Even before the coronavirus outbreak, leading fashion industry players were not too optimistic about 2020. That was the result of the “The State of Fashion 2020” report from McKinsey and The Business of Fashion, which was published at the end of 2019. Now, a few months later, Covid-19 has rocked the finance markets, upended supply chains and curbed demand worldwide. That quickly leads to a bleaker outlook for the fashion business. How will the changes in the world economy and consumer behaviour affect the fashion industry? Which developments will pick up speed? And, what can normality look like? These are the questions McKinsey and The Business of Fashion address in the Coronavirus Update, a supplement to “The State of Fashion 2020”.
Covid-19 could lead to the biggest recession since the second world war, impacting every field of business and the fashion business in particular. The authors of the report estimate that sales in the worldwide fashion industry will decline by 27 to 30 per cent in 2020 compared to 2019. In 2021, however, the industry could return to a growth of two to four per cent against 2019, the experts believe.
After the crisis, the fashion industry will not only be facing a market in recession. The dramatic change in the industry will also continue, meaning that companies, which were already in trouble before the pandemic, will have lesser chances to survive. This will lead to market consolidation and high merger and acquisition activity. The authors of the Coronavirus Update report also see changes on the horizon which are driven by the need for innovation: “Companies must introduce new tools and strategies across the value chain to improve operational agility, boost productivity, and future-proof business models“. Consumer behaviour will also change. Social distancing and lockdowns emphasise the importance of digital channels and will further accelerate digitalisation within the industry.
In this context, the report states that one issue in particular will become more important: “The pandemic will bring values around sustainability into sharp focus”, because of “a growing antipathy toward waste-producing business models and heightened expectations for purpose-driven, sustainable action”. According to the report, this applies particularly to consumers of the generations Y and Z, for whom environmental matters were important already before the crisis. In order to meet the demands of their customers, brands need to reorientate their missions and business models towards more sustainability and embark on new, innovative paths.
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