“The State of Fashion” : L’état de la mode en 2021

LET’S INTRODUCE

With the COVID-19 pandemic dominating thoughts and minds, fashion executives are planning for a range of scenarios and hoping for a rapid global recovery. However, in the midst of increasing performance pressure, changing consumer behaviors, and accelerating digital demand, it is imperative to act decisively to prepare for the next normal. After a year in which the fashion industry posted record economic profits, business leaders
looking to innovate while continuing to engage their core groups.

Given the disruptions of recent months, many companies are re-engaging with their supply chains, making tough decisions, and strengthening omnichannel services. This article explores the key themes affecting the fashion economy and assesses a range of possible responses. It examines the ten key trends that are likely to shape the business in the coming year.

 

POSITIVE FACTS

While the crisis has had a devastating impact on businesses and jobs, it may also have accelerated responses that can lead to positive outcomes.

Indeed, many fashion companies took time during the crisis to reshape their business models, streamline their operations and refine their customer propositions. Looking ahead, our baseline scenario is cautiously optimistic that the virus will be better controlled in the coming year, thanks to a strong public health response.

At the same time, government responses will partially offset the economic impacts and global travel will increase, along with the potential for larger social gatherings. In this scenario, we would see markets like China recover strongly. We expect sales growth of 5-10% in China in 2021 compared to 2019. Europe, on the other hand, will likely continue to feel the effects of moderate tourist arrivals, leading to a 2-7% decline in sales in 2021 from 2019. Moreover, pre-crisis activity levels are unlikely to return before the third quarter of 2022. We expect a similar trajectory in the U.S., with sales down 7-12% next year from 2019, and only a modest recovery before the first quarter of 2023.

Where there is positive momentum, the primary driver will continue to be digital channels, reflecting the trend established before the COVID-19 crisis and the reluctance of people in many countries to congregate in crowded environments. Indeed, recent data shows that we have moved five years ahead in digital adoption by consumers and businesses in a matter of months. Around the world, we expect annual digital growth of more than 20% in 2021 (including 30% in Europe and the United States) compared to 2020. Other positive trajectories will include the growing influence of platform propositions as customers become more familiar with marketplace experiences and the renewed appetite of brands and consumers for local engagement. Against this backdrop, the fortunes of the fashion industry are highly polarized.

E-commerce players, such as ASOS, FARFETCH UK, Revolve, and Zalando, have consistently outperformed in 2020, as locked-in customers have turned to digital devices to shop. In August, these top digital players
were trading on average 35% higher than in December 2019. Given the outstanding performance of digital channels in the current environment, we expect digital to remain king in 2021.

 

TEN THEMES FOR 2021

As the world recovers from the COVID-19 pandemic, what will be the defining themes in the fashion industry? Key drivers will include changing consumer behaviors, opportunistic investments, and the need to build more efficiently, more simply, and more on-demand.

1. Living with the virus: COVID-19 has impacted the lives and livelihoods of billions of people, disrupting international trade, travel, the economy, and consumer behavior. To manage persistent uncertainty, businesses must enable flexibility and faster decision-making. But also balance speed and discipline in the pursuit of innovation.

2. Declining demand: Fashion demand is unlikely to return to pre-pandemic levels in an environment of limited purchasing power, unemployment, and growing inequality. Companies must seize reshaped opportunities, doubling down on top-performing categories, value segments, and territories.

3. Digital Footprint: Digital adoption has exploded amidst the pandemic, with brands embracing live streaming, virtual customer service, and social shopping. Fashion players must optimize the online experience and channel mix while convincingly integrating the human touch.

4. Seek justice: As consumers become more aware of the plight of vulnerable fashion workers and the momentum for change builds, companies must provide more dignity, security, and justice for employees along the global value chain.

5. Disrupted travel: Travel retail will face continued disruption as international tourism remains subdued. Fashion companies will need to better engage with local customers and make strategic investments in market recovery to unlock new revenue opportunities.

6. “Less is more”: COVID-19 emphasized that more products do not necessarily yield more profits. Fashion companies need to reduce complexity while increasing full-price sales and reducing inventory levels by taking a demand-driven approach to new products and in-season replenishment.

7. Opportunistic Investments: During the pandemic, the gap between the best-performing fashion companies and the rest widened. With some players already out of business and others supported by government subsidies, companies will maneuver to take market share and expand their capabilities.

8. Deeper partnerships: Fashion players must mitigate future supply chain disruptions, moving away from transactional supplier relationships to deeper partnerships that bring greater agility and accountability.

9. Retail ROI: Permanent store closures will continue to increase in the post-pandemic period, while a potential shift in power from landlords to retailers in most regions, may require fashion players to rethink their retail footprint to improve return on investment at the store level.

10. Workplace Revolution: A new model of sustainable work is likely to emerge as fashion companies refine their remote and on-site work mixes, invest in talent reskilling, and instill a greater sense of belonging and shared purpose among employees.

We’re seeing brands rethink store formats and leverage data and analytics to predict foot traffic, manage assortments and create personalized offers. Flagship stores will be viewed as areas of discovery and tasked with creating emotional connections with customers. We’ve already seen Burberry and Nike, as well as digitally native ARIAS New York, invest in hybrid spaces and deploy technologies such as apps and body scans to create more
compelling experiences. At the same time, we’re likely to see more nuanced assessments of store ROI based on a combination of digital and physical lenses. With Chinese companies leading the way, brands will engage
even more closely with social media to deliver exclusive content and personalized experiences to shoppers.

LET’S CONCLUDE

There is no doubt that 2021 will remain challenging for many as the COVID-19 pandemic follows an uncertain trajectory. The task for policymakers, then, is to find comfort and promise, knowing that times of change are inherently rich
in opportunity. Fashion companies that double down on their strategy align with key trends and reflect an ever-changing consumer landscape. They are likely to emerge stronger, leaner, and ready to thrive in the next normal.

Greg