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The State of Fashion Report 2021 by McKinsey & Co

Read the latest report, The State of Fashion 2021, written by McKinsey & Company in partnership with the BoF. The report, the fifth in their annual series, drills down into the major themes affecting the fashion economy and assesses a range of possible responses.

Photo: McKinsey & Company, The State of Fashion Report 2021.

The sober mood among fashion executives surveyed in last year’s report has evolved over recent months into a strong determination to manage the industry through the COVID-19 pandemic. The McKinsey & company's calculations, based on the changes in market capitalisations over time in their index on global fashion, suggest that the industry’s economic profit will fall by 93 percent in 2020 after rising 4 percent in 2019. That translates into a significant increase in the number of companies that are “value destroyers*.

“The global fashion industry's profit is expected to fall by 93% in 2020.” by McKinsey & Co.

Still, there are silver linings among the clouds. While the crisis has visited a devastating impact on businesses and jobs, it may also have accelerated responses that can lead to positive outcomes. Indeed, many fashion companies have taken time during the crisis to reshape their business models, streamline their operations, and sharpen their customer propositions.

Companies that have performed the best over recent months tended to share at least one of two key characteristics. Many have had a strong Asia–Pacific focus, reflecting the economic strength of the region and the relatively lower impact of the pandemic there, and many have offered a compelling digital proposition. E-commerce players, such as ASOS, FARFETCH UK, Revolve, and Zalando, have consistently outperformed in 2020, as locked-down customers turned to digital devices to shop. By August, such digital-first players were trading 35% higher, on average, than they did in December 2019.

Ten themes across three categories will be critical for the fashion business in 2021:

  1. Living with the virus

  2. Diminished demand

  3. Digital sprint

  4. Seeking justice

  5. Travel interrupted

  6. Less is more

  7. Opportunistic investment

  8. Deeper partnership

  9. Retail ROI

  10. Work revolution

As decision makers continue to manage uncertainty, the most successful will be those that get a grip on the trends shaping the fashion landscape.

The authors of this article are Imran Amed (founder, editor in chief, and CEO of the Business of Fashion, and an alumnus of McKinsey’s London office), Anita Balchandani, Jakob Ekeløf Jensen, Achim Berg, Saskia Hedrich and Felix Rölkens.

Click here to read the full Report by McKinsey & Co. and BoF, 2021.


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