Nearly every company wants to grow, but in the specialty apparel market, it’s going to be fascinating to see who thrives and who declines in the next few years. A wide range of challenges—from fickle fashion trends to highly seasonal buying—has always made this category tough. But there are five even bigger barriers on the horizon that will make or break many specialty apparel retailers.

1. Appealing to a radically shifting customer base

While women’s apparel has always dominated retailers’ merchandise offer, men’s apparel is growing in strategic importance. Several factors have been cited as influencing the growth of the men’s apparel sector, including increasing employment rates and a greater focus on dressing well.

Plus-size apparel is also expected to gain greater significance in the coming years. U.S. population obesity rates coupled with the recognition that plus-size people cannot find fashionable clothing will drive demand and supply.

And perhaps the biggest customer demographic shift: Aging baby boomers are being replaced by millennials as the largest U.S. consumer group, and specialty retailers must figure out how to cater to millennials’ sartorial style.

2. Figuring out how to leverage big data

The amount of customer data available to retailers is growing rapidly. Historically, retailers relied on customer surveys and basic inventory management systems to understand customer demographics and preferences.

But now big data and predictive analytics make it possible for retailers to optimize nearly every aspect of the business, from supply chain to merchandising to marketing. Retailers that become adept at rigorous data analytics and omnichannel engagement will have a distinct competitive advantage.

3. Standing out from the competition
The specialty apparel market is highly fragmented and competitive, with no single retailer capturing more than a few percent of the market. This gives buyers a wealth of choices and makes it tough for any one retailer to stand out.

Product differentiation in this highly competitive environment is challenging, so specialty retailers rely on brand equity to build loyalty and drive higher prices. The question is how to build a strong brand name. Specialty apparel retailers focus on trendiness, assortment, pricing, quality, and the customer experience to develop and enhance their brand equity.

4. Appealing to online and digital-savvy shoppers
Online purchases accounted for 18 percent of all apparel sales in 2012, according to Euromonitor International. More of those consumers are shopping on their mobile phones and tablets than laptops or desktops, so specialty retailers need to create responsive site designs to optimize the customer experience. The most forward thinking retailers have started experimenting with in-store smart phone targeting to gather customer data and deliver targeted offers for an omnichannel experience.

5. Weathering challenging economic trends

The global recession brought with it a host of challenges for specialty retailers: sluggish buying, rising labor costs and rising cotton costs. It’s created a higher cost of goods sold and led to lower gross margins. As a result, comparable store sales of brick and mortar locations have struggled, although ecommerce continues to deliver strong growth.

Retailers are combatting this trend with everything from favorable supplier relationships to launching designer or brand collaborations that broaden their reach. Another strategy to effectively compete: Looking to mergers and acquisitions to grow share or create vertical integration. Most recently, Fast Retailing (Uniqlo) briefly considered an acquisition of J.Crew to consolidate market share and gain a foothold in the highly competitive U.S. market.

It’s a tough marketplace, but it will be exciting to see how the savviest companies innovate and rise to these challenges.

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