No company will get through the pandemic alone, and fashion players need to share data, strategies, and insights on how to navigate the storm. McKinsey & Co surveyed over 3,500 shoppers in the US, UK, China, Germany, and France for its 2020 Holiday Season report. The apparel trade could be reshaped by new barriers, trade tensions, and uncertainty. The State of Fashion 2019 also includes the third read-out of our industry benchmark, the McKinsey Global Fashion Index (MGFI). At the same time, consumers have become more demanding, more discerning, and less predictable in their purchasing behavior, which is being radically reshaped by new technologies. McKinsey continues to track economic and epidemiological developments around the world. The report argues that although reskilling takes a lot of planning and effort, it does tend to offer a higher return on investment than hiring. The industry is not looking forward to 2020—suggesting strategic clarity will be important. How will changes to the global economy and consumers’ behavior affect fashion in the postcoronavirus world? The prevailing mood of fashion leaders is one of anxiety and concern. Still, we do not believe the curtain is falling on physical channels. These developments take place at the same time as the fashion industry goes through other transformative shifts. At the end of the day, there’s plenty of evidence indicating that automation is the need of the hour for retailers that want to stay relevant and protect their margins. Meanwhile, the economic outlook in the mature part of Europe is stable, and fashion-industry sales growth is likewise expected to remain at a modest but steady 2 to 3 percent. They need to take an active stance on social issues, satisfy consumer demands for radical transparency and sustainability, and, most important, have the courage to “self-disrupt” their own identity and the sources of their old success to realize these changes and win new generations of customers. On the one hand, evolving channels, shifting markets, and groundbreaking research offer revenue opportunities and the chance for radical innovation. These short-term retail spaces serve as a natural setting for retail experimentation. © 2020 Tech Wire Asia | All Rights Reserved, McKinsey advises retail execs on how to leverage automation tech, Solid-state batteries could speed up the roll-out of EVs, AVs, Asian business well placed to drive post-crisis comeback with data, 5G, The rocky road to recovery for small business in 2021, How COVID is forcing a change in organizational governance, Maximising existing infrastructure, minimizing spending & other digital journeys in Gigamon webinar series. We also highlight the ten trends that will define the fashion agenda in 2019 (interactive). With tourism in the doldrums, domestic outlets will become more important than ever. Yet this sluggish overall growth masks some big winners: affordable luxury, value, and athletic wear. In response, wise companies are self-disrupting before upstarts do it for them, engaging in a digital landgrab to diversify their ecosystem, and using automation and data analytics to produce on demand to reduce waste and react rapidly to trends. McKinsey’s report does point out that as the demand for physical and manual skills declines, the need for technological skills, as well as social and emotional ones, will rise quickly in every sector, including retail. McKinsey analysis, based on data from S&P Capital IQ. In North America, while overall consumer confidence is strong, the impact of policy changes is uncertain, and markdown pressures, market corrections, and store closures continue. Pop-up stores are proliferating across the retail sector, and fast. This fourth in our annual series analyzes major themes around the fashion economy and breaks new ground to explain the dynamics driving the industry. Except, that is for consumers. At the same time, government interventions will partially offset economic impacts, and global travel will pick up, alongside the possibility of larger social gatherings. Structurally speaking, the think tank foresees retail organizations rethinking their operating models with far fewer layers. Our discussions with industry executives suggest that the key drivers will include shifting consumer behaviors (in relation to digital channels, social-justice concerns, and a reluctance to travel), opportunistic investment, and the need to build more efficient, simple, and demand-focused operating models (Exhibit 3). In a recent report, AmCham Member McKinsey & Company explains how retail can adapt supply chains to win in the next normal.. Alongside public companies, we also identified a group of “hidden champions.” These privately owned gems often dominate their category areas and generate significant revenues. With the COVID-19 pandemic dominating thoughts and minds, fashion executives are planning for a range of scenarios and hoping for a speedy global recovery. entails joblessness or financial hardship for people across the value chain. Fashion is one of the past decade’s rare economic success stories. These are some of the findings from our latest report on The State of Fashion, written in partnership with the Business of Fashion (BoF), which explores the industry’s fragmented, complex ecosystem. Fashion executives are focusing on crisis management now but eventually must shift to reimagining the industry. Washing, solvents, and dyes used in manufacturing are responsible for one-fifth of industrial water pollution, and fashion accounts for 20 to 35 percent of microplastic flows into the ocean. ... the 2019 McKinsey sourcing report found. Value and affordable luxury will probably be the big winners, both outpacing the industry average at a projected 3.0 to 4.0 percent and 3.5 to 4.5 percent growth, respectively. At the end of the day, McKinsey does acknowledge that there’s a social impact to retailers automating their facilities and operations — but highlight that they need to plan and support their staff and prepare for the future simultaneously. The interconnectedness of the industry is making it harder for businesses to plan ahead. The report was supplemented with consumer surveys, industry expertise and research by retail data company Edited. This is consistent with its 10 percent CAGR of the past decade, driven by consumers’ more active lifestyles, the rise of “athleisure,” emerging brands in the high-end segments, and product innovations. By August, such digital-first players were trading 35 percent higher, on average, than they did in December 2019. Many consumers today expect perfect functionality and immediate support at all times, coupled with rapid delivery times as players constantly compete to expedite products. Over that period, the industry has grown at 5.5 percent annually, according to the McKinsey Global Fashion Index, to now be worth an estimated $2.4 trillion. That translates into a significant increase in the number of companies that are “value destroyers,” which we expect will rise to 73 percent of those in the index in 2020, compared with 60 percent in 2019. When it comes to categories, the improvement of fashion-industry sales is reflected in stronger sales growth forecasts across the board, including apparel and footwear. Experiential retail is coming to life 13 Trend 5 Planet friendly is due to arrive 16 Trend 6 Social currency will be more transactional 19 Trend 7 From transaction to service provider 22 Top 10 lessons for retailers 26 Contacts 28 Further publications 29 Table of contents 2019 is poised to be a transformational year for retail. