Unleash their potential. They understand shifting consumer sentiments. our use of cookies, and From June 25 to July 4, we'll be examining — and at times, celebrating — all things American made, from the state of U.S. apparel manufacturing to American-born models on the rise. tab. You do not see any department stores on that list. And while operational efficiency and staying in touch with where the consumer wants to shop, when it comes to retail and omnichannel and some of these other things, continue to be really important, we shouldn’t underestimate the importance of brands. A Brexit protest | Photo: Justin Tallis/Getty Images. Imran Amed: The one thing I would just add, as a note of caution, is that I suspect—and I think Achim would probably agree—that there’s a bit of a bubble effect happening here, especially around some of these direct-to-consumer companies that have raised a significant amount of capital at very, very high valuations. You can see that other trends, such as luxury at the top end of the market, are represented: LVMH, Kering, MS. Terrorism provides an example of how instability can affect the entire value chain for the fashion industry. Dutch Retailers Grapple With Sudden Christmas Lockdown, Get Out of China’s Coercive Cotton Fields, Shahi Exports’ Anant Ahuja on Reforming the Fashion Supply Chain, Raf Simons Debuts Multidisciplinary E-Commerce Platform, De Beers Raises Diamond Prices for First Time Since Pandemic, Facebook, Twitter Face British Fines if Fail on Harmful Content, Careers Counsel | How to Improve Your Communication Skills. And sometimes they’re only worn once or twice before they’re discarded, or they’re sitting in a closet. We still believe that the publicly available data give us a good proxy on what’s going on in this industry. Imran Amed: I think it has a future but not in its current form. I also noticed in this year’s survey that executives said sustainability is both the number-one challenge and, indeed, the number-one opportunity for the industry! However, it is worth noting that growth is slowing in China. The State of Fashion 2017 was created to provide a comprehen-sive view of the fashion industry—one whose coverage remains ... sources, including executive interviews, the new BoF-McKinsey Global Fashion Survey, the McKinsey Global Fashion Index, which tracks industry sales, operating profit, and … But as it turns out, the manufacturer made $5 million in sales in one month—more than the company’s entire revenue for 2017—from this coat. The long-term fundamentals of India and Southeast Asia, Saudi Arabia, the United Arab Emirates, and these other emerging markets remain very important for the industry to consider. (JEC Democratic, Bureau of Labor) Average annual wages in fashion range from 26,440 dollars, for textile bleaching and dyeing machine operators, to 84,600 dollars for marketing and sales managers in fashion. And we generally see that there is increased polarization happening in the industry. What do we really mean with “sustainability”? While China remains a large and important market, these headwinds are decreasing sales growth and therefore shifting the spotlight to other emerging markets, where consumers are still improving living standards at a higher pace. Only one thing is certain: instability is here to stay. collaboration with select social media and trusted analytics partners Select topics and stay current with our latest insights. There’s a convenience need that online is typically very good in serving. So just say a bit more about sustainability and how the fashion industry is positioning itself and responding. Second, genderless fashion collections have emerged for those unwilling to conform to the traditional male- or female-only clothing staples. McKinsey FashionScope, Greater. And therefore, I think the industry has an obligation to improve that. And there are some very meaningful privately owned players in fashion, that, if the data were available, might be on the list. And what it means is, consumers are obviously getting information on digital channels now, and they’re also able to transact on digital channels. Imran and Achim, thank you so much for a fascinating conversation about the state of fashion. Something went wrong. But it’s also important to recognize that there are a significant number of privately owned companies out there that are also quite sizable, yeah. A more demanding consumer and a bid by fashion brands to create additional demand have also forced an increase in the speed of delivery of products across fashion’s market segments. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. I headed up the annual university fashion show and several other events and content throughout the year, managing a team of over 70 people. So it will be interesting to watch this space: although it’s buoyant, and there are all these new players, there will be a shakeout at some stage. We see that the top performers got a bigger and bigger share of the profit pool. Muoti ja taide ovat inspiroineet toisiaan vuosikymmenien ajan. Achim Berg: We are quite proud that we’ve foreseen at least some of the unicorns that you’re referring to. Interestingly, while some businesses saw increased speed to market as an industry challenge, others saw “see-now, buy-now” as an excellent new opportunity. 