The fashion industry is well known for its fast pace and unceasing engine for reinvention. It is with this momentum that the sector enters a pivotal moment, a year marked by unprecedented uncertainty. According to the annual State of Fashion report from Business of Fashion and McKinsey, the most prominent sentiment among fashion industry leaders looking toward 2024 is “uncertainty, reflecting the prospect of subdued economic growth, persistent inflation, and weak consumer confidence.”
Since the onset of the COVID crisis, our world has witnessed a relentless succession of health, humanitarian, and geopolitical crises. These events have disrupted not only the patterns of demand but also the intricate systems of production, transportation, and distribution. This is not likely to change in the coming year, and, in fact, it is reasonable to anticipate further disruption in 2024 as military conflicts continue and possibly widen.
There is consensus among analysts that, over the years, there has been a repositioning of the world into blocs. The division extends beyond economic distinctions to encompass political and cultural factors. On one side are the developed nations, led by the United States and Europe, characterized by democratic systems of government and liberal economies. In another bloc are the emerging and developing countries, led by China and Russia, where autocratic governance prevails. Within this landscape, the roles of India and Turkey emerge as pivotal.
So far in this century, the industry that has wielded the greatest influence is, without a doubt, the internet and data sector. This trend suggests that it is likely that the world will soon be split further into distinct virtual realms aligned with their respective blocs. In fact, China has already established its own digital ecosystem, one that has no place for Google, Facebook, or YouTube – but instead boasts its own e-commerce channels that combine social networking with online sales, such as WeChat, TikTok, and Little Red Book (Xiaohongshu). The shift is a departure from the globalized world we once envisioned as our future.
This framework lays the foundation for the McKinsey analysis of the fashion industry’s projections, which show a deceleration in growth in Europe and the United States in 2023, with China following suit in the second half of the year. Even the luxury sector, which had grown steadily during the worst crises, began to lose momentum for the first time in years. The State of Fashion report estimates an overall sales growth of just two to four percent for the year. Yet, the report underpins this growth on predictions that are fickle, such as a revival in the international travel and tourism industry, for example, or volatile such as the Middle East and its impact on international shipping.
The report mentions another factor that cannot be ignored by the fashion industry: the climate crisis and its corresponding weather events. The prediction is that many fashion companies will spend 2024 fortifying themselves against the impact of climate because “extreme climate events are already placing the lives and livelihoods of fashion workers in danger and could put at risk an estimated $65 billion of apparel exports by 2030.” This is on the heels of adopting a series of governance and regulatory measures in the industry, of which the UN is well aware, and which are gaining traction in the successive COP sessions. However, it is important to note that what neither the McKinsey report nor the COPs take into account is how the fashion industry landscape is changing due to the global division into blocs and the consequential imbalance that ensues.
There are regulatory measures in the United States and the EU that aim to ensure sustainability in the fashion industry by requiring compliance with carbon dioxide emissions and waste management standards, while promoting circularity and the regenerative economy. For example, in the US, the Climate Corporate Data Accountability Act requires large fashion companies doing business in California to report their greenhouse gas emissions each year. And in the EU, the Strategy for Sustainable and Circular Textiles addresses the production and consumption of textiles, whilst recognizing the importance of the textiles sector.
Yet, still, it’s crucial to further position these regulations within a triple sustainability framework that encompasses economic, ecological, and social dimensions. This approach would ensure that fashion’s pursuit of profit incorporates best practices that address environmental and social concerns.
We must look beyond these main markets and define the future of the fashion industry by broadening our scope of vision.
This coming year, the spotlight will also be on the emergence of antitrust and competition protection regulations. Within the EU, these regulations have already prompted many within the fashion community to unite against the UN Fashion Industry Charter for Climate Action, a proposal to protect small-scale, conscious fashion companies from the locust-like advances of the major fast-fashion chains. Originally endorsed by prominent figures in the industry like Stella McCartney (who later withdrew her support) and executives from influential groups such as Kering and Selfridge, the initiative has faced scrutiny within the EU because the anti-trust regulations and regulations aimed at protecting free competition clash with industry agents’ agreements to, for example, slow down the pace of seasons, promote smaller and more controlled productions, and other measures proposed by the signatories of the fashion charter to protect quality and sustainable fashion.
Despite these controversies and contradictions, these efforts signal a much-needed change in the industry and are in that respect commendable. But the change thus far only affects two markets – the US and EU – while their fast-fashion chain competitors in China, for example Shein and Temu, are raking in the lion’s share of the market.
But we must look beyond these main markets and define the future of the fashion industry by broadening our scope of vision, especially as we find ourselves operating in an increasingly globalized world where ironically globalization is no longer an option. Against this backdrop, I expect the fashion industry to change in three main areas:
- Business model and strategy. Fashion companies have nearly exhausted their tactics to save and boost product consumption. Therefore, they will focus on increasing revenues through sales promotion and pricing strategies rather than sales volumes. In fact, according to McKinsey, price hikes of over 50% are expected.
- Supply chain model. The constant flux and unpredictability caused by years of crises has led fashion brands to rethink their relationships with suppliers in order to prevent a bullwhip effect (in which small variations in sales lead to volatility, under-use of factories, over-production, layoffs, and delays.)
- User and marketing models. A new industry business model is in the making, one that complies with triple sustainability parameters and seeks to generate revenue from the quality of sales rather than their quantity.
In the current landscape, the concept of conscious design – meaning design that is considered good is that which contributes to a better world and a more sustainable way of life – will likely become increasingly prominent. The emerging fashion paradigm centers around a new type of consumer, one who aligns with brands and products on the basis of shared values. The State of Fashion report underscores this rise of this conscious consumer, revealing that 71% of surveyed executives intend to increase their marketing investments with the aim of cultivating deeper emotional connections with their user base. This shift is mirrored in the evolving influencer landscape, characterized by authenticity, originality, and a departure from conventional prototypes. It echoes a broader consumer trend – one marked by skepticism towards conventional marketing ploys and a genuine quest for authenticity.
Another influential factor that will reshape marketing strategies is the increase in investment in generative artificial intelligence. This technology will usher in a highly personalized approach to consumer engagement, probably to an extent that we do not even wish to imagine: intelligence that is programmed to motivate, suggest, and tempt us based on its comprehensive knowledge of our physical and psychological data (our preferences and tastes, habits and aversions, racial, ideological and religious biases, and the media and environments in which we function.) These developments align with the principles articulated by Shoshana Zuboff in her seminal work, The Age of Surveillance Capitalism and highlight the extent to which data-driven intelligence will play an increasingly central role in consumer relationships and marketing strategies, particularly in the fashion industry.
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