The fashion industry is synonymous with fashion weeks, photo shoots and cat walks but its more than that according to the American Fashion Industry Association. It comprises of brands and retailers, service providers that include customs officers, freighters, law firms and testing and certification companies, manufactures and their suppliers, agencies that work to promote the industry and academic institutions that teach the craft to aspiring fashion designers. The whole global industry was valued at $2.4 trillion by McKinsey & Company in their 2016 state of Fashion report with both big and small players contributing to the vast amount. This paper looks at the state of the fashion industry from the players, the performance of the sector to the many trends taking shape within the sector (State Of Fashion 2017).
Per Ahmed, Imram et al. the fashion industry has been one of the success stories of the past decade with an annual growth of 5.5% and would rank as the worlds seven largest economy were it to be alongside countries with its $2.4 trillion contribution to the global economy. Despite this the a authors note that 2016 had been one of the worst years for the industry owing to a number of things such as terrorism incidents in Paris, France, the Brexit vote in the UK and the volatility of the Chinese stock market. Other forces that have taken a toll on the fashion industrys performance include the case of consumers becoming more demanding and unpredictable and disruptive technologies. McKinsey & Company summarized the 2016 year in fashion as uncertain, changing and challenging (State Of Fashion 2017).With the change in industry also coming from within companies that institute changes related to product design, length of the fashion cycle and improving on sustainability.
2017 is expected to be a big year for the fashion with recovery from the upsets of 2016 being underwritten by several foundations (State Of Fashion 2017).The first of which according to the McKinsey & Company report are the macroeconomic indicators as the global economy is expected to grow at an average of 3.4% in the coming year although performance will depend on individual market conditions. The report also notes that many company executives expect an improvement in performance this year compared to 2016. Investors too expect a good return on their money coming from the industry depending on the market segments and product categories (State Of Fashion 2017).
Product categories are expected to grow over the coming years because of the many innovations in production, assembly and material. Athletic wear is noted as the category that will register the highest growth margins at 6.5-7.5% growth although not comparable to the double digit growth rates the segment experienced in the past decade. Luxury brands are also expected to perform well as the middle class in China and other emerging markets continue to grow.
A key concern in the fashion industry as earlier pointed out is the performance of the Chinese economy and the volatility seen in the nations stock market. China registered a GDP growth rate of 6.7% in 2016 which when compared to performance in previous years is not that remarkable and this has had the negative effect of reducing sales in the country. Chinese consumers are also noted as having shopping patterns that are fast changing. They are increasing preferring high end products that conform to their lifestyle changes as opposed to mass produced products that were previously the norm. Although China will continue to remain an important market in the fashion world, other markets are also contributing to the growth such as Arab Emirates and India.
Another trend in the fashion industry and which is proving to be disruptive is the demands of the consumer. McKinsey & Company notes that todays consumers are more demanding requiring high end personalized fashion at a lower price. A case in point is in the North American market where its now characterized by a high share of off-price sales which are said to account for 75% of apparel purchases across all channels (State Of Fashion 2017 6).The same trend can also be witnessed in other markets such as China where discount stores and malls are on the rise. Other consumer driven changes include athletic ware which is led by consumers who want to be more casual in their appearance; genderless fashion for people who dont want to be tied to stereotypical male and female dress modes as well as body positivity wear that cater to all body sizes and shapes. Another consumer led trend worth mentioning is modest ware that caters to people of the Islamic faith which is reportedly going to be worth $320 billion by 2020. These forces have forced companies to seek alternative ways of meeting consumer needs such as leveraging consumer data to predict shopping patterns and create and deliver personalized fashion products.
Consumers are also wary about the performance of the economy (Magni, Max et al.). They are fearful of another economic downturn that would negatively affect their finances. They also are fearful of some family member or other losing their job. This has the effect of making them delay their purchases and looking around for the best deals and hunting down coupons. However, not all consumers are as cautious as others are upbeat about the economy especially those in Chinese and North American markets. Magni, Max et al in their research note that globally, half of the consumers are concerned about the possibility of losing while a third express optimism on the state of the economy. Of note is that the expectation in income instability is greatest in emerging markets compared to the developed world.