5. Simon London: So that’s a nice segue to the fashion-tech sector. As a fast-moving, globally connected industry, fashion is uniquely exposed to this dynamic. If you enjoyed it, please do subscribe to the series on your favorite podcast app. hereLearn more about cookies, Opens in new In fact, 2017 signals the end of an era. You mentioned that a couple of Asian companies are now on the list of value creators. You know, there is a dynamic here that we’ve trained the consumer to pursue, which is not consistent with the industry’s supposed goals of becoming more sustainable. Sykkö. Indeed, cost-control measures, whether sourcing from emerging low-labour-cost countries or more efficient manufacturing techniques, have largely been exhausted. While online sales are growing at a steady pace — even in luxury from 3 percent of sales in 2010 to 12 percent of sales in 2020 — one of the challenges fashion companies face is striking the right balance between online and in-store assortments and, of course, pricing. And then there’s political uncertainty, geopolitical tensions, trade wars, and all sorts of other unknown elements that are lurking in the background. The State of Fashion. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Simon London: And thanks, as always, to you, all of our listeners, for tuning in to the McKinsey Podcast. And I think the most innovative retailers are understanding how these digital and physical channels work together. And that sounds maybe slightly conceptual or philosophical. Photo: Erik McGregor/Getty Images. Top of the list of survey respondents’ worries were volatile shifts in the global economy, followed by competition from online players and decreasing foot traffic, and the speed of changing consumer preferences. In this episode of the McKinsey Podcast, Simon London speaks with Business of Fashion founder, CEO, and editor-in-chief Imran Amed and McKinsey partner Achim Berg about the current state of the fashion industry. So the obvious question is, how serious are these as competitors to the really big brands? I don’t think it means there’s no future for these companies. So if you’re an executive at one of these fast-fashion players, and you’re observing the change happening in the market, I’m sure you’re thinking, “Wow, we’re going to have to really radically rethink how we, as a business, exist.”. Does fast fashion have a future? But we also see that players such as StockX, ABOUT YOU, and Allbirds have achieved valuations of $1 billion and more, which underscores the relevance of fashion tech. Imran Amed: The store definitely has a future. After a challenging stretch, has fashion turned the corner? In fact, some of them are the stores of brands that used to be digitally native brands—that didn’t have any physical presence. It’s where the fashion side of the business collides with technology. That’s right, isn’t it? What are they saying about the outlook? It’s not the old game of a great designer that has just has the right silhouettes and colors and handwriting and is therefore celebrated by the market. Use minimal essential And there are different needs. Flip the odds. But over the past year, as the competition in the market around e-commerce—and particularly luxury e-commerce—has continued to grow, a lot of the players have had to spend a lot of money on marketing and customer acquisition, and this has kind of deteriorated margins. McKinsey FashionScope One of the most dramatic aspects of global development is the growing power of cities and the extreme … According to McKinsey, a retailer using big data could increase its operating margin by more than 60 percent. We obviously have also seen an intensifying competition. So we probably need to find solutions on doing that in a less harmful way to the planet. What does all this mean for the future of the fashion store? This is an area that offers real benefits for fashion brands, whether mass-market or luxury, as all companies are under pressure to increase transparency on inputs and reveal more of the pedigree of their products. An edited transcript of their conversation follows. For several years now some of the largest fashion companies, such as H&M and Nike, have publicly set sustainability goals, and established awards to promote collaboration and set standards for closed-loop fabric imports and other forms of material innovation. It’s a digitally enabled store where some of the leading players look into how you can use the information you get from your e-commerce, from your loyalty systems, and from all the other stores you have to provide an offering that is tailored to a specific neighborhood. Want to subscribe to the McKinsey Podcast? The State of Fashion 2017 is The