We expect in 2022 that companies will seek fresh approaches to online creativity and commerce, with nonfungible tokens, gaming “skins,” and virtual fashion edging closer to the mainstream. Hyper-interactive digital environments and investment in e-commerce are increasingly the leitmotifs of brands that are pushing on fashion frontiers. In response, many have turned to remedies that include more nearshoring, in-store supply stocking, and agile operating models designed to respond flexibly to change.Īmong the standout themes of the past year has been the continuing flourishing of online business models, reflecting a longer-term trend that accelerated during the pandemic. Over recent months, numerous companies reported struggles to manage inventory flows or tied lower sales forecasts to supply-chain blockages. However, as they pivot toward growth, a significant challenge is potential shortages of products and resources, as chocked supply chains and rising shipping costs undermine operations. Indeed, recovery is at the top of executives’ minds for the coming year, with 75 percent of luxury-segment executives, 61 percent of midmarket executives, and 50 percent of value executives expecting better trading conditions. Please email us at: many global regions, the business of fashion is set to pick up momentum in 2022, as consumers unleash pent-up buying power and dress to impress (where the pandemic allows). If you would like information about this content we will be happy to work with you. We strive to provide individuals with disabilities equal access to our website. Finally, amid rising competition for talent-particularly tech talent-brands need to find new ways to attract the best and brightest, with cybersecurity likely to be near the top of the agenda (Exhibit 2). As sustainability becomes a more urgent concern, brands need to ramp up their efforts to reflect customer values in their assortments, supply chains, and ways of working. At the same time, they must adapt to evolving consumer demand and ensure they take the opportunities offered by new digital frontiers. Amid these challenging dynamics, the imperative for brands will be to secure their recovery. We kick off our ten key themes for this year by taking the temperature of the global economy and analyzing the complex impacts of the pandemic as it continues its unpredictable progress. The prominence of luxury brands among the top performers was attributable to the economic resilience of wealthier demographics, leading to a continuing demand for bags, luxury jewelry, and ready-to-wear. Over that period, the top five performers by economic profit were Nike, Inditex, Kering, LVMH (including Tiffany), and Hermes. This year, we return to our analysis but with an adapted approach: smoothing pandemic-induced distortions by calculating the average economic profit over both 20. In last year’s report, we did not publish our annual list of “super winners,” due to distortions and reporting gaps caused by the pandemic. Among product categories, it was a breakout year for sportswear, with 42 percent of positive economic profit in the MGFI index coming from sportswear companies, amid strong growth for Chinese players. However, performance was uneven, as countries with strong healthcare systems and economic resilience fared better than others. In the meantime, domestic markets are set to continue their recent strong performance.ĭespite a dip in margins, discount and luxury outperformed the wider market in 2020, while the midmarket continued to be squeezed. In 2022, the industry’s growth will likely be driven by both China and the United States, while Europe lags behind and will need the return of international tourism to recover fully (Exhibit 1). ![]() About 7 percent of companies left the market entirely, either due to financial distress or because they were bought by rivals.įrom a geographic perspective, China was the standout performer over 2021, as its economy recovered much faster than those of other countries. A record 69 percent of companies were value destroyers in 2020, according to the latest reading of the McKinsey Global Fashion Index (MGFI), compared with 61 percent in 2019 and just 28 percent in 2011. As the pandemic continued to run its course, the performance inequalities that have become a challenge over recent years were more in evidence than ever. The fashion industry posted a 20 percent decline in revenues in 2019–20, as earnings before interest, taxes, and amortization (EBITA) margins declined by 3.4 percentage points to 6.8 percent. This article is a collaborative effort by Imran Amed, Anita Balchandani, Achim Berg, Saskia Hedrich, Jakob Ekeløf Jensen, Leila Le Merle, and Felix Rölkens, representing views from McKinsey’s Retail Practice.
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