Although the digitalization of the fashion industry has been ongoing for many years, it continues to be a disruptive force both for good and bad in 2017 (Ahmed, Imram et al). The uptake of e commerce and digital tools is as swift as ever and it explains part of the reason that consumers are able to strike a bargain as they can compare prices across many platforms and shops at ease. Entrants in the fields are also shaping the way business is conducted and threatening established players one such new entrant is Amazon, the company known for its online business but has now opened an online shop to sell its products (State Of Fashion 2017). Online sales also make it easy for almost anyone to enter the sales business through programs such as affiliate marketing, block chains and other disruptive ways that do not even require inventory. It also allows for the by passing of the middle man usually the department stores.
Digital tools on the other hand are increasing being used to engage consumers and they include virtual headsets and smart mirrors that let people virtually test clothes without the need to wear them (Indivk, Lauren). Wearable devices are also making an entry into the fashion scene with remarkable results. Per Indvik, the wearable devices segment is one of the fastest growing area of the consumer electronics and is going to be worth anywhere between $30 billion to $50 billion in the next two years.
The last major trend in the fashion sector is about production and cost reduction. Companies face the double problem of slowing sales and increased bargaining powers of customers both of which do not help with reducing cost. The price of cotton for instance continues to increase and labor costs in China and other emerging economies are also on the rise and this forces fashion companies to pursue restructuring efforts that make the situation less of a bother to them. Some of the strategies being pursued include new fabrics, 3D printing, and new standards (Breyer, Mellisa). Labor is increasingly being mechanized and constantly shifted around the world from places such as china where the costs were very low just a decade ago to countries such as Ethiopia and Vietnam.
In summary, the state of the fashion industry in 2017 and beyond will depend on a number of factors. The projection however is that compared 2016; the sector will experience substantial growth owing to a recovery in the global economy. Areas that are expected to perform well include the sportswear segment and the luxury brands. The fashion industry will however continue to face disruptive forces different in their nature and sources. Consumers are continuing to drive trends that force companies to adjust their production priorities and marketing strategies such disruptions include genderless clothes, modest wear, athletic wear and body positivity wear. At the same time consumers are pressing for bargains even harder and are cautious about spending.
Another disruptive force is technology; online shopping although no longer a new thing is increasingly being adopted across the globe; with the consequence of consumers being able to compare prices and deals for a broad range of providers. New digital tools such as VR head sets and smart mirrors are making consumer experiences better and pushing competition towards the provision of these. And lastly wearable devices are making their mark in the industry with expectations that soon such will be a multibillion dollar industry to be reckoned with.
Works Cited
Ahmed, Imram et al. "The State Of Fashion". Mckinsey & Company, 2017, http://www.mckinsey.com/industries/retail/our-insights/the-state-of-fashion.
Breyer, Mellisa. "10 Awesome Innovations Changing The Future Of Fashion". Treehugger, 2017, https://www.treehugger.com/sustainable-fashion/10-awesome-innovations-changing-future-fashion.html.
Indivk, Lauren. "Fashion Designers Are Finally Getting Serious About Wearable Devices". Co.Design, 2017, https://www.fastcodesign.com/3024758/fashion-designers-are-finally-getting-serious-about-wearable-devices.
Magni, Max et al. "Saving, Scrimping, And Splurging? New Insights Into Consumer Behavior". Mckinsey & Company, 2017, http://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/saving-scrimping-and-splurging-new-insights-into-consumer-behavior.
Pichi, Aimee. "How "Smart Mirrors" Are Boosting Clothing Sales". Cbsnews.Com, 2017, http://www.cbsnews.com/news/how-smart-mirrors-are-boosting-clothing-sales/.
State Of Fashion 2017. 1st ed., Mckinsey & Company, 2016,.
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