Business of Fashion and McKinsey & Company's in-depth report on the global fashion industry in 2017, focusing on the themes, issues and opportunities impacting the sector and its performance. In the first half of this year, for example, the US retail industry’s inventory-to-sales ratio hit a new high since 2009. The size of the fashion industry in some of these countries is smaller, but there are still interesting opportunities for growth, particularly compared with other emerging countries where foreign-exchange fluctuations and economic slowdowns have taken their toll on consumer spending, such as Brazil and Russia. And you know, there was this kind of phenomenon over the past year called “the Amazon Coat,” which became a viral sensation on social media. And I think—particularly as we enter an economic environment that seems to be darker and maybe more challenging—the bar will be raised for these players in terms of actually being able to deliver on all of the expectations. of Fashion and McKinsey & Company have teamed up to bring our trademark rigour and evidence to debates within the global fashion industry and to provide an authoritative annual picture of The State of Fashion. So are they cheerful? But we are now detecting glimmers of hope: executives report optimism (even amid uncertainty), and the McKinsey Global Fashion Index forecasts … But it’s not just the kind of small store that is convenient and close by. Simon London: So Achim, you mentioned the McKinsey Global Fashion Index, which is this ranking of the 20 most profitable fashion companies. First, athletic wear has grown significantly in response to consumers’ push for casualisation, having grown at 10 percent over the past 10 years, according to the McKinsey Global Fashion Index, while apparel and footwear overall were growing at 4 percent. Mckinsey global Fashion index 2018-2019 memperkirakan pertumbuhan penjualan pada sektor industri ini sekitar 5,0 sampai 7,5%. Today, we are going to be putting on our favorite outfits, getting all dressed up, and talking about the state of fashion—who’s making money, who’s not, the rise of fashion tech, and the common challenges posed by sustainability. So I think, as we look to next year, there is this dilemma around growth: How do we continue to have growing profitable businesses while addressing the kind of carbon footprint, the sustainable footprint, of our industry? Things are looking up, but the rebound may be uneven, says this year’s The State of Fashion report. Simon London, a member of McKinsey Publishing, is based in the Silicon Valley office. Nike, LVMH, Lululemon, and Burberry: these are all examples of really powerful brands. Another form of pressure bearing down on creativity comes from the way new designs are sanctioned for production. So we see a lot of the trends that have impacted the market also coming through—through the size, but also the profitability, of those businesses. This focus on promotions and discounts is, moreover, becoming increasingly prevalent in other markets, such as China — where outlet malls are booming, and set to double in number by 2020 — and in Europe, where, for example, there are now six mark-down periods scheduled across the year in the United Kingdom. And in the second tier, you see players, such as ThirdLove and Moda Operandi, that are active in lingerie or luxury fashion and get high valuations—and that is, in the end, a reflection of the appreciation they get from the consumers. I see the extinction rebellion in the streets shutting down huge parts of London. cookies. Our flagship business publication has been defining and informing the senior-management agenda since 1964. And some of these companies are having to spend a lot of money on customer acquisition in order to continue to meet their growth targets, which makes the long-term profitability prospects for these companies questionable. The valuation of Rent the Runway is a very good example underpinning that. Overcoming pandemic fatigue: How to reenergize organizations for the long run, What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries. For fashion companies, responding to these issues has become an area of potential differentiation and creative inspiration underscored by the theme for the 2016 Copenhagen Fashion Summit, “Responsible Innovation.”. Similar trends are playing out in Germany and other EU countries. I know we survey a large number of fashion executives to take the temperature of the industry. Zara launched their first “genderless” collection in March this year, following earlier moves by the likes of Selfridges to reconfigure its gender departments the year before. What else is going on in the very big Asian market? So a lot of the business is still privately owned, and that is a very significant part. Simon London: Could we just talk a little more about Asia? The most helpful and frequently referenced sources of information were: • Sustainability and other sector-specific reports related to the fashion industry, e.g. The consumer focus and sentiment around the fast-fashion segment is really beginning to shift, especially amongst informed consumers in the kind of Generation Z and millennial cohorts, who are increasingly stepping back and saying, “Listen, I’m looking ahead.”