Sorting out the Business of Fashion report

Earlier this week, Business of Fashion and consulting firm McKinsey & Co. jointly released their State of Fashion 2017 report. The purpose of the report is to try and make some sense, connect the dots so-to-speak, of a fashion industry that is too large to report on cohesively on a daily basis. If fashion were its own country it would have the world’s seventh largest GDP, encompassing everything from luxury wear to crew socks.

While the full report, which you can download here, is a whopping 92 pages, what I want to focus on today is a list on page 13 titled: 10 TRENDS THAT WILL DEFINE THE FASHION AGENDA IN 2017. They’ve made the list short enough to fit on one page, but I want to take those trends, expand a bit, and maybe even give some of them a bit of a Hoosier twist. There’s a lot to dig into here, so let’s get busy.

1. INTENSIFYING VOLATILITY

What the report says: Volatility is the new normal. Geopolitical instability, terrorism, Brexit, and stalled trade deals will all increase a pervasive sense of uncertainty in the global economy.

Our take: Volatility may be an understatement. We’ve not even begun to see what the ramifications may be of a new US president and administration that is overly protective of American jobs, anxious to add taxes to companies that move overseas, and quick to add tariffs to imports. On one hand, this could aid US garment manufacturing which has struggled to compete with cheap shops in Bangladesh and other Asian countries. However, American workers are demanding better wages which the new US Labor Secretary isn’t keen on providing. There’s also a chance that we see OSHA’s powers diminished under the new administration, which could make working conditions more dangerous.

Put it all together and I don’t think one is overstating anything to call the atmosphere volcanic.

2. CHINA’S COMEBACK?

What the report says: China’s fundamentals, including growth of the middle and upper classes, remain strong and the government’s new fiscal policies are expected to improve conditions in 2017, but uncertainty remains.

Let’s define some of that uncertainty, shall we? Fashion loves the Chinese market and the rise of a luxury class across that country is what kept many of fashion’s biggest names from going under during the 2009 recession. However, even before recent political events muddied the waters, we were starting to see a pulling back from China’s wealthiest buyers. China’s government is looking to develop their own fashion industry so that they can keep more of that revenue at home. At the same time, as Europe and the United States become more protectionist and wary of international tourists who might also be corporate/industrial/political spies, frequent travelers from China are finding themselves facing increased scrutiny and suspicion.

Combine that with tensions rising in the South China Sea and the president-elect breaking protocol by contacting the president of Taiwan, and the stage is set to see China pull back from the West in a dramatic way should they be offended.

3. URBAN ENGINES

What the report says: City-based strategies trump country-based strategies: a new class of rapidly growing wealthy cities in newly influential markets are becoming central to the evolution of fashion.

The change has come subtly. We no longer talk so much in terms of French, Italian, or British fashion. Instead, we talk about the cities themselves. London, Paris, Milan, New York, Istanbul, Buenos Aires, Los Angeles, Sidney, Toronto, and even Moscow are all major fashion centers with more being added to the list. While the “big four” still dominate, designers and major labels are already beginning to pay attention to some of the other cities. Chanel has shown in both Istanbul and Buenos Aires. Tommy Hilfiger’s next show will be in Los Angeles.

What this ultimately means is that there are more players in a field growing broader than it ever has before. This could be a great thing for consumers as they have more choices. However, it is difficult to tell whether this kind of growth is sustainable.

4. SHREWDER SHOPPERS

What the report says:  Working harder to keep up with smarter shoppers: “always-on” consumers are becoming ever more sophisticated, more technology-driven, and harder to predict. 

Everyone loves a bargain and increasingly people are unwilling to spend any money unless they feel like they’re getting a deal. This is affecting the industry in a couple of different ways. One, it is setting up a discount tier in retail that is unsustainable and unrealistic.  The entire outlet mall concept is costing labels millions of dollars and threatens to sink some major names if not curbed. At the same time, it is pushing a few retailers to break the law. The Los Angeles district attorney has charged four major stores—JC Penney, Sears, Kohls, and Macy’s—of misleading shoppers. According to the DA, the stores are claiming that clothes are discounted from a price at which they never sold in the first place. So, the bargain one thinks they’re getting isn’t such a bargain after all.

Now, with Amazon getting into the fray with their own brands, expect the discounting to take even more of a toll. American shoppers especially largely refuse to pay full price for anything. This makes belts at fashion houses and retailers quite tight.

5. GENERATION CORRELATION

What the report says: Opportunities to serve the young and the old better: fashion companies should consider how to fine-tune and diversify the way they approach both retired and millennials consumers.

