state of fashion 2023 mckinsey

We expect a period of recovery to be characterized by a continued lull in spending and a decrease in demand across channels. Many consumers today expect perfect functionality and immediate support at all times, coupled with rapid delivery times as players constantly compete to expedite products. This group is often referred to as a group in its own right. SHANGHAI, March 15, 2023 /CNW . These are some of the findings from our latest report on The State of Fashion, written in partnership with the Business of Fashion (BoF), which explores the industrys fragmented, complex ecosystem. To execute these changes and respond better to forthcoming regulations around sustainability marketing, the fashion industry should rethink how it allocates talent, promotes, and establishes executive roles and teamsreflecting the key challenges facing the industry in the years ahead. Lifestyle Innovation Day 2023 - photo courtesy Dagor These are just some of the findings from The State of Fashion 2023, a joint report from the Business of Fashion and McKinsey. Our first two reports, last yearand the year before, laid the foundation for rigorous in-depth research and analysis, focusing on the themes, issues, and opportunities affecting the sector and its performance. The coming year will be tough, as the digital shakeout gathers pace, customers demand more on sustainability, and slower growth puts pressure on margins. Mainstream customers are moving into a decisive phase of digital adoption, and online sales of apparel and footwear are projected to grow rapidly. From a geographic perspective, China was the standout performer over 2021, as its economy recovered much faster than those of other countries. By Imran Amed, Anita Balchandani, Marco Beltrami, Achim Berg, Saskia Hedrich, and Felix Rlkens. As fashion brands invest in new digital applications, they must work harder than ever to protect their systems, partners, and customers. Perhaps unsurprisingly, 67 percent of executives said conditions for the fashion industry have worsened over the past 12 months. 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. Good Tuesday morning! Growth has slowed in China, and major questions loom about the markets future trajectory. Despite the economic headwinds ahead, fashion leaders are in a unique position to reevaluate the ways that their brands produce, distribute, and market their collections. More than ever, sustainability is dominating consumer priorities and the fashion agenda. 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. Zara said that it plans to cut 1,200 stores over two years and invest 2.7 billion in store-based digital.6Zara Owner to Invest $3 billion to Expand Amid Covid-19 Crisis, Bloomberg, June 10, 2020, https://www.bloomberg.com/news/articles/2020-06-10/inditex-has-first-quarterly-loss-since-zara-owner-went-public Still, we do not believe the curtain is falling on physical channels. In 2023, consumers will be unpredictable and fickle. Alongside public companies, we also identified a group of hidden champions. These privately owned gems often dominate their category areas and generate significant revenues. First, The Bad News: Most Fashion Brands Are Not Feeling Too Hopeful. In the coming 12 months, these efforts will gather pace, as in-app social commerce plays an increasingly important role. In a McKinsey fashion report, industry experts Elizabeth Hunter, Sophie . March 15, 2023 3 mins read. The industry is not looking forward to 2020suggesting strategic clarity will be important. However, amid increasing pressure on performance, shifting consumer behaviors, and accelerating demand for digital, there is an imperative to act decisively to prepare for the next normal. The latest reading of the McKinsey Global Fashion Index (MGFI), meanwhile, reveals new insights into fashion-company performance by category, segment, and region. 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. This article is a collaborative effort by Imran Amed, representing views from the Business of Fashion, and Sarah Andr, Anita Balchandani, Achim Berg, and Felix Rlkens, representing views from McKinseys Retail Practice. Honorable Brian J. Feldman, Chair . Enlit Africa Launches 2023 Programme Headlines / March 17, 2023 / By Editor Enlit Africa (formerly known as African Utility Week and POWERGEN Africa) proudly presents its 2023 programme, which will run from 16 to 18 May at the CTICC in Cape Town. For many in the fashion industry, the glass is half empty. This database of more than 500 companies allows us to analyze and compare the performance of individual companies with their peers, by category, segment, or region. 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. Headquartered in New York City, CGS has offices across North America, South America, Europe, the Middle East, and Asia. Hyper-interactive digital environments and investment in e-commerce are increasingly the leitmotifs of brands that are pushing on fashion frontiers. 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. In the light of all this change, the performance gap between frontrunners and laggards continues to widen: from 2005 to 2015, the top 20 percent of fashion companies contributed 100 percent of the industrys entire economic profit; in 2016, the top 20 percents contribution had increased to 144 percent. Many customers are reigning in their budgets after months of discretionary spending. Even after witnessing waves of insolvencies, industry leaders will need to get comfortable with uncertainty and ramp up future-proofing efforts as the potential for further outbreaks and lockdowns loom. Given the disruptions in financial year 2019, it was not possible for us to calculate our annual list of 20 super winners accurately. 