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10 trends that will define the fashion industry in 2017

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Fashion is one of the past decade’s rare economic success stories. Over that period, the industry has grown at 5.5% annually, according to the McKinsey Global Fashion Index, to now be worth an estimated US$2.4 trillion.Yet, 2016 was one of the industry’s toughest years. Terrorist attacks in France, the Brexit vote in the United Kingdom, and the volatility of the Chinese stock market have created shocks to the global economy. At the same time, consumers have become more demanding, more discerning, and less predictable in their purchasing behavior, which is being radically reshaped by new technologies.According to the report, external shock waves that have roiled the industry and companies have also been looking inward, implementing changes to the core operations that are reshaping the entire fashion system, from shortening the length of the fashion cycle to integrating sustainable innovation into the core product-design and manufacturing processes. About, 67% of executives said conditions for the fashion industry have worsened over the past 12 months.This fact is clearly borne out in the industry’s financial performance. Sales growth seems set to slow to a mere 2% or, at most, 3% percent by the close of 2016, with stagnating profit margins. Speculation and uncertainty over the repercussions of the US election outcome could further dampen consumer sentiment and affect sales.2017: Glimmers of recoveryThe report finds that fashion companies are hopeful they can improve their performance through a combination of organic growth and leveraging new technologies. According to the report, 2017 will be the year of organic growth by deepening relationships with existing clients, rather than through geographic, channel, and store-network expansion.And digital innovation will go behind the scenes as digitisation will be the key to supply-chain efficiency, lowering procurement costs, and the enhancement of sourcing opportunities.About 40% of executives we interviewed expect conditions for the fashion industry to improve in 2017, compared with the 19% who reported improving conditions in 2016. This is particularly true for the major players within each of the market segments and product categories. Many of them have already undertaken significant cost cutting and restructuring, and they are now primed to capture the benefits.Meanwhile here are 10 trends that will define the fashion industry in 2017.All things considered, the report expects fashion-industry growth will increase to 2.5 to 3.5% in 2017. Value and affordable luxury will probably be the big winners, both outpacing the industry average at a projected 3.0 to 4.0% and 3.5 to 4.5% growth, respectively. The report added that performance will vary depending on the individual dynamics of specific market segments and categories.Value and affordable luxury will probably be the big winners, both outpacing the industry average at a projected 3.0 to 4.0% and 3.5 to 4.5% growth, respectively. That said, almost all other market segments should see a slight improvement in sales growth of half to one-and-a-half percentage points. Only the discount segment is likely not to be part of the recovery trend.  Product categories are expected to grow in line with the overall industry average, but the biggest winners will be those companies with coherent channel strategies and clear value definitions.In the coming year, athletic wear is set to become the absolute category champion, maintaining 6.5 to 7.5% sales growth, although it will be unable to reproduce the double-digit growth of the past. In 2016, the 8.0 to 8.5% growth for athletic wear is more than double any other category. This is driven by consumers’ more active lifestyles, the rise of “athleisure,” emerging brands in the high-end segments, and product innovations. As athletic wear continues to grow, it will become a category with the ability to compete on equal terms with clothing and footwear, particularly in the midmarket and premium segments.The affordable-luxury segment seems likely to continue benefiting from consumers trading down from luxury, while signs point to the continued growth of the value segment as large global players expand internationally.In 2016, with respect to sales growth, the affordable-luxury and value sectors have outperformed all other segments by one to one-and-a-half percentage points. This is consistent with their compound annual growth rate (CAGR) over the past three years, which has been 9% for affordable luxury and 6% for value, the highest of any segment since 2013. Affordable-luxury players benefited from consumers trading down from luxury, particularly among Chinese consumers. However, their profit margins are expected to decline, especially after 2016, because of a pricing-arbitrage disadvantage across geographies and fluctuating foreign-exchange rates.  

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