Finally, 2017 will also be a critical year for the fashion business system, with developments expected around the fashion cycle, technological advancements, and a shake-up in the ownership of fashion companies, as players restructure and industry outsiders step up their activities in the fashion sector. Consumers (and increasingly, investors) will reward companies that treat their workers and the environment with respect, and the deeper relationships that emerge will bring benefits in agility and accountability. The value segment continued to grow in 2016, particularly as a consequence of large global players expanding geographically. Around the globe, we expect more than 20 percent annual digital growth in 2021 (with 30 percent in Europe and the United States) compared with 2020.3McKinsey analysis. This group is often referred to as a group in its own right. Some are household names, while others are less visible but still pack a punch. After nearly two years of disruption, the global fashion industry is once again finding its feet. Imran Amed is the founder, editor-in-chief, and CEO of The Business of Fashion. At the same time, they must cater to local tastes across multiple markets and cultures. Athletic wear is set to become the absolute category champion, maintaining 6.5 to 7.5 percent sales growth, although it will be unable to reproduce the double-digit growth of the past. Consumers are adjusting their behaviors, as many trade down to cheaper or discounted items to reduce their spending, though the luxury sector will remain strong, with affluent consumers less heavily affected by inflation. The task for decision makers, therefore, is to find silver linings, knowing that times of change are inherently rich with opportunity. Based on McKinsey's analysis of fashion forecasts, the luxury sector is expected to grow between 5 and 10 percent in 2023, driven by strong momentum in China (projected to grow between 9 and 14 percent) and in the United States (projected to grow between 5 and 10 percent). Daily office attire will become more casual, and special-occasion dress will become bolder. Consumers in Southeast Asia spend about eight hours a day online on average. Tesla Investor Day 2023: $25,000 Next Gen Vehicle To Be Made In Mexico . Many have had a strong AsiaPacific focus, reflecting the economic strength of the region and the relatively lower impact of the pandemic there, and many have offered a compelling digital proposition. As part of those efforts, some are leveraging digital product passports. At the same time, consumers have become more demanding, more discerning, and less predictable in their purchasing behavior, which is being radically reshaped by new technologies. With tourism in the doldrums, domestic outlets will become more important than ever. Supply chains remain disrupted from the COVID-19 pandemic, elevating the need to invest in faster and geographically closer manufacturing systems. This result may be critical for NYS dual meet tournament considerations later in January 2023. Handbags and luggage, and to some extent watches and jewelry, are returning slowly to their historic highs, driven by demand in AsiaPacific. In 2022, the industrys growth will likely be driven by both China and the United States, while Europe lags behind and will need the return of international tourism to recover fully (Exhibit 1). To address consumer behavior, players will have to learn to serve shrewder and more-demanding customers and adjust to a shifting demographic profile. Saskia Fairfull. Therefore, the task for companies will be to unlock growth, align with changing customer needs, and focus intently on the bottom line. Textiles are the second-largest product group made from petrochemical plastics behind packaging, making up 15% of all petrochemical products. Brands are also turning to passports, married with distributed-ledger technologies, in the battle against counterfeiting. The authors wish to thank Robb Young, the Business of Fashions global markets editor, for his contribution to this article. External shocks to the system continue to lurk around the corner, and growth cannot be taken for granted: the McKinsey Global Fashion Index forecasts growth of 3.5 to 4.5 percent, slightly below 2018 figures. How will changes to the global economy and consumers behavior affect fashion in the postcoronavirus world? Dear Chair Feldman and Members of the Education, Energy, and Environment Committee: We expect a similar trajectory in the United States, with sales down 7 to 12 percent next year compared with 2019, and only a modest recovery before the first quarter of 2023. Date and time: March 19 (Sunday), 6:30 pm. A return to the riches of the previous decade appears unlikely. Thanks to high inflation and turmoil in eastern Europe, many fashion retailers expect a downturn in the fashion economy this year. Asia in particular is emerging as a fertile ground for small and midsize enterprises that leverage e-commerce to reach out from the factory floor. For workers in low-cost sourcing and fashion-manufacturing hubs, such as Bangladesh, Cambodia, Ethiopia, Honduras, and