Fashion in 2023: A New Era of Resilience – Corpradar

Fashion in 2023: A New Era of Resilience

Just as the fashion industry was regaining its footing following the devastation of COVID-19, the final months of 2022 appear to be replete with discarded brands and retailers. Deteriorating macroeconomic and geopolitical conditions had a strong impact on the industry in the second half of the year and will continue to position fashion leaders as they look to 2023. in 2021 and the first half of 2022 saw impressive growth. 

As economies around the world began to shake off the ravages of a pandemic, which saw restrictions in 2021, the fashion industry benefited from pent-up consumer demand despite remaining challenges such as supply chain disruptions. 

Global industry revenue grew 21 percent annually in 2021, while the average EBITA margin almost doubled and grew 6 percentage points. 

The industry continued to develop strongly in early 2022, when turnover increased by 13 percent in the first half.

fashion sales

More than 50 percent of companies tracked by McKinsey’s Global Fashion Index contributed to the overall economic profit of the industry in 2021, compared to only 32 percent in 2020. The share of value destroyers (companies generating negative financial profits) therefore fell to its lowest level. Since 2013. Our list of super winners—the top 20 listed companies based on financial performance—includes many of the usual suspects in the luxury and sports categories, with players in the discount segment also moving up the list.

But some of those gains dissipated as 2022 progressed. The war in Ukraine, which began in February, triggered a series of events, including a widening energy crisis across Europe. Complicated inflation in many major economies prompted central banks to successively raise interest rates, ending a long period of very low and even negative interest rates, to contain rising prices and steer economies out of recession.

By 2023, fashion leaders will be reminded of the factors influencing widespread global weakness. In the BoF-McKinsey State of Fashion 2023 survey, 85 percent of fashion executives predict that inflation will continue to challenge the market next year. At the same time, geopolitical tensions, particularly around the ongoing war in Ukraine, have disrupted supply chains and created an energy crisis that 58 percent of executives believe is also weakening the fashion market.

Overall, McKinsey expects global fashion sales to grow by 5 to 10 percent in luxury goods and by negative 2 percent to positive 3 percent in other sectors in 2023, while the dichotomies that previously defined the fashion business return. In addition to the differences between players in the luxury class and other segments, regional differences are highlighted. 

Despite the slowdown, the US economy is expected to be stronger than other major global economies, with China continuing to deal with COVID-19 outbreaks and precautionary measures, while Europe suffers from the energy crisis and the weakening of the euro against the strong US. a dollar Against this background, the map of industrial growth around the world is changing. Markets that once had strong growth potential now face a greater range of risks than before, from extreme weather to political or social unrest. Other regions, such as the Middle East, could become new growth ports, requiring brands to localize design, marketing, and sales to attract new customers. But as fashion leaders assess what the new regional realities mean for their businesses, planning for these scenarios must consider more than financial risks and opportunities.
Fashion companies need to rethink their operations. 


sustainable fashion


New Strategies

Many are modernizing their organizational structures by introducing new roles or enhancing existing roles to target key growth opportunities and respond more effectively to risks. Next year may also see brands working with manufacturing partners to sharpen their supply chain strategies. This could mean a closer area to better respond to rapidly changing consumer demand or a greater reliance on data analytics and technology to ensure efficient inventory management.

Distribution channel mixes are also ripe for reevaluation. As e-commerce growth returns to normal after the pandemic outbreak, the shine has begun to fade from the direct-to-consumer digital model that has driven many brands over the past decade. With the removal of lock-in restrictions, shoppers have made it clear that while they still value online channels—especially luxury, where e-commerce DTC and third-party platforms continue to grow—they also want brick-and-mortar experiences. 

Brands must also consider the continued return of international travel to pre-pandemic levels, fueled by a strong US dollar. Wholesale and physical retail are playing a new role in reinventing customer journeys, requiring brands to look beyond major cities to be physically closer to consumers.


Consumer Behavior

In a difficult economic environment, brands must work hard to remain attractive to consumers. Consumer behavior in 2023 will largely depend on household income. While high-income households are less affected by financial pressures and appear to continue to buy luxury goods as in previous recessions, low-income households are likely to reduce or even eliminate discretionary spending such as clothing. Some people trade down and go to reputable retailers with bargains and low prices, but avoid full-price, premium, and mass-market brands.

