Although hard to predict , even in the best of times, the fashion industry is in for a particularly tumultuous and uncertain A long-feared cyclical slowdown has arrived. Consumers, affected by the recent period of high inflation, are increasingly price sensitive. There is also the surprising rise of dupes, the acceleration of climate change, and the continued reshuffling of global trade.
Regional differences, which came into focus in , will become even starker in the coming year. In short, the negative environment predicted by many in the fashion industry this time a year ago has now materialized.
There is still growth to be found, but economic uncertainty, geographic disparities, as well as shifting customer behavior and preferences mean seizing it will require navigating a maze of compounding challenges at every turn. Consequently, is likely to be a time of reckoning for many brands. While luxury has led in value creation in recent years, the McKinsey Global Fashion Index forecasts that in , it is nonluxury that will drive the entirety of the increase in economic profit for the first time since excluding the COVID pandemic.
Just 20 percent expect improvements in consumer sentiment in , while 39 percent see industry conditions worsening. The geographic drivers of revenue and economic profit are also undergoing historic shifts. In particular, the industry will benefit from falling inflation and increased tourism in Europe, the resilience of high-net-worth individuals in the United States, and new growth engines in Asia to counteract uncertainty around consumer spending in China, which is still recovering from the pandemic.
To reach these consumers, executives told us they will localize their go-to-market models, broaden their price ranges, and focus on brand positioning to capture the attention of shoppers who are increasingly prioritizing value.
