The industry is now on red alert. Saint Corona stepped in and swiftly destroyed fashionistas’ plans. Against this background, fashion-industry fortunes are highly polarized. Consumers are increasingly waking up to this reality and demanding change. With the COVID-19 pandemic dominating thoughts and minds, fashion executives are planning for a range of scenarios and hoping for a speedy global recovery. Reinvent your business. The outlook for the fashion industry varies across different value segments, too. We expect that themes of digital acceleration, discounting, industry consolidation, and corporate innovation will be prioritized once the immediate crisis subsides. “NIKE, Inc. reports fiscal 2020 fourth quarter and full year results,” Nike, June 25, 2020, news.nike.com. The interconnectedness of the industry is making it harder for businesses to plan ahead. In a Post-COVID 2021, Fashion Will Trend Toward Sustainability U.S. Cotton Trust Protocol Published 2 weeks ago. With the COVID-19 pandemic dominating thoughts and minds, fashion executives are planning for a range of scenarios and hoping for a speedy global recovery. 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. Below, panelists share their views on how the fashion industry will likely evolve in light of … At the forefront for many is the future role of brick-and-mortar stores. Overall, the industry continues to hover in a state of flux, and the fortunes of individual players can turn with frightening speed. Subscribed to {PRACTICE_NAME} email alerts. The main sources of growth are emerging-market countries across Asia–Pacific, Latin America, and other regions; they are forecasted to grow at rates ranging between 5 and 7.5 percent in 2018 (exhibit). That offering will combine the best of human and automated services—the beginning of a truly “bionic” customer experience. 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. How will changes to the global economy and consumers’ behavior affect fashion in the postcoronavirus world? COVID-19 has sent shockwaves through the fashion industry’s global sourcing and production operations. So what will change in 2017? The global Covid-19 pandemic is exacting a terrible human toll and menacing the world economy. Many consumers today expect perfect functionality and immediate support at all times, coupled with rapid delivery times as players constantly compete to expedite products. 9 Imran Amed, the founder, editor-in-chief, and CEO of the Business of Fashion, is an alumnus of McKinsey’s London office, where Anita Balchandani is a partner and Jakob Ekeløf Jensen is a consultant; Achim Berg is a senior partner in the Frankfurt office; Saskia Hedrich is a senior expert in the Munich office; and Felix Rölkens is an associate partner in the Berlin office. 8 But speed and flexibility bring added complexity. The authors wish to thank McKinsey’s Tiffany Chan and Marilena Schmich, as well as The Business of Fashion’s Robb Young, for their contributions to this article. 6 According to our estimates, each racked up more than $2 billion in economic profit in 2017. Explore our Insights page to filter by industry.  Please use UP and DOWN arrow keys to review autocomplete results. Our discussions with industry executives suggest that the key drivers will include shifting consumer behaviors (in relation to digital channels, social-justice concerns, and a reluctance to travel), opportunistic investment, and the need to build more efficient, simple, and demand-focused operating models (Exhibit 3). According to McKinsey’s 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. Subscribed to {PRACTICE_NAME} email alerts. They are also most successful in attracting funding and talent, often leaving the rest to fight over scraps. McKinsey analysis, based on data from S&P Capital IQ. No company will get through the pandemic alone, and fashion players need to share data, strategies, and insights on how to navigate the storm. Press enter to select and open the results on a new page. And that shift is unlikely to reverse, as nearly 28 percent of consumers expect to buy less at physical stores—a trend seen in higher shares in Generation Z and millennial respondents (Exhibit 6). Players need to be decisive and start putting recovery strategies into motion to emerge with renewed energy. Humanitarian repercussions are expected to outlast the pandemic itself. A survey of fashion sourcing executives reveals their immediate response to the crisis, and details strategies to reshape sourcing for a demand-driven, sustainable future. At the opposite end of the price spectrum is Primark, whose commitment to its core value proposition has made it a formidable competitor. We estimate that revenues for the global fashion industry (apparel and footwear sectors) will contract by –27 to –30 percent in 2020 year-on-year, although the industry could regain positive growth of 2 to 4 percent in 2021 (compared with the 2019 baseline figure). Affordable-luxury players benefited from consumers trading down from luxury, particularly among Chinese consumers. By Imran Amed, Anita Balchandani, Achim Berg, Saskia Hedrich, Shrina Poojara, and Felix Rölkens. After a year in which the fashion industry posted record-low economic profits, business leaders are on the front foot, seeking to innovate while continuing to engage their core constituencies. McKinsey analysis, based on data from Amazon and Stackline. However, there will be opportunities. The coronavirus also presents the fashion industry with a chance to reset and reshape the industry’s value chain completely—and an opportunity to reassess the values by which it measures actions. Twelve of the top 20 have been a member of the group for the last decade. 