Business of Fashion and McKinsey have released their seventh annual joint report, The State of Fashion 2023, which discusses the major themes shaping the fashion economy and assesses a range of possible responses. Reflecting in-depth research and numerous conversations with industry leaders, it reveals the key trends likely to shape the fashion landscape in the year ahead.
This year’s report presents a difficult outlook ahead, as fashion companies face challenges and revise forecasts downward after an exceptionally strong 2021, per McKinsey analysis of global data in the fashion industry. Inflation is a top concern for execs, which includes the spiking costs of goods and reduction in consumer demand.
Additionally, geopolitical concerns dominate the agenda for 2023, including the ongoing war in Ukraine is of high concern to the industry, having already disrupted trade routes and triggered an energy crisis that will continue to have impact. In China, further COVID-19 outbreaks and the real estate crisis have undermined the region’s growth trajectory, as well as disrupted supply chains. Meanwhile, extreme weather is negatively affecting supply chains and raw materials across Asia.
As a result, the report concludes that consumers are adjusting their behaviors, as many across the middle- and low-income households trade down to cheaper or discounted items to reduce their spending. Meanwhile, shoppers for luxury items will likely continue to spend largely as they have been, insulated from the impact of the economic slowdown.
Despite the economic headwinds ahead, the report states that fashion leaders are in a unique position to reevaluate the ways that their brands produce, distribute, and market their collections. Supply chains remain disrupted from the COVID-19 pandemic, elevating the need to invest in faster and geographically closer manufacturing systems. While direct-to-consumer, digital channels remain a top priority, fashion industry leaders will need to diversify their sales channels to maintain efficiency and market relevance.
And finally, brands will need to be more creative in marketing to attract customers through bold, differentiated content that cuts through a crowded digital environment in which data targeting is no longer effective. To execute these changes and respond better to forthcoming regulations around sustainability marketing, the fashion industry should rethink how it allocates talent, promotes, and establishes executive roles and teams—reflecting the key challenges facing the industry in the years ahead.
Heading into 2023, the report concludes that the fashion industry’s decision makers will need to prepare to make strategic sacrifices while investing in agility and creativity to succeed when the market eventually recovers.
You can download the full The State of Fashion 2023 report here.
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