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of Fashion 2017
Copyright The Business of Fashion and McKinsey & Company 2016
The State of Fashion 2017
6
which tracks industry sales, operating profit, and economic
profit (value creation) and McKinseys FashionScope, a city-
level growth forecasting tool for the fashion industry.
The report is split into two sections: Section 1 provides
10
a review of the industry in 2016, highlighting the indus-
trys performance across sales, operating profit (EBITA), FOREWORD
and economic profita measure of value-add that takes into
account both the explicit and implicit costs of generating
incomeand recapping the ten key themes that shaped 2016;
14
Section 2 provides an outlook for 2017, forecasting for the first EXECUTIVE SUMMARY
time expected growth for the fashion industry across market
segments and product categories, highlighting the top priorities
for executives, and defining the ten trends that we believe will
38
set the agenda for the industry over the next 12 months.
In order to present a full picture of the ecosystem and bring I. INDUSTRY REVIEW 2016
to life the complex and multifaceted aspects of the industry, the
report also includes a series of deep dives and executive inter-
views on some of the most exciting developments, including the
44
growth of Russias fashion market, the new wave of digitisation
McKINSEY GLOBAL FASHION INDEX
of the supply chain, and the rise of new consumer capitals in
China, the Middle East, and Latin America.
88
II. INDUSTRY OUTLOOK 2017
4 5
The State of Fashion 2017
FOREWORD
F
lective knowledge creation is unique and an integral part of this report,
and the insights we share will be relevant to everyone who engages in
ashion is one of the worlds most important industries, dri- the business of fashion, whether in the boardroom, as an entrepreneur
ving a significant part of the global economy. In 2016, the in- building a start-up, or even as an informed shopper on the high street.
dustry is projected to reach a staggering $2.4 trillion in total With this report, we also unveil a new industry benchmark: the
value.1 If it were ranked alongside individual countries GDP, McKinsey Global Fashion Index (MGFI). With a database of over 450
the global fashion industry would represent the worlds se- different fashion companies, this index will allow for analysis and com-
venth largest economy.2 parison of how a fashion company is performing against others in its
And yet, for some observers, fashion is still regarded as simulta- market segment, product category, and even operating model. Over
neously frivolous and indulgent; and many of the sources of informati- time, the data set will grow and become ever more valuable as a source
on about the industry are fragmented, incomplete, or unreliable. of insight into both the pressures impacting fashion, as well as the op-
Now, McKinsey & Company and The Business of Fashion (BoF) are portunities and new sources of revenue and innovation that will emerge
aiming to close that gap. Our first State of Fashion report lays the foun- from the worlds increasingly turbulent fashion markets.
dation for rigorous in-depth research and analysis of the global fashion For creative leaders and business executives, this has arguably been
industry, focusing on the themes, issues, and opportunities impacting the most uncertain operating environment in living memory. Howe-
the sector and its performance. ver, we hope that with new resources like The State of Fashion and the
Over the last few months we have put together a global network of McKinsey Global Fashion Index, the global fashion community will be
experts, research and analysis to bring you a report that makes sense in a stronger position to face challenges in the market, and plot a path to
of the challenges and opportunities across all of fashions market seg- a successful future.
Thomas Lohr
CONTRIBUTORS
As founder, editor-in-chief, and CEO Based in Frankfurt, Achim Berg As the head of McKinseys fashion
of The Business of Fashion, Imran co-leads McKinseys Global Apparel, work in the United Kingdom, Leonie
Amed is one of the fashion indus- Fashion & Luxury Practice and is has led the turnarounds of several
trys leading writers, thinkers, and active in all relevant sectors including iconic European fashion brands,
commentators. Fascinated by the clothing, textiles, footwear, athletic working across a range of topics
industrys potent blend of crea- wear, accessories, and retailers in strategy, customer experience,
tivity and business, he began BoF as spanning from the value end to luxury. inventory management, and digital/
a blog in 2007, which has since grown As a global fashion industry and retail omnichannel. Leonie is a regular
into the pre-eminent global fashion expert, he supports clients on a broad speaker and author of industry publi-
industry resource serving a three- range of strategic and top manage- cations on multiple aspects of fashion
million-strong community from ment topics, as well as on operations and luxury goods.
over 200 countries and territories. and sourcing-related issues.
Previously, he was a consultant at
McKinsey in London.
ACKNOWLEDGEMENTS
The authors would like to thank all the members of the BoF and McKinsey
community for their contribution to research and participation in our
Global Fashion Survey. In particular we would like to thank: Princess Deena
Aljuhani Abdulaziz, Avery Baker, Angelica Cheung, Laurent Claquin, Colin
Henry, Tommy Hilfiger, John Hooks, Andrew Keith, Daniel Lalonde, Daniel
Lopez, Karla Martinez, Natalie Massenet, Alexander Pavlov, Franois-Henri
Pinault, Nadja Swarovski, Mimma Viglezio, Jason Wachob, and David Zhao
for their input into the report.
The authors also give thanks to Jrn Kupper, Kate Smaje, Richard
Dobbs, Greg Kelly, Antonio Achille, Nathalie Remy, Aimee Kim, Jennifer
Schmidt, Jessica Moulton, Bjorn Timelin, Kai Peter Rath, Adriana Clemens,
As well as working with apparel Johnattan brings his experience as As global markets editor of The Marcus Jacob, Benjamin Durand-Servoingt, Helen Mullings, Jonathan
clients globally on strategy, sourcing a former associate at The Business Business of Fashion, Robb oversees Ablett, Mafalda Hipolito, Christoph Goeken, Neha Nangia, Abhishek Goel,
optimisation, merchandising trans- of Fashion to his work serving content from Asia-Pacific, the Middle David Honigmann, Anja Weissgerber, Michael Seva, and Rachel McClean of
formation, and CSR, Saskia supports McKinseys Apparel, Fashion & East, Latin America, Africa, the CIS, McKinsey and the entire team from The Business of Fashion who have played
countries in Africa, Asia, and Latin Luxury clients across categories and and Eastern Europe. He is an expert an instrumental role in creating this reportin particular, Sarah Guttridge,
America to develop strategies for functional topics from jewellery on emerging and frontier markets, Robin Mellery-Pratt, Anouk Vlahovic, Jan-Nico Meyer and Cyrus Yu.
