For fashion players, 2019 will be a year of awakening. The ones who will succeed will have to come to terms with the fact that in the new paradigm that is taking shape around them, some of the old rules simply don’t work.
For fashion players, 2019 will be a year of awakening. The ones who will succeed will have to come to terms with the fact that in the new paradigm that is taking shape around them, some of the old rules simply don’t work. Regardless of size and segment, players now need to be nimble, think digital-first and achieve ever-faster speed to market. They need to take an active stance on social issues, satisfy consumer demands for ultra-transparency and sustainability, and, most importantly, have the courage to “self-disrupt” their own identity and the sources of their old success in order to realise these changes and win new generations of customers.
They also need to invest in enhancing their productivity and resilience, as the outlook is increasingly uncertain. External shocks to the system continue to lurk around the corner,
and growth cannot be taken for granted: the McKinsey Global Fashion Index (MGFI) forecasts growth of 3.5 to 4.5 percent for 2019, slightly below 2018 growth, predicted at 4 to 5 percent. Optimism can be found only in pockets, notably in North America and in the premium and luxury segments, aided by their strong performance in 2018. The majority of executives in the remaining segments and geographies are pessimistic, citing “dealing with volatility, uncertainty and shifts in the global economy” as their primary concern for the year ahead. Risks of trade disruptions and slowing economic growth, even in key growth markets in Asia, could undermine global growth prospects, as could uncertainty over other major events such as Brexit or the possible onset of a global economic slowdown.
All this comes against a backdrop of a fashion industry that turned a corner in 2018, with increased growth justifying the optimism expressed in last year’s global fashion survey. But even with this more positive backdrop, executives are now fully acknowledging the changing nature of the industry, using words such as “changing,” “digital,” and “fast” to describe it. In a year of reckoning, for which the McKinsey Global Fashion Index predicts growth of 4 to 5 percent for 2018 (up from 2.5 to 3.5 percent in 2017), fashion players have begun to look proactively at opportunities rather than just focusing on challenges ahead.
According to McKinsey FashionScope, Greater China is expected to overtake the US as the largest fashion market in the world in 2019.
However, recovery continues to be unequal, with most of the growth coming from luxury and emerging markets in Asia. According to McKinsey FashionScope, Greater China is expected to overtake the US as the largest fashion market in the world in 2019. Mid-market companies and mature economies continue to lag, with the exception of North America, which saw higher than expected growth supported by an expansive fiscal policy. Meanwhile, polarisation persists: the top 20 companies in the industry account for 97 percent of economic profit, while an increasing proportion of publicly-traded fashion companies struggle to create any economic value. The prizes for those who can adapt may be greater than ever — but so are the penalties for those who fail.
Read the full report here
