A year of colossal change for fashion companies - BOF and McKinsey show how the Corona crisis changed the fashion landscape forever
The annual report on the world of fashion, “The State of Fashion 2021”, developed in cooperation between the international consulting firm McKinsey & Company and the renowned online fashion platform Business of Fashion (BOF), predicts a coming year full of challenges for fashion companies.
2020 is a year unlike any year before, with the coronavirus' shocking development around the globe. In their report "The State of Fashion 2021", BOF and McKinsey have defined XNUMX key themes highlighting a major disruption for the Fashion market. The following shows a snapshot of their results:
Fashion companies saw their profits fall 90% in 2020
For the Fashion industry 2020 was the year in which everything changed. As the coronavirus pandemic sent shockwaves around the world, the industry suffered its worst year on record with almost three quarters of listed companies losing money. Consumer behaviour shifted, supply chains were disrupted and the year approached its end with many regions in the grip of a second wave of infections, the report says.
At the end of the year, many regions were affected by a second wave of infections. According to the McKinsey Global Fashion Index, fashion companies will record a decline in profits of around 2020% in 90 (economic profit), while they rose by 2019% in 4.
Digital and Sustainability are primary growth driver in 2021
According to the report, the primary driver of growth in the coming year will continue to be digitization. In particular, reflecting the fact that people in many countries remain reluctant to gather in crowded environments. Digital is seen by a third of executives as a silver lining that presents the biggest opportunity in 2021.
As consumers become increasingly aware of labor welfare issues and the effects of factory closures, companies must increasingly uphold ethical business practices and prevent the exploitation of people and the planet. Looking to the future, the industry should set its goals higher and strive for a “Better Normal”. This applies to stores, partnerships as well as to the product range.
In such a warped business environment, decision makers need to act boldly. According to BOF and McKinsey, managers should develop novel strategies that focus on profitability, value, simplicity, and scaled-down collections, rather than discounting and volume business.
According to the report, there is no likely scenario that predicts a strong recovery in the fashion market in 2021. The 10 key themes defined in The State of Fashion 2021 report each highlight a major industry disruption triggered by the pandemic.
The State of Fashion 2021 - 10 key themes
- Living with the Virus
- Diminished Demand
- Digital Sprint
- Seeking Justice
- Travel Interrupted
- Less is More
- Opportunistic Investment
- Deeper Partnerships
- Retail ROI
- Work Revolution
In the following we outline three dramatic themes, which are disrupting the market and underline the urgent need for more sustainability.
71% of executives expect their online business to grow by 2021% or more in 20
Digital adoption has soared during the pandemic, with many brands finally going online and enthusiasts embracing digital innovations like livestreaming, customer service video chat and social shopping. As penetration of online channels accelerate and shoppers demand ever-more sophisticated digital interactions, fashion players must optimise the online experience and channel mix while finding persuasive ways to integrate the human touch.
55% of consumers expect fashion brands to care for the health of employees in times of crisis
In times of crisis, textile workers, sales assistants and other mostly underpaid workers are at the forefront of the fashion industry. Here consumers are becoming increasingly aware of the plight of vulnerable employees in the value chain. The dynamics of change move in parallel with campaigns against the exploitation of labor. Consumers expect companies to reassure workers of greater dignity, safety and justice across global industries.
Less is More
58% of fashion managers consider fashion collection planning to be a key area for data and analysis in 2021
Covid-19 has made it clear that more products and collections do not necessarily lead to profit maximization. The State of Fashion thus emphasizes the need to rethink profitability. Organizations need to reduce complexity and find ways to increase sales at full price and reduce inventory. By designing their strategy for collections to be demand-oriented and at the same time increasing flexibility and responsiveness within the season. This applies both to new products and to the increase.
The beginning of a new chapter for the global fashion industry
2020 has been a year of colossal change. What is clear is that the fashion industry, like many other sectors, will certainly exit this crisis in a very different form than that in which it entered. Depending on their sizes, geographies and the segments in which they operate, some players can anticipate a brighter outlook in the year ahead. Others will not.
Read the full report "The State of Fashion 2021" here
Related topics: Sustainability # 1 - Fashion Megatrend 2020