Fashion Industry 2018 – Overview – Digitisation, China, And Sustainability. The industry of fashion is turning a corner. A new sense of optimism is rising in an industry plagued by uncertainty. According to ‘McKinsey Global Fashion Survey’ the state of the 2018 fashion industry is “optimistic,” despite remaining challenges and concerns of “uncertainty” ahead.
Composed of almost 500 public and private companies, the McKinsey Global Fashion Index (MGFI) is spanning diﬀerent product categories and consumer segments across many geographies. MGFI was created to track the fashion industry’s performance through three core variables: sales, operating profit, and economic profit, with the aim of providing a comprehensive benchmark for the global industry.
Fashion Industry 2018 – Emerging Markets Takeover
According to the McKinsey Global Fashion Index forecasts, 2017 signalled the end of an era. Luxury and fashion sales are to triple by the end of 2018, from 1.5 percent in 2016 up to almost 4.5 percent. By the end of this year, for the first time, more than half of footwear and apparel sales will come from emerging market countries across Asia-Pacific, Latin America and other regions.
The West is no longer the global stronghold for fashion sales, and this outlook varies across value segments. Trends show that the ‘absolute luxury’ segment is accelerating alongside aﬀordable luxury in an ongoing polarisation of the market. Also, consumers’ constant movements up and down from mid-market price points create headwinds for mid-priced fashion players. Lastly, brands operating in the discounted luxury segments continue to grow.
Fashion Industry 2018 – Key Source Of Diﬀerentiation
Apart from consumer and market changes, the new tech-driven developments undergoing in the fashion industry are creating previously unseen shifts. The increasing digital adoption puts pressure on luxury and fashion brands to accentuate on delivering convenience, better prices, higher quality, and fulfiling their constant need for newness. That is, digitisation has raised consumers’ expectations for customised experiences and personal touch.
The implementation of digitisation technologies sees brands using granular customer insights as their key source of diﬀerentiation. The trend of using mixed consumer data from browsing, purchases but also biometrics from wearable devices translates into a new wave of startups and leading fashion brands joining forces to launch innovative business models.
The year of 2018 is the year of innovative and smart materials, leather alternatives, virtual and augmented reality used in experiential marketing, artificial intelligence for trend spotting and garment design, all with the aim of pushing the limits of operations and product development. Moreover, powered by big data and artificial intelligence, e-commerce platforms will make the impersonal environments seem personal with tailored offerings and personalised recommendations.
Fashion Industry 2018 – The Challenge Of Digitisation
However, if there is a downside of technological adoption, it is reflected by the gap between front-runners and laggards. For example, on the economic profit, the fashion industry reported between 2005 to 2015, top 20 percent of fashion companies contributed to almost 100 percent. The gap continues to grow as digitisation brings the challenge of operating in an unpredictable macroeconomic environment and a fast-changing industry.
‘Unpredictable’ has become the new standard of the landscape, forcing industry players and fashion executives to focus resources and energy on improving what is within their control rather than attempting to resist the tide of changes.
Fashion Industry 2018 – Asian Fashion Players
Along the product computation, individual personalisation and cutting-edge deployment of artificial intelligence, another theme has emerged as the defining feature of 2018. The end of this decade shows Asian fashion players asserting their power on the global stage.
From designers to influencers and brands to materials, Asia is poised to take the lead of fashion and luxury landscapes for years to come. Asia now boasts two-thirds of the world’s 45 e-commerce unicorns, and China is one of the world’s most active digital investment and startup environments.
The rise of sustainable fashion is generating the highest interest among investors. Last year, the ‘green bond’ market grew by 78% compared to 2016, reaching $156 billion. China is not just leading the sustainability movement but also showcasing a willingness to help design the features of a modern fashion system while connecting with fashion consumers across the globe at a more personal level.