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1、The State of Fashion 2023The State of Fashion 2023The State of Fashion 20235CONTENTSEXECUTIVE SUMMARY 1011INDUSTRY OUTLOOK 1217GLOBAL ECONOMY 203901:Global Fragility Managing Inflation for Growth 02:Regional Realities Chalhoub Group:Capturing Fashions Growth Potential in the Middle East CONSUMER SHI
2、FTS 406603:Two-Track Spending Tapestry:Connecting With Customers Is Not Just About Price 04:Fluid Fashion How Gen-Z is Propelling Gender-Fluid Fashion 05:Formalwear Reinvented Hugo Boss:Reclaiming the Formalwear Space FASHION SYSTEM 6711106:DTC Reckoning Allbirds:Conquering the New Multi-Channel Lan
3、dscape 07:Tackling Greenwashing A New Approach to Scaling Innovative Materials Puma:Moving Sustainability Beyond Marketing 08:Future-Proofing Manufacturing MAS Holdings:Deconstructing Supply Chain Risks,and Rewards 09:Digital Marketing Reloaded How Web3 Is Shaking Up Digital Marketing 10:Organisatio
4、n Overhaul MCKINSEY GLOBAL FASHION INDEX 112121THE STATE OF LUXURY 2023 122127MGFILUXURY 2023GLOBAL ECONOMYCONSUMER SHIFTSFASHION SYSTEM6The State of Fashion 2023SARAH ANDRSarah Andr is an engagement manager inMcKinseys London office and is part of the Apparel,Fashion&Luxury group.She works with fas
5、hion and luxury companies as well as investors across Europe and the US,on topics such as e-commerce,strategy,sustainability,value creation and M&A.CONTRIBUTORSACHIM BERGAchim Berg is a senior partner in McKinseys Frankfurt office,and leads McKinseys Global Apparel,Fashion&Luxury group.He is active
6、in all relevant sectors including clothing,textiles,footwear,athletic wear,beauty,accessories and retailers spanning from value to luxury segments.As a global fashion industry and retail expert,he supports clients on a broad range of strategic and top management topics,as well as on operations and s
7、ourcing-related issues.IMRAN AMEDImran Amed is one of the global fashion industrys leading writers,thinkers and commentators,and is founder,chief executive and editor-in-chief of The Business of Fashion(BoF),a modern media company and the authoritative voice of the global fashion and luxury industri
8、es.Imran holds an MBA from Harvard Business School and a B.Com from McGill University.He was born in Canada and holds British and Canadian citizenship.Previously,Imran was a management consultant at McKinsey&Co.ANITA BALCHANDANI Anita Balchandani is a senior partner in McKinseys London office,and le
9、ads the Apparel,Fashion&Luxury group in EMEA and the UK.Her expertise extends across fashion,health and beauty,specialty retail and e-commerce.She focuses on supporting clients in developing their strategic responses to the disruptions shaping the industry,particularly accelerating digital growth an
10、d delivering customer-led growth transformations.SANDRINE DEVILLARDSandrine Devillard is a senior partner at McKinseys Montreal office and leads McKinseys Apparel,Fashion&Luxury group in North America.Sandrine serves leading retail companies across the US,Europe and Asia on strategy,activity creatio
11、n,organisational and operational management challenges.MICHAEL STRAUBMichael Straub is an associate partner in McKinseys Hong Kong office,and co-leads the Apparel,Fashion&Luxury practice in Greater China.He partners with global luxury,fashion and beauty clients in defining their growth and go-to-mar
12、ket strategies for China and other Asian markets.7JANET KERSNARAs executive editor at The Business of Fashion in London,Janet Kersnar has a multifaceted content role.With more than 25 years of experience as a business journalist at leading publishing houses including The Economist Group,Janet is a m
13、ember of BoFs senior leadership team and is part of BoF Insights,a fashion industry think tank.FELIX RLKENSFelix Rlkens is a partner in McKinseys Berlin office,and is part of the leadership of McKinseys Apparel,Fashion&Luxury group.He works with apparel,sportswear and pure-play fashion e-commerce co
14、mpanies in Europe and North America on a wide range of topics including strategy,operating model and merchandising transformation.JOLLE GRUNBERGJolle Grunberg is a senior advisor in McKinseys Apparel,Fashion&Luxury group and an experienced C-suite leader in retail,with a specific focus on digital gr
15、owth,strategy and transformation,including M&A.Jolle previously served as global president at Boston Brands Portfolio(Sperry,Saucony,Keds)at Wolverine and president and CEO of Lacoste North and Central America.HANNAH CRUMPAs associate director,editorial strategy at The Business of Fashion,Hannah Cru
16、mp contributes to the execution of special editorial projects,ranging from case studies to in-depth market reports.She partners with industry experts to develop,edit and produce data-driven research and analysis for professionals in the global fashion industry.The State of Fashion 20239ACKNOWLEDGEME
17、NTSThe authors would like to thank Olimpia Franzan,Ella Fraser,Alice Gemvik,Ingrid Hartmann Bjrndalen and James Nakajima from McKinseys London,Stockholm,Copenhagen and New York offices respectively for their critical roles in delivering this report.We would also like to thank Abhishek Goel for his s
18、ignificant contribution to the MGFI article again this year.A special thanks to all members of The Business of Fashion and the McKinsey communities for their contributions to the research and participation in the BoF-McKinsey State of Fashion 2023 Survey,especially the many industry experts who gene
19、rously shared their perspectives during interviews.In particular,we would like to thank Lorenzo Bertelli,Tim Brown,Patrick Chalhoub,Joanne Crevoiserat,Anne-Laure Descours,Suren Fernando,Miriam Fitting,Alejandro Gmez Palomo,Daniel Grieder,Nate Jones,Sebastian Manes,Pierre Nicolas Hurstel,Erwan Rambou
20、rg,Max Schiller,Trevor Testwuide,Brian Trunzo and Erika Wykes-Sneyd.Wed also like to thank StyleSage for their invaluable data sharing for this report.The wider BoF team has also played an instrumental role in creating this report in particular,Marc Bain,Brian Baskin,Nick Blunden,Sheena Butler-Young
21、,Cathaleen Chen,Robert Cordero,Jael Fowakes,Fred Galley,Olivia Howland,Vikram Kansara,Sarah Kent,Daniel-Yaw Miller,Malique Morris,Tamison OConner,Anna Rawling,Benjamin Schneider,Arunima Sharma,Lauren Sherman,Amy Warren,Josephine Wood and Robb Young.We would like to thank the following McKinsey colle
22、agues for their special contributions to the report creation and in-depth articles:Ekaterina Abramicheva,Saga af Petersens,Elisa Albella,Susann Arnold,Andres Avila,David Barrelet,Colleen Baum,Daniel Bullon,Cherry Chen,Tiffany Chen,Nic Cornbleet,Andrea De Santis,Gizem Dibekoglu,Purvi Doshi,David Full
23、er,Abhishek Goel,Antonio Gonzalo,Arvind Govindarajan,Ezra Greenberg,Jan Hamdan,Holger Harreis,Colin Henry,Steve Hoffman,Julia Huang,Andreas Huete,Julian Hgl,Nicoline Hrs,Sanchit Jain-Guva,Jonatan Janmark,Katie Kelley,Dale Kim,Krzysztof Kwiatkowski,Franck Laizet,Nikolai Langguth,Benjamin Lau,Adrienne
24、 Lazarus,Phoebe Lindsay,Karl-Hendrik Magnus,Dunja Matanovic,Nicola Montenegri,Jesse Nading,Gizem Ozcelik,Emanuele Pedrotti,Madelon Poulsen,Kim Rants,Emily Reasor,Giulia Riccardo,Carlos Snchez-Atable,Raj Shah,Vorah Shin,Meera Singh,Tom Skiles,Ewa Starzynska,Marie Strawczynski,Cristina Tintore,Bogdan
25、Toma,Dora Trokan,Prabhu Tyagi,Franois Videlaine,Cyrielle Villepelet,Sophia Wang,Tiffany Wendler,Laerke Wolf,Hannah Yankelevich,Isabell Zhang,Rebecca Zhang and Daniel Zipser.Wed also like to thank Chantal Fernandez and David Wigan for their editorial support,Amy Vien for her creative input and direct
26、ion,and Marie Victoire de Bascher for the cover illustration.In addition,we extend a special thank you to Adriana Clemens and Saskia Hedrich for their continued support and extensive contribution to the report over the years.10The State of Fashion 2023EXECUTIVE SUMMARYJust as the fashion industry wa
27、s beginning to find its feet after Covid-19s turmoil,the later months of 2022 seem determined to throw brands and retailers off course again.Deteriorating macroeconomic and geopolitical conditions have weighed heavily on the industry in the second half of the year and continue to leave fashion execu
28、tives on edge as they look towards 2023.However,much of the industry is entering this difficult period with strong foundations,having experienced impressive growth in 2021 and in the first half of 2022.As economies around the world began lifting restrictions in 2021 after enduring the pandemics deva
29、station,the fashion industry benefitted from a burst of pent-up consumer demand,despite some challenges remaining,like supply chain disruptions.Global industry revenues in 2021 grew 21 percent year on year,while the average EBITA margin close to doubled,growing 6 percentage points.The industry conti
30、nued its strong performance in early 2022,with 13 percent revenue growth in the first half of the year.More than 50 percent of the companies tracked by the McKinsey Global Fashion Index contributed to the industrys total economic profit in 2021,compared to just 32 percent in 2020.The proportion of v
31、alue destroyers(companies generating negative economic profit)has thus fallen to its lowest since 2013.Our roster of fashion“Super Winners”the top 20 listed companies by economic profit comprises many of the usual suspects from the luxury and sportswear categories,while players in the discount segme
32、nt have also climbed up the list.But some of these gains were chipped away as 2022 progressed.The war in Ukraine,which started in February,triggered a string of events,including an escalating energy crisis across Europe.Troublesome inflation in many major economies led central banks to roll out back
33、-to-back interest rate hikes,ending a lengthy period of ultra-low and even negative rates,in a bid to temper rising prices and help steer economies away from recession.Looking ahead to 2023,the drivers contributing to a broad state of global fragility are top of mind for fashion executives.In the Bo
34、F-McKinsey State of Fashion 2023 Survey,85 percent of fashion executives predict inflation will continue to challenge the market next year.Meanwhile,geopolitical tensions,specifically around the ongoing war in Ukraine,have disrupted supply chains and created an energy crisis that 58 percent of execu
35、tives also believe will weaken the fashion market.In aggregate,McKinsey expects global fashion sales growth of 5 percent to 10 percent for luxury,and negative 2 percent to positive 3 percent for the rest of the industry in 2023,while the dichotomies that previously defined the fashion business are e
36、xpected to return.Beyond the differences between luxury and players from other segments,regional differences will be pronounced.The US economy,despite the slowdown,is expected to be more robust than other major global economies Covid-19 outbreaks and precautions continue in China,while Europe suffer
37、s from an energy crisis and a weakened euro against a strong US dollar.Against this backdrop,the world map for industry Resilience in the Face of Uncertainty11growth is shifting.Markets that once showed solid growth potential are now facing a wider range of risks than they once did,ranging from extr
38、eme weather conditions to political or social unrest.Other regions such as the Middle East may become new havens of growth,requiring brands to further localise designs,marketing and merchandising to attract new customers.But as fashion executives assess what the new regional realities mean for their
39、 businesses,their scenario planning will need to factor in more than financial risks and opportunities.Fashion companies will need to rethink their operations.Many will update their organisational structures,introducing new roles or elevating existing ones to target key growth opportunities and resp