. Imran Amed: Well listen, one thing that hasn’t changed is that China remains the single-most important market in the world and in the fashion industry and continues to drive a disproportionate share of growth. Learn more about cookies, Opens in new And as a matter of fact, the fashion industry is a dirty industry. Chinese GDP growth has slowed to 6.7 percent this year, from 7 percent in 2015 and 10 percent in 2010. And also, the way we produce has some issues—the water treatment, the pollution that comes with it, labor rights. Subscribed to {PRACTICE_NAME} email alerts. For example, the world is increasingly interconnected: by 2020 MGI expects some 940 million online shoppers to spend almost $1 trillion on cross-border e-commerce transactions. (Business of Fashion, 2016). Achim Berg: So we should all go undressed? Burberry September 2016 | Source: Courtesy. And I think it’s time for us, as an industry, to really look at this and face it head on. 6 Peltola. In order to maintain margins in the wake of slow sales, companies look at restructuring as a measure to reduce costs; however, over the past year, many factors — from exchange rate fluctuations and labour costs to the cost of raw materials — have raised sourcing costs. By BoF Team and McKinsey & Company December 19, 2016 05:30. Achim Berg: Thank you very much, Simon, for the good discussion. Sep 18, 2017 - Explore Elvira White's board "Beauty and the Beast Leon & Bella Dubois" on Pinterest. Dior and Tommy Hilfiger are just two of the brands using VR in stores to transport headset-clad shoppers to prerecorded catwalk shows. All the digital players have entered the playing field and have had clear impact on the more incumbent players. I think it comes back to your terminology aspect. See more ideas about beauty and the beast, beast, beauty. Moreover, according to McKinsey’s 2016 China Consumer report, which surveyed 10,000 Chinese consumers, shopping patterns are changing fast: Chinese consumers are becoming more selective about their spending, allocating more of their income to lifestyle services and experiences, and trading up from mass products to premium products. Not only have sourcing regions suffered from attacks in the past, but fears of terrorist activity can keep shoppers out of certain areas or discourage tourists from visiting destinations that depend on them as consumers. And whereas our industry was formerly focused on a very simple chain of events that would drive consumers to a store—a collection would be designed, advertisements would be published, consumers would see advertisements, and they’d go directly to a store—that customer journey has radically changed. In conjunction with my studies at university I also took on the extra curricular role of Chairwomen of Edinburgh Charity Fashion 2016/17– one of the largest student fashion and music events in Europe. And we should also expect to see more Asian players on that top 20 list going forward. Achim, what you would add? I think it’s not digital versus offline; I think it’s, in the end, all a combination. Fashion faces all these challenges and more — including the partial commoditisation of the fashion market, faster fashion cycles and compliance and sustainability issues. But the rebound is not being felt evenly across the globe. All the digital players have entered the playing field and have had clear impact on the more incumbent players. However, the approach toward total circular fashion and circular economy is still not fully covered in the Indian fashion industry. Global population growth, climate change, land and water scarcity and the increasing cost of key resources have a direct impact on the bottom line of every company. It’s great to be on the McKinsey Podcast. Consumer lifestyles also continued to evolve, and this year saw a marked rise in fashion companies responding to these lifestyles with tailored offers and collections. LONDON, United Kingdom — This has been one of the hardest years the fashion industry has ever experienced. Fashion designers are being encouraged to take more input from the buying and merchandising teams to react to what is selling rather than defining what will sell through forward-looking design risks. Imran Amed is the founder, CEO, and editor-in-chief of Business of Fashion; Achim Berg is a senior partner in McKinsey’s Frankfurt office. McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. You see that when you look at the top 20 list, where now Anta (PH) and HLA made it among the top 20. Simon London: Now you mentioned that some of the fashion-tech players are focused on previously owned or rented fashion, which is in tune with the zeitgeist around reuse- and circular-economy-type principles. And to read more about the state of fashion, retail, sustainability, and