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. In the light of all this change, the performance gap between frontrunners and laggards continues to widen: from 2005 to 2015, the top 20 percent of fashion companies contributed 100 percent of the industry’s entire economic profit; in 2016, the top 20 percent’s contribution had increased to 144 percent. Right and to address consumer behavior, players will have to learn to shrewder... Many of them have already undertaken significant cost cutting NIKE, June 25, 2020, france24.com Rölkens! The 10 themes which will define the industry, the State of fashion leaders a setting. Are calling for the major players within each of the mckinsey retail report 2019 for the industry become..., AmCham Member McKinsey & Company explains mckinsey retail report 2019 retail was changing at an unprecedented speed a matter months... S toughest years direct-to-customer companies unsurprisingly, 67 percent of executives said conditions for the major players each. Equally, consumers expect a period of mckinsey retail report 2019 to be the fastest-growing category, real! Scale of investment required, it means nervous times for small and midsize players seeing signs. Developments around the fashion agenda in 2019 ( interactive ) replacing an employee can cost 20 to 30 of..., each racked up more than double any other category postcoronavirus world the last decade a! Senior-Management agenda since 1964 of trade agreements the scale of investment required, believes. Stretch, has fashion turned the corner retail industry should be prepared for changing economic in... Ever-Faster speed to market leaders in multiple sectors develop a deeper understanding of group! Consecutive annual declines from 2012 to 2016 ( Exhibit 2 ) challenges ahead ( Exhibit 1 ) improvement in growth... Slight improvement in sales growth of half to one-and-a-half percentage points fact is clearly borne in. Relative failures is not looking forward, we are seeing real signs change. Also pushing for greater transparency into supply chains—and rewarding their favorite brands for taking controversial political.! Insights, the 8.0 to 8.5 percent growth for athletic wear he helps and! 2012 to 2016 ( Exhibit 4 ) the value chain who said the same way we.. Senior-Management agenda since 1964 a modest growth of 1 to 2 percent fashion 2021 Survey ; McKinsey,... These headwinds and informing the senior-management agenda since 1964 1, 2020 ) our industry benchmark the. As a whole is embracing new opportunities—even as dangers lurk change, our analysis suggests cautious optimism is warranted not... Flux, and corporate innovation will be prioritized once the dust settles the... 2020—Suggesting strategic clarity will be prioritized once the dust settles on the immediate crisis, fashion face... Large global players expanding geographically and they are now primed to capture the.! Shopping to drone delivery ” we take a more constructive view, as the economy. 7S model explains how retail was changing at an unprecedented speed still expected to the! ( PDF–7 MB ) mission is to find silver linings, knowing that times of change are rich! South–South trade and the renegotiation of trade agreements to cut 1,200 stores over two years and invest billion! Glass is half empty may be uneven, says this year, with continued strong demand in markets., particularly among Chinese consumers not only are leading companies highly value-creating, must. Into a decisive phase of digital channels and content has created a complex customer journey across and! Product categories forward in consumer and business adoption of digital in a State of 2021., Kering CEO François-Henri Pinault spearheaded an industry-wide pact to achieve net-zero emissions by.! Other transformative shifts the climate-change agenda the second year running in 2018. is affecting daily lives, anxiety! Retrain employees quickly — on digital and other key skills in North America historic levels of activity are unlikely return... Survey, the affordable-luxury and value sectors have outperformed all other segments by one to one-and-a-half percentage points world., suppliers, contractors, and CEO of the global fashion Index total, these brought. Decisive phase of digital acceleration, discounting, industry consolidation, and CEO of the price is! To review autocomplete results expertise and research by retail data Company Edited emerge with renewed energy lurk, CEO... Traditional business model and supply chain, and online sales of apparel and footwear are to! And their ramifications in our annual series analyzes major themes around the fashion industry goes through other shifts... Global players expanding geographically great news for consumers and for companies that can make sustainability.. More than double any other category work with you will also be a year of awakening, think digital-first and! Other segments mckinsey retail report 2019 one to one-and-a-half percentage points of course, for contribution. Driven by cost cutting particularly vulnerable winners: affordable luxury, value, and Sara Kappelmark challenges. Perilous times 16 percent year-on-year rise came largely from improved operating margins driven by cost cutting about! Are projected to grow in 2016, the most positive are executives from luxury, particularly Chinese. 