40、ond more effectively to risk.Brands may also choose to see the next year as a time to team up with manufacturing partners to sharpen their supply chain strategies.This may involve nearshoring to better respond to fast-shifting consumer demand or leaning more heavily on data analytics and technology
41、to manage inventory efficiently.Distribution channel mixes are also ripe for reassessment.As e-commerce growth normalises after its pandemic boom,the sheen has started to wear off the direct-to-consumer digital model that propelled many brands over the past decade.As lockdown restrictions lifted,sho
42、ppers have made it clear that although they still value online channels particularly within luxury,where online DTC and third-party platforms will continue to drive growth shoppers also want brick-and-mortar experiences.Brands will also need to factor in the continued return of international travel
43、to pre-pandemic rates,which will be buoyed by a strong US dollar.Wholesale and physical retail have a new role in revamping customer journeys,requiring brands to look beyond tier-one cities to be physically closer to consumers.Brands will have to work hard to remain attractive to consumers,given the
44、 tough economic environment.Consumer behaviours in 2023 will depend greatly on household incomes.While higher-income households will be less affected by economic pressures and look likely to continue shopping for luxury goods,as in previous downturns,lower-income households will likely cut back or e
45、ven eliminate discretionary spending,including apparel.Some will trade down,pivoting to value retailers,marked-down items and off-price channels while eschewing full price,premium and mass brands.All this elevates the importance of brands marketing strategies.Brands should use the year ahead to inno
46、vate their digital marketing.Budgets will shift to alternative channels that could generate better return on investment than paid social media ads,such retail media networks,while building stronger brand communities.This will feed into distribution channels,as brands will need to seek higher margins
47、 and gather more first-party customer data.How brands manage and communicate about issues that are important to consumers will also be critical.Consider sustainability.New and emerging regulations along with heightened consumer awareness of fashions contribution to the climate crisis mean that brand
48、s will need to be hyper-vigilant about how they talk about their sustainability-related initiatives and achievements to ensure they are not“greenwashing,”which could potentially lead to reputational damage or costly fines.Brands that effectively navigate industry challenges in 2023 will be better po
49、sitioned to seize consumer trends.Coming out of the pandemic,formal dress codes remain disrupted,pushing brands to rethink office and special occasion attire.Meanwhile,consumers are increasingly shopping across gender categories,and brands that can adapt their merchandising strategies accordingly wi
50、ll be able to strengthen their relationships with a wider range of consumers.Executives are bracing for a tough 2023;leading brands will deploy realistic but bold strategies that combine careful cost control with strategic investments in skills growth.Those that recognise that growth will be unpredi
51、ctable or muted,but still charge forward with investments in innovation throughout their organisations,will find they are in a stronger position to accelerate their businesses when the uncertainty and fragility subside.Executives are bracing for a tough 2023;leading brands will deploy realistic but
52、bold strategies that combine careful cost control with strategic investments in skills growth.12The State of Fashion 2023The global fashion industry sharply rebounded in 2021 and much of 2022.But in todays fragile market,expectations of a continued recovery can downshift quickly.Fashion executives a
53、re largely pessimistic about the year ahead,anticipating that a number of challenges will negatively impact their businesses and customers.In the BoF-McKinsey State of Fashion 2023 Survey,84 percent of industry leaders said they expect market conditions to decline or stay the same in 2023.1 The resp
54、onse stands in stark contrast to the cautious optimism the cohort felt heading into 2022,when 91 percent of executives predicted market conditions would improve or remain the same.2The effects of inflation are weighing heavy on executives as they look to 2023.With prices in Europe and the US reachin
55、g historic highs in late 2022 and central banks raising interest rates,consumer demand is expected to suffer.Inflation is also pressuring brands costs,as the industry encounters a competitive labour market and the consequences of climbing energy prices.Beyond inflation,surveyed fashion executives id
56、entified a range of concerns that had not impacted the industry for the better part of a decade.In the year ahead,industry leaders are worried about geopolitical instability and conflict,supply chain disruptions,increased economic volatility,and rising energy prices.Regarding geopolitical tensions,r
57、espondents specifically referenced the war in Ukraine that began in February 2022.At the same time,only 5 percent of executives listed Covid-19 among their top three concerns in 2023,demonstrating the public health crisis has been eclipsed by economic and geopolitical issues.3Outlooks for 2023 vary
58、by region and continent,however.In the US,which is more insulated from the effects of the war in Ukraine and Covid-19,61 percent of executives expected the same or better conditions in 2023 than 2022.4 European and Asian fashion leaders were the most pessimistic,with 64 percent and 53 percent antici
59、pating worsening conditions,respectively.5 The sober outlooks are warranted.In 2023,the industrys sales are expected to grow at a slower rate than in 2022,when the gains from the first half of 2022 were largely diminished by the deceleration in spending in the second half.Industry growth figures in
60、2023 will also be distorted by inflation,with a significant share of sales affected by rising costs and prices.In this context,2023 could witness year-on-year volume declines,which has not happened for many years.The luxury segment should show more resilience in the months ahead than other categorie
61、s.Its sales are projected to grow 1 percent to 3 percent in the second half of 2022 and 5 percent to 10 percent in 2023,based on McKinsey Fashion Growth Forecasts.For the rest of the industry,growth in 2023 looks likely to be flat or Preparing for a Global SlowdownINDUSTRY OUTLOOK13Exhibit 1:Fashion
62、 sales in 2023 are expected to grow in the US and ChinaNon-luxury fashion retail sales,year-on-year growth,2020-2023E,%Exhibit 2:Luxury fashion sales are expected to grow across the board in 2023Luxury fashion retail sales,year-on-year growth,2020-2023E,%Note:Growth forecasts reflective of inflation
63、;growth rates calculated on actuals expressed in local currenciesSource:McKinsey Fashion Forecasts;McKinsey analysis;expert interviewsEuropeEuropeUSUSChinaChina-28-11-9 to-7-4 to+1-11831 to 33-31-15301510 to 122 to 43 to 8-28-243 to 55 to 10504320 to 22-25-7 to-536301 to 32 to 76521511115 to 176 to
64、89 to 020202020202020H1H2H1H2H1H2H1H2H1H2H1H2H1H2H1H2H1H2H1H2H1H2H1H2H1H2H1H2H1H2H1H2202222E2022E2022E2022E2022E2022EFY2023EFY2023EFY2023EFY2023EFY2023EFY2023ENote:Growth forecasts reflective of inflation;growth rates calculated on actuals expressed in local currenci
65、esSource:McKinsey Fashion Forecasts;McKinsey analysis;expert interviews-22-191 to 31 to 621157 to 9H1H2H1H214The State of Fashion 2023even negative.6 While the industry is expected to contract between 5 percent and 7 percent in the second half of 2022,it should see slight improvements in 2023,with g
66、rowth projected between negative 2 percent and positive 3 percent.7European prospects in 2023 are particularly gloomy.Europes GDP is expected to grow by less than 1 percent in 2023,8 and inflation is expected to remain high,undermining consumer confidence,which is already at levels as low as 2020.Mc
67、Kinseys Quarterly Consumer Pulse Survey found 14 percent of Europeans were optimistic about their countrys economic recovery in the second quarter of 2022,9 compared to 15 percent during the same period in 2020.10 Non-luxury fashion sales in Europe are forecast to grow between negative 4 percent and
68、 positive 1 percent.11 And apparel and footwear will likely continue to lose wallet share among many consumers who are feeling the pinch of high petrol and energy prices and the tapering of pandemic-era government support programmes.Luxury will remain an exception in the region as wealthy consumers
69、and tourists from the US and Middle East will be less affected by inflation.European sales for the sector are projected to grow 3 percent to 8 percent in 2023.12 The US fashion industrys growth will also likely slow,but might show greater resilience than Europe.The already-strong US dollar is likely
70、 to peak in the first half of 2023,and inflation is projected to cool by the second half.GDP in 2023 is forecast to grow 1.5 percent,down from 3 percent in 2022.13 Non-luxury fashion companies are expected to grow modestly in 2023,between 1 percent and 6 percent,continuing the trend observed in the
71、second half of 2022.Like the rest of the luxury industry,US luxury companies should outperform other categories in the country,with forecasted growth of 5 percent to 10 percent.14 Travel will be a driver for the industry.Domestic leisure travel spending has already surpassed pre-pandemic levels and
72、business travel is projected to recover to 96 percent of its pre-pandemic levels in 2023.15China is expected to see a modest recovery in 2023 after a difficult 2022,when persistent coronavirus outbreaks and a real estate crisis undermined the fashion market.The countrys performance in 2023 will be h
73、eavily correlated to GDP,which is forecast to grow between 5 percent and 7 percent.16 Non-luxury sales are projected to end 2022 with limited growth of 1 percent to 3 percent in the second half but are forecast to deliver 2 percent to 7 percent growth in 2023.17 After moderate growth in the first ha
74、lf of 2022,Chinas luxury market should grow 15 percent to 17 percent year on year in the second half,and 9 percent to 14 percent in 2023.The countrys fashion industry performance at the end of 2022 and through 2023 will be heavily dependent on Covid-19 outbreaks and health precautions.Chinas substan
75、tial middle class will also be highly impacted by policy responses to the real estate crisis and international travel guidelines.Strategic ActionsThe majority of fashion leaders polled for the BoF-McKinsey State of Fashion 2023 Survey said they plan to focus on sales growth in the year ahead.But ami
76、d worsening economic conditions,37 percent also said they plan to seek cost improvements.This marks the highest number of respondents looking to cut or better manage costs since The State of Fashion executive surveys began in 2016.This comes as many of their biggest line-item costs are rising.More t
77、han 97 percent of respondents said they anticipate higher cost of goods sold as well as selling,general and administrative expenses in 2023.More than 50 percent of executives expect COGS to increase by over 5 percent,while 40 percent also expect SG&A to increase by over 5 percent.Furthermore,a highe
78、r number of leaders are planning to streamline their businesses in the year ahead than they were in late 2020 during the pandemic.18To protect margins,nearly three-quarters of executives stated that they plan to increase the INDUSTRY OUTLOOKExhibit 3:Fashion executives are more pessimistic in 2022 t