India, extended periods of unemployment will mean hunger and disease. Annapolis, Maryland 21401 . Renewed optimism for the fashion industry, Sporting goods 2021: The next normal for an industry in flux, Revamping fashion sourcing: Speed and flexibility to the fore, Oliver Guyot, Caught between inflation and rising costs, fashion seeks to strike new balance,, State of Fashion 2022: An uneven recovery and new frontiers, The State of Fashion 2021: In search of promise in perilous times, Its time to rewire the fashion system: State of Fashion coronavirus update, The State of Fashion 2020: Navigating uncertainty, The State of Fashion 2019: A year of awakening, The State of Fashion 2018: Renewed optimism for the fashion industry. They need to get digital right and to address consumers increasingly concerned by the climate-change agenda. Hyper-interactive digital environments and investment in e-commerce are increasingly the leitmotifs of brands that are pushing on fashion frontiers. With companies in China leading the way, brands will engage even more closely with social media to offer shoppers exclusive content and personalized experiences. We see 2020 as being a watershed for Inclusive Culture, with diverse races, genders, and sexual orientations increasingly present across organizations and in leadership roles. If stores remain closed for two months, McKinsey analysis approximates that 80 percent of publicly listed fashion companies in Europe and North America will be in financial distress. First, The Bad News: Most Fashion Brands Are Not Feeling Too Hopeful. As with everything in this fast-moving sector, well just have to wait and see. could accelerate some of these consumer shifts, such as a growing antipathy toward waste-producing business models and heightened expectations for purpose-driven, sustainable action. Successful companies will invest more to nurture local clientele: 2017 will be the year of organic growth by deepening relationships with existing clients, rather than through geographic, channel, and store-network expansion. Download The State of Fashion 2018 to view the exhibit and read the full report on which this article is based (PDF3 MB). According to McKinseys 2019 Apparel Chief Purchasing Officer Survey, while the absolute number of sustainable fashion products remains low, there has been a fivefold increase over the past two years. Fashion executives are focusing on crisis management now but eventually must shift to reimagining the industry. We foresee that the differences between the shopping habits of low- and high-income households will become more pronounced, as cost-conscious customers are likely to cut back or trade down. Over that period, the top five performers by economic profit were Nike, Inditex, Kering, LVMH (including Tiffany), and Hermes. Achim Berg is a senior partner in the Frankfurt office. As athletic wear continues to grow, it will become a category with the ability to compete on equal terms with clothing and footwear, particularly in the midmarket and premium segments. That said, almost all other market segments should see a slight improvement in sales growth of half to one-and-a-half percentage points. In all other regions and segments, executives are notably pessimistic, reflecting the potential challenges ahead (Exhibit 1).19To view exhibit, refer to The State of Fashion 2019. The mood among respondents to our executive survey is sober across geographies and price points, and the pockets of optimism seen last year in North America and the luxury segment have steadily evaporated (Exhibit 1).14To view exhibit, refer to The State of Fashion 2020. Even before the coronavirus disrupted financial markets, upended supply chains, and crushed consumer demand across the global economy, fashion-industry leaders were not optimistic about 2020. The prevailing mood of fashion leaders is one of anxiety and concern. Strategically, there will be an imperative in 2021 to manage commercial opportunities actively and to be acute in picking winning segments, markets, and channel combinations. Strikingly, only 9 percent of respondents think conditions will improve next year, compared with 49 percent who said the same last year. An energy crisis is disrupting European economies. We expect that the slowdown is likely to continue through 2023. In the United States alone, some 20,000 to 25,000 stores were expected to close in 2020, more than double the number that did so in 2019. The modern shoppers comfort with digital channels and content has created a complex customer journey across online and offline touchpoints. Instead, from the wreckage of 2020, a sleeker, more focused offeringwill emerge. Member-News DNA markers can verify recycled cotton. Looking forward, we anticipate that the luxury sector will outperform the rest of the industry, as wealthy shoppers continue to travel and spend, and thus remain more insulated from the effects of hyperinflation. Based on McKinseys analysis of fashion forecasts, the luxury sector is expected to grow between 5 and 10 percent in 2023, driven by strong momentum in China (projected to grow