In recent years, the global fashion industry has been marked by instability. In 2023, the strong post-pandemic recovery stopped, and growth slowed. According to the report, three out of four industry leaders see the outlook for the industry in 2024 as either the same or worse than in 2023.
The growth of the fashion industry is expected to slow down further in both Europe and the United States. The luxury segment, which has been successful in the past, will also suffer from the situation in the industry. Seven out of ten leaders are now planning price increases in response to the challenges. Although many companies in the fashion industry are facing difficulties, the situation is not clear-cut:
"It is important to remember that the industry is diverse and there are winners, for example the demand for outdoor clothing is strong thanks to the outdoor trend. Niche players with a strong brand and an attractive customer offering still have the opportunity to succeed. That is why brand marketing will become even more important this year. In addition, investments in generative AI in marketing, planning and product development will increase," says Tuomas Kahri, a partner in McKinsey's Helsinki office.
Sustainability challenges
The fashion industry has long been criticized for its slow transition to sustainability. In addition, the lack of clear standards has made it difficult for both companies and consumers to understand what can be considered sustainable. Especially in the EU, new regulations are expected that tighten the requirements for the entire value chain, from product design to manufacturing and marketing:
"Companies in the fashion industry must work together to solve these problems and create clear standards that help consumers make more informed purchasing decisions," stresses Kahri.
Expect a "bullwhip" effect
Disruptions in supply chains seem to increase in 2024. Changes in consumer demand have created a "bullwhip" effect, with which market volatility is reflected unpredictably in supply chains. This, in turn, may lead to a reduction in production, staff reductions and delays in investments. In order to meet the challenges, suppliers and retailers must improve their cooperation:
"Disruptions in supply chains affect all parties, though on a different scale. It is a problem that requires joint solutions. It is clear that those actors who are transparent and invest in strategic partnerships are more successful," says Kahri.
"The State of Fashion 2024" considers ten themes that are expected to influence the fashion industry in 2024.