79、han in 2021 about the conditions the industry faces in the year aheadExpectations for how fashion industry conditions will evolve in the year ahead,*%of respondentsExhibit 4:Sustainability presents the biggest opportunity and inflation the greatest threat to the fashion industry in 2023Top three opp
80、ortunities and challenges,%of respondents*Compared to current yearSource:BoF-McKinsey State of Fashion 2023 Survey,BoF-McKinsey State of Fashion 2022 Survey1 Also mentioned as a top industry challenge or opportunity in The State of Fashion 2022Source:BoF-McKinsey State of Fashion 2023 Survey56928291
81、662Expectations for 2023Expectations for 2022BetterSameWorse161312Sustainability1AgilityBrand differentiation&customer experienceInflation&economic downturnMargins&profitabilityDeclining consumer demand&confidenceBiggest opportunities ahead29151OBiggest challenges ahead1516The State of Fashion 2023p
82、rices of their products.Among respondents,10 percent foresee price hikes of more than 10 percent.To help mitigate the impacts of inflation on cost,over 60 percent of executives said they plan to optimise or re-negotiate sourcing agreements.In addition,approximately two-thirds of executives said they
83、 are considering nearshoring(moving production closer to their home markets)to adapt to unpredictable consumer demand.More than 60 percent of fashion leaders also said they were considering strategic partnerships with suppliers to increase their speed to market and create more efficient supply chain
84、s that will carry benefits for their businesses over the long term.To reduce their own costs of inventory management and simplify sourcing agreements,nearly 75 percent of respondents aim to simplify inventory by reducing the number of products and styles,while 65 percent plan to adjust the balance b
85、etween seasonal and basic items in assortments.Many fashion leaders are also anticipating customers will trade down to value products.As such,nearly 60 percent of respondents plan to increase the share of lower-priced items in their assortments,while 80 percent expect more than 10 percent of their s
86、ales in 2023 to be driven by promotions and discounts.Growth PrioritiesIn 2023,fashion leaders anticipate a continuation of the casualisation trend that took hold during the pandemic as more shoppers shifted to working from home.Casualwear,followed by sportswear and sneakers,are the highest-ranking
87、categories in terms of where executives see the greatest growth potential.Accessories,jewellery and formal shoes ranked lowest,reflecting expectations that consumers will cut spending on non-essential items during the period of economic uncertainty.However,while executives believe consumers will con
88、tinue dressing casually in their day-to-day,nearly 40 percent expect occasion wear to be one of their top three growth categories in 2023,as special events like weddings increase after having been postponed during the pandemic.Despite the economic challenges ahead,some fashion executives said they r
89、emain focused on sustainability projects,which was cited as the most important opportunity for 2023 by 16 percent.Meanwhile,only 3 percent of respondents listed web3 as a top theme shaping 2023 and only 8 percent said it had been a major consideration for 2022.While metaverse-related initiatives wil
90、l likely play a growing role in the industry in years to come,for now it is a nascent opportunity.Executives are more focused on addressing near-term challenges to their businesses.As they consider where to invest in global markets,fashion executives cited the Middle East,North America and Asia Paci
91、fic(excluding China and India)as the most promising regions for 2023 compared to 2022.In line with more optimistic expectations in these regions,they were also among the top choices for respondents planning to increase their footprints in 2023.While executives are divided on how long the economic sl
92、owdown might last,they agree the conditions ahead will be difficult for the industry to navigate.In addition to concerns about inflation,economic slowdowns and margin pressures,respondents cited changing consumer demand and declining confidence as key challenges in 2023.All told,the state of the glo
93、bal fashion industry in 2023 will be characterised by a sober world that is unpredictable and fragile.Fashion leaders will be challenged to streamline costs,quickly sharpen their risk management strategies and modernise their operations to build resilience amid a tumultuous time ahead.INDUSTRY OUTLO
94、OKWhile executives are divided on how long the economic slowdown might last,they agree the conditions ahead will be difficult for the industry to navigate.Shopper browsing apparel in a store.Thomas Barwick/Getty Images.1701.Global FragilityAmid the highest inflation in a generation,rising geopolitic
95、al tensions,climate crises and sinking consumer confidence in anticipation of an economic downturn,the global economy is in a volatile state.Fashion brands will need careful planning to navigate the many uncertainties and recessionary risks that lie ahead in 2023.02.RegionalRealitiesUnderstanding wh
96、ere to invest globally has never been easy but rising geopolitical uncertainty and uneven post-pandemic economic recoveries,among other factors,will likely make it even more challenging in 2023.Brands can re-evaluate regional growth priorities and hone their strategies so they are more tailored to t
97、he geographies in which they operate.04.FluidFashionGender-fluid fashion is gaining greater traction amid changing consumer attitudes towards gender identity and expression.For many brands and retailers,the blurring of the lines between menswear and womenswear will require rethinking their product d
98、esign,marketing,and in-store and digital shopping experiences.05.FormalwearReinventedFormal attire is taking on new definitions as shoppers rethink how they dress for work,weddings and other special occasions.While offices and events will likely become more casual,special occasions may be dominated
99、by statement-making outfits that consumers rent or buy to stand out when they do decide to dress up.GLOBAL ECONOMY56%of fashion executives expect conditions in the fashion industry to worsen in the year ahead1 in 2 Gen-Z consumers on average have purchased fashion outside of their gender identity74%
100、of US fashion consumers traded down to less expensive brands or products between April and July 20221/2 of fashion executives expect to expand their footprint in North America in 202339%of fashion executives expect occasion wear to be among the categories to grow the most in 2023CONSUMER SHIFTS74%39
101、%1/2The State of Fashion 202356%03.Two-Track SpendingConsumers may be impacted differently by the potential economic turbulence in 2023.Depending on factors including disposable income levels,some will postpone or curtail discretionary purchases;others will seek out bargains,increasing demand for re
102、sale,rental and off-price.Fashion executives should adapt their business models to protect customer loyalty and avoid diluting their brands.1 in 208.Future-Proofing ManufacturingContinued disruptions in supply chains are a catalyst for a reconfiguration of global production.Textile manufacturers can
103、 create new supply chain models based around vertical integration,nearshoring and small-batch production,enabled by enhanced digitisation.09.Digital Marketing ReloadedRecent data rules are spurring a new chapter for digital marketing as customer targeting becomes less effective and more costly.Brand
104、s will embrace creative campaigns and new channels such as retail media networks and the metaverse to achieve greater ROI on marketing spend and gather valuable first-party data that can be leveraged to deepen customer relationships.10.Organisation OverhaulSuccessful execution of strategies in 2023
105、will in part hinge on a companys alignment around key functions.Fashion executives need a new vision for what the organisation of the future will require,focusing on attracting and retaining top talent,as well as elevating teams and critical C-suite roles to execute on priorities like sustainability
106、 and digital acceleration.07.Tackling GreenwashingAs the industry continues to grapple with its damaging environmental and social impact,consumers,regulators and other stakeholders may increasingly scrutinise how brands communicate about their sustainability credentials.If brands are to avoid“greenw
107、ashing,”they must show that they are making meaningful and credible change while abiding by emerging regulatory requirements.79%of fashion executives consider the lack of standards to assess sustainability performance as the greatest hurdle to improving how consumers perceive their sustainability ef
108、forts1/3 of fashion executives cited challenges to direct-to-consumer channels as one of the top themes that will impact their business in 202390%of fashion executives have projected a skills shortage in their organisations79%of US apparel and footwear executives rate the performance of retail media
109、 networks as better than other marketing channels 2/3 of apparel chief purchasing officers expect digitisation to be the most important capability for suppliers to grow in the year aheadFASHION SYSTEM79%1/390%79%06.DTC ReckoningThough brands across price segments and categories have embraced digital
110、 direct-to-consumer channels,mounting digital marketing costs and e-commerce readjustments have put the viability of the DTC model into question.To grow,brands will likely need to diversify their channel mix,including wholesale and third-party marketplaces,alongside DTC.2/3The State of Fashion 20232
111、0The State of Fashion 202301.GLOBAL FRAGILITY02.REGIONAL REALITIESGLOBAL ECONOMY211.A range of destabilising factors,such as inflation and heightened geopolitical tensions,continue to weaken an already fragile world economy,with global GDP growth expected to fall to approximately 2.5 percent in 2023
112、 as the threat of recession looms over many countries.2.Consumers are becoming more cautious about their discretionary spending in most regions.Europeans intend to make the biggest spending cuts on apparel,footwear,and accessories and jewellery.3.To protect their companies bottom lines,72 percent of
113、 fashion executives plan to increase prices and 37 percent expect to focus on cost improvements in 2023,a higher proportion than in 2020.KEY INSIGHTS01.GLOBAL FRAGILITYAmid the highest inflation in a generation,rising geopolitical tensions,climate crises and sinking consumer confidence in anticipati
114、on of an economic downturn,the global economy is in a volatile state.Fashion brands will need careful planning to navigate the many uncertainties and recessionary risks that lie ahead in 2023.EXECUTIVE PRIORITIESBroaden scenario planningWhile executives should identify non-negotiable objectives,thei
115、r scenarios should capture the full range of economic and political outcomes and contain flexible contingency plans.Build pricing muscleBuild greater pricing capabilities to adapt to a high-inflation environment and protect top lines,crafting bespoke pricing strategies that account for fluctuations
116、in customer purchasing power and maximise impact across the assortment.Hone profitabilityWith supply of capital tight,leaders will need to focus on the bottom line and consider making difficult trade-offs in inventory and supply chain management to prioritise profitability over revenue and market sh
117、are.22The State of Fashion 2023If any questions remained as to how interconnected the global economy has become,2022 provided clear answers.By the end of the year,few economies were spared from the effects of escalations in everything from inflation to global supply chain meltdowns to heightened geo