between 9 and 14 percent) and in the United States (projected to grow between 5 and 10 percent). In 2020, Nike announced the acceleration of its digital strategy and investment in its highest potential areas, which it said would lead to job cuts in stores.5NIKE, Inc. reports fiscal 2020 fourth quarter and full year results, Nike, June 25, 2020, news.nike.com. This is an edited excerpt from the first joint report from McKinsey and the Business of Fashion, The State of Fashion(PDF8MB). A "modest" recovery in China is expected in 2023, according to McKinsey, and will be tied heavily to the country's luxury sales. NEW YORK, March 16, 2023 (GLOBE NEWSWIRE) -- CGS, a global provider of business applications, enterprise learning, and outsourcing services, today released its . Adriana Zilic 16.03.2023. . However, there may also be new opportunities from growing southsouth trade and the renegotiation of trade agreements. Athletic wear is the only category where record growth rates look to slow down slightly in 2018, as the athleisure trend has reached its peak in some mature markets. This years report presents a difficult outlook ahead, as fashion companies face challenges and revise forecasts downward after an exceptionally strong 2021, per McKinsey analysis of global data in the fashion industry. Once the dust settles on the immediate crisis, fashion will face a recessionary market and an industry landscape still undergoing dramatic transformation. On the consumer side, we foresee the end of ownership, as concerns about sustainability grow and consumers and companies alike worry about how to alleviate their impact on the environment. Of course, for every success, there are also relative failures. The outlook for the global fashion industry in 2023 is uncertain and tenuous. Meanwhile, some of the shifts we will witness in the fashion system, such as the digital step change, in-season retail, seasonless design, and the decline of wholesale, are mostly an acceleration of the inevitablethings that would have happened further down the road if the pandemic had not helped them gain speed and urgency now. Still, there are silver linings among the clouds. And finally, brands will need to be more creative in marketing to attract customers through bold, differentiated content that cuts through a crowded digital environment in which data targeting is no longer effective. All things considered, we expect fashion-industry growth will increase to 2.5 to 3.5 percent in 2017, although the days when the industry outpaced GDP growth by as much as two percentage points seem over. Equally, consumers and advocates are calling for the industry to become more inclusive. On the one hand, evolving channels, shifting markets, and groundbreaking research offer revenue opportunities and the chance for radical innovation. Yet the . Indeed, consumer pessimism about the economyis widespread, with 75 percent of shoppers in Europe and the United States believing that their financial situation will be affected negatively for more than two months.10McKinsey COVID-19 Consumer Pulse Survey: for Europe, held March 2026, 2020, with 5,614 respondents (France, Germany, Italy, Portugal, Spain, and the United Kingdom); for United States, held March 2329, 2020, with 1,119 respondents. Download The State of Fashion 2023, the full report on which this article is based (PDF21.5MB). The fashion industry delivered a 21 percent increase in revenues in 202021, and EBITA margins doubled by 6 percentage points to 12.3 percent. The interconnectedness of the industry is making it harder for businesses to plan ahead. In response, leading fashion players are offering innovative business models, using granular customer insights as a source of differentiation, and pushing the limits of go-to-market times. This is particularly true for the major players within each of the market segments and product categories. Many of them have already undertaken significant cost cutting and restructuring, and they are now primed to capture the benefits. Our survey of 290 global fashion executives and interviews with thought leaders and pioneers have helped us identify ten key themes that will set the agenda in the year ahead. March 15, 2023 3 mins read. With this special coronavirus update to The State of Fashion 2020, we have taken a stance on what our new normal will look like in the aftermath of this black swan event to provide insights (from analyzing surveys, data, and expert interviews) for fashion professionals as they embark on the 12- to 18-month period after the dust settles. Fashion companies that can adapt to the increasing complexity by updating their operating models and adjusting their strategies for supply chain, sales channels, and digital marketing will be best placed to weather the upcoming storm. Download The State of Fashion 2019, the full report on which this article is based (PDF3 MB). Now that's a strong look The fashion industry is booming again. Reflecting in-depth research and numerous conversations with industry leaders, it reveals the key trends likely to shape the fashion business in the year ahead. 