their national garment industries. and fashion media to digital trans- whose career as a fashion editor, In addition, the authors would like to thank Patrick Li and Joan Cheng
As senior expert, Saskia is a regular formations, strategy, marketing and business journalist, author, and at Li Inc. for their creative input and direction into our first State of Fashion
speaker and author of industry sales. strategic consultant has seen him lead report, Craig & Karl for our cover illustration and Getty Images for supplying
publications. industry projects around the world. imagery to bring our findings to life.
8 9
Terrorist attacks in EXECUTIVE SUMMARY
France, the Brexit vote
in the UK, and the
volatility of the Chinese
stock market have
created shocks to
the global economy.
Meanwhile, consumers
have become Looking back at 2016 one of the toughest
years on record
vation into their core product design and manu-
facturing processesre-evaluating the entire
more demanding,
As fashion executives around the world reported fashion system itself.
to us in the first BoF-McKinsey Global Fashion Perhaps unsurprisingly then, 67 percent
Survey, 2016 can be summarised in three words: of the executives surveyed reported that condi-
uncertain, changing, and challenging. tions for the fashion industry have worsened
and intensifying business in the global macroeconomic and geopolitical sphere, large-
scale shifts in consumer behaviour, and intensifying business
pressures to produce more for lessless time, less money, and
Exhibit 2 67% of survey respondents believe that conditions for the fashion Exhibit 3 Executives name volatility and uncertainty as the biggest challenge, and
industry have become worse over the past 12 months see digitalisation and e-commerce as the biggest opportunity of the year
Fashion business sentiment 2016 % of executives Global economy Consumer Fashion system
% of respondents
TOP 6 CHALLENGES
19% Dealing with volatility,
19
Became better
14%
decreasing foot traffic
67%
Speed of changing
Remained the same consumer 7
preferences
Margin
Became worse
erosion due to 5
discounting
Sales and 5
profitability growth
Question Over the past 12 months, how do you think conditions for the fashion industry have changed?
Source BoF-McKinsey Global Fashion Survey, September 2016
Speed to market
and the fashion 5
cycle
This is in part due to the wide range of challenges the TOP 6 OPPORTUNITIES
industry has faced in 2016. Top of the list of survey respond-
ents worries were volatile shifts in the global economy, followed
Digitalisation and 29
by competition from online players and decreasing foot traffic, e-commerce
and the speed of changing consumer preferences (Exhibit 3). In
addition, businesses were concerned about both their top and 9
bottom lines, with margin erosion from increased discounting See now, buy now
and a general slowdown of sales growth this year. The last group
of concerns centred on the increased speed to market and Mastering the 4
economic downturn
changes in the fashion cycle seen in 2016.
All this notwithstanding, the industry remained positive
Reducing promotional 2
about growth opportunities, highlighting digitisation and activity, global pricing
e-commerce as by far the single biggest opportunity of 2016.
Interestingly, while some businesses saw increased speed to Omnichannel 2
market as an industry challenge, others saw see-now, buy-now integration
as an excellent new opportunity. Finally all market shifts result Shaping
consumers; 2
in winners and losersand those smart enough to master this tapping millennials
time of unprecedented change have the best chance to emerge
Question What do you think has been the single biggest challenge and the single biggest opportunity for the fashion industry in 2016 so far?
as winners in the coming year. Source BoF-McKinsey Global Fashion Survey, September 2016
18 19
2016
The State of Fashion 2017
YEAR IN REVIEW:
FASHION INDUSTRY
TRENDS
01. 02. 03. 04. 05. 06. 07. 08. 09. 10.
Geopolitical Chinese growth Promotions and New customer The fashion Fashions fragile Its getting harder See-now, The accelerated Ethical innovation
and economic hits a soft patch: discounts are the lifestyles come industry gets system hits a to reduce costs: buy-now adds pace of fashion offers a way forward:
instability a stock market new normal: into focus: more proficient breakdown: Sourcing wont to channel industry cycles Consumers and
intensifies, raising dip and real Consumers have Emerging with the digital The fashion solve the cost pressures: prompts a brands have
concerns about estate concerns come to expect consumer tribes realm: Digital industry faced a problem any New cycle models creativity crisis: prioritised
the impact of have decelerated frequent are driven platforms and year marked by a longer; more are promising More collections sustainable fashion,
destabilising forces chinese growth, discounts and by casualisation, strategies low sales growth, companies are immediate and shorter design which is
such as terrorism, and shifted promotions, inclusivity and become more price volatility turning to consumer cycles are leading transforming
growing volatility attention to India, buying less and active lifestyles, prevalent, and overstocking restructuring, gratification, to high turnover product design
and uncertainty Turkey, and other less at full-price giving rise to integrated and job cuts, and even from off-the- among creative and manufacturing
on the fashion high-growth athleisure, sophisticated, store closures runway fashion directors, and
industry markets genderless, with e-commerce to instant putting strains
plus-size and rising, pure-play delivery on the creative
modest wear brands emerging, process
fashion and brands
engaging with
consumers 2014
through virtual Emerging
19% 14%
65
reality Markets
Became
Better
Remained
the Same
3m BUY
2010
Growth of
sales in 2016 12% 2015 NOW percent
10.6%
9%
2016 8-8.5% 4m
6.7% Mature
Market
32
2016
67% 3% percent
Became
Worse
1-1.5% 1% 5m
~30
2011 -2015
Athletic wear Clothing 2010 2020 2010 2016
2016
Google results
fashion restructuring
67% of executives Chinese GDP Number of full- More people E-commerce Sales growth Throughout the Lead time ~30 high-profile More than 65% of
believe that continues to price stores in the wearing casual luxury fashion lower today than year, major fashion reduction from 6 creative director emerging market
economy will slow-down US and Canada clothes Growth sales will increase 5 years ago - e.g. companies months to 0. rotations consumers
worsen in 2016 in 2016 lower than of sales of fourfold from Clothing y-o-y announced Lead time from actively seek
discount stores sport-inspired 2010 to 2020 growth: programmes to catwalk to sustainable fashion
apparel 5x higher 1-2% in 2016 reduce headcount, shopping bag versus 32% or
than of general vs. 8% in 2011 close stores, and eliminated less in mature
Clothing in 2016 review their markets
processes
20 21
The State of Fashion 2017
respond to short-term
changes, such as abrupt
drops in demand that
occur when consumers
stay away.