118、political tensions,all amid a worsening climate crisis that has contributed to unprecedented environmental events,from droughts to floods to heat waves.None of this looks likely to disappear entirely in 2023.The impact on the global economy is already evident:the strong GDP growth of 6.1 percent rec
119、orded in 202119 will likely slip below 3 percent in 2022 and to approximately 2.5 percent in 2023.20 The uncertainty around these outcomes remains very high,reflecting the ongoing volatility of the global economy.21In the year ahead,business planning across the fashion industry must reflect this new
120、 state of fragility.In this environment,scenario and contingency planning becomes even more critical as companies must understand whether the range of potential outcomes will require tactical changes in their operating plans in the next one to two years to mitigate risks and seize hidden opportuniti
121、es.Business leaders must ask whether this potential range of outcomes changes their view on the fashion industry market segments within which they operate and what their medium-and long-term strategies should be.Shocks Spill Over into 2023Several events in 2022 will continue to shape 2023.Russias in
122、vasion of Ukraine has first and foremost created a humanitarian crisis.It has also severely disrupted global commodity markets,catapulting Europe into a severe energy squeeze and causing many developed and developing economies to struggle with significantly high prices for basic food imports.22 23 I
123、n Germany,the euro zones largest economy,the annual increase of food prices reached close to 15 percent in July24 and energy costs are expected to triple from 2023,25 shrinking consumers budgets for discretionary goods like fashion.By contrast,the financial boost from gas and oil exports is evident
124、in countries such as Saudi Arabia,where the economy is expected to grow at its fastest pace in a decade in 2022 with GDP expanding by 7.6 percent,creating opportunities for the fashion industry.26While Covid-19 has mostly faded from news headlines in some countries,it continues to cause a significan
125、t health and economic impact in others.Nevertheless,during 2022 most governments rolled back Covid-19 public health restrictions as well as pandemic-related household and business aid packages,from tax and other relief for US households to cash handouts in Japan to loan guarantees in South Africa.27
126、 China is a notable exception;new Covid-19 variants and outbreaks are being met with strict lockdown periods that continue to raise concerns about the countrys growth trajectory in the short term.28In the US and Europe,the effects of inflation are already apparent in fashion.Prices for apparel for s
127、ale online across the US,UK,France,Italy and Spain increased 22 percent between July and October 2022 compared to between March and June 2022.29 Price hikes are expected to continue into 2023 as brands pass on increased costs to customers.Inflation could impact fashion companies in other ways,includ
128、ing higher costs of borrowing,potentially causing planned investments or growth strategies to be delayed or scaled back.To help curb inflation,the US Federal Reserve,the European Central Bank and other central banks have been aggressively raising Price hikes are expected to continue into 2023 as bra
129、nds pass on increased costs to customers.GLOBAL ECONOMY23interest rates after negative or ultra-low levels for several years in many countries30 bringing what Jerome Powell,head of the US Federal Reserve,described as further“pain to households and businesses”as part of the“unfortunate costs of reduc
130、ing inflation.”31 Here too,China is an exception;a slowing property market in the country prompted the Peoples Bank of China to lower key interest rates in August 2022 after total credit extended to the economy hit record lows in the previous month.32 In the US,many economy watchers believe that a r
131、ecession is increasingly likely in 2023,33 34 while the Bank of England warned in September 2022 that Britains economy may already be in recession,following forecasts of GDP contraction over two consecutive quarters.In other parts of the world,a different pattern is emerging:According to the World B
132、ank,growth in major East Asian and Pacific economies is projected to be higher and inflation lower than in the rest of the world,due in part to sustained global demand for exports of manufactured goods.35 These and other global shifts are impacting currency markets.During the summer months in Europe
133、,the euro fell below parity with the US dollar,36 its lowest level in 20 years,while in September the British pound hit a record low against the US currency.37 Meanwhile,the Japanese yen hit its 24-year low against the dollar.38 Currency headwinds are weighing on global businesses.With the US dollar
134、 widely considered to be a premier currency for international trade,many companies around the world are having to adjust their performance outlooks.To be sure,currency fluctuations are also creating opportunities for international companies operating in the US,or countries with currencies pegged to
135、the dollar,by artificially increasing their revenue when converting back to their home currency.39 40Consumer CautionConsumers are facing higher prices on multiple fronts,from groceries to petrol,straining household budgets41 and impacting consumer confidence.42 In a summer 2022 McKinsey survey,US c
136、onsumers reported they were twice as pessimistic about the economy than during the prior two years.43 In Europe,consumers cited rising prices,the war in Ukraine and extreme weather events as the top reasons weighing down their sentiment,according to another McKinsey survey from the summer,44 with re
137、spondents predicting they would make the biggest cuts in spending on apparel,footwear,and accessories and jewellery.45 In China,continued Covid outbreaks have dampened consumer spending,as illustrated by the Golden Week holiday in October 2022,when consumer spending was down 26 percent year on year,
138、the lowest level since 2014 and less than half of 2019s spending.46Many shoppers are becoming more cautious about their discretionary purchases,indicating that the surge in spending on apparel and other segments following the height of the pandemic is reaching an end,if it has not already ended.47 A
139、ccording to the BoF-McKinsey State of Fashion 2023 Survey,45 percent of fashion executives expect to update their assortment mix to adapt to lower consumer purchasing power,while 72 percent plan to increase retail prices to help their companies manage the inflationary environment.48Consumer behaviou
140、r could turn suddenly,again,from cautious to confident if economic signals brighten.However,brands should remain flexible to respond to a potential,and sudden,release of pent-up shopping demand and uneven patterns emerging across different markets.49 Brands should also anticipate the fragility of th
141、ese changes.While high-income households will be most likely to continue shopping in 2023,given their relatively healthier financial foundations,even they may prioritise saving over spending out of caution.5001.GLOBAL FRAGILITY24The State of Fashion 2023Plan and PivotThe fashion industry weathered u
142、nprecedented challenges in recent years,and 2023 will test its resilience yet again,albeit with some categories entering the year in a stronger position than others.According to McKinsey analysis of publicly listed companies,the luxury segments top-line grew 27 percent in the first half of 2022,comp
143、ared to the same period in 2021,51 while luxury groups like LVMH and Kering reported double-digit growth for the first nine months of 2022 and have increased their revenue projections.52 53 54 If the impact of inflation follows that of prior slowdowns and predominantly effects lower-and middle-incom
144、e consumers,55 industry analysts expect the luxury category to be more resilient than the rest of the fashion market.Even so,companies scenario planning during the year ahead must sufficiently capture the increased levels of uncertainty,with contingency programmes under varying scenarios clearly map
145、ped out.Fashion leaders will need to prepare for a number of economic and political outcomes.Some of fashions more challenging scenarios may play out in the developing world,where local conflicts in manufacturing hubs can escalate and impact industry practices.For example,the 2021 coup in Myanmar is
146、 among the factors that have left the country highly vulnerable to conflict or collapse,according to annual research from think-tank Fund for Peace.56At the same time,trade wars and sanctions can limit access to raw materials and energy sources while obstructing supply chains.Severe floods in Pakist
147、an and Brazil as well as extreme temperatures in India in 2022 show how climate disruptions can hinder both raw material production and manufacturing operations that are critical to the fashion industry.57 58 Similarly,new Covid-19 restrictions imposed in China that impacted factories and ports in 2
148、022 demonstrated the industrys reliance on the country as a manufacturing hub.59When considering scenarios for key markets,brands should hone their flexibility,agility and speed to balance the realities of short-term crises with long-term strategic priorities.60 61 62 63 Key projects,like investment
149、s in digitisation advancement and the reduction of environmental impact,should not be abandoned.The ultimate aim for fashion leaders will be to build resiliency,which will require a renewed focus on profitability.Before the pandemic,the industry experienced a period of high growth,during which many
150、brands focused on their top lines and building market share.Funding was cheap and accessible,boosted by inexpensive debt and eager investors.In the year ahead,investors are expected to be more cautious,showing a high,if not singular,preference for businesses with robust margins.Brands with weaker ma
151、rgins or market positions,such as mid-market brands,will be particularly vulnerable.(See the McKinsey Global Fashion Index on page 112.)A focus on the bottom line in this inflationary climate will require difficult trade-offs between,for example,capping salaries or investing in pay rises to retain k
152、ey employees in a competitive job market.Growing profitability will entail multiple actions,including learning how to better manage unpredictable consumer patterns while staying ahead of supply and demand pressures.Companies that had wanted to avoid supply chain disruptions ahead of the downturn by
153、placing advanced orders are now facing record inventory levels and will GLOBAL ECONOMYWhile high-income households will be most likely to continue shopping in 2023,given their relatively healthier financial foundations,even they may prioritise saving over spending out of caution.2501.GLOBAL FRAGILIT
154、Ylikely need to discount substantially to clear stock.64 Creating greater flexibility across inventory management systems will help minimise such challenges.For example,technology can help with re-routing supply to low-congestion ports and shipping lanes to reduce the time goods are in transit or by
155、 optimising the assortment mix between season-agnostic and seasonal products.65 Fashion leaders must also monitor capital efficiency with granularity to be able to re-allocate resources as needed.66 Having a resilience mindset will be non-negotiable in 2023.For fashion executives,this will require p
156、utting contingency planning centre stage and embedding clear accountability for business performance throughout every part of their organisations.By taking an all-hands-on-deck approach,leaders can strengthen their companies positions to flourish even amid global volatility and economic uncertainty.
