The New Year 2018 is going on. Every year fashion industry gets new look, new dimension, which could be optimistic or pessimistic for the businessman. Therefore, it is better to know the future trends as one can cope up with it. The State of Fashion 2018, McKinsey & Company and Business of Fashion said in a report that though “uncertain” and “challenging” remains the top to descriptors companies used to describe the state of the sector last year, “optimism” followed right behind in third place.
The report said, “Industry players are coming to accept unpredictability as the new normal, and fashion executives will respond by focusing their energy on improving what is within their control.”
The report has focused on 10 key trends that will define the fashion agenda in 2018:
- Unpredictability becomes the new norm
Economic uncertainty, geopolitical turmoil and unpredictability are the current realities of the global fashion industry. Store closures, mall vacancies and the growing dominance of online shopping will continue to encourage fashion companies to stay nimble and adapt to the evolving landscape by focusing on their own resources and consumer services. What’s more, fashion companies are expected to pursue more technology, including AI (Artificial Intelligence), to stay agile amid political tensions and economic disturbances, including Brexit, and other international trade challenges that may escalate this year. While uncertainty was the top word among executives in 2017, roughly 21 percent of executives said “optimism” was the top word they’d use to describe the industry in 2018—pointing to a more positive outlook for the coming months.
|10 key trends that will define the fashion agenda in 2018|
|1. Unpredictability becomes the new norm
2. Globalization reboots
3. Asia steps up its fashion dominance
4. Personalization and curation lead consumer efforts
5. Online platforms come first
6. Mobile gains momentum
7. AI takes fashion to the next level
8. Sustainability shifts to circular economy
9. Off-price sector remains a double-edged sword
10. Startup state of mind
- Globalization reboots
“We are entering a new phase of globalization, driven by digital connectivity and the flow of data, and this will lead to much greater global connectedness, not less,” the report noted. “Cross-border bandwidth has risen approximately 80 times since 2005, and over the course of a decade, data flows have raised world GDP by more than 10 percent. Data flows now account for a larger share of the impact on GDP than the global trade in goods.”
What’s more, according to the report, consumers are estimated to spend $1 trillion on cross-border e-commerce by 2020 and more than 900 million people have international connections on social media—potentially providing fashion tycoons the opportunity to grow their shopper bases and boost revenues on global digital platforms.
- Asia steps up its fashion dominance
Western companies may be facing more competition from Asia this year, as the continent already accounts for 60 percent of the world’s e-commerce powerhouses, more than half of global online retail sales and a myriad of technology innovations. According to the McKinsey Fashion Scope, Asia is expected to account for nearly 40 percent of international apparel and footwear sales by 2018, with the Asian online apparel market expected to reach $1.4 trillion in two years. While the continent continues to deliver on the needs of its digitally-savvy consumer base, Asian companies may reverse the old global expansion movement of Western companies moving East, and instead, move outbound to other global regions, including the Americas, Africa and Europe.
- Personalization and curation lead consumer efforts
Global fashion companies are shifting their focus on the consumer—and prioritizing personalization in their strategic efforts to ramp up loyalty and sales. According to the report, 41 percent of consumers demand personalization for their shopping experiences, as they continue to value authenticity and sustainability in their wardrobes. Fashion companies are expected to harness the power of data to tailor personal recommendations, engage with social media influencers and tap into the needs of each consumer by facilitating more digital experiences online and in stores.
- Online platforms come first
In 2018, McKinsey & Company predicts that global online platforms, like Amazon and Tmall, will experience two to three times more revenue compared to the past three years. While consumers frequent websites to compare prices and products, global online platforms are expected to expand their fashion brand partnerships and develop additional engagement methods to stay competitive in the digital shopping space. This year, the challenge will no longer be about collaborating with online platforms, but about how fashion brands can use these partnerships to boost their online presences and attract more consumers outside of the brick-and-mortar store environment.
- Mobile gains momentum
According to McKinsey & Company data, there will be 8-20 times more mobile payment transaction value this year compared to 2015. With more mobile payment solutions becoming available worldwide, consumers will keep demanding fashion companies deliver convenient smartphone transactions, where they can shop and pay for products easily. More fashion companies are expected to create mobile transaction options, including frictionless checkouts online and self-checkout in physical stores.
- AI takes fashion to the next level
Artificial Intelligence is set to disrupt the fashion value chain by streamlining product sourcing, manufacturing and distribution. This year, AI will go beyond machine operations and shape creative processes and consumer interactions. The report revealed that 75 percent of fashion companies plan to ramp up their AI investments in 2018 and 2019, as the technology continues to be an attractive aid in tackling business amid retail’s uncertainty. Even though concerns remain over AI’s influence on human jobs, experts say AI will instead benefit global fashion jobs—enabling associates to focus on consumers and create more opportunities for employment at high-tech distribution centers worldwide.
- Sustainability shifts to circular economy
More and more fashion companies are taking sustainability beyond their corporate social responsibility (CSR) agendas and making circularity part of every point in their supply chains. From sourcing to product distribution, fashion companies will creatively explore recycling concepts, including fibers made from recycled plastic bottles and clothing take back programs, to make the global fashion value chain more eco-friendly. Last year, 42 percent of fashion brands shared their supplier information in an effort to be more transparent with consumers—and the report anticipates that this trend will continue.
- Off-price sector remains a double-edged sword
Consumers love bargain hunts and off-price retailers, like TJ Maxx and Saks Off Fifth, will remain popular this year. While challenges, including excess product stock and slow growth remain persistent in retail’s uncertainty, the global fashion industry is turning to off-price to boost sales and gain consumers. According to the report, off-price growth has increased 18 percent in the U.S., 32 percent in the EU and 74 percent in China. While the off-price sector gains momentum this year, fashion companies will have to be cautious of their off-price channel categories to avoid the risk of margin erosion.
- Startup state of mind
Agility, collaboration and versatility are expected to become the new cultural norm among fashion companies in 2018. To stay innovative and competitive, fashion companies will experiment with new types of talent, new ways of working, new partnerships and new investment models.