Justin Tallis/
Getty Images
23
The State of Fashion 2017
Exhibit 4 44% of global executives believe geopolitical instability and the slowdown in China
economy are the highest risk to economic growth 02. China interrupted
As highlighted by the BoF-McKinsey Global services and experiences, and trading up from
Fashion Survey, a key topic of discussion over mass products to premium products.
the past year has been the economic slowdown While China remains a large and important
INCREASING RISKS1
New risks in 2016 survey
Risks in 2015 & 2016 survey
in China, which has been one of the key growth market, these headwinds are decreasing sales
45 markets for fashion since the 2008 financial crisis. growth and therefore shifting the spotlight to
Slowdown in Chinas economic activity
September 2016 survey results
% respondents
Geopolitical instability
Chinese GDP growth has slowed to 6.7 percent other emerging markets, where consumers
40
this year, from 7.0 percent in 2015 and 10.0 are still improving living standards at a higher
35 percent in 2010. While this slowdown is not severe pace. FashionScopes projected growth this year
Slowdown in the global trade by Western standards, it is notable all the same compared with annual growth for the past five
30
given the absolute size of this market. What makes years shows that the highest-growth countries
25 2016 noteworthy is the combination of the CSI are expected to be India and the United Arab
DECREASING RISKS
Transitions of political leadership 300 Index turbulence early in 2016, and the over- Emirates but lag far behind in size compared to
20 Increased economic volatility
Exit of one or more countries from the eurozone
Threat of terrorist attacks supply of apartment buildings and other real-es- China and the United States (Exhibit 5). The size
15 Volatile commodity prices tate issues that have emerged to cloud the invest- of the fashion industry in some of these countries
10 ment outlook in China. Moreover, according to is smaller, but there are still interesting oppor-
Volatile exchange rates
Insufficient government-policy support McKinseys 2016 China Consumer report,9 which tunities for growth, particularly compared with
5
Inflation surveyed 10,000 Chinese consumers, shopping other emerging countries where foreign-ex-
0 patterns are changing fast: Chinese consumers change fluctuations and economic slowdowns
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 are becoming more selective about their spending, have taken their toll on consumer spending, such
September 2015 survey results allocating more of their income to lifestyle as Brazil and Russia.
% respondents
1 The risk matrix represent the % of respondents that voted for a particular risk. The area above the dividing line
indicates decreasing risk while the area below indicates increasing risk in September 2016 vs. September 2015.
Question What risks to economic growth will be present in the global economy over the next 12 months?
Exhibit 5 Growing at 9% in 2016, India leads emerging markets as the fastest growing
Source McKinseys Global Economics Intelligence Quarterly Executive Survey, September 2015 & 2016 country for fashion
Canada
Russia
Saudi Arabia
the main topic of speculation. economies, aging populations in established 4
United Arab
Japan
As a fast-moving, globally connected industry, markets, and new technologies further compli- 2
South Korea
South Africa
Emirates
fashion is uniquely exposed to this dynamic. cate the current environment.
Turkey
Fashion purchases are often emotional ones, Fashion faces all these challenges and 0 Australia
Brazil
United Kingdom
Germany
and if consumers are feeling uncertain or scared, moreincluding the partial commoditisation -2
France
they are less likely to buy. Many fashion players are of the fashion market, faster fashion cycles, and Spain
working to develop the agility they need to respond compliance and sustainability issues. Demand -4
Italy
to short-term changes, such as abrupt drops in can fluctuate widely, while shocks to the cost -6
demand that occur when consumers stay away. base, such as the impact of plummeting exchange 0 0.5 1.0 1.5 2.0 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 9 9.5
Volatility takes many forms. Currency has rates on sourcing costs, are a constant threat. As 2015-16 y-o-y growth
%
been more volatile in 2016 than it was on average a result, the value created by apparel and luxury
for the past five years. Meanwhile, a study from companies varies much more than it does for the 1 Excludes Argentina and Venezuela due to poor data reliability resulting from FX fluctuations.
the McKinsey Global Institute (MGI) shows market overall. Source McKinsey FashionScope
24 25
The State of Fashion 2017
Courtesy
tually lead to a race to the bottom that shrinks
profit margins and eats away at brand value.