133 These price hikes are in part due to ongoing supply chain disruptions that will impact margins . In response, wise companies are self-disrupting before upstarts do it for them, engaging in a digital landgrab to diversify their ecosystem, and using automation and data analyticsto produce on demand to reduce waste and react rapidly to trends. A freeze on spending is aggravating the supply-side crisis. As noted in our previous articles on getting woke, radical transparency, and sustainability first, the consumer mindset was already showing signs of shifting in certain directions before the pandemic. Plus, consumer companies are turning to chief transformation officers more often, and why it's important for leaders to demonstrate "deliberate calm." Fashion forward. This fact is clearly borne out in the industrys financial performance. At the same time, brands will need to update their merchandising and design approaches to reflect shifting ideas around gender lines in fashion and dress codes. As the pandemic continued to run its course, the performance inequalities that have become a challenge over recent years were more in evidence than ever. All this comes against a backdrop of the fashion industry having turned a corner in 2018, with increased growth justifying the optimism expressed in last years global fashion survey. Luxury stands to grow by 9 percent to 14 percent in 2023, compared with non-luxury fashion categories, which are projected to see just 2 percent to 7 percent growth next year. Exactly when this will happen is impossible to know for sure, except that it will, in all likelihood, be linked to the discovery of a workable antiviral treatment and delivery of a proven vaccine, which some experts say is at least 12 to 18 months away. Moreover, precrisis levels of activity are unlikely to return before the third quarter of 2022. Frontrunners are building agile supply chains supported by higher-quality consumer insightswith the frontier being close to a real-time supply chain fed by test and learn and data analytics. By causing blow after blow to both supply and demand, the pandemic has brewed a perfect storm for the industry: a highly integrated global supply chainmeans that companies have been under immense strain as they have tried to manage crises on multiple fronts as lockdowns were imposed in rapid succession, halting manufacturing in China first, then Italy, followed by countries elsewhere around the world. This unforeseeable humanitarian and financial crisis has rendered previously planned strategies for 2020 redundant, leaving fashion businesses exposed or rudderless as their leaders confront a disorienting future and vulnerable workers face hardship and destitution. Indeed,fashion executives across different value segments have cited plans to increase prices in 2022, with an average expected rise of 4 % in luxury, 2 % in mid-market and 5 % in value, according to the BoF-McKinsey State of Fashion 2022 Survey. The industry is not looking forward to 2020suggesting strategic clarity will be important. Daily Kickoff. Cathrine Matidza, director of fleet procurement at the Department of Trade, Industry and Competition, told a webinar that current legislation - which makes local content requirements optional for state organs . According to our estimates, each racked up more than $2 billion in economic profit in 2017. Product categories are expected to grow in line with the overall industry average, but the biggest winners will be those companies with coherent channel strategies and clear value definitions. Our first The State of Fashion report (PDF8MB) finds that its not only external shock waves that have roiled the industry. This button displays the currently selected search type. Good Tuesday morning! Brands can no longer plan on complete political neutrality as their global customer bases become more connected and outspoken. There is little doubt that 2021 will continue to be tough for many as the COVID-19 pandemic tracks an uncertain trajectory. Just as China inched through recovery, outbreaks worsened in Europe and the United States. Not surprisingly, this regional divide is reflected in fashion executives sentiments, as respondents to the BoFMcKinsey Global Fashion Survey from emerging countries are more optimistic about the industrys outlook in 2018 than their European or North American counterparts. Slow technology adoption rates in fashion. Humanitarian repercussions are expected to outlast the pandemic itself. Among the well-known brands, Chanel is a significant player, with revenues of more than $10 billion, while Rolex is one of the few large independent and private luxury watch brands remaining. The prominence of luxury brands among the top performers was attributable to the economic resilience of wealthier demographics, leading to a continuing demand for bags, luxury jewelry, and ready-to-wear. Three roadblocks to making circular fashion work - and how to navigate them. Perhaps unsurprisingly, investors this year had more confidence in the top 20 than in other companies, and super winners were less badly hit by the April stock market