Popular Global consulting firm Mckinsey & Company in association with Fashion Industry giant Business Of Fashion, has released a detailed report called 'The State of Fashion 2023'. This report is the seventh annual report of its kind.
The State of Fashion 2023 report offers a bold revelation. The report states that the Global Fashion Sector is heading for an economic slowdown in 2023.
Coming from the back of the Pandemic, the year 2021 was filled with robust growth for the Global Fashion Industry. The Industry’s revenue grew by more than 21% year-on-year in 2021. One year ago at this moment, 2022 had arrived with bursting optimism. The first six months of 2022 saw continuing pent-up growth in the Fashion Industry. However, since June last year, the signs of slowing became visible.
Mckinsey's State of Fashion 2023 report reveals a challenging year for the Global Fashion Sector in 2023. The report stresses that the Industry will have to adapt to varied situations to navigate uncertain times.
What is the exact picture painted by the Mckinsey report? What are the reasons for the projected slowdown in the Global Fashion Industry? And what adjustments can the industry make to crawl out of such a rough time? Let's dive into the details of the report to find out!
REASONS FOR SLOWDOWN
The following are the primary reasons for the projected slowdown in the Fashion Industry.
The fundamental reasons for the current slowdown are geopolitical tensions. The Global Fragility produced by the tensions in Europe will hit the Fashion Industry in 2023. More countries will see political instabilities of their own, as a ripple effect of tensions in Europe. Political instabilities in different markets are projected adversely affect the Fashion Industry globally.
Political tensions centred in Europe have produced issues all over the World. The State of Fashion report states that the world map of industry growth is shifting. Markets that were once considered solid have turned fragile, while markets that were neglected before now show promise. The State of Fashion report stresses the need for the Global Fashion Industry to turn towards potential markets such as the Middle-East and the Arab World.
The direct result of the political tensions in Europe is Economic uncertainty. The Inflation produced all over the world, because of both- the Covid Pandemic and Geopolitical tensions, is fierce.
In the State of Fashion 2023 report, 85% of surveyed fashion executives predict that inflation will continue to hit the market in 2023. With geopolitical tensions hitting Supply Chains inflation will be felt worse by consumers this year. 58% of surveyed fashion executives also believe that Inflation will weaken the fashion market in 2023.
A DECLINE OF D2C
The State of Fashion 2023 report states that the Direct-to-Consumer Model, which saw phenomenal growth during the Pandemic and after, is starting to crumble. The sheen of D2C seems to be wearing off as fashion e-commerce normalizes after Pandemic.
Large number of consumers surveyed in the report state that they still crave a brick-and-mortar experience. As the lasting effects of the lockdown fade, more customers seem to be returning to the physical experiences. The trend of consumers returning to physical stores will be widely seen in 2023.
WAYS OUT FOR THE GLOBAL FASHION INDUSTRY
Above-mentioned reasons sure present a heated picture of why we will see a slowdown in 2023. However, the Mckinsey report also reveals concrete steps in which the Global Fashion Industry can crawl its way out.
LUXURY ABOVE THE REST
You read it right! The State of Fashion 2023 report actually projects growth in Luxury sales by nearly 5-10% in 2023. No matter the uncertainty and inflation, consumers are sure to invest more in luxury this year.
Luxury sector is projected to outperform the rest of the Fashion Industry in 2023. The report claims wealthy shoppers will continue to travel and spend, keeping the luxury sector insulated from hyperinflation. Investing heavily in Luxury products is the best way in which the Fashion Industry can find growth in 2023.
ADAPT TO NEW MARKETS
The Mckinsey report claims that the World Map for Industry growth is shifting, and the Fashion Industry needs to shift accordingly. Regions like the Middle-East, which are widely insulated from geopolitical tensions and global inflation, may become havens for growth in 2023.
The report stresses the need for the Global Fashion Industry to adapt to such new markets. The demand to deeply localize designs and merchandise to serve these markets must be met by the Fashion Industry in 2023. Deeper scenario planning and higher financial risk-taking must be performed by the Global Fashion Industry to meet opportunities in potential markets.
USE OF TECH PLATFORMS TO SMOOTHEN SUPPLY CHAINS
One of the major reasons why political tensions in Europe adversely affect Supply Chains globally are the existing frictions in Global Fashion Supply Chains. The State of Fashion report claims that Fashion Brands must see 2023 as a time to sharpen supply chain strategies.
End-to-End Tech Platforms must be availed to achieve smoother supply chains. Tech Platforms that offer Sourcing, SAAS, and Financial services together over the entire supply chain, must be availed by the Fashion Industry in 2023. A closer relationship between large retail brands and manufacturing partners is the need of the times
2023 promises to be a bumpy yet beneficial year for the Global Fashion Industry. While geopolitical tensions and rising inflation may offer challenges, adapting to new markets and smoothening supply chains presents opportunities for long-term growth.
Perhaps a slowdown for some period is inevitable in 2023. However, the Global Fashion Industry can indeed achieve success in establishing new markets and simplifying global trade.
Can the Global Fashion Industry once again view crisis as an opportunity remains to be seen. One thing is certain, 2023 sure promises to be a thrilling, crests-and-troughs-filled, exciting year for the worldwide trade of Fashion.