What we’re looking at generationally isn’t really anything new. Younger generations buy because they want to look conteporary in their choice of styles. Older people buy because they have more disposable income and can afford nice things.  What’s happening now, though, is a magnification of those trends. Younger people have extended lines of credit at an earlier age. Clothing is a major expenditure for those under the age of 25 but they’re careful about what they spend so they can buy more. Older generations secure in their retirement are looking for luxury purchases at a rate that far outspends their parents. Both have the ability to be dramatic wins for fashion labels.

However, fashion labels are failing to generate the loyalty that keeps them profitable long term. Especially as millennials get older, they are less likely to stay faithful to the brands they shopped when they were in college. Labels have a considerable challenge in more firmly addressing these sections of the market.

6. THE WELLNESS DIVIDEND

What the report says: Feeling good is the new looking good: more fashion players can start profiting from the wellness movement rather than competing with it.

Like it or not, fitness wear is the dominant sector in fashion, across the board, in almost every country. As a result, we see Chanel blending fitness fabrics in with their tweeds and other labels making strategic partnerships with athletic footwear companies. The ability to look good while working out as well as immediately after working out has drive sales of athliesure wear to the top of the charts.

This trend shows absolutely no sign of slowing down anytime soon. Interestingly enough, though, traditional athletic brands are not always reaping the rewards as traditional fashion labels move into the sector. While big names like Nike and Under Armor are seeing strong profits, smaller brands are having difficulty competing as names such as Ballenciaga and Prada hit the shelves in sporting goods stores. Amidst all the growth their looms an inevitable shake out between winners and losers.

7. CHANGING THE RHYTHM

What the report says: Disruptions to the fashion cycle: expectations set by the faster pace of fashion and consumer desire for instant gratification must be addressed to deliver fashion immediacy.

See-no, buy-now is here to stay, despite heavy opposition from both Parisian and Milan labels. The fahion cycle we once knew is gone. Also gone at an increasing rate are separate men’s and women’s shows. Designers are frequently opting to put both in the same show to save both time and money. This past September was the first big experiment with such a disruption and those who participated enjoyed significant rewards. As a result, we can expect more labels to fallow suit.

At the same time, consumers are demanding new fashions coming at them faster and faster. This is where things get dangerous. In order to produce more at less costs, garment manufacturers are turning to sweatshops and child labor in dangerous settings that frequently border on slavery. While both government and retailers having taken steps to prohibit child labor specifically, increasing demand makes it easy to skirt around the laws and the inspector. As long as demand remains high, labor issues will continue to be a problem.

8. ORGANIC GROWTH

What the report says: Investing more to nurture local clientele: 2017 has the potential to be the year of organic growth based on deeper relationships with existing clients rather than geographic, channel, and store network expansion. 

Check your wallet. How many consumer loyalty cards do you have? Almost every major retailer has some form of customer retention program that involves sales, discounts, and other incentives to keep you coming back. What you can expect in the next year is for those programs to get more aggressive and more competitive. They know they’re not the only card you’re carrying. What they’re vying for is to be the one in the front of your wallet, the one you rely on the most.

There’s an opportunity here, though, for smaller designers and boutique shops. Local shops already know more about their customers, or, at least, have that opportunity. Mining those relationships so that customers stay local could give small shops and designers an advantage. Consider having special events to introduce frequent customers to new merchandise, or working with other shops near you to create bundled deals. Pampering customers has never held  more opportunity than it does now.

9. UPSTREAM TECHNOLOGY

What the report says: Digital innovation goes behind the scenes: digitisation is a key to supply-chain efficiency, lower procurement costs, and enhanced sourcing opportunities.

You probably won’t see any of the digital logistics changes taking place within the industry, but you reap the benefits in lower prices. Everything from fabric development to inventory control benefits from increased efficiency in backend systems. Your purchases are immediately factored into how much of the same material is manufactured, when new orders are placed, and even where garments are placed in the store.

Nope, not the most romantic aspect of fashion at all, but this is where money is saved to pay for those dicounts we keep demanding. What is looking on the horizon is the ability to walk into a store, try on a pair of slacks, and walk them right on out the store. Amazon appears to be the current leader in that technology, but as it all comes together we could see even more innovations.

10. OWNERSHIP SHAKE-UP

What the report says: Emotionless reappraisal of brand portfolios: fashion conglomerates can be expected to further intensify their focus on big brands, creating space for other brands and industry outsiders such as private equity and family owners to acquire targets.

This is another part of the fashion industry that doesn’t get a lot of attention except in industry mags such as Business of Fashion  and WWD. This is important, though, because it gives emerging designers a chance to be seen. When investors sell a brand, they can then use that capital to help younger brands become established. With fashion institutions churching out more young designers every year, this turnover of capitol is necessary for anyone to succeed.

2017 holds a lot of promise, but it also holds a lot of challenges. The winners will be those who step up to the challenges and take advantage of the opportunities.

So, the question would be: are you up to the challenge?