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. Please try again later. COVID Response Center. 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. Yet this sluggish overall growth masks some big winners: affordable luxury, value, and athletic wear. For the personal luxury goods industry (luxury fashion, luxury accessories, luxury watches, luxury jewelry, and high-end beauty), we estimate a global revenue contraction of –35 to –39 percent in 2020 year-on-year, but positive growth of 1 to 4 percent in 2021 (compared with the 2019 baseline figure). The industry was already on high alert, and executives expressed pessimism across all geographies and price points in our annual report, The State of Fashion 2020, released late last year. 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 year ahead will be an awakening after the reckoning of 2018—a time for fashion companies to look at opportunities and not just at surmounting challenges. The ones that will succeed will have come to terms with the fact that in the new paradigm taking shape around them, some of the old rules simply don’t work. To address consumer behavior, players will have to learn to serve shrewder and more-demanding customers and adjust to a shifting demographic profile. Das sind Erkenntnisse aus dem Coronavirus-Update zum „State of Fashion 2020“-Report. The apparel industry, globally, could see revenue contract by 27 to 30% this year over last, according to a predictive joint report from Business of Fashion and McKinsey & Company. Sales of the traditional fast-fashion sector have grown by more than 20 percent over the last three years, and new online fast-fashion players are gaining ground. External shocks to the system continue to lurk, and growth cannot be taken for granted. Some are household names, while others are less visible but still pack a punch. The report, the fifth in our annual series, drills down into the major themes affecting the fashion economy and assesses a range of possible responses. To keep up, leading fashion players are accelerating their speed from design to shelf. That’s great news for consumers and for companies that can make sustainability real. COVID-19 could spur the biggest economic contraction since World War II, hitting every sector from finance to hospitality. Learn more about cookies, Opens in new They need to get digital right and to address consumers increasingly concerned by the climate-change agenda. These are some of the findings from our latest The State of Fashion report, written in partnership with the Business of Fashion (BoF) to explore the industry’s fragmented, complex ecosystem. 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. Takeaways: The new State of Fashion 2021 report is based on two McKinsey fashion scenarios: a more optimistic “Earlier Recovery” scenario predicts that global fashion sales will decline by between 0 and 5 percent in 2021 compared to 2019, and a “Later Recovery” scenario would see sales growth decline by 10 to 15 percent next year compared with 2019. For fashion players, 2019 will be a year of awakening. Learn about 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. 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. McKinsey Quarterly 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. Indeed, recent data show that we have vaulted five years forward in consumer and business adoption of digital in a matter of months. Here, we expect a modest growth of 1 to 2 percent. Equally, consumers and advocates are calling for the industry to become more inclusive. Widespread store closures for an industry reliant on offline channels, coupled with consumer instinct to prioritize necessary over discretionary goods, hit brands’ bottom lines and depleted cash reserves. Sustainability, which breaks into our respondents’ list of the most important challenges for the first time, is evolving from a tick-box exercise into a transformational feature. Please click "Accept" to help us improve its usefulness with additional cookies. Long-term leaders include, among others, Inditex, LVMH, and Nike, which have more than doubled their economic profit over the past ten years (Exhibit 2). Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Once the dust settles on the immediate crisis, fashion will face a recessionary market and an industry landscape still undergoing dramatic transformation. (For more, see our infographic on the ten trends that will define the fashion agenda in 2018.) The trick in 2020 will be to prove to investors they can turn potential into profit. cookies, McKinsey_Website_Accessibility@mckinsey.com, UN chief says coronavirus worst global crisis since World War II, Coronavirus offers ‘a blank page for a new beginning’ says Li Edelkoort, The State of Fashion 2020: Coronavirus Update, the outlook for the global economy is less rosy, 2019 Apparel Chief Purchasing Officer Survey, a potential shake-up of global value chains, moving into a decisive phase of digital adoption, consumers expect a consistent brand experience, a shift in focus to a customer-centric model, consumers have become more demanding, more discerning, and less predictable in their purchasing behavior. Over the last 5 years, we have brought our expertise and industry insights to more than 1000 apparel, fashion, and luxury projects. Reinvent your business. Although the fashion industry appears to be turning a corner, the rebound is not being felt evenly across the globe. 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 inevitable—things that would have happened further down the road if the pandemic had not helped them gain speed and urgency now. McKinsey Global Institute. 11. 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. Our clients range from medium-size companies to industry leaders—spanning across producers and brands, vertical fashion retailers, apparel … We expect a period of recovery to be characterized by a continued lull in spending and a decrease in demand across channels. Navigating this uncertainty will not be easy for fashion leaders. Its petroleum practice helps improve performance in retail marketing, commercial sales and refining areas. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. 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. McKinsey analysis. Terrorist attacks in France, the Brexit vote in the United Kingdom, and the volatility of the Chinese stock market have created shocks to the global economy. Earnings before interest, taxes, and amortization. Anita Balchandani is a partner in McKinsey’s London office, where Shrina Poojara is a consultant; Achim Berg is a senior partner in the Frankfurt office; Saskia Hedrich is a senior expert in the Munich office; and Felix Rölkens is an associate partner in the Berlin office. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Polarization continues to be a stark reality in fashion: fully 97 percent of economic profits for the whole industry are earned by just 20 companies, most of them in the luxury segment. Although they are written off by some as “too 20th century,” we take a more constructive view. Use minimal essential Mainstream customers are moving into a decisive phase of digital adoption, and online sales of apparel and footwear are projected to grow rapidly. ACHIM BERG Based in Frankfurt, Achim Berg leads McKinsey’s Global Apparel, Fashion & Luxury group and is active in all relevant sectors including clothing, textiles, footwear, athletic wear, beauty, accessories and retailers spanning from the value end to luxury. Never miss an insight. entails joblessness or financial hardship for people across the value chain. The authors of this article are Imran Amed (founder, editor in chief, and CEO of the Business of Fashion, and an alumnus of McKinsey’s London office), Anita Balchandani (a partner in the London office), Jakob Ekeløf Jensen (a consultant in the London office), Achim Berg (a senior partner in the Frankfurt office), Saskia Hedrich (a senior expert in the Munich office), and Felix Rölkens (an associate partner in the Berlin office). By Imran Amed, Anita Balchandani, Marco Beltrami, Achim Berg, Saskia Hedrich, and Felix Rölkens. 4. GLOBAL ECONOMY CONSUMER SHIFTS FASHION SYSTEM. McKinsey & Company is a global management consulting firm. In luxury, Kering made an impressive rise through the ranks, driven by Gucci’s double-digit sales growth and strong performance in Asia–Pacific markets such as Japan. By segment, the most positive are executives from luxury brands, reflecting their strong growth trajectory in 2018. Just as China inched through recovery, outbreaks worsened in Europe and the United States. In North America, while overall consumer confidence is strong, the impact of policy changes is uncertain, and markdown pressures, market corrections, and store closures continue. Consumers in Southeast Asia spend about eight hours a day online on average. The report includes the third readout of our industry benchmark, the McKinsey Global Fashion Index. The coming year will be tough, as the digital shakeout gathers pace, customers demand more on sustainability, and slower growth puts pressure on margins. Still, we do not believe the curtain is falling on physical channels. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Across industries, companies should act now to protect their employees and customers—and prepare now for the world beyond coronavirus. 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