Fashion sector growth to slow down by 4.5% in 2019: Report
Source: McKinsey Global Fashion Index, based on data from Corporate Performance Analysis by McKinsey
The State of Fashion 2019, a new report co-published by The Business of Fashion (BoF) and McKinsey & Company, says that 2019 will be a year of awakening for the fashion industry, one that will go down in history.
The majority of executives across different segments and geographies remain pessimistic, citing ‘dealing with volatility, uncertainty and shifts in the global economy’ as their primary concerns for the year ahead. Risks of trade disruptions and slowing economic growth, even in key growth markets in Asia, could undermine global market growth prospects, as could uncertainty over other major events, such as the Brexit or the possible onset of a global economic slowdown.
“Optimism can be found in pockets, notably in North America and in the luxury segment, aided by their strong performance in 2018,” says Imran Amed, founder and editor-in-chief of BoF. “But they cannot rest on their laurels as the market continues to be characterised by radical shifts in the global economy, consumer behaviour and the fashion system itself.”
“Looking at segments, only value and luxury will perform very well in 2019 growing by 5.0 to 6.0 and 4.5 to 5.5 per cent. Value will be primarily driven by competitors having very strong propositions that edge out the mid-market players. Luxury, on the other hand, will be fuelled by fast-growing Asia-Pacific economies and the continuing boom in global travel,” says Achim Berg, senior partner and expert on the fashion and luxury industry at McKinsey.
The report recognises the rise of ‘super winners’, the top 20 publicly listed companies that are increasingly dominating the industry in terms of value creation. This group includes brands such as Nike, LVMH and Inditex, and it now accounts for around $25 billion of economic profit, which is 97 per cent of total industry value created, compared to 70 per cent in 2010. Over time, North American department stores have lost traction amongst this cohort, with none remaining in the top 20, compared to three 10 years ago. The report notes that online retailers have yet to break into this elite group with none represented in the top 20 at all.
Fashion companies have to wake up not only to the tougher economic environment, but also to changing consumer trends and shifts in the fashion system. Created by a team of experts, a survey of almost 300 fashion executives and extensive interviews, The State of Fashion 2019 identifies 10 trends that will have a major impact on the fashion industry in the coming year, namely, ‘Caution ahead’, ‘Indian ascent’, ‘Trade 2.0’, ‘End of ownership’, ‘Being woken up’, ‘Now or never’, ‘Radical transparency’, ‘Self-disruption’, ‘Digital land-grab’ and ‘On-demand’.
The State of Fashion 2019 marks the third year of an ongoing partnership between The Business of Fashion and McKinsey & Company. The research conducted by a team of global experts, establishes a common understanding of the forces at work in fashion; sets out how well the industry is performing; and identifies the top priorities, both business and creative, for 2019. (KD)
Fibre2Fashion News Desk – India
The growth of the fashion industry is expected to slow down to 3.5 to 4.5 per cent in 2019, slightly below 2018 figures, according to a recent report. It further adds that Greater China will for the first time in centuries overtake the US as the world’s largest fashion market, while external shocks to the system continue to lurk around the corner.