The global fashion industry is finally catching up after two disrupted years. The recovery, however, will not be without fits and starts: fashion companies need time to adapt to changing consumer behaviour, the increased pressure on the supply chain and new developments in digitization and sustainability. That is the main conclusion from the State of Fashion report by consultancy firm McKinsey in collaboration with Business of Fashion, which is published annually in December.
As usual, the report highlights several themes that will play a major role in the development of the fashion industry in the next calendar year. What should brands and retailers keep in mind? FashionUnited highlights a number of central points.
The recovery from the pandemic will be different for every fashion company. The impact of Covid-19 on the economy of sales markets is decisive for this, as are the consequences of the virus for the country and the specific region where production takes place. Countries with strong healthcare and economic systems will outrun other countries. Fashion companies that operate internationally will have to anticipate these inequalities, the report says. Any investment should be a well-considered choice, paying close attention to local conditions and making careful risk assessments.
Home and away: logistical problems and a focus on your own market
Over the past two years, fashion companies have faced rapidly growing pressures and disruptions in the supply chain. While the corona crisis required considerable flexibility from fashion companies and their production chains, this was not always available. Some companies were forced to cancel orders, others – especially brands and retailers with thriving online channels – had to increase the numbers. At the same time, closing factories caused sudden shortages of materials and products. Logistical problems caused delivery delays and increased transport costs. In the coming period, companies will have to rethink their supply chains, write McKinsey and Business of Fashion. Particular attention should be paid to facilitating greater flexibility and reviewing existing sourcing strategies.
Several companies are already looking at possibilities for
nearshoring and local production† In terms of demand, producers would also benefit from looking more at local markets, the report says. This is especially true for luxury companies, which previously relied to a large extent on tourism. However, travel remains difficult: according to McKinsey and Business of Fashion, it will take another two to three years for international tourism to fully recover. It is therefore important to shift the focus to your own market and to make an inventory of what customers in the neighborhood are looking for.
Online: the metaverse, social media and the risks of the internet
No one will have missed the fact that retail is becoming increasingly digitized. Multichannel businesses with a good online store were significantly less affected by forced store closures during the pandemic and some e-tailers achieved higher turnover than ever. But shifts are also taking place within the digital landscape. For example, fashion is increasingly being sold via social media apps, where consumers can not only discover brands, but can now also purchase products directly via livestream sessions or shop features that can be found in apps such as Facebook and Instagram are integrated. Companies are advised to make the journey from discovery to purchase as smooth as possible on their social media channels and to experiment with new technologies.
Now that consumers are spending more and more time online, there is also a growing interest in the possibilities of the internet and the shaping of an online personality. For example, various designers are already anticipating the arrival of a ‘metaverse’ a virtual meta-universe with browsing, gaming and social interaction capabilities, featuring digital fashion designs which can be worn by avatars.
However, the internet also has its risks, the report warns. More and more companies are suffering from cyber attacks and abuses come to light regarding companies’ handling of consumer data. Companies would do well to get their online security systems in order and invest in the digital security of their customers, the report says.
Sustainability: circularity and product passports
Fashion companies also face a challenge in the field of sustainability. The fashion industry still generates tens of millions of tons of textile waste every year, which ends up in landfills or is incinerated. At the same time, the production of textiles and clothing still requires an excessive amount of water and raw materials. The development of circular textiles is one of the best opportunities the fashion industry has to change this, conclude McKinsey and Business of Fashion. Brands and retailers will need to integrate circular technologies in the design phase, as well as set up infrastructure for the collection and sorting of used clothing and textiles.
Another emerging sustainability initiative is the product passport. Information about a garment can be stored on these mostly digital ‘passports’. For example, such a passport can contain a certificate of authenticity, or offer consumers insight into how and where a garment was produced. Another option is to let customers fill the passport themselves with memories or stories about a piece of clothing, which can be cherished by the customer or handed over to a next buyer if the piece of clothing ends up in the second-hand circuit.
In short, companies in 2022 will face a complex combination of opportunities and challenges. In the current precarious situation, there is ‘little room for missteps’, according to McKinsey and Business of Fashion. But, it is predicted, better times are coming.