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. To address consumer behavior, players will have to learn to serve shrewder and more-demanding customers and adjust to a shifting demographic profile. The crisis is affecting daily lives, instilling anxiety and uncertainty in the minds of almost everyone. Many U.S. consumers have … Right? 7. Every trend firm, every consultancy. Digital upends old models. Many of them have already undertaken significant cost cutting and restructuring, and they are now primed to capture the benefits. Fashion companies that double down on strategy, align with key trends, and reflect an evolving consumer landscape are likely to emerge from the crisis stronger, leaner, and ready to thrive in the next normal. 11. Regardless of size and segment, players now need to be nimble, think digital-first, and achieve ever-faster speed to market. 4 We predict a 5 to 10 percent sales growth in China in 2021 compared with 2019. The industry as a whole is embracing new opportunities—even as dangers lurk. 7 Download The State of Fashion 2020: Coronavirus Update, the full report on which this article is based (PDF–3MB). McDonald’s self-service ordering kiosks, for example, save time for employees — these employees have been trained to offer table service to customers (in Hong Kong and other cities) which significantly (and directly) boosts customer experience and satisfaction. Other positive trajectories will include the growing influence of platform propositions as customers warm to marketplace experiences and renewed appetite among both brands and consumers for local engagement—the personal touch that reflects the priorities of many. But fast-forward a few months, and fashion’s outlook has gotten dramatically and suddenly bleaker. Another is that India is on the rise—its growing middle class, powerful manufacturing sector, and increasingly savvy tech have made it an essential destination for fashion companies. But equally, there is no call for rags just yet. But it is in the developing world, where healthcare systems are often inadequate and poverty is rife, that people will be hit the hardest. Given the think tank’s understanding of the industry, it believes that automation is somewhat critical to the industry. Je houdt je bezig met de overgang naar duurzame technologieën, de economische transitie van Afrika, overnames, de toekomst van onderwijs, gezondheidszorg, of de financiële sector. Never miss an insight. Yet fashion, because of its discretionary nature, is particularly vulnerable. The economy slowed last year, with real GDP growth declining to 1.9 percent in Q3 from 3.1 percent in Q1. Perhaps unsurprisingly, investors this year had more confidence in the top 20 than in other companies, and super winners were less badly hit by the April stock market sell-off than their peers were (–26 percent from December, compared with –33 percent on average). Digital-first companies such as Alibaba, Amazon, Net-a-Porter, and Zappos continue to force fashion companies to provide an even more premium experience. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Deal Day Spending. Consumers in Southeast Asia spend about eight hours a day online on average. In response, leading fashion players are offering innovative business models, using granular customer insights as a source of differentiation, and pushing the limits of go-to-market times. He helps small and medium enterprise owners understand what's most important to their company's growth and success. For workers in low-cost sourcing and fashion-manufacturing hubs, such as Bangladesh, Cambodia, Ethiopia, Honduras, and India, extended periods of unemployment will mean hunger and disease. This should lead to a move beyond 2019’s focus on transparency toward real commitment. The MGFI forecasts that growth will slow to 3 to 4 percent in 2020, slightly below the predicted rate for 2019. To thrive in this environment, companies must think strategically, sharpen their decision making, and keep their fingers on the pulse of customer demand. 2019 Retail Outlook Transition ahead 8 Synchronizing your bets for a year of transition Transactional loyalty vs. emotional loyalty The retail industry accounts for a majority (42 percent) of loyalty memberships in the United States, 12 yet many ... average consumer reports being a member of more Some are household names, while others are less visible but still pack a punch. As noted in our previous articles on “getting woke,” radical transparency, and sustainability first, the consumer mindset was already showing signs of shifting in certain directions before the pandemic. Flip the odds. Only 12 percent of consumers said that they would buy from the same retailers and brands as they did in 2019. ... July 28, 2020 – The eighth edition contains our latest thinking on the topics that matter most to retail and Consumer Goods leaders. Office – After a landmark 2018, the sector is looking forward to another strong year as new sources of demand emerge and quality supply At the opposite end of the price spectrum is Primark, whose commitment to its core value proposition has made it a formidable competitor. The report also finds that the biggest bottleneck to automation is often internal and not external. By Imran Amed, Anita Balchandani, Marco Beltrami, Achim Berg, Saskia Hedrich, and Felix Rölkens. 11 McKinsey’s report does point out that as the demand for physical and manual skills declines, the need for technological skills, as well as social and emotional ones, will rise quickly in every sector, including retail. While many experts speak broadly of the issues, McKinsey uses data to paint a more vivid picture: “Our analysis suggests that typical grocery and hypermarket retailers face 100 to 150 basis points of margin pressure, and typical specialty apparel or department stores 350 to 500 basis points. 1 In-store revolution 2 New store experiences 3 Innovating at scale 4 Re-defining convenience 5 Re-inventing retail 6 Re-commerce 7 The personal edit 8 Social discovery 9 East beats West 10 China leads the e-commerce revolution 11 The Chinese consumer market goes global 12 The challenges of a fundamentally changing industry and a continued unpredictable macroeconomic environment has led fashion players to toughen up. Indeed, consumer pessimism about the economy is widespread, with 75 percent of shoppers in Europe and the United States believing that their financial situation will be affected negatively for more than two months. 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