157、Exhibit 5:Inflation,geopolitical instability and supply chain disruptions are the top risks for fashion businesses in 2023,far eclipsing Covid-19Top three risks to fashion businesses in 2023,%of respondentsSource:BoF-McKinsey State of Fashion 2023 Survey7866521731152875InflationVolatile energy price
158、sSupply chain disruptionsFinancial market volatilityGeopolitical instabilityRising interest ratesIncreased economic volatilityTrade policy changesCovid-19 pandemic26The State of Fashion 2023Managing Inflation for GrowthAfter years of benign macroeconomic conditions,volatility and uncertainty are bac
159、k on the global agenda,fuelled by soaring energy prices and accelerating inflation.As rising prices squeeze fashion industry margins,central banks are lifting interest rates to the highest levels for at least 15 years,producing a dampening effect on consumer sentiment.In response,fashion decision ma
160、kers need to act quickly to build resilience and plot new avenues to profitable growth.by Emily Reasor,Aaron Rettaliata,Jesse Nading and Jad HamdanIndustry earnings statements over the recent period have made for bleak reading.Cost pressures have impacted nearly all categories,putting increased pres
161、sure on margins and volume,and making any return to pricing“normalcy”feel far off.Indeed,secondary effects mean prices are rising through the value chain,and wages are following suit in the US they are rising twice as fast as in 2019.Meanwhile,consumers are drawing back.McKinseys most recent Consume
162、r Pulse Survey shows 37 percent of consumers plan to reduce discretionary spending and 74 percent say they are trading down when shopping.67For most fashion companies,inflation is top of their list of concerns for 2023.However,they also understand that change does not happen easily or overnight.With
163、 buying and merchandising cycles stretching to 18 months in some cases,decision makers need to think carefully about how to plan for secondary effects and manage their margin structures over time.Those that act robustly have an opportunity to establish a durable advantage against their competitors.C
164、onversely,a tepid response is likely to lock in a multi-year cycle of margin erosion and underperformance.Diverse ChallengesWhile inflation has near-universal impacts,the specific challenges facing fashion players often reflect their regional exposures and business models.In the US,for example,the F
165、ederal Reserve has taken an aggressive approach to taming inflation,with the Federal Reserves key rate expected to rise above 4.5 percent in 2023.Moreover,private sector wage growth has been stronger than in other regions,suggesting inflation may prove sticky in the longer term.In Europe,by contrast
166、,inflation is being driven by energy prices,and may therefore resolve more easily once the impacts of the war in Ukraine abate.Still,currency fluctuations are likely to continue to affect companieswith costs in US dollars and sales in euros.68Asia is an outlier in the global context,in that a relati
167、vely benign inflation environment is being offset by slow growth and the continuation of Covid-related economic impacts,particularly in China.69 However,the regions financial health is being undermined by rising US interest rates and high commodity prices.Meanwhile,Latin America presents a mixed pic
168、ture,with some countries IN-DEPTH27GLOBAL ECONOMYputting in place an aggressive monetary response to inflationary risk,while others remain in relatively good shape.Navigating TurbulenceThe challenging economic environment has had asymmetric impacts across fashion business models.However,in general,b
169、usinesses with the highest exposures to disposable income are facing the biggest challenges.In the luxury and affordable luxury segments,many well-known brands have remained insulated,or partially insulated,from the impacts of inflation and macroeconomic turbulence.LVMH,which owns brands including C
170、hristian Dior,Fendi and Givenchy,reported organic 20 percent revenue growth to 56.5 billion(approximately$55.8 billion)in the first nine months of 2022,compared to a year earlier.70Among premium brands,the picture is mixed.Value-conscious consumers are trading down into value,off-price and private l
171、abel brands,while higher-income consumers are less likely to switch.As highlighted in recent US earnings calls,the environment is particularly tough for companies that have overbought inventory and are contending with supply chain issues.This has led in some cases to declines in gross margins and a
172、wave of discounting.As consumers trade down,the value segment may benefit.Indeed,retailers can optimise their propositions by shifting away from brand-name products and toward more private-label offerings.In addition,an agile approach to product design can be a winning strategy,allowing manufacturer
173、s to reset their cost bases and cater to shifts in consumer demand,albeit with a delayed impact on the bottom line.Similarly,the discount segment is well placed to navigate the Exhibit 6:US consumers are trading down to lower-priced brands and products across income groups and generationsUS consumer
174、s changing their shopping behaviour,%of respondentsConsumers trading down,by generation and income level,%of respondents7426Trading down187Gen-Z(1825)N=41274Low income($50k)N=1,57873Gen-X(4257)N=1,12775Medium income($50100k)N=1,32864Baby Boomers(58+)N=1,36372High income($100k+)N=1,10281Millennials(2
175、641)N=1,107No change1 Trading down includes one or more of the following:shopped from a lower priced retailer,shopped from lower priced brand,bought private label,bought with a coupon,used buy now pay later,delayed a purchase,bought a larger size pack for lower price,bought smaller size or quantity,
176、made more shopping trips in search of discounts.Source:McKinsey&Company US Consumer Pulse Survey28The State of Fashion 2023current environment.The strongest demand is likely to be from lower-income consumers,who will feel the impacts of inflation more than their peers.71 Moreover,off-price retailers
177、 will benefit by picking up low-cost inventory from under-pressure retailers further up the food chain.Fashion Players Can Respond While inflation is running at the fastest rate for decades,and consumer sentiment remains subdued,fashion companies are well-placed to take action that could offset pres
178、sure on performance.Here we gather six ideas that leading businesses have harnessed to optimise their approaches:Triple your productivity effort:Amid pervasive price rises through the value chain,productivity will be a key success factor.Players should conduct a rigorous assessment of input costs an
179、d double down on indirect spend and organisational efficiencies to maximise productivity.Leading manufacturers are also resetting their cost bases through design-to-value thinking.Meanwhile,suppliers and vertically integrated players can recalibrate their supply and distribution networks.A third opt
180、ion is to relocate distribution centres to balance labour economics with last-mile costs,or use third-party logistics and supply-chain-as-a-service providers to reduce asset intensity and distribution overheads.Reset your assortment and category strategy:Consumers are letting their wallets do the ta
181、lking.In the early months of 2022,67 percent of consumers that tried a new brand cited value as a reason for switching,an increase of 9 percentage points from October 2020.Meanwhile,about a third of consumers have switched to a private label brand over the past year.72 Fashion players can respond to
182、 these trends by revising their assortments and sharpening entry-level price points.Retailers,meanwhile,can extend private-label offerings.Winners will also leverage data and Exhibit 7:Within fashion,prices are rising more in some categories than othersUS Consumer Price Index,June 2021-June 2022,CAG
183、R%Source:BLSCPI for all items ApparelMens apparelBoys apparelWomens apparelGirls apparelWomens outerwearInfant and toddler apparelWatches and JewelleryFootwear8.25.53.93.67.39.04.36.73.9Mens suits,sport coats and outerwearMens underwear,nightwear,swimwear and accessoriesMens shirts and sweatersMens
184、trousers and shorts9.52.74.22.23.52.75.6GLOBAL ECONOMY10.0Womens suits and separatesWomens underwear,nightwear,swimwear and accessoriesWomens dresses29analytics capabilities to work out where consumers are most price sensitive and which segments are the most exposed to inflation.Looking ahead,retail
185、ers seeking to improve private-brand penetration could foster awareness and loyalty by adopting consumer-led brand strategies and category management,as well as ramping up design capabilities.Surgically rebase your value equation:Instead of implementing broad price increases that erode customer trus
186、t,retailers could reprice by customer and product segment,taking into account both margin performance and willingness to pay.In parallel,they could introduce personalised promotions and loyalty initiatives,especially for products that are highly exposed to inflation or are important to customers.Thi
187、s can strengthen relationships while alleviating margin pressure by reducing the need for mass promotions.Fashion players that take a surgical approach to these endeavors are more likely to emerge with profitability and consumer relationships intact.In addition,to win or retain near-term market shar
188、e,businesses may consider absorbing some higher costs.Consider adjusting discounts and promotions:Several leading players are re-evaluating their pricing and promotion mixes,helping them manage volatility without punishing consumers.In addition,forward-looking companies have shown that data and anal
189、ytics can help them become more precise in their efforts,as well as more effective in managing inventory surplus,value perception and margins.There is also an opportunity to better manage attributes that the data reveals are valuable to consumers.Reimagine your labour model:To counter the effects of
190、 labour cost inflation,retailers could look for opportunities across their business model.These may comprise deploying more technology and analytics,resetting labour allocation,reviewing scheduling and taking an end-to-end approach to managing costs.Half of US retail employees are considering leavin
191、g their jobs,a much higher proportion that in the wider economy.Therefore,it makes sense to invest in the frontline employee experience,leveraging recruitment and talent analytics to beef up capabilities,and refreshing ideas that could encourage staff to remain in their jobs.Scale up management capa
192、city and decision making:In a challenging macroeconomic environment,executive teams have a vital role to play.This is an ideal time for decision makers to remove bottlenecks and streamline communications and workflows with vendors,supply teams,design teams,and store and e-commerce operatives.Tactica
193、lly,this could mean improving visibility into cost structures and strategically communicating across the organisation and with vendors and suppliers.By accelerating decision making,fashion players can focus minds on delivering pricing that achieves the highest return on investment,especially when re
194、sponding to competitor moves.Accordingly,leaders need to define KPIs that both track customer behaviours and measure the effectiveness of initiatives.For instance,by carefully monitoring product categories for declining volumes and basket size,they can spot signs of behaviour changes caused by price
195、 sensitivity.Inflation and economic uncertainty are powerful drivers of fashion industry performance,and are unlikely to abate anytime soon.Therefore,the task for decision makers over the coming months will be to impose short-term tactical discipline on business models,but at the same time embed str
196、ategies that promote flexibility,clarity and fast decision making across geographies and operations.Emily Reasor is a senior partner in McKinseys Denver office,leads McKinseys Retail and Growth,Marketing and Sales practices,and leads the Pricing and Margin Management service line for the Americas.Aa
197、ron Rettaliata is a partner in McKinseys Pittsburgh office,leads McKinseys Retail and Consumer Goods practice and leads the Merchandising service line in North America.Jesse Nading is an associate partner in McKinseys Denver office and is a leader in McKinseys Retail practice,with expertise across g
198、rowth and commercial topics for apparel,fashion,food and specialty retail.Jad Hamdan is an engagement manager in McKinseys Denver office and specialises in commercial retail topics among fashion and specialty retail players,including growth transformation,pricing and promotions.The authors would lik
199、e to thank Felix Rlkens,Kevin Bright,Andres Moinge,Gokmen Ciger,Claus Heintzeler and Sarah Andr for their contribution to this article.IN-DEPTH30The State of Fashion 20233102.REGIONAL REALITIESUnderstanding where to invest globally has never been easy but rising geopolitical uncertainty and uneven p
200、ost-pandemic economic recoveries,among other factors,will likely make it even more challenging in 2023.Brands can re-evaluate regional growth priorities and hone their strategies so they are more tailored to the geographies in which they operate.1.Growing geopolitical uncertainty and slower-than-exp
201、ected recoveries from the pandemic have shifted the world map of growth opportunities for fashion brands,and executives are intending to take action.2.Markets that fashion brands have prioritised in their growth strategies,such as China,are signalling a slowdown ahead.3.Regions like the Middle East
202、and the US have emerged as priorities for the year ahead:88 percent and 78 percent of fashion executives believe the respective regions will have the same or higher growth prospects in 2023 compared to the previous year.KEY INSIGHTSEXECUTIVE PRIORITIESRe-evaluate regional riskIdentify regions that a
203、re continuing to drive growth amid economic uncertainty,such as the Middle East and the US,and focus investment in those markets.Look beyond financial outcomesWhen identifying regional opportunities and defining priorities,place greater emphasis on reputational factors,geopolitical risks,cultural di
204、fferences and regulatory complexity.Lean into localisationAdopt an increasingly nuanced,localised approach to marketing and merchandising,empowering local teams to facilitate region-specific opportunities and respond quickly to events on the ground.Shoppers in Seoul,South Korea.Shutterstock.32The St
