Fashion industry in 2022 & beyond

How fashion was disrupted

Starting from China in 2020, COVID-19 virus spread slowly but steadily throughout rest of the year and in 2021 it released new variants generating fatal waves after waves. Its existence led to continued series of lockdowns, travel restrictions, social distancing and other COVID-appropriate behaviours in various parts of the world. The circumstances left retail industry, fashion segment in particular, in complete disarray impacting sales, profits, inventories, jobs and the entire ecosystem.

Global fashion industry, valued at $3 trillion, constitutes 2 per cent of the word’s GDP and when such an industry is impacted the results are far-reaching. The disruption in global fashion started when people were asked to stay at home as precautionary measure to contain the spread of the virus. To rule out any possibility of their coming out, markets, shopping malls and retail stores were also shut down. This disallowed outside shopping for months forcing the consumers to switch to online shopping. To further worsen the things, the authorities’ world over, allowed online purchase of only essential items, restricting sale of non-essential items, that also included fashion, for a later time. Consequently, fashion sales declined and inventories held up throughout the supply chain. Orders were either cancelled or reduced or diverted to arrest additional losses. Simultaneously, constrained global freights and transportation jeopardised supply chain logistics worldwide. The goods transportation to their destination markets faced challenges and those which could make their way out could move only with increased cost, eating up profit margins. Overcoming all these challenges, when fragmented fashion supplies opened up after sizeable gap the demand for fashion items had taken a 360 degree turn with ‘need’ replacing ‘aspiration’. Luxury and aspiration fashion was not needed anymore and the fashion demand, otherwise widely diverse, narrowed to only essential wearables. Work from home cut down sales of formal wear; no outing dented active wear category; social distancing too restricted fashion, requiring very few options that already existed in the wardrobes; home confinement needed only lounge and comfort wear as new buys; curtailed festivities, celebrations and public gathering suppressed beauty, fashion accessories and occasion wear demand for a long time; and, school uniform sales also touched the bottom due to online schooling that compensated for school shut downs.

Not only the consumption side suffered immensely but supply side had its own sufferings too. Global fashion hubs in Europe, Asia and America had to either suspend or delay forward-looking and business-building activities of fashion shows, trend forecasts, new expansions, brand launches and other growth plans. Big fashion players suddenly started looking at other aspects of their existence – charities, donations, human welfare, medical supplies, sustainability, social responsibility and human well-being knowingly and global well-being unknowingly.

What changed in 2021

2021 began with good news of availability of various vaccines to fight COVID-19, speeding large scale vaccination programmes in many countries. The development brought back some relief and markets throughout the world began opening up, reviving hindered businesses. Although new variants of the virus continued raising their heads in many countries, the overall fashion sentiments gained life. The fashion players innovated, adapted to new realities, incorporated new strategies and began building upon new learning enforced by unprecedented times. Whether it was product development, tracking consumer and shopping behaviour, re-working supply chain, switching to new operational models to keep businesses running, adopting new technologies, reworking marketing and distribution approach in order to meet uncertainties of unknown future, everything progressed with purposeful agility. Among plethora of developments, fashion revived with short-term as well as long-term changes as the year 2021 approaches its end.

As this feature goes in print the year-end estimations are out. A joint report by McKinsey and The Business of Fashion estimates the global fashion sales to surpass 2019 levels by 3-8 per cent with strongest recovery to be seen in China and US markets, followed by Europe. The fashion industry recovery will be V-shaped as performance in the first half of 2021 pointed to a possible return to profitability by 2022. However, the recovery is expected to have a flip side too. A combination of material shortages, transportation bottlenecks and rising shipping costs will inflate input costs at estimated average of 3 per cent, forcing increased prices for consumers. This will call for businesses to re-look at their supply models and focus on making these as flexible and resilient as possible to navigate the years ahead.

Luxury fashion & consumerism

Despite luxury retail hit hard in 2020 due to lockdowns and travel restrictions impacting wealthiest of consumers, it revived back in 2021 to some extent. As the year progressed, markets around the world kept opening up and by the end of third quarter, many luxury brands reported a good turnaround. According to a Bain and Company study done in association with Altagamma – the Italian luxury trade foundation, global personal luxury goods sales will end 2021 with €283 billion ($324 billion). The projected figure will be 1 per cent increase over 2019and 29 per cent increase over 2020, though earlier projection did not expect recovery anytime before well into 2022. Projecting forward, Bain has predicted the personal luxury goods to continue its upward trajectory through 2025, advancing between 5-9 per cent CAGR to reach €360 to €380 billion ($412-$435 billion). Millennials or Gen Y, as Bain terms them, and Gen Z consumers will account for nearly two-thirds (63 per cent) of personal luxury goods sales in 2021, up from 44 per cent in 2019. By 2025, they will make up over 70 per cent of the total market as Gen X and Baby Boomers’ will influence and spend less. Noting that the COVID-19 pandemic and recovery has fast-forwarded structural changes in the luxury market that will set the pace for the coming decades of its evolution, luxury brands will continue to redefine themselves, expanding their mission beyond creativity and excellence, becoming enablers of social and cultural change.

Original Posts: https://www.fibre2fashion.com/industry-article/9327/fashion-industry-in-2022-beyond