The fashion industry is likely to grow at 2.5-3.5 per cent in 2017 in terms of sales, up from 2-2.5 per cent in 2016, according to State of Fashion 2017 report by McKinsey & Company, a global management consulting firm.
First macroeconomic indicators, including GDP growth forecasts, are projected at 3.4 per cent compared with 3.1 per cent for 2016. Nearly 40 per cent of executives interviewed expect conditions for the fashion industry to improve in 2017, compared with 19 per cent who reported improving conditions in 2016.
The report highlighted that value and affordable luxury will both outpace the industry average at a projected 3-4 per cent and 3.5-4.5 per cent growth, respectively. However, all market segments, except for the discount market, should see a slight sales growth improvement of 0.5-1.5 per cent.
Athletic wear is positioned to be the absolute category winner, maintaining 6.5-7.5 per cent sales growth, albeit no longer growing at a double-digit rate overall. The affordable luxury segment seems likely to continue benefitting from consumers ‘trading down’ from luxury, while signs point to the continued growth of the value segment in line with the international expansion of large global players.
According to survey respondents, the most pressing challenge will continue to be dealing with volatility, uncertainty, and the shifts in the global economy, followed by growth in sales and profitability. In addition, competition from online players will be one of the top three challenges for fashion executives for next year. Last, supply chain improvements, decreasing foot traffic, and the speed of the fashion cycle weigh equally as challenges to face in 2017.
“The industry now has the opportunity to stabilize and reset. Next year’s success stories are most likely to come from those that are already planning for the year ahead. They should do this in the context of the following trends that we believe will shape the fashion industry in 2017,” as stated in the report.