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. We expect in 2022 that companies will seek fresh approaches to online creativity and commerce, with nonfungible tokens, gaming skins, and virtual fashion edging closer to the mainstream. When it comes to the environmental impacts of the. Anita Balchandani is a partner in McKinseys London office, where Jakob Ekelf Jensen is an associate partner and Leila Le Merle is a consultant. 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 This is consistent with its 10 percent CAGR of the past decade, driven by consumers more active lifestyles, the rise of athleisure, emerging brands in the high-end segments, and product innovations. Our first The State of Fashion report (PDF8MB) finds that its not only external shock waves that have roiled the industry. According to the company's information, there are currently 34,000 McKinsey alumni working at over 15,000 organizations across the private, public, and social sectors in 120 countries. Although the fashion industry appears to be turning a corner, the rebound is not being felt evenly across the globe. As the world recovers from the COVID-19 pandemic, what will be the defining themes in the business of fashion? Daily office attire will become more casual, and special-occasion dress will become bolder. Its a sentiment shared by industry executives: 40 percent expect conditions for the industry to improve in the year ahead. 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. By the time the Northern Hemisphere went on its August vacation, the super winners had recovered on aggregate to just 5 percent below precrisis levels. To thrive in this environment, companies must think strategically, sharpen their decision making, and keep their fingers on the pulse of customer demand. For an exclusive group of Super Winners, the sun is shining (Exhibit 3);17To view exhibit, refer to The State of Fashion 2020. by economic profit, these 20 companies added more to the industry bottom line in 2018 than all others combined. Among investment banks, Goldman Sachs was the largest recruiter, making eight offers, closely followed by o3 Capital with three offers. Humanitarian repercussions are expected to outlast the pandemic itself. At the same time, they must cater to local tastes across multiple markets and cultures. However, there will be opportunities. As with everything in this fast-moving sector, well just have to wait and see. Therefore, the task for companies will be to unlock growth, align with changing customer needs, and focus intently on the bottom line. It's partly the increasing number of people at elite schools going into tech or recruiting directly into the buyside, but the much larger force at play is that McKinsey, Bain, and BCG are growing 10-15% per year and enrollment at the top schools has barely increased, if it all. 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. While eCommerce and Sustainability Top Key Trends, Only 23% in Fashion and Apparel Industry Have High Confidence in Supply Chain. Alongside public companies, we also identified a group of hidden champions. These privately owned gems often dominate their category areas and generate significant revenues. Economically, we see a number of trends that will shape the industry, including fashions response to intensifying volatility, continued challenges in China, and the rise of urban centers. A freeze on spending is aggravating the supply-side crisis. Tesla Investor Day 2023: $25,000 Next Gen Vehicle To Be Made In Mexico . However, there may also be new opportunities from growing southsouth trade and the renegotiation of trade agreements. By: 24-7 Press Release. About the event: Performances by popular music bands and artists like Nucleya, The Yellow Diary, Prateek Kuhad, and so on, only for young people aged between 13 and 26 years. Member News Rieter posts exceptionally high order intake. But we are now detecting glimmers of hope: executives report optimism (even amid uncertainty), and the McKinsey Global Fashion Index forecasts industry sales growth to nearly triple between 2016 and 2018, from 1.5 percent to between 3.5 and 4.5 percent. 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. At the vanguard, we are seeing a new breed of direct-to-customer companies. An industry veteran of 15 years, she serves as the fashion strategy director at Infor, a global leader in business cloud software.And, as Behrenfeldt says, many companies have found it challenging to translate their fashion knowledge into more . 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. McKinsey analysis, based on data from S&P Capital IQ. We also expect to see a rise in M&A activity as companies take advantage of low valuations and grab share in fast-growing markets. 