The fashion industry is facing an uncertain year – opportunities for niche brands
Press release, 20 March, 2024
The fashion industry continues to struggle amidst economic difficulties, and now the industry is threatened by price increases and even greater investments in marketing. This is revealed in the annual report "The State of Fashion" published by The Business of Fashion and McKinsey.
In recent years, the global fashion industry has been marked by instability. In 2023, the strong post-pandemic recovery stopped, and growth slowed. According to the report, three out of four industry leaders see the outlook for the industry in 2024 as either the same or worse than in 2023.
The growth of the fashion industry is expected to slow down further in both Europe and the United States. The luxury segment, which has been successful in the past, will also suffer from the situation in the industry. Seven out of ten managers are now planning price increases in response to the challenges. Although many companies in the fashion industry are facing difficulties, the situation is not clear-cut:
"It is important to remember that the industry is diverse and there are winners, for example the demand for outdoor clothing is strong thanks to the outdoor trend. Niche players with a strong brand and an attractive customer offering still have the opportunity to succeed. That is why brand marketing will become even more important this year. In addition, investments in generative AI in marketing, planning and product development will increase," says Tuomas Kahri, a partner in McKinsey's Helsinki office.
Sustainability challenges
The fashion industry has long been criticized for its slow transition to sustainability. In addition, the lack of clear standards has made it difficult for both companies and consumers to understand what can be considered sustainable. Especially in the EU, new regulations are expected that tighten the requirements for the entire value chain, from product design to manufacturing and marketing:
"Companies in the fashion industry must work together to solve these problems and create clear standards that help consumers make more informed purchasing decisions," stresses Kahri.
Expect a "bullwhip" effect
Disruptions in supply chains seem to increase in 2024. Changes in consumer demand have created a "bullwhip" phenomenon, with which market volatility is reflected unpredictably in supply chains. This, in turn, may lead to a reduction in production, staff reductions and delays in investments. In order to meet the challenges, suppliers and retailers must develop their cooperation:
"Disruptions in supply chains affect all parties, though on a different scale. It is a problem that requires joint solutions. It is clear that those actors who invest in transparency and strategic partnerships are more successful," says Kahri.
"The State of Fashion 2024" deals with ten themes that are expected to influence the fashion industry in 2024. The report can be read in its entirety on McKinsey's website.
Press contact
Mari Muoniovaara
External Relations Specialist
+358 40 728 1550
mari_muoniovaara@mckinsey.com
About McKinsey & Company
McKinsey is a global management consulting firm committed to helping organizations accelerate sustainable and inclusive growth. We work with clients across the private, public, and social sectors to solve complex problems and create positive change for all their stakeholders. We combine bold strategies and transformative technologies to help organizations innovate more sustainably, achieve lasting gains in performance, and build workforces that will thrive for this generation and the next. www.mckinsey.com
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