sell-off than their peers were (26 percent from December, compared with 33 percent on average). Qualifications. Imran Amed is the founder, editor-in-chief, and CEO of the Business of Fashion. Its a sentiment shared by industry executives: 40 percent expect conditions for the industry to improve in the year ahead. As fashion brands invest in new digital applications, they must work harder than ever to protect their systems, partners, and customers. E-commerce players, such as ASOS, FARFETCH UK, Revolve, and Zalando, have consistently outperformed in 2020, as locked-down customers turned to digital devices to shop. In a McKinsey fashion report, industry experts Elizabeth Hunter, Sophie . The State of Fashion 2023: Resilience in the Face of Uncertainty The seventh annual State of Fashion report by The Business of Fashion and McKinsey & Company reveals the industry is heading for a global slowdown in 2023 as macroeconomic tensions and slumping consumer confidence chip away at 2022s gains. In China, further COVID-19 outbreaks and the real estate crisis have undermined the regions growth trajectory, as well as disrupted supply chains. The outlook for the fashion industry varies across different value segments, too. However, performance was uneven, as countries with strong healthcare systems and economic resilience fared better than others. The 4-in-1 oral care system one-ups other electric toothbrushes in the market by incorporating state-of-the-art oscillation, plus a switch-out head that allows users to pop on a polishing tool. While direct-to-consumer, digital channels remain a top priority, fashion industry leaders will need to diversify their sales channels to maintain efficiency and market relevance. Imran Amed is the founder, editor-in-chief, and CEO of the Business of Fashion and an alumnus of McKinseys London office, where Anita Balchandani is a senior partner; Sarah Andr is a consultant in the Paris office; Achim Bergis a senior partner in the Frankfurt office; and Felix Rlkens is a partner in the Berlin office. Value and affordable luxury will probably be the big winners, both outpacing the industry average at a projected 3.0 to 4.0 percent and 3.5 to 4.5 percent growth, respectively. A record 69 percent of companies were value destroyers in 2020, according to the latest reading of the McKinsey Global Fashion Index (MGFI), compared with 61 percent in 2019 and just 28 percent in 2011. Stock-market valuations of tech players have reached dizzying levels, reminiscent of the dot-com boom of the early 2000s, while a number of private companies have reached unicorn status. The industry as a whole is embracing new opportunitieseven as dangers lurk. Here, we expect a modest growth of 1 to 2 percent. Even online sales have declined 15 to 25 percent in China, 5 to 20 percent across Europe, and 30 to 40 percent in the United States.11McKinsey analysis, based on data from Amazon and Stackline. Against this background, fashion-industry fortunes are highly polarized. The main sources of growth are emerging-market countries across AsiaPacific, Latin America, and other regions; they are forecasted to grow at rates ranging between 5 and 7.5 percent in 2018 (exhibit).21To view exhibit, refer to The State of Fashion 2018. Only the discount segment is likely not to be part of the recovery trend. That's up from the 9% who had the same expectations for 2022. 1 "The State of Fashion 2023: Holding onto growth as global clouds gather," McKinsey, November 29, 2022. That translates into a significant increase in the number of companies that are value destroyers, which we expect will rise to 73 percent of those in the index in 2020, compared with 60 percent in 2019. As our ten trends indicate, new markets, new technologies, and shifting consumer needs present opportunitiesbut also risks. And more broadly, all-time-high vacancy rates mean brands must find novel ways to attract and retain employeesas other industries compete hard on salaries, sustainability, and job security. Consumers want to know where materials come from, how products are made, and whether the people involved are treated fairly. One reason that executives are not breaking out the bunting is that the outlook for the global economy is less rosythan it was a year ago. Overall, the industry continues to hover in a state of flux, and the fortunes of individual players can turn with frightening speed. 2 West Miller Senate Office Building . With the pandemic adding to the segments woes, many brands have embarked on strategic reviews or have compressed multiyear transformations into just a few months. The industry continues to polarize: consumers are trading away from the midmarket price points even while the luxury, value, and discount segments are picking up speed. Our third trend is Trade 2.0: a warning that companies should make contingency plans for a potential shake-up of global value chains. We expect that themes of digital acceleration, discounting, industry consolidation, and corporate innovation will be prioritized once the immediate crisis subsides.
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