1 - BoF-McKinsey's State of Fashion 2023 Survey Media Contacts: Escalate PR for CGS cgs@escalatepr.com Mark D. Tullio, CGS newsroom@cgsinc.com Our calculations, based on the changes in market capitalizations over time in our index on global fashion, suggest that the industrys economic profit will fall by 93 percent in 2020 after rising 4 percent in 2019 (Exhibit 1). 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. A growing number of publicly traded and private companies have become value destroyers. The midmarket in particular is in the doldrums, generating negative returns for shareholders. The Super Winners include three new entrantsAnta Sports, Heilan Home (HLA Corporation), and Lululemonreflecting the strength of sportswear and the growing influence of Chinese players. The 16 percent year-on-year rise came largely from improved operating margins driven by cost cutting. Anita Balchandani is a partner in McKinseys London office, where Marco Beltrami 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 Rlkens is a consultant in the Berlin office. Plus, consumer companies are turning to chief transformation officers more often, and why it's important for leaders to demonstrate "deliberate calm." Fashion forward. These are some of the findings from The State of Fashion 2022, written in partnership with the Business of Fashion (BoF). We expect that themes of digital acceleration, discounting, industry consolidation, and corporate innovation will be prioritized once the immediate crisis subsides. In today's Daily Kickoff, we report on the opening of the Manara Center in Abu Dhabi, a collaboration between the United Arab Emirates and the Anti-Defamation League, and talk to actor Joshua Malina about his return to Broadway as the lead of "Leopoldstadt.". This is in stark contrast to the fashion industrys performance over the previous decade, which saw the industry expand at 5.5 percent annually. 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. SHANGHAI, March 15, 2023 . Other positive trajectories will include the growing influence of platform propositions as customers warm to marketplace experiences and renewed appetite among both brands and consumers for local engagementthe personal touch that reflects the priorities of many. The report includes the third readout of our industry benchmark, the McKinsey Global Fashion Index. These can be embedded in items to support after-use activities such as resale and recycling. The industry is now on red alert. They are also most successful in attracting funding and talent, often leaving the rest to fight over scraps. where McKinsey & Company state in their Fashion on Climate report that over 70% of the . 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. In luxury, Kering made an impressive rise through the ranks, driven by Guccis double-digit sales growth and strong performance in AsiaPacific markets such as Japan. Download The State of Fashion 2018 to view the exhibit and read the full report on which this article is based (PDF3 MB). They need to take an active stance on social issues, satisfy consumer demands for radical transparency and sustainability, and, most important, have the courage to self-disrupt their own identity and the sources of their old success to realize these changes and win new generations of customers. 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. In August 2019, Kering CEO Franois-Henri Pinault spearheaded an industry-wide pact to achieve net-zero emissions by 2050. 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. Elon Musk says he will honour the results of a Twitter poll asking whether the should resign as head of the social media platform Download the report to view the exhibit. With its clearly defined value proposition, the value segment has been taking share from discount this year. They will need to develop risk mitigation strategies that can be implemented quickly as conflicts, fiscal policies, and government regulations evolve. Anita Balchandani is a partner in McKinseys 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 Rlkens is an associate partner in the Berlin office. unpacks five areas that could see significant changes; the full report explores these areas in greater depth. By segment, the most positive are executives from luxury brands, reflecting their strong growth trajectory in 2018. A "modest" recovery in China is expected in 2023, according to McKinsey, and will be tied heavily to the country's luxury sales. Sales growth seems set to slow to a mere 2 or, at most, 3 percent by the close of 2016, with stagnating profit margins. Notably, the top 20 group of companies has remained stable over time. 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. No company will get through the pandemic alone, and fashion players need to share data, strategies, and insights on how to navigate the storm. Europe, on the other hand, will probably continue to feel the effects of subdued tourist arrivals, leading in 2021 to a 2 to 7 percent sales decline from 2019. Download The State of Fashion 2023 The authors wish to thank McKinseys Tiffany Chan and Marilena Schmich, as well as The Business of Fashions Robb Young, for their contributions to this article. Equally, consumers and advocates are calling for the industry to become more inclusive. Daily Kickoff. Among the standout themes of the past year has been the continuing flourishing of online business models, reflecting a longer-term trend that accelerated during the pandemic. 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