26 27
The State of Fashion 2017
07. Cost burdens 08. Instant gratification Exhibit 6 Cotton prices have risen throughout 2016, reaching a 2-year high of $0.86/
pound in August
In order to maintain margins in the wake of A more demanding consumer and a bid by Cotlook A Index
slow sales, companies look at restructuring as a fashion brands to create additional demand has USD per pound
measure to reduce costs; however, over the past also forced an increase in the speed of delivery
year, many factorsfrom exchange rate fluc- of products across fashions market segments.
tuations and labour costs to the cost of raw Running counter to cost-reduction measures, 0.86
materialshave raised sourcing costs.24 Indeed, fashion companies are attempting to increase
0.84
cost-control measures, whether sourcing from sales by responding more rapidly to consumer
emerging low-labour-cost countries or more demand. Though the rapid lifecycle of mass- 0.82
efficient manufacturing techniques, have largely market collections in the fast-fashion category 0.80
been exhausted. For instance, according to the is well known, it is now reaching the luxury
0.78
Cotlook A Index, the average price of cotton has and affordable luxury segments, putting addi-
ticked higher in 2016 than in the past two years tional pressure on supply chains and distribu- 0.76
(Exhibit 6), and continues to increase. While tion management in 2016. This shows no sign
0.74
the traditional answer has been to diversify of abating: whether feeding instant gratifica-
sourcing as one way of keeping costs low, today tion or building out delivery channels, brands 0.72
there are only so many options for production. have pushed boldly into the digital era where 0.70
Many fashion companies across the spectrum, customers globally have virtual access to fashion
from Burberry, Sonia Rykiel, Roberto Cavalli to shows and buy collections at the click of a button. 0.68
Ralph Lauren and Marks & Spencer, have under- Some luxury brands, led by Burberry, Tom Ford, 0.66
taken restructurings and job cuts, even shut- and Tommy Hilfiger, have experimented with
tering stores and reviewing their store networks, the see-now, buy-now approach, extending it 0
all in an effort to make ends meet.25 But the cost all the way to the runways of Septembers fashion Sep 2014 Jan 2015 Jan 2016 Oct 2016
pressures persist. shows.26 Othersboth luxury and mass-market Source Cotlook
brandsare experimenting with same-day, or in
specific markets, even one-hour delivery.27 The
jury is still out on whether these new approaches
will win over the most demanding customers
while also maintaining margins and profitability
over the longer term. 09. A creativity crisis
Experimenting with fashion cycles is not new. as the pressure to create new collections is as
The pace of fashion has accelerated greatly in much a concern for mass-market players as it is
recent years, with many brands increasing the for luxury brands.29 Even fast-fashion companies
number of collectionsnow averaging six per are adjusting their processes to accommodate
yearand ratcheting down the lead times for even shorter design cycles.
pieces, even at the luxury end of the spectrum. Another form of pressure bearing down on
Now, however, this combined with other creativity comes from the way new designs are
pressures has led to an unprecedented level of sanctioned for production. Fashion designers
turnover among creative directors for several are being encouraged to take more input from
major luxury and fashion brands, with designer the buying and merchandising teams to react to
exits and arrivals at Christian Dior, Lanvin, what is selling rather than defining what will sell
Calvin Klein, Saint Laurent, Ermenegildo Zegna, through forward-looking design risks.30
Berluti, Balenciaga, Oscar de la Renta, Brioni, and How the various pressures on fashion
Carven, amongst others.28 players will reach equilibrium remains, for now,
At the same time, the reduced time between an open question.
Burberry Spring/Summer 2017
Image: Courtesy Burberry cycles has led to an increase in alleged plagiarism,
30 31
The State of Fashion 2017
Copenhagen Fashion
Summit 2016
Image: Courtesy Danish
Fashion Institute
32 33
HOW RED TOURISM BEAT
THE RUSSIAN RECESSION
Tsums general director Alexander Pavlov explains how red tourism
from China and quick-response pricing strategies helped boost sales
at the Russian department store by 40 percent.
by Limei Hoang and Robb Young
MOSCOW, Russia For Alexander Pavlov, the decision were down 10 percent in 2015 and keep decreasing in
to dramatically cut prices at Russias famed luxury depart- 2016, Sukharevsky adds.
ment store was a risk worth taking. Though it was at a Yet one silver lining in the countrys otherwise dim
time when local customers were tightening their belts, market environment is that Russia has emerged as a more
Tsums general director saw an opportunity where others affordable place for foreigners to shop. Typically, Russian
did not. retailers are at a disadvantage because of euro-denom-
Over the last few years, Russia has witnessed a new inated designer fashion and heavy import duties. This
kind of tourist hoping to take advantage of the weak rouble can amount to luxury goods being 20 to 30 percent more
one of the worlds worst-performing currencies over the expensive than the same items at retailers in France or
2014-15 period.35 The Russian economy has been suffering Italy, depending on product category.37
due to a combination of factors including low oil prices However, by the middle of 2016, the rouble was
and international sanctions resulting from geopolitical trading at half the value it was to the dollar two years
tensions with the West. earlier.38 For affluent shoppers willing to travel from
After barely avoiding a recession in 2014 with abroad, unlikely though it seemed, Russia suddenly had
0.7 percent growth the economy contracted by 3.7 the potential of a bargain hunters paradise.
percent in 2015, says Alex Sukharevsky, a Moscow-based If they were fast and bold enough in their approach,
senior partner at McKinsey & Company. The recession Russian retailers could now finally offer globally compet-
continues into 2016, but it is expected to be limited to 1-2 itive prices to help compensate for the shortfall in
percent with forecasts improving as oil prices rebound. domestic spend. Pavlov wasted no time adjusting Tsums
Most analysts expect a return to modest growth in 2017 at prices down to make the department store even more
around 1 percent. attractive to international customers hungry for anything
Official data released in August 2016 by Rosstat, from Armani to Zegna.
Russias statistics service, showed that Russians real After slashing the prices of handbags, Pavlov says
Olga Maltseva / Getty Images
disposable incomes had fallen at the fastest pace in seven the company soon tripled sales of its accessories business
years.36 Many Russian consumers have been struggling to which led him to cut prices on shoes and finally on ready-
maintain the lifestyles to which they became accustomed to-wear. The risk he took to lure in foreign shoppers by
in the boom years. discounting paid off, he says, resulting in an estimated 40
Consumer confidence experienced a double-dip percent year-on-year sales increase for Tsum between
decline in 2014-16, although the drop has been more 2015 and 2016.
modest than during the 2009 crisis. Overall retail sales What makes Tsums 2016 business illuminating is
35
not only its role in helping to make Russia an unexpected
international shopping destination. It is the fact that
After we lowered our prices,
many of those who Pavlov attracted were from China. we started advertising inside
After we lowered our prices, we started advertising
inside airports and airplanes and we connected later with airports and airplanes and we
them on social networks so we were able to increase sales
with the Chinese by five-fold, says Pavlov.
connected later with them on
For Asian tourists in particular, it is often easier to
come to Moscow rather than travel to Europe, he adds,
social networks so we were
referring to the shorter flight time from cities in China to able to increase sales with the
Moscow compared to destinations in Western Europe.