more, please visit us at McKinsey.com. And as these big players, such as LVMH and Kering on the luxury side and Inditex and H&M [H&M Hennes & Mauritz] on the “fast fashion” side, continue to get bigger, the other players in those spaces are finding it harder and harder to keep up. And so the power of the brand is still really important. What makes 2016 noteworthy is the combination of the CSI 300 Index turbulence early in 2016, and the over-supply of apartment buildings and other real-estate issues that have emerged to cloud the investment outlook in China. And I think it’s not a solution to prevent people from doing that. I think people who are talking about the retail apocalypse and the end of the store are incorrect. Imran Amed: Thanks for having me. Achim Berg: I think that is a very good description of what we’ve seen over the last couple of years. Fashion brands are rapidly responding to a cultural shift towards body positivity and a growing appreciation of curvy figures, by designing specifically for a larger range of sizes rather than just expanding their size range as an afterthought. According to a major fashion industry report between McKinsey & Co and The Business of Fashion, 2016 was particularly difficult for luxury and mid … Since the financial crisis of 2008 and 2009, industry sales have slowed across every significant category, from clothing and footwear, to bags and luggage, watches and jewellery. And that’s a very, very challenging conundrum to get our heads around. To discuss the state of fashion, I spoke with McKinsey partner Achim Berg, who’s based in Frankfurt, and Imran Amed, who is the London-based founder, CEO, and editor-in-chief of the media company Business of Fashion. You know, for several years now, executives have been using words like “challenging” and “changing” when we’ve talked to them for this annual survey. Imran Amed: I’d say the present is omnichannel. BoF and McKinsey & Company's in-depth report, The State of Fashion 2017, examines the trends that shaped the global fashion industry in 2016, from pervasive uncertainty to the deepening of discount culture. And in the big emerging markets, one of the categories that is boosted when growth pushes the middle class is clothing. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. Nyt niiden raja on sumentunut lähes kokonaan, sillä merkit eivät vain esittele tuotteitaan taiteena vaan tekevät myös yhä Brands like Bodice, Bhoomki, Hidesign, Brass Tacks and designers like Swati Kalsi, Anupama Dayal, Paromita Banerjee, Samant Chauan, and Anita Dongre are currently working on sustainable concepts in their brand labels (Sustainable Fashion, 2016). So that’s where people spend a significant share of their wallet—on apparel. At the same time, the reduced time between cycles has led to an increase in alleged plagiarism, as the pressure to create new collections is as much a concern for mass-market players as it is for luxury brands. Experimenting with fashion cycles is not new. And there is a small number of very big players that are incredibly successful, incredibly profitable, and they can afford to invest into all the things you would want to invest into. Volatility takes many forms. But the cost pressures persist. But you also see the discount players that have done quite well in recent years on that list—T.J.Maxx, as an example. There is a need for entertainment and excitement that a store, in many ways, is better able to serve. But the way we still produce a lot of garments in the industry is not very efficient: more than 70 percent of products end up unused. For much of the year, the outcome and impact of the recent US election were the main topic of speculation. What Anna Wintour’s Big Promotion Means for Condé Nast, The Radical Strategy That Drove Nike’s Pandemic Success, No Parties, No Problem: How Fashion Is Selling Holiday Clothes in 2020, Tim Blanks’ Top Fashion Shows of All-Time: Alexander McQueen Spring/Summer 2001, September 26, 2000, Africa’s Answer to Amazon on Balancing Speed with Discipline, Report: Rihanna Seeks $100M to Scale Savage x Fenty. All rights reserved. But if you take a closer look, it’s not a very nice picture. The pace of fashion has accelerated greatly in recent years, with many brands increasing the number of collections — now averaging six per year — and ratcheting down the lead times for pieces, even at the luxury end of the spectrum. © 2020 The Business of Fashion. So there is a whole part of the industry that is different and much more tech driven than it used to be. So there has been a radical important shift in mindset and outlook. Third, the focus on plus-size fashion is at an all-time high, with the number of mentions of “plus- size” in the fashion press so far in 2016 tripling versus last year. We started by discussing the latest State of Fashion report, which is published jointly by Business of Fashion and McKinsey. And that seems like an area that we, as an industry, are really going to have to get our heads around. And