations of consumers and address the climate crisis. Given the introduction of new regulations and increased consumer awareness, brands need to exercise utmost caution in discussing their sustainability-related initiatives and accomplishments to avoid “greenwashing.” Failure to do so could result in reputational damage and potentially lead to costly fines. By prioritizing transparency and authenticity, brands can establish a strong foundation for their sustainability efforts, ensuring that they align with their values and resonate with environmentally conscious consumers.


Additionally, embracing gender-fluid fashion is becoming increasingly significant, driven by shifting consumer attitudes towards gender identity and expression. This trend necessitates a reevaluation of product design, marketing strategies, and the in-store and digital shopping experiences provided by brands and retailers. Adapting to this blurring of the lines between menswear and womenswear enables brands to cater to a broader range of customers and stay relevant in an evolving fashion landscape.

Looking Ahead: The Future of Fashion E-Commerce

What does the future hold for fashion retailers and their online stores? In Europe, estimates indicate that consumers will spend on average of $999 on fashion-related products per year by 2025.


The fashion accessory segment will also note massive increases, with Asia-Pacific as the fastest-growing market with a CAGR of 12.3% between 2018 and 2028. 


Another profitable segment of e-commerce fashion is footwear, which will increase from $381.9 billion in 2022 to $455 billion in 2027 in the global market size.


What about jewelry? The global revenue is expected to increase by 12% annually between 2023 and 2026, reaching 418.9 billion U.S. dollars – with e-commerce sites responsible for 22.4% of sales in the luxury goods category.

PayU fashion

Summary: Why Payments Matter in Fashion

Increasing globalization, the rise of digital technologies, digital innovation, and changing consumer spending habits have transformed the fashion industry in recent years. These seismic shifts have created a more unpredictable business climate, causing many fashion retail companies to struggle in the face of growing competition and innovation. One ongoing area of change is in online payments. 


As part of one of the most dynamic e-commerce verticals around the world, fashion retailers face many challenges when selling fashion items online. Return rates are a major problem that ends up causing a loss of revenue for e-commerce businesses. With so many choices for consumers, the entire shopping experience may feel overwhelming. Carefully designing and optimizing the customer experience are key. 


This is why streamlining the checkout experience is so important for merchants looking to expand their operations globally. Cart abandonments represent millions of dollars in potential sales that never go through. At the same time, for conversions that are successful, the worst outcome in a competitive industry is for potential sales to be rolled back by false declines and other payment-related mishaps. When selling in international markets, transaction cost and approval rate optimization can result in literally hundreds of thousands of dollars in valuable additional revenue and profits.


By implementing a global payment solution, businesses can ensure maximum approval rates – with the lowest possible fees – when it comes to processing and optimizing payments from customers around the world. At the same time, merchants can more easily win over new customers in the fashion landscape by delivering a smooth, reliable, and secure experience throughout the checkout process.

Get started

Do you want to start implementing local payments for your eCommerce sales?
Contact us