The Chinese spent around $1 billion just in Russia Chinese by five-fold.
in 2015 and 60 percent of it was on shopping, according to
various estimates.39 Rosstats data reveals that the number
of Chinese tourists increased 65 percent year-on-year
from 2014 to 2015. It counted 677,619 of them in 2015, but
this figure does not include Chinese visitors coming for
business or other purposes besides tourism. Therefore
the total number of Chinese visitors to Russia was actually
twice as high.
The positive trajectory continued in the first half
of 2016. In fact, a Federal Agency for Tourism tally of all
inbound tourists to Russia revealed something interesting.
While the total number of foreign visitors was down 5
percent year-on-year, Chinese visitors were up 9 percent,
earning them the rank of fifth highest out of all nationali-
ties visiting Russia.
Fashion Index
further by -0.5-0 percentage points in 2016
Total fashion
Dec 2005 = 100
11
The McKinsey Global Fashion Index (MGFI) is composed
of more than 450 public and private companies
10
spanning across market segments, product categories, EBITA
and geographies, created to track the industry's 9
margin
in %
performance through three key variables - sales, operating
profit, and economic profit - going back to 2005. 8
Forecast
6
0
2004 2006 2008 2010 2012 2014 2016
EBITA: Operating profit measure Earnings Before
Interest, Taxes, and Amortization
Source McKinsey Global Fashion Index 2016
The fashion industry is one of the largest and Exhibit 7 McKinsey Global Fashion Index predicts ries, or the top or bottom line of mainly public Exhibit 9 Despite slowing sales growth and declining
most value-creating industries in the world the fashion industry will grow 2-2.5% in 2016; companies, MGFI looks at the entire industry. profit margins, MGFI shows that economic profit in
the lowest level since the financial crisis the industry has doubled since 2009
above media, transportation, and even commer- Obtaining a clear picture of the industry as a
cial and professional servicesyet its performance Total fashion whole is important because all the segments are Total fashion
tracking remains largely fragmented and is not Dec 2005 = 100 interconnected, and consumers shop across the Dec 2005 = 100
reported systematically across market segments, whole range, so when one part of the ecosystem
300 300
product categories, operating models, or regions. changes this will affect all the other parts. MGFI
Although not directly comparable, if the fashion tracks three key performance variablessales,
industry were a country, its market size would operating profit, and economic profitgoing Economic
Profit
equate the seventh-largest GDP in the world42, back to 2005 (Exhibits 7-9). In addition to the top
before the likes of India and Italy. The McKinsey 200 and bottom line, the index also tracks economic 200
Global Fashion Index (MGFI) was developed to fill Sales profit (s. glossary) as a measure of value creation
the gap in understanding around this ecosystem to determine how much each company had to 2x
and provide a global and holistic benchmark invest to generate its performance. These variables
for the entire fashion industryfrom luxury to 100 are further broken down for six price segments: 100
discount players. The index is composed of more luxury, affordable luxury, premium/bridge,
than 450 public and private companies, repre- mid-market, value, and discount. The index covers
Forecast
38 39
The State of Fashion 2017
Exhibit 10 Throughout the report, we refer to 6 fashion market segments, which have been created Exhibit 11 Over the past decade, the top 20% of fashion companies created 100% of the
using a price index across a wide basket of goods and geographies economic profit for the industry
100%
PRICE SEGMENTS BRAND EXAMPLES BASKET EXAMPLE
Mens jeans1 Top 20%
High
2180%
Luxury Tom Ford >$315
Chanel
Overall industry performance years, which has seen a 6 percent compound Product category performance is slowing rapidly: in 2016, it is forecast to be down
The business sentiment captured above is also annual growth rate (CAGR) for value and 9 percent In 2016, athletic wear is projected to grow at to 3.54.0 percent. This development is due to
borne out by the actual outcomes we expect for affordable luxury, the highest rate for any of the 8.08.5 percentmore than twice as fast as former luxury consumers trading down to cheaper
in 2016. After years of stable growth rates, the segments since 2013. any other category. This is consistent with its options, which puts pressure on profit margins.
industry is expected to face a major slowdown in Affordable luxury players benefited from 10 percent CAGR of the past decade, driven by Similarly, although watches and jewellery
2016, dipping from 5.0 percent growth in 2015 to consumers trading down from luxury, particularly consumers more active lifestyles, the rise of are expected to maintain a constant growth
2.02.5 percent growth in 2016 (Exhibit 12). As amongst Chinese consumers. In North America athleisure, emerging brands in the high-end of 1.52.0 percent in 2016, this is a slowdown
the McKinsey Global Fashion Index shows, this especially, the affordable luxury segments growth segments, and product innovations. As athletic from the previous decade. According to MGFI,
is the slowest growth fashion has seen in the past was driven by new players operating with the posi- wear continues to grow, it will become a category compounded annual sales growth here between
decade, a period during which the industry has tioning of designer quality at affordable prices. with the ability to compete on equal terms 2005 and 2015 was the highest of any category
consistently outpaced global GDP growth, having However, their profit margins are expected to with clothing and footwear, particularly in the at 11.0 percent. The largest impact is due to the
recorded 5.5 percent between 2005 and 2015 continue to decline, especially after 2016, due to a mid-market and premium segments. In line with shift on luxury spending, particularly for watches.