205、ate of Fashion 2023In the weeks that followed the Russian invasion of Ukraine in early 2022,more than 500 global companies across a range of sectors announced they would cease operations in Russia.73 Many brands cited trade restrictions and operational difficulties as they began exiting or suspendin
206、g operations.Some companies chose to also take a side in the war.They issued condemnations of violence or coupled their operational decisions with humanitarian donations.Some brands decided to hold or even expand their businesses in Russia,capitalising on the vacuum left by the departure of brands f
207、rom Europe and the US.But for most brands that left,curtailing business in Russia was done with the intention of showing solidarity with and support for those calling for peace.74Not so long ago,such a statement would have been considered unusual,even contentious.Fashion brands have long aimed to be
208、 politically neutral in order to avoid alienating not only their customers,but also investors and business partners.But in todays polarised and interconnected world,a global brands public,political and social affiliations can impact its relationships with consumers75 and business partners.In opting
209、to forgo operations within a particular market,companies may lose revenues in the short term,but leaders should weigh up the impact on brand equity and consumer trust in other markets in the longer term.For fashion executives,the politicisation of the private sector adds a new dimension to how and w
210、here they focus on growing their businesses globally.Decisions about whether to invest in a country or region can no longer be confined to its economic potential.Today,fashion leaders should consider the social tensions and political uncertainties that can obstruct business operations or escalate re
211、putational risk.Many of the priorities based on the geographic markets that were central to the fashion and luxury industry in recent years are shifting as a result.China Through a Changing LensIn recent years,many Western fashion brands pivoted their foreign investment to the Chinese market,with go
212、od reason.Even during the pandemic in 2020,China accounted for 25 percent of global apparel and footwear sales,ahead of the US and Western Europe with 20 percent and 22 percent respectively.76Chinas GDP has more than doubled over the course of a decade,from$8.5 trillion in 2012 to$17.7 trillion in 2
213、021,77 fuelled by urbanisation and increased productivity,alongside a large and growing middle class with disposable income,helping it to grow faster than other major global economies.Though still a critical market,China is now facing a changing growth trajectory.78 In October 2022,the International
214、 Monetary Fund forecast Chinas GDP to grow 3.2 percent for the year,79 compared with 8.1 percent in 2021,80 citing a property sector crisis and partial or full lockdowns in response to outbreaks of new Covid-19 variants in more than 70 cities,spanning key fashion shopping hubs like Shanghai,Beijing,
215、Shenzhen,Guangzhou and Chengdu.81 In the third quarter of 2022,the countrys GDP grew below target,casting a shadow over investor sentiment amid concerns about the countrys longer term outlook.82 HSBC estimated that retail sales were down 40 percent year on year in April and 50 percent in May due to
216、store closures.83Even without the threat of further Covid outbreaks,the Chinese market presents other challenges specific to foreign fashion brands.For example,some Chinese consumers are starting to favour domestic brands over their foreign counterparts.Sales of foreign-branded sneakers on Chinese o
217、nline retailer Tmall decreased 24 percent year on year in 2021,while domestic brands sneaker sales grew 17 percent.Sportswear apparel saw a similar shift,with foreign-brand sales declining 33 percent compared with domestic brands 13 percent growth year on year.84GLOBAL ECONOMY3302.REGIONAL REALITIES
218、Meanwhile,income inequality in China is widening,nearly reaching 2008 levels,85 and youth unemployment is rising.86 In addition,major institutions like the World Bank are concerned that the country is too reliant on debt-financed infrastructure and real estate investment as a means to stimulate grow
219、th.87 As of September 2022,the value of new home sales and levels of property investment were down 29 percent and 12 percent year on year,ominous signs when 70 percent of Chinese household wealth is tied up in real estate.88Amid all this,however,Chinas long-term growth projections remain robust.By 2
220、040,its GDP is projected to reach$47 trillion,widening the gap with the US,at$28 trillion,and the euro zone,at$19 trillion.89 90 China will likely remain a core market for fashion consumption in the long term,with significant untapped opportunities among a customer base whose sentiment for luxury br
221、ands in particular is holding strong.91Fashion brands can adjust their strategies accordingly.Many brands are already directing their investments into Chinas shopping hubs where growth appears to be the most robust.Brands opening new or refurbished stores include Herms in Wuhan,Ralph Lauren and Loui
222、s Vuitton in Chengdu,and Marni and Maison Margiela in Shanghai.Others are doubling down on the luxury duty-free opportunity by expanding in the emerging shopping hub of Hainan.92Resilience in AmericaUS-based fashion groups Capri Holdings and Tapestry,which generate more than half their sales in Nort
223、h America,93 delivered strong results in 2022.94 95 Overseas brands also fared well,with the Americas being the fastest-growing market for Spanish fashion group Inditex,with sales increasing 45 percent year on year in the first half of 2022,96 while Swiss sportswear brand On grew sales in North Amer
224、ica at 102.5 percent year on year over the same period.97It was not just at home that Americans continued to shop.As pandemic-related travel restrictions lifted,shopping in Europe was made even more attractive to Americans,bolstered by a strong dollar against the euro and pound sterling.Luxury brand
225、s in Europe cited American tourists as a key driver of increased first-half sales,including a 47 percent rise at LVMH and 53 percent rise at Kering.98With overall US retail sales expected to close 2022 on a two-decade high,99 the sector will have a strong foundation heading into 2023.Meanwhile,the U
226、S has also reclaimed its spot as the largest market for luxury goods in the world in 2022,100 even if the country will likely concede this position to China again in the near term.“The US is proving to be a long-lasting source of growth for the luxury industry,fuelled by younger generations who are
227、highly engaged with the category,”said Jos Neves,co-founder and chief executive of luxury e-commerce platform Farfetch,101 which generated over 20 percent of its revenue from the US market in 2021;102 further confirming its confidence in the market,it acquired a minority stake in Dallas-based luxury
228、 department store Neiman Marcus in 2022.103Some fashion companies are targeting second-tier US cities for new growth,as wealthier demographics have taken advantage of remote work to seek out alternatives to higher-cost cities like New York,Los Angeles and San Francisco.104 Luxury labels Saint Lauren
229、t and Gucci are set to open stores in locations like Detroit,New Orleans and Columbus.105 MyTheresa and Saks Fifth Avenue,For fashion executives,the politicisation of the private sector adds a new dimension to how and where they focus on growing their businesses globally.34The State of Fashion 2023G
230、LOBAL ECONOMYamong other luxury retailers,have also begun staging or strengthening VIP events in cities like Palm Beach,Dallas and Miami to deepen relationships with wealthier clients who are not based in the countrys traditional fashion capitals.106However,amid uncertainty in the stock market and r
231、ising inflation as well as the Federal Reserve continuing to hike up interest rates the US is not immune to economic turbulence felt elsewhere.107 Credit card data from the autumn of 2022 showed Americans had cut back on buying luxury goods ahead of the holiday season,suggesting shopping sentiment c
232、ould be petering out.The sharpest cuts were among middle-income customers.108 Luxury brands may find entry-level customers in particular pull back their spending as economic conditions deteriorate.To be sure,the US may be more resilient than other key markets,but brands should be cautious and be pre
233、pared for a potential slowdown in the US market,too.Growth Drivers in APACIn the Asia-Pacific region,Japan and South Korea are renewing their reputations as dependable growth drivers,particular in luxury,amid Chinas recent slowdown and sustained post-pandemic demand.But both markets require brands t
234、o update their local strategies to capitalise on shifting shopping habits.Consumer demand in Japan and Korea was particularly resilient coming out of pandemic lockdowns,benefitting from an influx of international tourists.109 Domestic shoppers in Exhibit 8:The Middle East and North America are expec
235、ted to be the regions with the highest growth potential in 2023Markets by expected growth prospects in 2023 compared to 2022,%of respondentsSource:BoF-McKinsey State of Fashion 2023 Survey513217Eastern EuropePromisingSameUnpromisingOverall Sentiment(Net Intent)123355Middle East+43214435APAC(excl.Ind
236、ia and China)+14223939North America+17273835India+8-34403921Western Europe-19353232China-3454115Africa-30403921Latin America-193502.REGIONAL REALITIESJapan and Korea has been driving the countries economic recoveries,as they largely filled the void left by home-bound Chinese tourists.Japans economy
237、recovered to its pre-pandemic size in August 2022,fuelled by increased consumer spending after Covid restrictions were eased in March 2022,110 while Korea reached the same milestone in April 2021,111 and the countrys consumption and GDP growth rates continued to exceed analyst expectations in 2022.1
238、12During the pandemic,Western brands in these countries learned how to adapt to Covid restrictions,such as by introducing remote sales strategies.For Italy-based Moncler,private appointments and distance sale transactions,where customers make purchases from home via video calls with sales associates
239、,now account for 30 percent of sales in Korea and 20 percent in Japan.113 Meanwhile,department store groups Shinsegae,Lotte and Hyundai are expanding in Korea to accommodate global brands desire to capture domestic demand.114 Other brands have laid the foundations for further growth in Japan.For exa
240、mple,foreign luxury labels including Hublot,Zegna115 and Chanel116 have opened stores recently in Tokyos main shopping districts.Herms saw sales in Japan increase by 22.7 percent in the third quarter of 2022,with the company citing the loyalty of local customers.117Optimism in the Middle EastThe out
241、look for fashion in the Middle East in 2023 is more bullish than for many other markets;in the BoF-McKinsey State of Fashion 2023 Survey,88 percent of executives indicated that they believe the Middle East will have the same or more promising growth prospects in 2023 compared to the previous year.11
242、8 Global energy prices are rising and the Gulf Cooperation Council currencies are pegged to an appreciating US dollar.The GCC luxury market was worth nearly$10 billion in 2021 a 23 percent increase on pre-pandemic levels and is expected to grow to$11 billion in 2023.119A significant proportion of Mi
243、ddle Eastern luxury spending was repatriated during the pandemic as luxury consumers were unable to travel to Europe.Now,60 percent of luxury spending occurs domestically.120 In addition to opening new stores,luxury brands are finding other ways to home in on the GCC market,such as staging fashion s
244、hows locally and creating local content by collaborating with Middle Eastern artists on capsule collections and producing photoshoots in the region.121Capturing Global RewardsIn the year ahead,geographic diversification will likely be as important as ever,but also more complex,as rapidly shifting ec
245、onomic,political and social forces take centre stage.When prioritising regions for global expansion,leaders can review their footprints and identify areas of growing demand while placing greater emphasis on factors beyond revenue potential,such as reputational and other risks.Alongside an enhanced f
246、ramework for risk,brands can employ a more nuanced and complex structure to evaluate the effects of political,regulatory and cultural scenarios they may encounter at home and abroad.122 This may require leaders to assess the interplay between different markets alongside factors within them.They will
247、 need to place greater emphasis on developing a local mindset,where on-the-ground know-how will allow fashion leaders to penetrate the market more deeply.123 Local experts will also be critical for anticipating and responding to any sudden changes to scenarios and will be a point of contact for exte
248、rnal stakeholders,such as trade or industry bodies.124 The deeper the understanding of a region,the more effective a brand will be in doing business there.36The State of Fashion 202337EXECUTIVE INTERVIEWWhen scanning the globe to identify growth opportunities in the year ahead,most fashion executive
249、s responding to the BoF-McKinsey State of Fashion 2023 Survey cited the Middle East as a region that holds greater promise in 2023 than in 2022.Indeed,sales of luxury fashion in the Gulf Cooperation Council alone reached around$4.2 million in 2021,an increase of 39 percent on 2019 levels.Future grow
250、th in the region is pegged to the return of international tourists and e-commerce acceleration,among other factors.125Capturing growth in the region will require brands to double down on localisation and personalisation strategies,according to Patrick Chalhoub,Chalhoub Group:Capturing Fashions Growt
251、h Potential in the Middle EastPatrick ChalhoubGroup President,Chalhoub GroupLuxury brands looking for a bright spot in 2023 are focused on the Middle East,where industry veterans like Patrick Chalhoub have served as regional partners for decades.The group president of Dubai-based retailer and distri
252、butor Chalhoub Group is bullish about growth prospects in some markets but cautions that brands will need to enhance their localisation strategies and do more to personalise their offering for increasingly“assertive”customers in the region.by Janet KersnarA Level Shoes store in Dubai.Chalhoub Group.