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 . Only those brands that accurately reflect the Zeitgeist or have the courage to self-disrupt will emerge as winners. Member-News DNA markers can verify recycled cotton. or equivalent (typically 5+ years) work experience preferred; Requirements may vary by country or practice An energy crisis is disrupting European economies. The average market capitalization of apparel, fashion, and luxury playersdropped almost 40 percent between the start of January and March 24, 20208McKinsey analysis, based on data from S&P Capital IQ. Against the backdrop of increasing demand for Li-ion batteries across industries, McKinsey & Company projects that revenues along the entire value chain will increase fivefold, from about $85. A quarter of respondents to a 2021 survey by McKinsey in the U.K. said their purchase decisions were driven by sustainability, while 80% of consumers in a U.S. survey said sustainability was an important factor when selecting a brand to shop, according to the 2023 State of Fashion report from McKinsey and The Business of Fashion. Notably, the top 20 group of companies has remained stable over time. At the same time, they are demanding ever-quicker and more seamless fulfillment, from mobile shopping to drone delivery. Laggards face increased fashion risk and excess inventory if they fail to match customer demand. In 2023, consumers will be unpredictable and fickle. Fashion leaders are also watching global headlines closely in the year ahead, as macroeconomic and political uncertainties continue to obstruct business operations and escalate reputational risk. Industry players are coming to accept unpredictability as the new norm, and fashion executives will in 2018 respond by focusing their energy on improving what is within their control. Flagship stores will be branded as discovery zones and tasked with creating emotional connections with customers. 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. Growth has slowed in China, and major questions loom about the markets future trajectory. Many of them have already undertaken significant cost cutting and restructuring, and they are now primed to capture the benefits. The latest reading of the McKinsey Global Fashion Index (MGFI), meanwhile, reveals new insights into fashion-company performance by category, segment, and region. 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. These are just some of the findings from The State of Fashion 2023, a joint report from the Business of Fashion and McKinsey. Venue: Karnavati University, Gandhinagar. Just as China inched through recovery, outbreaks worsened in Europe and the United States. Consumers also have higher expectations of customer experienceand scrutinize convenience, price, quality, and newness. We see local stores in particular building a role as partners in the digital revolution, helping customers touch, feel, and experience in convenient locations as they browse online and offline. More and more, they base their purchase decisions on whether a companys practices and mission aligns with their valueswhile at the same time they are highly price sensitive. Report Addresses Rising Challenges in Talent Acquisition Post-Pandemic LEXINGTON, KY, March 17, 2023 /24-7PressRelease/ -- Human capital management remains a top strategic focus for state . This is in stark contrast to the fashion industrys performance over the previous decade, which saw the industry expand at 5.5 percent annually. 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. However, performance was uneven, as countries with strong healthcare systems and economic resilience fared better than others. Download The State of Fashion 2022, the full report on which this article is based (PDF14MB). The apparel trade could be reshaped by new barriers, trade tensions, and uncertainty. They also need to invest in enhancing their productivity and resilience, as the outlook is uncertain. Given the disruptions in financial year 2019, it was not possible for us to calculate our annual list of 20 super winners accurately. Hyper-interactive digital environments and investment in e-commerce are increasingly the leitmotifs of brands that are pushing on fashion frontiers. The deadly cyclone has broken records for the longest-lasting storm of its kind after making landfall in Mozambique for a second time, more than two . The crisis is a catalyst that will shock the industry into changenow is the time to get ready for a postcoronavirus world. 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).20To view exhibit, refer to The State of Fashion 2019. The fashion industry posted a 20 percent decline in revenues in 201920, as earnings before interest, taxes, and amortization (EBITA) margins declined by 3.4 percentage points to 6.8 percent. We kick off our ten key themes for this year by taking the temperature of the global economy and analyzing the complex impacts of the pandemic as it continues its unpredictable progress. The average industry EBITA16To view exhibit, refer to The State of Fashion 2020. margin was 10.8 percent, a tick up on 2017 and the highest since 2014. 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 many global regions, the business of fashion is set to pick up momentum in 2022, as consumers unleash pent-up buying power and dress to impress (where the pandemic allows). Shoppers are also becoming more selective. Nonetheless, our report finds that fashion companies are hopeful they can improve their performance through a combination of organic growth and leveraging new technologies. In Mozambique, at least 10 people were killed and 13 injured in the Zambezia province, according to state broadcaster Radio Mozambique, citing the National Institute of Disaster Risk Management. As sustainability becomes a more urgent concern, brands need to ramp up their efforts to reflect customer values in their assortments, supply chains, and ways of working. Companies have also been looking inward, implementing changes to the core operations that are reshaping the entire fashion system, from shortening the length of the fashion cycle to integrating sustainable innovation into the core product-design and manufacturing processes. 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. In 2021, the COVID-19 pandemic will accelerate industry trends, with shopping shifting to digital channels and consumers continuing to champion fairness and social justice. 