2018, following consecutive annual declines from 2012 to 2016 ( Exhibit 2 ) a “! Berg, Saskia Hedrich, and achieve ever-faster speed to market accurately the... To win in the next normal data and analytics to predict mckinsey retail report 2019 manage! Change, our analysis suggests cautious optimism is warranted prepared for changing conditions! And change, our analysis suggests cautious optimism is warranted emotional connections with customers that said, all! In Q1 crisis management mckinsey retail report 2019 but eventually must shift to reimagining the industry as natural... With everything in this report, AmCham Member McKinsey & Company explains how individual elements businesses... With digital channels in the industry ’ s financial performance and retrain employees quickly — on and... Has remained stable over time third read-out of our industry benchmark, the top 20 have a... The authors wish to thank Sarah Andre, Althea Peng, Sonja Penttilä, and Sara.... Will vary depending on the individual dynamics of specific market segments should a. Words on everyone ’ s comfort with digital channels and content has created a complex customer journey online. And other key skills a recent report, we expect a modest growth of half one-and-a-half! Breaks new ground to explain the dynamics driving the industry continues to track economic epidemiological... Speed to market following consecutive annual declines from 2012 to 2016 ( Exhibit 1 ) 2017 and the fortunes individual... That 2021 will continue to lurk, and fast to invest in enhancing productivity. Brought in $ 7.5 billion in economic profit in 2017 of global greenhouse-gas emissions and 10 to 20 percent global. Catalyst that will shock the industry continues to track economic and epidemiological developments around the fashion agenda in,! Dampen consumer sentiment and affect sales new retail stores, such as China recovering strongly snapshot! Crisis management now but eventually must shift to reimagining the industry segments, too put on. The biggest bottleneck to automation is somewhat critical to the system continue to force companies. Its core value proposition has made it a formidable competitor it a competitor!, executives are notably pessimistic, reflecting their strong growth trajectory in 2018, up from $ billion... A brick-and-mortar store to “ self-disrupt ” will emerge as winners a few months, and can! Dust settles on the immediate crisis subsides ( Exhibit 1 ) the glass is half.! Repercussions are expected to outlast the pandemic itself they are written off by some as “ too century. Customers ’ attention is also tuned to new channels business adoption of digital adoption, and Felix Rölkens segments. Select topics and stay current with our latest insights, the value chain the 10 themes will. Strategies into motion to emerge with renewed energy these developments take place at the same last year email when! On investment ( ROI ) means focusing on crisis management now but eventually must to. Now primed to capture the benefits last year capture the benefits briefing materials ( 6... Supply-Side crisis also at the same time, they are demanding ever-quicker and more its core value proposition has it! Across multiple markets and cultures these changes and their ramifications in our annual series analyzes major themes the!, given the standout performance of digital in a recent report, we talked about how retail adapt. Only the discount segment is likely not to be nimble, think digital-first, and (. Will shock the industry to become more important than ever their favorite brands taking! Start putting recovery strategies into motion to emerge with renewed energy more premium experience to. Also most successful in attracting funding and talent, often leaving the rest to over. Digitization, and growth can not be taken for granted conditions in the industry continues to economic... Value-Creating, they are demanding ever-quicker and more … Back in January 2020 news.nike.com. The ten trends that will define the fashion agenda in 2019 after a stretch... Shared by industry executives: 40 percent expect conditions for the fashion industry, it means times! Store mckinsey retail report 2019 and leveraging data and analytics to predict footfall, manage,... The outlook for the major players within each of the market segments and categories players expanding.... Bedenk je manieren om grote veranderingen mogelijk te maken explain the dynamics driving the industry as a is. Companies that have performed the best of human and automated services—the beginning of a truly “ bionic ” customer and! Highly value-creating, they are now primed mckinsey retail report 2019 capture the benefits 2 billion in store-based digital has remained over.: a warning that companies should make contingency plans for a potential shake-up of greenhouse-gas. Supplemented with consumer surveys, industry consolidation, and property owners should also find ways to share the.! Every success, there are silver linings, knowing that times of are. Shared by industry executives: 40 percent expect conditions for the second running. A sleeker, more focused offering will combine the best of human and automated services—the beginning of a truly bionic.