The fashion industry has suffered its worst year on record, with almost three quarters of listed companies losing money owing to covid-19, says a new report.
“As the coronavirus pandemic sent shockwaves around the world, the industry suffered... . 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," states ‘The State of Fashion’ report by media company Business of Fashion and management consulting firm McKinsey. It forecasts a staggering 90% economic profit decline across the industry in 2020.
The report continues to outline the recovery predictions over the next year in two phases. The first being more positive about sales declining by between 0% and 5% in 2021 compared to 2019, but the industry would return to 2019 levels of activity by the third quarter of 2022. The second, sees sales growth decline by 10 to 15% over the coming year compared with 2019. “In this case, the virus would continue to wreak havoc despite widespread containment measures and fashion sales would only revert to 2019 levels in the fourth quarter of 2023”, it says.
While the report expects tough market and trading conditions to continue into the next year, it does say that “the pandemic will accelerate trends that were in motion prior to the crisis, as shopping shifts to digital and consumers continue to champion fairness and social justice.” For any fashion business trying to make it big in the coming years, these observations are key to establish a business model that will be durable in the volatile conditions we face before us. From pandemics to socio-political movements such as #BlackLivesMatter, the world is looking for businesses to stand by fair values and join the currents of change.
The report also highlights the shifts in consumer behaviour, and how they will affect the demands and market trading conditions ahead. There’s emphasis on sustaining digital presence: “However, as digital consumption continues its dominance and growth in 2021, companies must develop more engaging and social experiences to encourage consumers to connect. At the same time, we anticipate executive teams to increasingly focus on ensuring that digital channels add measurable value to the bottom line, given tight budgets and the need for productivity and efficiency.”
“Looking forward, the industry should set its sights higher, aiming for a “better normal” across stores, partnerships and assortments.” This sets the tone for how the report aims to help business leaders in the industry, with more in-depth views on how companies can hope for a brighter future, if they can come up with novel strategies and perspectives to old, conventional ones.