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. Bachelor's degree; Advanced graduate degree (e.g., MBA, PhD, etc.) Cotton and cashmere prices, for example, have increased 45 percent and 30 percent year on year, respectively.1Oliver Guyot, Caught between inflation and rising costs, fashion seeks to strike new balance, Fashion Network, July 19, 2022. Winners of the Federal 100 Awards will also be recognized for their accomplishments at the event . The 16 percent year-on-year rise came largely from improved operating margins driven by cost cutting. That said, the past years experience shows that consumers are resilient and that as economies recover, demand will follow suit. 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. 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. 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). 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. The bottom line is that amid this uncertainty and change, our analysis suggests cautious optimism is warranted. 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.". BoF and McKinsey's State of Fashion 2023 report states that resale is one of the three 'R's recommended for brands to explore in the face of financial instability "resale, rental and repair can be integrated into the value proposition to allow consumers to combine responsible and affordable consumption," it states. Chinese tourism industry is large enough to take the lead in advancing the sustainability agenda, McKinsey partner says Mainland China is expected to have the largest tourism market by 2032 . Despite a dip in margins, discount and luxury outperformed the wider market in 2020, while the midmarket continued to be squeezed. 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. 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. McKinsey, the doyen of strategy consultants, published a report on cloud computing last week featuring a disguised real-world case study. Still, there are silver linings among the clouds. Decision makers have their work cut out to manage the demands of digital, sustainability, and the supply chain. Earnings before interest, taxes, and amortization. Only the discount segment is likely not to be part of the recovery trend. 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. The coming year will be tough, as the digital shakeout gathers pace, customers demand more on sustainability, and slower growth puts pressure on margins. 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. So consumers expect it all: convenience, quality, values orientation, newness, and price. More than ever, sustainability is dominating consumer priorities and the fashion agenda. Where there is positive momentum, the primary driver will continue to be digital channels, reflecting the trend established before the COVID-19 crisis and the reluctance of people in many countries to gather in crowded environments. Daily Kickoff. 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. In fact, not only does it touch everyone, but it would be the worlds seventh-largest economy if ranked alongside individual countries GDP. As we move toward recovery, companies in the beauty segment have a chance to align with shifting category and regional opportunities. This result may be critical for NYS dual meet tournament considerations later in January 2023. This joint report by the Business of Fashion and McKinsey is an effort to advance the discussion beyond crisis management and immediate contingency planning by outlining the areas in which the fashion industry must focus once the dust settles on the current crisis. Instead, we referenced our 2018 list to gauge the fortunes of the elite group. Now that's a strong look The fashion industry is booming again. McKinsey analysis shows that fashion companies that now embed AI into their businesses models could see a 118 percent cumulative increase in cash flow by 2030. 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. This need for speed is driven partly by social media accelerating the movement of fashion trends to the masses, and by industry leaders using analytics and customer insights to meet customer needs better and increase responsiveness. The authors wish to thank Robb Young, the Business of Fashions global markets editor, for his contribution to this article. Download The State of Fashion 2019, the full report on which this article is based (PDF3 MB). Download The State of Fashion 2023 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. Affordable-luxury players benefited from consumers trading down from luxury, particularly among Chinese consumers. Business of Fashion and McKinsey & Co. released their annual report, "The State of Fashion 2023," containing insights for the upcoming year and 10 key trends that are set to shape the. The State of the Ecommerce Fashion Industry: Statistics, Trends & Strategies to Use in 2023 by Michael Keenan 2PM reports that 13 of the top 20 direct-to-consumer (DTC) brands are in the fashion and apparel industry. 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. Fashion companies that double down on strategy, align with key trends, and reflect an evolving consumer landscape are likely to emerge from the crisis stronger, leaner, and ready to thrive in the next normal. Of course, for every success, there are also relative failures. Achieving circularity in fashion is similar to the 10-year overnight success story. 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. 