Top 10 challenges facing fashion in 2020
Jaime Martinez | Monday, December 30 2019
"Anxiety" and "worry". With those two words we could very well define the feelings with which the fashion world, and its top executives, face the year 2020. This situation is counterbalanced by the slight air of optimism with which some sectors, especially in the United States, were entering 2019.
This is at least what the latest annual report on the state of the industry, "The State of Fashion 2020", by the consulting firm McKinsey and BoF, says, based on a survey of over 290 senior fashion executives, as well as opinion leaders and opinion leaders. It forecasts a 2020 dominated by instability and a slowdown that the main companies in the sector, and their executives, are already preparing for. This situation is considered by many to be premature, but according to the consultancy firm, it will lead to a drop of between 3 and 4 percent in the fashion industry's income. These falls will be underpinned by growing macroeconomic uncertainty, trade wars, declining sales in emerging markets in Asia and the Pacific, and the economic pessimism that is beginning to reign in Europe.
More power to big companies in the sector
In the face of such a worrying situation for the fashion industry, it will not all be bad news. Or rather, it will not be bad news for everyone. Since the growth of the emerging markets in Europe, Latin America, the Middle East and Africa is expected to remain stable throughout 2020. At the same time, we will see a greater concentration of a sector in which large companies and multinationals will be taking an increasing share of the pie. Because they will be the only ones able to satisfy the demands in innovation and sustainability that today's consumers demand.
"It will become increasingly difficult for medium-sized companies to compete with the all-powerful companies in the fashion industry," says Achim Berg, McKinsey's director of fashion and luxury, and one of the authors of the report. Because "to meet challenges such as digitalization, consumer demand and sustainability, brands need to focus their priorities and make the necessary capital investments to carry out their strategic plans. And it will be the companies that can do so that will find some light throughout 2020.
It will not be an easy year," says Imran Amed, founder and editor-in-chief of The Business of Fashion and co-author of the report. He underlines the fact that "the coming year will require fashion companies to make significant changes in their value chains, as on many other fronts, while learning to reduce their risks and manage in a climate of uncertainty.
In view of this situation of growing concern and competition, the report considers these 10 key points as the main challenges and issues to be addressed by companies in the fashion industry throughout this 2020. That is, if what they want is to survive in the face of turbulent times that have already managed to defeat more than one giant that felt invincible.
1. On high alert
One of the main recommendations the report makes to companies is that by 2020 they should act with extreme caution. They should pay particular attention to monitoring potential frictions between developed economies and emerging markets. Situations that, together with the increased risk of a possible recession, have already led many companies to develop resilience guides and contingency plans with which to mitigate macroeconomic and geopolitical instabilities and trade tensions.
2. Beyond China
China will continue to offer incredible and exciting growth opportunities for the fashion industry in 2020, but the Chinese giant is proving to be much more complex than many multinationals ventured to estimate. So it is advised that, as some companies are becoming too dependent on the Chinese market, and others are only aspiring to enter it; companies should consider diversifying their risks by expanding into other growth areas.
3. New generation of consumers
As all companies struggle to capture and retain users' attention through the same platforms and social networks, it will become imperative for fashion companies to rethink their strategies and find ways to maximize the return on marketing spend. To achieve this, it will be key to achieve content capable of attracting maximum attention. Content must be developed taking into account the platform on which it will be published and the market to which it is directed, using, whenever possible, direct links that facilitate the purchase.
4. Neighbourhood shops
The immediacy demanded by today's consumers is causing many companies to decide to complete their commercial network with smaller physical stores. With which they manage to bring the products closer to the consumer. Being successful, they point out from the report, in managing to combine the experiences in stores with an offer located in neighborhoods and suburbs beyond the main commercial routes.
5. More sustainability
The fashion industry is one of the most polluting industries, and one of the most energy and raw material intensive. For this reason, and in spite of the tenuous advances that are already being introduced, 2020 will be the year in which companies will have to leave their promotional and advertising initiatives to three, replacing them with really significant actions that will even exceed what consumers are already demanding today. In this way, the definitive transformation of the industry towards a new sustainable model will be promoted.
6. New materials
There are more and more companies that are betting on exploring new alternatives to traditional materials, deciding to replace them in their collections with new, more sustainable or technical fabrics. These advances are expected to continue throughout 2020, a year in which great surprises are expected to come from the R+D departments.
7. An inclusive culture
Consumers already demand that fashion companies be proactive guarantors and advocates of diversity and inclusion. These two concepts will continue to be at the heart of companies' agendas throughout 2020, being among their highest priorities and affecting their own internal organisation, advertising campaigns and collections. These measures will add to an increasing demand in terms of transparency.
8. Increased foreign competition
Until now, companies, especially European and American multinationals, had found in Asia a "virgin" market in which to fatten their economic balance sheets. Something that, as we have already seen in 2019, has begun to prove not to be so easy to achieve, in a trend that does not seem to be diminishing throughout 2020, but quite the opposite. New challenges will appear as Asian companies and SMEs begin to abandon their traditional role as manufacturers, and start selling their products directly to end consumers. A large number of hitherto unknown players are expected to emerge in the coming year, especially from the supply chains of multinationals in Asia. From where they will begin to sell their products at very competitive prices through online trading platforms and international marketplaces.
9. Revolution at the Fairs
Some of them have even disappeared, while the vast majority are committed to introducing new advances with which to adapt to the new times. A transformation that we will continue to observe at the international fairs in 2020. In which, in an attempt to differentiate themselves, or even to survive, they will add B2C experiences or launch new services and improvements in relation to their traditional B2B strategy.
10. Recalibrating the digital
With many of them making major acquisitions, others making the leap into the physical environment and a few reaching the coveted "unicorn" status, there is no doubt about the great role that native digital companies have managed to play throughout 2019. A role that could start to have its days counted. "Investor sentiment is getting worse" in relation to almost all digital companies, the report says. Therefore, it is possible that in 2020 we will see, on the one hand, a lesser appearance of new companies, and on the other hand, the disappearance of some of them. Both as a result of a change in the parameters of investor financing and in their profitability targets.
This article was originally published on FashionUnited.ES, translated and edited by Kelly Press.
Photo Credits: Unsplash.