(Exhibit 7). The 2016 slowdown has affected all pricing arbitrage disadvantage across geographies the general slowdown of the luxury segment, Watches have suffered especially from reduced
market segments and product categories across and fluctuating foreign exchange rates. subdued growth of just 1.01.5 percent is expected gifting in China, decreased tourism over the past
the board. Nonetheless, fashion is still outper- The value segment also continued to grow in for clothing and footwear. year, and competing wearable technology gadgets.
forming global GDP growth43 at 2.02.5 percent 2016, particularly as a consequence of large global Over the past decade, bags and luggage have The same is true for higher-end jewellery, so
though not at its historical excess of one to two players expanding geographically. As indicated by been a consistently impressive source of growth, actual growth in this category will come from mass
percentage points. The negative impact on sales the MGFI, the only segments that have seen sales at rates often as high as 10.0 percent. This growth offerings.
across all segments is the result of a volatile global and profit margins increase are discount and value
environment, reduced tourism, and the economic players, which have increased their economic
Exhibit 12 We expect fashion industry growth will slow to 2-2.5% in 2016 slowest
slowdown in China. Speculation and uncertainty profit over the past five years and created signifi- in Luxury at 0.5-1%, fastest in Athletic wear at 8-8.5%
over the impact of the outcome of the election in cant value for the industry. With its clearly defined
the United States could further impact the critical value proposition, the value segment has been
holiday shopping season if consumer sentiment taking share from discount this year. Moreover, GLOBAL FASHION SALES GROWTH 2015-2016
dampens. supermarkets and hypermarkets selling items at
In line with slowing sales growth, there has discount prices are also suffering, with many of FASHION INDUSTRY GROWTH 201516
also been no margin improvement: the amount by these closing this year; accordingly this has led
which revenues exceed costs is down by up to 0.5 to mixed results and a neutral projection for this GLOBAL Total industry 22 %
percentage points. Over the past three years, prof- segment.
itability growth has tailed off in spite of continued The biggest losers, however, have been the SEGMENT Luxury 1 %
sales growth, expected to deliver a profit margin of luxury and mid-market segments. Hit by chal-
Affordable luxury 33 %
only 9.09.5 percent in 2016. This is the result of lenges in the past decades most-bankable growth
wider sales growth slowdown, rising costs, and also markets, such as China and the United States, Premium/Bridge 22 %
lower pricing power by fashion companies, due to growth in the luxury segment is expected to slow Mid-Market 12 %
increased competition, price transparency and to 0.51.0 percent this year versus the 8.0 percent
Value 23 %
rampant discounting. CAGR recorded between 2010 and 2015. In 2016,
The lack of significant differences in perfor- the struggle of the mid-market segment seems Discount 22 %
mance of product categories for the most part unlikely to end. According to the MGFI, over the
suggests that the main driver of sales and profit is past five years this has been the slowest-growing
CATEGORY Clothing 11 %
the positioning of each brand and the value propo- segment at 5.0 percent CAGR, with a sharp drop
sition it communicates to consumers. in operating profit margins of 4.0 percent. Given Footwear 11 %
the high spread between the best and worst-per- Athletic wear 88 %
Market segment performance forming companies, its clear that many of these Bags and luggage 34 %
In terms of market segments, the biggest winners players are not communicating a clear value prop-
Watches and jewellery 12 %
in 2016 have been affordable luxury and value, osition to consumers. This year, growth should
which have outperformed all of the other segments be moderate and driven by large established Other accessories 23 %
by 1.01.5 percentage points (Exhibit 9). This is companies, and particularly e-commerce players.
consistent with their growth over the past three Source McKinsey Global Fashion Index 2016
42 43
II.
INDUSTRY
OUTLOOK 2017
percent growth.
However, a significant
Exhibit 13 40% of survey respondents believe conditions for the fashion industry will
improve in 2017
37%
weightsespecially in
40%
Will get worse
(67% in 2016)
Question How do you expect conditions for the fashion industry to develop over the course of the next 12 months?
Source BoF-McKinsey Global Fashion Survey, September 2016
47
The State of Fashion 2017
In terms of sales our analysis suggests that Market segment performance achieved from 2005 to 2015 (6.0 percent CAGR continue to grow by expanding their geographic
the fashion industry will grow 2.53.5 percent in In 2017, we expect general growth improvements for luxury, and 5.0 percent for mid-market). footprint, store networks, and channel offerings.
2017, up from 2.02.5 percent in 2016 (Exhibit for all segments except discount. The probable Nevertheless, this is still an improvement over Though growth between 2016 and 2017 will not
14). While this represents a slight recovery, it is winners will continue to be the value and afforda- 2016. Both segments should benefit from the rise improve, some players should be able to counter
not yet at the historical 5.5 percent annual growth ble-luxury segments, which we believe will see of fast-growing e-commerce players, particularly the pressures on the discount segment exerted by
it enjoyed for many years. Driven by the factors 3.0-4.0 percent and 3.54.5 percent sales growth, in the mid-market. Growth could also be further the growing value players.