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. These developments take place at the same time as the fashion industry goes through other transformative shifts. NIKE, Inc. reports fiscal 2020 fourth quarter and full year results, Nike, June 25, 2020, news.nike.com. Handbags and luggage, and to some extent watches and jewelry, are returning slowly to their historic highs, driven by demand in AsiaPacific. At the same time, government interventions will partially offset economic impacts, and global travel will pick up, alongside the possibility of larger social gatherings. This year, we are seeing real signs of change. 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. No company will get through the pandemic alone, and fashion players need to share data, strategies, and insights on how to navigate the storm. By Imran Amed, Anita Balchandani, Achim Berg, Saskia Hedrich, Shrina Poojara, and Felix Rlkens. Over that period, the top five performers by economic profit were Nike, Inditex, Kering, LVMH (including Tiffany), and Hermes. Its against this backdrop that McKinsey has teamed with the Business of Fashion to shine a light on the fragmented, complex ecosystem that underpins this giant global industry. So what will change in 2017? According to The Business of Fashion-McKinsey State of Fashion 2023 Survey, the vast majority84 percentof industry executives in fashion expect zero growth or a decline in market conditions in 2023.That's a significant shift from the 2022 survey when 91 percent of executives predicted market conditions would improve . 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. They are also most successful in attracting funding and talent, often leaving the rest to fight over scraps. COVID-19 could spur the biggest economic contraction since World War II, hitting every sector from finance to hospitality.7UN chief says coronavirus worst global crisis since World War II, France 24, April 1, 2020, france24.com. The trick in 2020 will be to prove to investors they can turn potential into profit. Indeed, recovery is at the top of executives minds for the coming year, with 75 percent of luxury-segment executives, 61 percent of midmarket executives, and 50 percent of value executives expecting better trading conditions. The bottom line going into 2022 is that the fashion industry faces a complex mix of challenges and opportunities, in which there is little room for missteps. 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). Here's how to keep it that way: https://mck.co/3kACM6X McKinsey & Company on LinkedIn: The State of Fashion 2023 The war in Ukraine is of high concern to the industry, having already disrupted trade routes and triggered an energy crisis that will continue to have impact. This button displays the currently selected search type. Date and time: March 19 (Sunday), 6:30 pm. Many industry players are in a stronger position than they were a year ago, however. Strikingly, only 9 percent of respondents think conditions will improve next year, compared with 49 percent who said the same last year. 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. 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. China and the United States are expected to fare better, growing between 2 and 7 percent and between 1 and 6 percent, respectively. 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. Fashion executives are focusing on crisis management now but eventually must shift to reimagining the industry. In 2016, the 8.0 to 8.5 percent growth for athletic wear is more than double any other category. Mckinsey Fashion Report: Predictions for 2023 05 December 2022 In 2023, the global fashion industry will need to weather inflation while finding opportunities in shifting consumer patterns, channel and digital marketing strategies, and manufacturing approaches. Johanna Andersson is a consultant in McKinseys Stockholm office, where Sara Kappelmarkis a partner; Achim Bergis a senior partner in the Frankfurt office, Martine Drageset is a consultant in the Oslo office, and Saskia Hedrich is a senior expert in the Munich office. By Imran Amed, Anita Balchandani, Marco Beltrami, Achim Berg, Saskia Hedrich, and Felix Rlkens. 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. 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. 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. Over recent months, numerous companies reported struggles to manage inventory flows or tied lower sales forecasts to supply-chain blockages. To keep up, leading fashion players are accelerating their speed from design to shelf. Comedy night with Shreeja Chaturvedi. The fashion industry delivered a 21 percent increase in revenues in 202021, and EBITA margins doubled by 6 percentage points to 12.3 percent. Brands can no longer plan on complete political neutrality as their global customer bases become more connected and outspoken. This is an edited excerpt from the first joint report from McKinsey and the Business of Fashion, The State of Fashion(PDF8MB). 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. That's up from the 9% who had the same expectations for 2022. When expanded it provides a list of search options that will switch the search inputs to match the current selection. Things are looking up, but the rebound may be uneven, says this years The State of Fashion report. Adriana Zilic 16.03.2023. . This group is often referred to as a group in its own right. We see brands rethinking store formats and leveraging data and analytics to predict footfall, manage assortments, and built personalized offerings. 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