McKinsey has joined hands with corporate giants worldwide to analyse global trends in fashion. They have also looked into businesses, their management styles, and the issues in predicting and forecasting future trends. In line with this, The State of Fashion, a report by McKinsey on the fashion industry, was published in 2022. This article summarizes the 144-page McKinsey Report, highlighting the trends in the fashion industry and making specific predictions.
The pandemic put varying restrictions upon different countries at different times. As a result, the fashion industry saw a huge decline in terms of revenue. While some countries like China quickly recovered their economies, several European and Asian countries are still recovering from the aftermath of the pandemic. With more variants of the virus wreaking havoc in different parts of the world, businesses have been globally erratic. This has led the fashion industry to shift towards digitization and automation.
The McKinsey Report focuses on the technological aspect of the fashion industry. It has predicted that the industry will adopt technological innovation on a global level in the coming decade. As several fields of businesses adopt technological innovation, the fashion industry, too, has followed suit in order to create a more responsive, innovative, efficient, and responsible business model.
As of 2021, fashion companies have invested 1.6 to 1.8 % of their revenues in technology, and the percentage is projected to reach over 3 to 4 % in the coming decade. However, this implementation differs from other business sectors. It focuses mainly on data, trends, operations, and analytics, because it has a more consumer-centric approach. The investments made primarily address the end-user or consumer.
Fashion companies are investing in technological innovation with a conviction that it will provide the industry with a more responsive and efficient customer-based model. They believe it will give them an edge over the current market.
The primary focus of these investments is customer-centric. By designing apps, they are focusing on store automation, robotic technology, and advancement in analytics. The conviction stems from the belief that creating such levels of industrial automation, specifically at the retailer and merchandiser level to address the consumer directly, will result in:
The raging pandemic has led to a significant increase in digital consumer engagement in the last two years. This has led to consumers
Surveys have noted that most customers find it convenient to connect with brands via social media and online sites. On these lines, the McKinsey Report predicts the following trends by the next decade:
The companies have begun integrating AI software into their digitization process. The McKinsey Report makes a few predictions for both companies that have and have not implemented this model:
A marked improvement in the performance of companies that successfully implement AI integration is a forecast to be noted.
The McKinsey Report highlights five principal aspects. These may help companies maximize their technological resources and combat pressing challenges. Several potential opportunities could arise by the successful implementation of these themes:
The value of digital marketing and NFTs is currently strong. However, companies will have to separate the hype from the concrete opportunities sooner or later. This is necessary to generate consumer engagement with the metaverse, and it will generate potentially sustainable revenue streams in the coming decade.
Building one-to-one loyalty with the customer is vital for generating long-term revenues. One way to achieve this is by harnessing big data and integrating AI analytics. This can result in a personalised experience for the end-user.
The rise of e-commerce has made the need for physical stores questionable. By installing in-store apps, companies can address this challenge. In-store apps will enhance the consumer experience by leveraging the stores and using micro fulfilment technologies.
End-to-end value chain integration will create efficient and profitable operations. It can potentially overcome the limitations of digital analytics that hamper cross-functional improvements.
Improved traceability will provide companies an insight into their supply chain, specifically the product life cycle. It will create sustainable road maps for the companies from now on. Harnessing big data and integrating traceability software can help achieve this.
The McKinsey Report concludes with tips for emerging enterprises to penetrate the market. Diluting brand identity should be avoided at all costs as it confuses potential consumers. When a company diversifies or expands into new categories, there is a risk for brand dilution. It is essential, in such cases, to anchor the essence of the brand in question.
Brand messaging should also be consistent with consumer values such as sustainability, and inclusivity. At the same time, brand value has to be retained while licensing or outsourcing products.
In the end, a company needs to connect with end-users in an authentic fashion. Without over-reliance on offline distribution, brands should aim to communicate with their customer base across various digital platforms. The utility of harnessing big data and subsequent AI analysis will prove instrumental in the success of these brands. Sign up with Fashinza to effectively analyze and implement key insights from the McKinsey Report.