above, and in particular a rebalancing environ- respectively. Both segments should benefit from impacted by new economic policy in the United
ment in China and North America, growth in shifts from other segments, as more consumers States, including international trade and taxation. Product category performance
2017 will likely be in line with GDP growth expec- trade down from luxury to affordable luxury and However, we expect the discount segment to We do not expect a single hero product category
tations. Given the ongoing impact of political trade up from discount to value. continue to grow at 2.03.0 percent for another in 2017, as most will grow in line with the overall
changes across countries and recent election Although growth improvement is antici- yearthe slowest-growing of all segmentsand industry, increasing one or two percentage points
in the United States, world GDP forecasts and pated for the luxury and mid-market players, below historical growth levels. Some players will from 2016. Athletic wear is expected to remain
other macroeconomic indicators such as oil and they are still expected to underperform in terms almost certainly struggle to grow and defend their the absolute category winner next year, main-
commodity prices are highly speculative. Due of both overall industry growth and their own market share against value players and discounters taining sales growth of 6.57.5 percent, but this
to continuing global challenges, fashion will not historical growth. Anticipated growth rates in offering higher-quality products at low prices, represents a weaker pace than in 2016. Although
again in 2017 outpace GDP growth by multiple 2017 for the luxury and mid-market segments are adopting their offer to reach consumers through double-digit growth for athletic wear overall
percentage points, as it did over the past decade. 1.52.5 percent, approximately half the rate they multiple channels. Others, nonetheless, will likely appears to be a thing of the past, its sub-category
Exhibit 14 In 2017, McKinsey Global Fashion Index predicts fashion industry growth will
improve to 2.5-3.5%, in line with GDP but not above
SEGMENT Luxury 1 % 12 %
Affordable luxury 33 % 34 %
Premium/Bridge 22 % 34 %
Mid-Market 12 % 23 %
Value 23 % 34 %
Discount 22 % 23 %
CATEGORY Clothing 11 % 12 %
Footwear 11 % 12 %
Athletic wear 88 % 67 %
Bags and luggage 34 % 45 %
Watches and jewellery 12 % 23 %
Other accessories 23 % 34 %
48 49
The State of Fashion 2017
Exhibit 15 Executives continue to name volatility and uncertainty as the biggest challenge for 2017,
of athleisure is expected to continue growing at dealing with volatility, uncertainty, and the shifts and improvements in customer engagement as the biggest opportunity next year
that pace through 2017.46 Watches and jewellery in the global economy (Exhibit 15), followed by
will likely see a single-percentage-point increase growth in sales and profitability. In addition, % of executives Global economy Consumer Fashion system
in growth rate in 2017 to 2.03.0 percent. fashion executives continue to see competition
Although conditions will improve for high-end from online players as one of their top three chal- TOP 6 CHALLENGES
watches and jewellery, with projected growth lenges for next year. Last, supply chain improve-
of 1.02.0 percent, the main growth driver is ments, decreasing foot traffic, and the speed of
projected to be mass (fine, costume/silver) the fashion cycle weigh equally on their mind Dealing with volatility,
uncertainty and shifts
16
jewellery. Overall, the homogeneity projected as challenges to face in 2017. On the one hand, in the global economy
across product categories makes channel this combination of challenges underlines the
strategy and clear value propositions all the more pressures executives will face from the global Sales and
profitability
10
important for companies to emerge as the winner economy, changes in consumer behaviour, and growth
among product categories. the internal workings of the fashion system. On
the other hand, these challenges are countered Competition
from online and
9
Sources of growth by the opportunities they see to improve their pure-play players
Though more positive about industry perfor- performance through focusing on improving the
mance in 2017 than 2016, industry players remain customer experience, omnichannel integration, Supply chain
6
aware of the challenges that lie ahead in 2017. and the digitisation of the value chain. improvement
According to survey respondents, the most- Interestingly, in 2017 the fashion industry
pressing challenge next year will continue to be plans to focus on organic growth over cost Decreasing foot
traffic and offline
6
retailing pressure
TOP 6 OPPORTUNITIES
Customer engagement
and improvement of
13
channel experience
Omnichannel
9
integration
Digitalisation of
8
the value chain
Product
innovation and
6
creativity
See now,
5
buy now
Improvement
3
in China
Question What do you think will be the single biggest challenge and the single biggest opportunity for the fashion industry in 2017?
Source BoF-McKinsey Global Fashion Survey, September 2016
51
The State of Fashion 2017
Exhibit 17 62% of executives surveyed say they will invest in omnichannel integration, e-commerce and
cutting. According to the BoF-McKinsey Global profits, fashion companies will also rely on some digital marketing in 2017
Fashion Survey, only 5 percent of business exec- cost improvement levers that go beyond the
utives believe that cost alonerather than low-hanging fruit, such as the standard sourcing % of executives
saleswill be the key focus for increasing profits optimisation. Instead, executives plan to focus on
(Exhibit 16). The sentiment is that the potential productivity and process improvements, which SALES GROWTH AND INVESTMENT
to cut costs further is about to be exhausted: over shows the maturity of sourcing as a lever for cost
recent years companies have deployed multiple cutting (Exhibit 18). Omnichannel
levers to further reduce cost and have still had In 2017, the fashion industry has the oppor- integration,
e-commerce,
62
to find profits elsewhere. This seems likely to tunity to stabilise and reset. Next year offers an digital marketing
produce a renewed focus on top-line growth opportunity for fashion companies to work hard
coupled with an emphasis on continuous perfor- to grow, learning from the lessons of 2016. The CRM capabilities
and VIP loyalty
41
mance management. Key investments for growth ten key trends for next year reflect the complex programmes
are expected to come from omnichannel integra- yet exciting journey the fashion industry can
tion, e-commerce, and digital marketing (Exhibit expect. These are derived from a variety of qual- 40
17). Additionally, organic growth through itative and quantitative analyses, desk research, In-store experiences
improved consumer relationship management expert interviews, the BoF-Mckinsey Fashion
(CRM) and in-store experiences should remain survey of industry executives and the foundation IT capacity for value
25
key drivers in 2017. In an effort to improve of existing BoF and McKinsey research. chain digitisation
Exhibit 16 Only 5% executives said that they would focus more on cost improvements
Question What are the top 3 priority areas for your company in 2017?
to improve company performance in 2017 Source BoF-McKinsey Global Fashion Survey, September 2016
5%
% of executives Exhibit 18 27% of executives surveyed say they will reduce costs in 2017 by increasing employee
productivity and leveraging lean processes
% of executives
Cost improvement
COST IMPROVEMENTS
Org structure
and employee
16
productivity
34%
Sales growth
End to end
(lean process)
11
61%
opportunities
6
Combination of the above Review store network
Reduce product
assortment
6
complexity
Question What will you focus more on in 2017 to improve your companys performance? Question What are the top 3 priority areas for your company in 2017?