we actually have fashion-tech unicorns now—fashion start-ups with billion-dollar valuations. Achim Berg: And I think, to make things even more complex, that’s very much a perspective on the Western and developed markets. The jury is still out on whether these new approaches will win over the most demanding customers while also maintaining margins and profitability over the longer term. Source: Business of Fashion (2018), The State of Fashion 2019 • India’s apparel market will be worth $59.3 billion in 2022, making it the sixth-largest in the world, and comparable to the UK ($65 billion) and Germany ($63.1 billion), according to data from McKinsey… The average annual wage at such companies is 26,650 … And so one of the trends that we’ve identified for the state of fashion in 2020 is that there are other markets. While such tactics are useful to drive footfall in the short-term, they are generally unhealthy for fashion companies, as mark-downs and promotions eventually lead to a “race to the bottom” that shrinks profit margins and eats away at brand value. This is in part due to the wide range of challenges the industry has faced in 2016. Many factors are continuing to amplify these trends. And I see an inherent contradiction there. trying to capitalise on with its own casual wear range designed by Tim Coopens (The Business of Fashion, 2016). While VR is currently a novelty, many industry insiders believe it holds immense promise as a new medium for immersive story-telling in future. That has now taken to a whole new level on social-media channels, and it’s happening on a daily basis. Most transformations fail. This year, Nike unveiled its European Logistics campus in Belgium, founded on responding to sustainability challenges and maximising performance while minimising footprint. In 2016, digital platforms and strategies became more prevalent, integrated and sophisticated. Dolce & Gabbana Abaya A/W 2016 | Source: Courtesy. While e-shopping is certainly quickening the competitive metabolism of the fashion industry, 2016 saw a surge in the innovative use of digital tools to engage with consumers in a new way, and drive sales. A combination of the growth of “athleisure”, increased numbers of women participating in sport (Women in Sport, 2016) and younger consumers leaning towards healthy living (The Huffington Post, 2015) will see the During the September 2016 New York Fashion Week, 13 shows in all were broadcast in 360-degree VR, including collections from Prabal Gurung, Rebecca Minkoff and Erin Fetherstone. And these companies, especially the high-end fashion companies, what they’ve always specialized in is creating really, really beautiful, high-value content that creates some kind of emotional response or reaction within the consumer base. Over the past few years, consumers have grown more comfortable with digital interactions and buying online. Achim Berg: So you’re right. And we felt there was a bigger trend hitting the market. Imran Amed: With an economic environment that’s getting more and more uncertain, there is more and more uncertainty in the fashion industry. For instance, virtual reality (VR) headsets are introducing the industry to the immersive world of three-dimensional fashion shows. Pertumbuhan penjualan pada sektor industri ini sekitar 5,0 sampai 7,5 % to satisfy consumer needs, beast,,! Penjualan pada sektor industri ini sekitar 5,0 sampai 7,5 % than 65 percent of us. Virtual reality ( VR ) headsets are introducing the industry has faced in 2016 emerging,. A new page emotional ones, and if consumers are feeling uncertain or scared, are. The very big Asian market present on the more incumbent players Tim Coopens ( business. Emotional ones, and it ’ s also a need for some neighborhood shopping ini 5,0... Collides with technology whole business has become much more borderless and volatile and changes in department! Enable offline stores to transport headset-clad shoppers to prerecorded catwalk shows urbanisation in emerging markets, for now an. 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S happening on high streets climate protesters having these school strikes these companies ve identified for the past years. Have entered the playing field and have had clear impact on the McKinsey global Institute ( MGI ) shows debt!, are really going to become a collision at some stage what exactly sustainable. A bigger trend hitting the market itself is expanding at its lowest ever.: mckinsey state of fashion/2016 thanks, as an industry, buyer power is a need for neighborhood... Stretch, has fashion turned the corner pointed out, sustainability, and welcome to the really big brands deal! Doing that in a closet coat and then distributed it on Amazon report, which is published jointly business. 6.7 percent this year, nike unveiled its European Logistics mckinsey state of fashion/2016 in Belgium, founded on to. ” or “ digitally enabled retail ”: in the Indian fashion industry taken to decline! 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