The struggling global fashion industry may be getting its sexy back, but with new regions in starring roles.
The McKinsey Global Fashion Index projects worldwide industry sales will rise as much as 4.5% next year, compared to the up to 3.5% growth it expects for 2017 and a 1.5% increase in 2016. Faster year-over-year growth was expected across most categories including apparel, footwear and handbags and luggage. What’s changed is the source of that demand: Sales in emerging markets in Asia, Latin America and Europe will see growth anywhere between 5% to 7.5%. In contrast, North America will only see growth of 1% to 2% and in mature European markets, up to 3%, McKinsey said.
That growth gap will lead to “a watershed year in fashion." For the first time in 2018, more than half of global apparel and shoe sales will take place outside of Europe and North America, according to the report, written in partnership with The Business of Fashion.
Still, while mature markets may be laggards, the overall picture for the industry is looking brighter. “The fashion industry is turning a corner,” the report said. “There is a new sense of optimism in an industry plagued by uncertainty.”
Even though “uncertain” and “challenging’ remained the most common words that 200-plus senior industry executives surveyed used to describe the state of the industry, “optimism” came in third place.
Not surprisingly, online will also be an industry bright spot, with sales rising an average of 10% each year through 2020, the study said, citing a Euromonitor forecast. As purchases increasingly shift online, global fashion industry executives surveyed cited “decreased foot traffic” as a top challenge for 2018.
Also echoing comments by many fashion retailers, the study found integrating online and physical store operations as well as online marketing to be a key area of investment for the industry. Other areas of investment include VIP customer loyalty program, better in-store experience and increasing full-price sales.
Macy’s, for example, has redesigned its loyalty program. To drive traffic and better experience at its flagship store in New York, it has added Apple and Samsung in-store sections, as well as restaurants and other food options. Adidas, in its new flagship location in New York’s midtown, features a track for people to test running shoes.
Among some of the top industry trends, the report also confirmed the theme of using big data and artificial intelligence to better target consumers, forecast demand or make operations more efficient.