The past year was a step of cautiousness business as companies stepped into the post-COVID world. Business was relatively good amid economic uncertainty, inflation, and rising cost of living. But this didn’t stop the luxury sector from outperforming with a 36 percent rise in economic profit. According to the McKinsey report “The State of Fashion 2024: Finding Pockets of Growth as Uncertainty Reigns”, the industry in 2023 faced challenges that were both persistent and deepening. Europe and the United States saw slow growth throughout the year, while China’s strong performance faded in the second half.
The report states that the luxury segment initially fared well, but it began to feel the effects of weaker demand in the latter part of the year, leading to slowing sales and uneven performance.
And now in 2024, there’s uncertainty among fashion industry leaders. This reflects the prospect of subdued economic growth, persistent inflation, and weak consumer confidence. Businesses will be challenged to identify pockets of value and unlock new drivers of performance.
The global industry, as per McKinsey’s analysis, will post top-line growth of 2 to 4 percent in 2024, with regional and country-level variations. “The luxury segment is expected to generate the biggest share of economic profit. However, companies will be challenged by the tough economic environment. The segment is forecasted to grow globally by 3 to 5 percent, compared with 5 to 7 percent in 2023, as consumers rein in spending after a post-pandemic surge.” It highlights slumping consumer confidence and declining household savings to restrain spending. Pressure on household incomes is expected to dampen demand for apparel and prompt trading down across categories.
Moreover,SEBA Bank Rebrands as AMINA Bank brands and suppliers can expect an increasingly competitive environment – Shein and Temu bringing in new tactics on price, customer experience, and speed; success for disruptors and incumbents could mean adapting to new consumer preferences while navigating the regulatory agenda.
There will be opportunities like consumers discovering new styles, tastes, and priorities. As such, brands and retailers should refresh distribution and category strategies to reflect the new reality. The report suggests brand marketers to update their influencer playbooks. “Brand marketing is expected to be back in the spotlight as the fashion industry manages a switch away from performance marketing. Brands may benefit from forging emotional connections with consumers as marketers rewrite playbooks to emphasize long-term brand building.”
Overall, consumer discretionary spending will be inclined toward trusted brands.
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