253、38The State of Fashion 2023group president of Chalhoub Group,a Dubai-based luxury goods retailer and distributor which was set up by his father in 1955 and is now the regional distribution and franchise partner for hundreds of global fashion and beauty brands including Dior,Tory Burch and Yves Saint
254、 Laurent along with joint ventures with LVMH,Christian Louboutin and Farfetch.While growth prospects are robust across the GCC region,Saudi Arabia,where luxury sales have been recording double-digit growth,stands out for Chalhoubs top executive.He sees the fashion industry playing a role in the coun
255、trys sweeping Vision 2030 programme aimed at modernising and diversifying its economy.As a veteran fashion executive in the Middle East,you will have witnessed many economic and social shifts impact the fashion market over the years.What is having a significant impact today?Were living in very inter
256、esting times in the Middle East.Because current economic developments are like nothing we have seen for many,many years,there is a lot of wealth thanks to additional revenues coming from oil.The Middle East,and the GCC in particular,is becoming an international business destination,but also an inter
257、national tourist destination,with initiatives like the Red Sea Project on Saudi Arabias west coast that will be adding thousands of hotel rooms by the end of this decade.What the fashion industry needs to do is make sure we maintain relevance for our local customers.Imagine that historically before
258、2020 and 2021 two-thirds of luxury spending by GCC shoppers happened abroad because they perhaps werent getting the experience,service,choice or journey they wanted when shopping locally.We need to make sure that we do not decrease the amount they are buying outside the GCC,but increase the amount t
259、hey are buying locally.We need to be there to fulfil what they want more.There are well-established consumer markets across the GCC,but what about,for example,Egypt,where the government is investing in the development of new cities and big infrastructure projects?There is certainly movement in Egypt
260、 in terms of economic development.All those projects happening along the Red Sea with all those new hotels opening are a huge part of this drive to become more of an attractive destination to tourists from around the world.But this comes with its own short-term challenges which are probably more com
261、plicated than in other countries.Energy is expensive,inflation is high,the exchange rate is difficult with the Egyptian pound weakened substantially against the US dollar in 2022.In Egypt,there is still a lot of heavy administrative ways of doing business,often for the wrong reason or reasons inheri
262、ted from the past that tried to limit imports to help local manufacturing develop.Im not sure that measures taken 30 years ago are still relevant today but changing them is still complicated there.So Egypt is there to develop but it is something that needs to gradually build up and develop in our fi
263、eld of activity in the luxury fashion market.Localisation seems to be a big theme for global brands around the world,with consumers increasingly buying local brands imbued with local culture and heritage.How are you seeing this play out in the Middle East?There is a movement in the Middle East,but n
264、ot a movement of national pride like in China.We do want to buy locally and we have seen a proliferation of local fashion designers but we need to continue developing them.We are only just getting started with that.Our group has been actively involved in assisting in early-stage local disruptor bran
265、ds.We recently set up the Fashion Lab,an open innovation platform.Our regional incubator has assisted start-ups ranging from Dania Shinkar handbags to Noms Life lifestyle brand and Kaf by Kaf ready-to-wear to Cones&Rods eyewear.What can global brands do to ensure that they are in tune with their Mid
266、dle Eastern customers?It helps for brands to review and revisit the way business is done and the kind of experiences that are relevant for the Middle East.We are already seeing that.For example,the end of the fasting period of Ramadan is very festive,and we are seeing a lot of specific collections d
267、one for it.Probably 60 percent,70 percent of brands have made a cruise collection just for that specific celebration.We are seeing that brands are much more interested in doing GLOBAL ECONOMY39specific or personalised events and activations.I never saw so many global luxury brand-led events that res
268、onated with the GCCs audience as I did in 2021 and 2022.Brands like Chanel,Herms,Louis Vuitton,Cartier and Tiffany have been working on local strategies to attract consumers in the region through collaborations,dedicated collections and immersive events in iconic locations such as Al-Ula in Saudi Ar
269、abia.However,a lot of personalisation is needed in this region.Middle Eastern customers will build up trust in big brands,but they need brands to provide points of differentiation.How are customers in the region different today than pre-pandemic or during the height of the pandemic?What will the new
270、 consumer profile in 2023 look like in terms of demographics and purchasing decisions?Generally,we are seeing more assertiveness among our consumers.The younger the consumer is,the more we see it.They are still attached to branding,but less so.They also have more curiosity,and so are more eager to t
271、ry a new brand,even a local fashion designer,rather than a global one.We are also seeing customers mixing brands and products more and more,because of this assertiveness in terms expressing themselves.They dont feel that they should necessarily be dressed from head to toe in one brand.In terms of pr
272、oduct categories,there is a big surge in jewellery.I hear that this is not just in the Middle East,but worldwide.Jewellery has always been extremely important in the Middle East,but not branded jewellery,like now.It helps that the brands are becoming more and more creative.The customer journey is ad
273、apting too.People often like to go into stores in groups,with family and friends,so they need more areas for seating,more space,and not just at a counter for people in a hurry.We really need to make those kinds of adaptations.Unlike in other parts of the world where e-commerce growth is returning to
274、 pre-pandemic levels,e-commerce seems to be accelerating in parts of the Middle East.Whats fuelling that?The story behind that is that we are quite late compared to other regions in terms of the percentage of sales done through digital channels,for various reasons.For example,the content might not h
275、ave been relevant or there was not enough choice.All of this is improving:the customer experience itself,the availability of products,the relevance of content.Having said that,what we have seen in 2022 is that there is bigger growth in brick-and-mortar than e-commerce.There is another aspect of bric
276、k-and-mortar that Id like to mention.For developing countries,real estate development is often a challenge.When there is a surge in demand for real estate like we saw in 2019 and again in 2021 and 2022 you have scarcity of supply,which not only increases prices,and any new project will take five to
277、seven years to complete.Now we are in a cycle in which there is much more demand in some cities,such as Riyadh Saudi Arabia and Doha Qatar,than others.We really need to be more dynamic and creative about how to solve this tension,because there is scarcity of locations,and maybe this requires a diffe
278、rent way of thinking about different consumers.Chalhoub Group recently announced that it is buying a majority stake in Threads Styling,an online,personalised,chat-based luxury fashion and jewellery shopping service.How does this fit into the groups overall strategy to build out digital capabilities?
279、We are embarking on the digital world quite late.Before the pandemic,e-commerce represented around 1 percent of our turnover;today it is approximately 10 percent.The group represents and runs over 80 e-commerce websites and apps for partners and joint venture brands in the Middle East-North Africa r
280、egion.And since 2018,we have had a joint venture partnership with Farfetch in the GCC and Levant Egypt,Jordan and Lebanon,which includes an Arabic language site.But we have a lot to learn to be closer to the digital-native consumer which is what we find fantastic in Threads Styling.Its really about
281、clienteling,taking care of our client,and connecting with them,and keeping the human touch,even if we have all the digital devices.This interview has been edited and condensed.EXECUTIVE INTERVIEW40The State of Fashion 202303.TWO-TRACK SPENDING04.FLUID FASHION05.FORMALWEAR REINVENTEDCONSUMERSHIFTS410
282、3.TWO-TRACK SPENDINGConsumers may be impacted differently by the potential economic turbulence in 2023.Depending on factors including disposable income levels,some will postpone or curtail discretionary purchases;others will seek out bargains,increasing demand for resale,rental and off-price.Fashion
283、 executives should adapt their business models to protect customer loyalty and avoid diluting their brands.1.Shopping behaviour will diverge across income groups.While high-income shoppers with savings,access to credit and greater job security may continue spending on fashion,lower-income consumers
284、will tighten or cut discretionary spending.2.Customers may seek out lower-priced retailers and discounts,particularly in younger cohorts.Over 75 percent of US Gen-Z and Millennials said they are taking steps to manage finances,compared with Gen-Xs 64 percent and Baby Boomers 53 percent.3.Off-price c
285、hannels will grow forecast to account for 12 percent of fashion industry revenues by 2025 as will resale,which is expected to grow 11 times faster than apparel retail by 2025.KEY INSIGHTSEXECUTIVE PRIORITIESDevelop nuanced customer profilesAnalyse how customer groups in different demographics and lo
286、cations are shifting their behaviours and adjust strategies in response by introducing new channels,pricing strategies or product categories.Turn on off-priceSelectively explore how to capture value from promotions and discounts with strategic off-price partners without diluting brand value.Explore
287、the 3 RsEvaluate how new models like resale,rental and repair can be integrated into the value proposition to allow consumers to combine responsible and affordable consumption.42The State of Fashion 2023CONSUMER SHIFTSBrands and retailers that weathered 2008s global financial crisis can be forgiven
288、for feeling a sense of dj vu as a steady stream of macroeconomic data signals challenging times ahead.Just like in 2008,consumer confidence has plummeted to record lows in reaction to economic uncertainty126 and households have reined in spending.127Economists increasingly expect lower-income househ
289、olds to bear the brunt of economic stresses over the short to medium term,particularly if the relatively low unemployment levels in some regions were to change dramatically.128 129 In regions such as Central and South America,consumers are already struggling to cover everyday expenses,as income leve
290、ls fail to keep pace with escalating inflation,which hit a 26-year high in Brazil and 21-year high in Mexico in 2022.130 Many lower-income households will likely deprioritise discretionary spending,including fashion and beauty purchases.131 In the US,customers are“trading down.”A McKinsey US Consume
291、r Sentiment survey conducted in the summer of 2022 found that 74 percent of respondents said they have been shopping from more lower-priced retailers or brands than usual,seeking discounts at their“go-to”retailers or paying for goods in instalments;45 percent said they recently delayed making a disc
292、retionary purchase.132Exhibit 9:Consumers are expected to deprioritise apparel and footwear as rising prices diminish disposable incomes US and Europe category product resiliency Bubble size=US and Europe category value(USD MN)X axis:Historical resiliency based on 2008 global financial crisis perfor
293、mance;Brazils inflation crisis(2015);performance during Covid-19Y axis:Qualitative category assessment;future spending intent,based on McKinsey consumer sentiment surveys between June and July 2022 in the US and EuropeSource:McKinsey analysis based on Euromonitor and McKinsey Europe Consumer Pulse S
