10 themes critical for the business of fashion in 2022
It’s been a tough 20 months for the global fashion industry, as the downturn in international travel and lockdowns brought on by the pandemic has significantly impacted fashion sales, both luxury and non-luxury. Not to mention the continuing impact that supply chain challenges have had on the industry.
After nearly two years of disruption, the industry is finding its feet once more, however, according to the sixth edition of The State of Fashion 2022 report from McKinsey in partnership with the Business of Fashion.
Looking ahead to 2022, in aggregate, McKinsey Fashion Scenarios suggest global fashion sales will reach 96-101% of 2019 levels in 2021 and 103-108% in 2022. Still, while overall sales are expected to make a full recovery next year, performance will vary across geographies, with growth likely driven by the US and China, as Europe lags.
Here, in Europe, consumer confidence in economic recovery is more cautious, according to the report, with around one-quarter of respondents in a September 2021 survey optimistic that the economy would rebound to pre-pandemic levels by the end of 2021.
According to the just-released report, while the industry will continue to face significant challenges amid supply-chain disruption, patchy demand, and persistent pressure on the bottom line, it can return to growth as changing category landscapes, new digital frontiers, and advances in sustainability continue to present opportunities.
So, what are the themes and trends that will dominate the fashion industry landscape in 2022? Digital and sustainability will offer fashion’s biggest opportunities for growth, while supply chain pressures will continue to challenge the industry in 2022. we highlight 10 themes from McKinsey’s report.
1. Uneven recovery
Recovery from Covid-19-related economic shocks will be uneven across consumer markets and sourcing regions, as countries with strong healthcare systems and economic resilience outperform. In this patchy environment, fashion players with international footprints will need to look at investment decisions with precision, reassessing local conditions regularly while mitigating for market-specific risks.
2. Logistics gridlock
The fashion industry is reliant on an intricate web of global supply chains that are seeing unprecedented levels of pressure and disruption. With logistical logjams, rising shipping costs and shortages of many kinds adding new layers of complexity, companies must rethink their sourcing strategies while implementing cutting-edge supply chain management, and building in greater flexibility to keep products flowing with customer demand in the year ahead.
3. Domestic luxuries
Travel has traditionally been a key driver of luxury spending, but international tourism is not expected to fully recover until between 2023 and 2024. To capture the shift in shopping patterns set to shape the year ahead, luxury players should engage more deeply with domestic consumers, rebalance their global retail footprints and duty free networks and invest in clienteling for local e-commerce channels.
4. Wardrobe reboot
After focusing on the likes of loungewear and sportswear for nearly two years, consumers will reallocate wallet share to other categories as pent-up demand for newness coincides with more social freedoms outside the home. To anticipate these nuanced and sometimes paradoxical preferences, brands should lean more on data-driven product development, adjusting their inventory mix accordingly to ensure that assortments resonate with consumers adjusting to new lifestyles.
5. Metaverse mindset
As consumers spend more time online and the hype around the metaverse continues to cascade into virtual goods, fashion leaders will unlock new ways of engaging with high-value younger cohorts. To capture untapped value streams, players should explore the potential of nonfungible tokens (NFTs), gaming and virtual fashion — all of which offer fresh routes to creativity, community-building and commerce.
6. Social shopping
Social commerce is experiencing a surge in engagement from brands, consumers and investors alike as new functionality and growing user comfort with the channel unlocks opportunities for seamless shopping experiences from discovery to checkout. Though use cases differ across global markets, brands should double-down on tailored in-app purchase journeys and test opportunities in technologies such as livestreaming and augmented reality try-on.
7. Circular textiles
One of the most important levers that the fashion industry can pull to reduce its environmental impact is closed-loop recycling, a system which is now starting to be rolled out at scale, promising to limit the extractive production of virgin raw materials and decrease textile waste. As these technologies mature, companies will need to embed them into the design phase of product development while adopting largescale collection and sorting processes.
8. Product passports
In a bid to boost authentication, transparency and sustainability, brands are using a portfolio of technologies to store and share product information with both consumers and partners. To get the most from these digital ‘product passports,’ which can help brands tackle counterfeiting, differentiate themselves and build loyalty by enhancing consumer trust, businesses must coalesce around common standards and engage with pilot projects at scale.
9. Cyber resilience
As the digitisation of fashion businesses reaches new heights, companies face more threats of cyber attacks and growing risks relating to improper data handling. Amid increased sophistication in cyber crime and rises in consumer and regulatory pressure, brands need to act urgently to shore up their defences and invest more to make digital security a strategic imperative.
10. Talent crunch
Companies that rely on brand appeal or the allure of fashion to attract and retain talent will need to raise their game as competition from both within and outside the industry intensifies, leading to more vacancies next year. As employees from upper management to the retail front line reconsider their priorities, companies must refresh their talent strategies for an increasingly flexible, diverse and digitised workplace.
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