More than half of the fashion industry’s leaders believe that it is headed for a global slowdown, driven by the combination of the war in Ukraine, rising inflation, and supply chain pressure, expecting conditions to worsen in 2023.
Themes expected to continue into next year include a shift in regional focus towards geographies with more potential, changing consumer behaviour, and how to tackle greenwashing in the industry.
85 percent of fashion executives polled in The State of Fashion 2023 report released by The Business of Fashion and McKinsey & Company, predict inflation will continue to be a challenge next year and 58 percent believe the energy crisis will continue to weaken the market. Global GDP growth is expected to slow to approximately 2.2 percent in 2023 and the threat of recession looms over many major economies.
However, luxury is expected to provide a bright spot for the fashion industry, global sales of luxury fashion are expected to grow between 5 and 10 percent in 2020, compared to -2 percent to +3 percent for the rest of the market.
And when identifying markets with the same or more promising growth prospects in 2023 than the previous year, 88 percent of executives cite the Middle East. In addition, 50 percent of fashion executives are expected to increase their companies’ footprint in North America next year. Meanwhile, Japan and South Korea are renewing their reputations as dependable growth drivers in the Asia-Pacific region.
“Our report indicates that the current economic environment is creating a shift in regional dominance: While China’s growth may slow down in part due to COVID-19 restrictions still in place, Japan and South Korea continue to be growth drivers in the Asia-Pacific region,” said Anita Balchandani, Senior Partner, Head of McKinsey’s Apparel, Fashion and Luxury Group for EMEA in a statement.
“In the Middle East, especially the GCC luxury market is expected to grow to $11 billion in 2023, with 60 percent of luxury spending occurring domestically. US retail sales are expected to close 2022 on a two-decade high, building a strong foundation heading into 2023.”
The report also outlined 10 themes that its authors believe will reshape the fashion industry for the coming year, which includes global fragility, regional realities, two-track spending, fluid fashion, tackling greenwashing and organisation overhaul.
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