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December 5, 2019

Business of Fashion: The State of Fashion 2020

The fourth annual State of Fashion report by The Business of Fashion and McKinsey & Company forecasts slowing growth...

The fourth BOF: The State of Fashion report has been released. Within the report McKinsey & Company forecasts the future of the fashion industry, explore the prevailing mood of anxiety and concern as well as predicting themes that will set the agenda in 2020…

Fashion leaders are not looking forward to 2020. The prevailing mood among respondents to our executive survey is one of anxiety and concern. In contrast to last year, when there were pockets of optimism in North America and within the luxury segment, we now see pessimism across all geographies and price points. To make matters more complicated, although we know that external shocks will continue, we don’t know what form they will take.

Even without the economic headwinds, these would be challenging times. The McKinsey Global Fashion Index (MGFI) forecasts that global fashion industry growth will slow further — down to 3 to 4 percent — slightly below predicted growth for 2019. Fashion players are under pressure to be digital-first and fully leverage new technologies, to improve diversity across their assortments and organisations and to address growing demand for the industry to face the sustainability agenda head-on.

Yet not all companies are created equal. Polarisation persists and the “Super Winners” — the top 20 players by economic profit — account for more than the combined economic profit of the entire industry. Not only are they highly value-creating and of immense scale, but they often pioneer innovation in the industry through their product ranges and interaction with consumers. They are also best positioned to attract the industry’s limited resources and talent, while others risk getting left behind. A growing proportion of publicly traded fashion companies are actually “value destroyers” that rack-up negative economic profit. In a “winner takes all” market, the implications for laggards are troubling.

Volatility is here to stay, so fashion companies should take steps to become more resilient, build a profound understanding of the risks they face and consider strategic actions to minimise them. Successful companies will be the ones that make moves early, focus on boosting earnings over revenue growth, and work out how to improve productivity while ensuring operational and financial flexibility. Crucially, all this will require leaders who make quick decisions in an environment of great uncertainty.


While 2020 is not expected to be easy, it will be significantly more challenging for some companies than for others. Indeed, the year ahead will require fashion companies to deliver meaningful change across the value chain and on multiple fronts while mitigating risk and managing uncertainty. But, for the fortunate few, there will also be opportunities to capture.

Fashion industry themes that will set the agenda in 2020:

1. On High Alert

Continued caution is advised for the year ahead as mounting underlying turmoil could disrupt relations among both developed and emerging market economies. Indicators of recession risk are spurring companies across industries to build a resiliency playbook and plan for other macro risks such as geopolitical instability and the inflammation of trade tensions.

2. Beyond China

China will continue to provide exciting opportunities and play a leading role in the global fashion industry, but the colossal market is proving harder to crack than brands anticipated. As some successful players become over-reliant on China and others struggle, companies should consider spreading their risk by expanding to other high-growth geographies.

3. Next Gen Social

As traditional engagement models struggle on established social media platforms, fashion players will need to rethink their strategy and find ways to maximise their return on marketing spend. Attention-grabbing content will be key, deployed on the right platform for each market, using persuasive calls-to- action and, wherever possible, a seamless link to checkout…

To find out more information, see all themes and download the full report visit The Business of Fashion