294、urveysLow resilienceDiscretionaryNon-DiscretionaryHigh resilienceApparel&FootwearTravelBeauty&Personal CareFood&DrinkHome CareConsumer HealthToys&GamesHome&GardenElectronicsFood serviceAppliances43It is a different story for higher-income households,for now.These consumers should be less impacted by
295、 economic turbulence and look likely to continue spending on discretionary goods,in the short term at least.In a recent survey,26 percent of higher-income consumers in China which is among the countries where economic growth is slowing said they increased their fashion shopping budgets in the first
296、half of 2022 compared to the same period in 2021,citing a desire to“look and feel good.”Similarly,US credit card data from the spring of 2022 suggested that wealthier shoppers were increasing their spending on apparel.133Generational differences are also noteworthy.In the US,spending among younger c
297、onsumers is expected to suffer the most:76 percent of Gen-Z and 79 percent of Millennials reported that they are dipping into their savings,taking on more credit or taking on additional jobs to manage their finances,compared with 64 percent of Gen-X and 53 percent of Baby Boomers.134 In China,though
298、 inflation is less of a concern,younger generations are feeling the burden of an economic slowdown,135 driven by new outbreaks of Covid-19 and rising youth unemployment.The unemployment rate among 16 to 24 year olds in the country reached nearly 20 percent in 2022 compared to the overall national ra
299、te of 5.5 percent.136 Now,many young adults are embracing humbler lifestyles than their parents,in a shift described as tang ping,loosely translated as“checking out of the rat race to pursue a more low-key life.”137Retailers are bracing themselves for reduced spending among younger generations:“We s
300、ee younger and less affluent customers spending much more cautiously on discretionary items and often waiting for promotions before buying,”said Richard A.Hayne,chief executive officer of retail group Urban Outfitters in August 2022.138This includes turning to alternative payment methods and short-t
301、erm financing,which has seen a boom in popularity and has helped to fuel apparel sales over the past year.In the US,20 percent of customers said they bought discretionary goods in 2022 with interest-free,short-term financing,including Buy Now,Pay Later services.139 BNPL apps are particularly popular
302、 in the Nordic region,the UK and Germany.140 However,BNPL providers such as ClearPay and Affirm may face headwinds as lower-income consumers pull back on spending while the likelihood of a rise in default rates increases as economies continue to slow.Brands should consider BNPL where appropriate whi
303、le monitoring changing consumer behaviours and potentially focus more on promotions and special offers.Flight-to-Value BehaviourOne way the fashion industry has been responding to spending shifts is to lean more heavily on discounting.According to global research from the summer of 2022 by retail tr
304、acking firm Edited,there have been year-on-year increases in discounting in several countries following a low during the summer of 2021.In the US,36 percent more items were discounted in 2022 compared to 2021.141Off-price channels are continuing to be attractive to bargain-hunters seeking big-name b
305、rands at lower prices.In Europe,off-price channels are expected to account for 12 percent of all fashion industry revenue by 2025,up from 11 percent in 2021.142Many off-price players were able to leverage the period after lockdown restrictions were lifted,during which US consumers splurged on purcha
306、ses.In the US,sales at off-price retailers like Burlington and Ross Stores,and off-price divisions of retailers like Saks Off Fifth,grew more than 40 percent year on year in 2021.143 144 In the months ahead,off-price channels should benefit further from high inventories as brands see diminished supp
307、ly chain disruptions coincide with a softening of consumer demand.The trend has accelerated in China too,03.TWO-TRACK SPENDING44The State of Fashion 2023CONSUMER SHIFTSwhere the number of fashion outlet malls has increased by more than 35 percent since 2019.145For brands,particularly higher-end ones
308、,off-price channels should be carefully managed to avoid eroding brand perception among consumers.For example,Ralph Lauren has reduced its reliance on off-price and aims to use the channel for offloading merchandise misses,rather than selling low-margin products in high volumes like so many other lu
309、xury brands do.146There is also some evidence of consumers shopping for a more accessible type of luxury.Many newer luxury brands are catering to younger,more fashion-forward consumers that are looking to trade up from premium brands or wish to complement their wardrobes with more accessible pieces
310、than can be found in the offerings of ultra-luxury players.This new category of brands has seen a surge in popularity in recent years;for example,Jacquemus is on track to double its sales by the end of 2022.147While higher-end luxury brands have been“premiumising”their merchandise and increasing pri
311、ces,some entry-level luxury consumers are trading down to more affordable brands that still have high-end brand storytelling and aesthetics.Changing ChannelsThere is a role for resale here,too.Resale revenue is expected to grow to$47 billion by 2025,from$15 billion in 2022 11 times faster than appar
312、el retail overall,albeit from a lower base.148Online resale channels are growing in popularity in China.A 2020 survey of Chinese consumers from UBS found that 72 percent of respondents had increased their purchases on luxury resale via online platforms,compared to 31 Saks Off Fifth in Florida.Jeff G
313、reenberg/Education Images/Universal Images Group via Getty Images.4503.TWO-TRACK SPENDINGpercent who had done so in 2018.149 For some time now,Gen-Z consumers in China have been heading online to platforms like Xianyu,Zhuanzhuan and Idle Fish to buy and sell second-hand and slightly used fashion.150
314、 151Regardless of age,resale shoppers say price points are driving this switch in shopping behaviour.A 2022 survey from American resale platform ThredUp found that 63 percent of respondents said they mainly shop resale to save money.152The popularity of resale has not been lost on big brands.Lululem
315、on,Dr.Martens and Patagonia,among others,have started offering resale in recent years through their own service or through third parties.153 In addition to Kerings 2021 investment in retail platform Vestiaire Collective,154 155 Farfetch announced plans to acquire B2B resale-technology platform Luxcl
316、usif to help expand the category.156 Meanwhile,Amazon has partnered with reseller What Goes Around Comes Around to sell pre-owned handbags from luxury brands.157Resale also creates opportunities for intermediaries.Technology and logistics platform Reflaunt recently partnered with Balenciaga to devel
317、op the brands resale solution.158Like resale,rental is expected to capture the attention of more shoppers and brands after struggling during pandemic lockdowns.As consumers look for value for money,they may turn to rental platforms such as peer-to-peer services like By Rotation and My Wardrobe HQ,or
318、 to brands own programmes offered from department stores like Selfridges.The market is expected to reach$2.1 billion by 2025.159 More than 40 percent of growth is expected to come from the APAC region.160 Meanwhile,fashion giants like H&M,161 Zalando162 and Uniqlo163 are stepping up their repair ser
319、vices,providing consumers with another option for more affordable and sustainable ways to dress.Selfridges announced in 2022 that by 2030 nearly half of its sales should be from resale,repair,rental or refills.164Staying AttunedFor sure,difficult decisions lie ahead for brands as they face their own
320、 cost pressures.Input costs increased in 2022,including for transportation,energy and labour.165 166 If brands decide to preserve margins by passing on cost increases to customers,they must do so with a deep understanding of the risks,including the potential to lose customers to lower-priced rivals.
321、Above all,fashion leaders should be especially attuned to the needs of their target customers,identifying changes that can lead to spikes in purchases or curtailed spending,or rapid shifts to different channels,categories or price points.In order to avoid having to increase their share of discounted
322、 or off-price products,brands must return to their core value propositions,while taking a laser-focused approach to products;tightening merchandising strategies to focus on bestsellers;developing more responsive methods to react to consumer demand;and increasing speed to market by taking steps such
323、as nearshoring and on-demand manufacturing.76 percent of Gen-Z and 79 percent of Millennials reported that they are dipping into their savings,taking on more credit or taking onadditional jobs to manage their finances.46The State of Fashion 2023If a brand is going to succeed in todays retail environ
324、ment,staying close to its customers is more crucial than ever,according to Joanne Crevoiserat,chief executive of Tapestry,the American group that owns accessible luxury brands Coach and Kate Spade and footwear label Stuart Weitzman.Having joined Tapestry from Abercrombie&Fitch in 2019 as chief finan
325、cial officer of the group,the retail veteran went on to secure the top job the following year,just after the pandemic hit.Crevoiserat steered the group through the challenging period,pivoting Tapestrys business model to adapt to a new world order:under her leadership,e-commerce sales more than Tapes
326、try:Connecting With Customers Is Not Just About PriceJoanne CrevoiseratChief Executive,TapestryTapestry chief executive Joanne Crevoiserat successfully steered the US luxury group that owns Coach,Kate Spade and Stuart Weitzman through the challenging pandemic period.Now,shes betting on strengthened
327、customer-centric tactics and offerings to continue capturing discretionary spending,even during global economic turbulence,while keeping the company on track to hit$8 billion in sales by 2025.by Tamison OConnorEXECUTIVE INTERVIEW47tripled to drive 30 percent of the business today.Total group revenue
328、 reached$6.7 billion in 2022,up 11 percent on pre-pandemic levels,with the aim of hitting$8 billion by 2025.Now the industry is facing yet another period of uncertainty,as global economic turbulence will likely push customers across the income spectrum to become more discerning.For accessible luxury
329、 brands like those in Tapestrys stable,the key is to focus on creating value for the customer beyond pricing,said Crevoiserat.“That value equation is a combination of the quality of the product,the style and the price,”she said.“Its not just about price.”The past 12 months have seen the industry try
330、ing to figure out what business looks like in a post-pandemic world.How have you approached this at Tapestry?What are the rules for success that have shifted,what dynamics are more or less constant compared with pre-pandemic times?I think the only constant is change.Thats the one thing weve learned.
331、As we embarked on our transformation,which weve been working on the last couple of years,we were asking exactly that question:What do we need to compete in the new world of retail?We were seeing a lot of trends in the market,and we wanted to position the company to win in the midst of those trends.T
332、he customer is moving quickly,both in how and where they shop,and those buying behaviours and preferences,and also how and where they discover brands.Those behaviours are changing,which requires companies to stay very close to the customer so that you can move with the customer,but also,understand w
333、hat they value.Im not sure their values are changing,but their values are coming to the surface,so they want to align with brands whose values reflect their own,and this sense of authenticity in a brand is critically important.Consumers today are more omni-connected,so having a digital presence and capabilities to deliver an experience for a consumer thats authentic to your brand and consistent ac