All this raises the importance of brand marketing strategies. Brands should use the coming year to revamp their digital marketing. Budgets are shifted to alternative channels that could generate better returns than paid social media advertising, such as retail media networks, while building stronger brand communities. This is moving into distribution channels as brands seek higher margins and collect more first-party customer data.

How brands manage and communicate important issues to consumers is also crucial. Consider durability. New and emerging regulations and increased consumer awareness of fashion’s impact on the climate crisis mean that brands must be extremely careful about how they communicate their sustainability initiatives and achievements to avoid “greenwashing,” which can lead to reputational damage or expensive fines.
Brands that effectively navigate industry challenges in 2023 will be better positioned to capture consumer trends. After the pandemic, formal wear styles continued to be disrupted, forcing brands to rethink office and party wear. At the same time, consumers are increasingly shopping across gender categories, and brands that can adjust their sales strategies accordingly can strengthen their relationships with more consumer groups.
Leaders are preparing for a challenging year in 2023 by implementing realistic but bold strategies that combine careful cost management with strategic investment in capacity building. Those who understand that growth is unpredictable or muted but continue to invest in innovation across their organization will find themselves stronger to accelerate their business as uncertainty and fragility diminish.


10 agenda in fashion 2023

10 trending topics that will set the agenda in 2023:

1. Global fragility

Amidst the highest inflation in a generation, rising geopolitical tensions, the climate crisis, and declining consumer confidence ahead of a recession, the global economy is changing. volatile state. Fashion brands need careful planning to deal with the many risks of uncertainty and recession ahead of 2023.

2. Regional realities

Figuring out where to invest globally has never been easy, but with geopolitical uncertainty and an uneven post-pandemic economic recovery, it will likely become even more difficult in 2023. Brands can reassess their regional growth priorities and refine their strategies to better fit the geographies in which they operate.


3. Two-way consumption

Possible economic instability may affect consumers in different ways in 2023. Depending on factors such as the level of disposable income, some voluntary purchases are delayed or reduced; others look for bargains, which increases the demand for resale, rental, and bargain prices. Fashion leaders must adjust their business models to protect customer loyalty and avoid diluting their brands.

4. Fluid fashion

Gender-fluid fashion is gaining more and more influence as consumer attitudes about gender identity and expression change. For many brands and retailers, blurring the line between menswear and womenswear requires rethinking product design, marketing, and in-store and digital shopping.


5. Formal Wear Reinvented

Formal wear has been redefined as shoppers rethink how they dress for work, weddings, and other special occasions. While offices and events are likely to become more casual, special occasions may be dominated by different clothes that consumers rent or buy to stand out from the crowd when choosing to dress up.

6. DTC Accounting

As brands across price segments and categories embraced digital direct-to-consumer channels, rising digital marketing costs and e-commerce reregulation challenged the viability of the DTC model. To grow, brands will likely need to diversify their channel mix, including wholesale and third-party markets in addition to direct-to-consumer (DTC).

7. Fighting Greenwashing

As the industry continues to grapple with its harmful environmental and social impacts, consumers, regulators, and other stakeholders may increasingly monitor how brands communicate their sustainability goals. If brands want to avoid “greenwashing,” they must demonstrate that they are making meaningful and credible changes while meeting new regulatory requirements.

8. Preview Manufacturing

Continued disruptions in supply chains are a catalyst for a global restructuring of manufacturing. Textile manufacturers can create new supply chain models based on vertical integration, proximity, and small-scale production made possible by advanced digitization.

9. Digital Marketing Reloaded

Recent data regulations are creating a new chapter in digital marketing as customer targeting becomes less effective and more expensive. Brands are embracing creative campaigns and new channels like retail media networks and meta-versions to achieve greater marketing ROI and collect valuable first-party data that can be used to deepen customer relationships.

10. Organizational Renewal

Successful implementation of strategies in 2023 depends in part on the company’s orientation around core functions. Fashion leaders need a new vision of what the organization of the future requires, focusing on attracting and retaining top talent and elevating teams and key C-suite roles to deliver on priorities such as sustainability and digital acceleration.

Source: Mckinsey,Bof

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