Source BoF-McKinsey Global Fashion Survey, September 2016 Source BoF-McKinsey Global Fashion Survey, September 2016
52 53
2017
The State of Fashion 2017
INDUSTRY OUTLOOK
NEW YEAR,
NEW PATTERNS
01. 02. 03. 04. 05. 06. 07. 08. 09. 10.
Volatility is the Chinas City-based Working harder Opportunities to Feeling good is See-now, buy- Investing more to Digital innovation Fashion conglomerates
new normal. fundamentals, strategies trump to keep up serve the young looking good: now and other nurture local goes behind will continue to
Geopolitical including growth country-based with smarter and the old more fashion disruptions to clientele: 2017 the scenes: intensify their focus on
instability, of the middle and strategies: a new shoppers: better: fashion players will start the fashion cycle: will be the year of digitisation will big brands, creating
terrorism, Brexit, upper classes, class of rapidly- always-on companies will profiting from expectations organic growth be the key to space for other brands
and stalled trade remain strong and growing wealthy consumers will need to fine tune the wellness set by the faster by deepening supply chain and industry outsiders
deals will all the government's cities in newly become ever-more and diversify movement, rather pace of fashion relationships efficiency, lowering such as private equity
increase a new fiscal policies influential markets sophisticated, the way they than competing and consumer with existing procurement and family owners
pervasive sense are expected to are becoming more technology- approach both with it desire for instant clients, rather costs and the to acquire targets
of uncertainty in improve conditions central to the driven, and harder retired and gratification must than through enhancement
the global in 2017, but evolution of fashion to predict. millennials be addressed geographic, of sourcing
economy. uncertainty consumers channel and opportunities
remains store network
expansion
Global Internet
Consumption
P.
113
min
Federal
Brexit election
negotiations in Germany
60
elections First year
in France, for new US
Iran, president
3.7%
E.
South Korea
= 25%
51
Communist 46 min
Party min
BUY
TTIP / CETA
141
of China
25
negotiations quinquennial
congress
27
60%
min
War
on TPP
suspension
mega cities
Y-O-Y NOW 0.7b
GROWTH
ISIS
million
2014 2018 2014 2018
new Upper/ 2010 2020 2011 2017
Upper-Middle Mobile Desktop
class households
in the next
ten years
A variety of Growth of Upper/ New emerging The consumer The 60-plus age The amount of 15+ major Growing a compound 25% Fashion Strong growth in
political events Upper-Middle cities will have spends more and segment will ac- money spent fashion labels annual growth rate Executives see M&A activity
remain unsolved class households larger populations more of his digital count for nearly on gym have announced of more than 50 IT capacity for expected in 2017
and will cause 2015-2025 helps than mature time on mobile 60 percent of memberships/ See-Now, percent, the global value chain
volatility in 2017 to secure countries, e.g. devices by 2018 consumption yoga classes is Buy-Now location-based-ad- digitization as
as the world long-term by 2020 4x times as much growth in Western constantly collections vertising market is the key investment
adjusts to them fundamentals Istanbul > Austria as on the desktop Europe and increasing for 2017 expected to exceed area for 2017
Northeast Asia 10 bilion USD in 2018
54 55
The State of Fashion 2017
GLOBAL ECONOMY
Exhibit 19 54% of global executives believe economic conditions will remain volatile over
the next decade
30% 10%
POCKETS OF GROWTH GLOBAL SYNCHRONICITY
Uneven, volatile, but high Rapid globally distributed growth
global growth: Uncoordinated underpinned by broadening
efforts to resolve structural productivity increases:Tech-
and near-term demand nology and information flows
challenges lead to uneven increase, near-term demand
success and difficulties challenges are overcome, major
in international economies tackle structural
economic policies. challenges to growth.
24% 36%
tential to disrupt the entire fashion value chain. costs. As a result, companies will likely need to
Indeed, a recent report by the U.S. Senate Commit- adjust their strategies in four ways: 1) adopt a
tee on Armed Services reflects the potential for an consumer-driven mindset that adjusts in real
increase in activity from various terror organisa- time to changes in consumer needs; 2) build REGIONAL CRISES GLOBAL DOWNSHIFT
tions in the year ahead, perhaps to record levels.47 agile supply chains that guarantee operational Volatile and weak global growth: Countries navigate near-term
Another source of uncertainty is the lingering readiness; 3) diversify their brand, category, and Near-term demand issues prove demand challenges, but
issue of Brexit, with pending departure negotia- geographical portfolios: as a top executive of a too challenging, and long-term structural challenges linger.
tions with the EU. Anticipation of the impact of the global conglomerate advised, to balance perfor-
structural issues are left unresolved. International linkages are
United Kingdom potentially leaving the European mance it is important to know how to take
Single Market has already caused the British advantage of one region while another one is Financial flows become more somewhat strengthened,
pound to fall to 168-year lows, and it is impossible in a downturn; 4) safeguard their cash flow by volatile, with more frequent and leading to new opportunities
to say exactly how the negotiations will proceed or managing costs. Finally, even the most successful powerful shocks. for growth.
to what timetable.48 There is also some uncertainty strategy requires an agile organisational model to
about the future of existing and proposed trade have impact. Source McKinseys Global Economics Intelligence analysis; McKinsey Global Executive Survey Results, Sept 2016
56 57
The State of Fashion 2017
Exhibit 20 China will remain central to fashion with 28% of growth in the number of upper
middle and upper class households until 2025
% of global Million
U/UM class U/UM class
household households
growth 2025
Indonesia 23 5 42
Brazil 10 2 39
Egypt 9 2 23
02. Chinas comeback? With China playing such a significant role in the
Russia 8 2 40 global fashion business, and especially as it has
been the source of so much growth over the past
few years, the question on everyones mind is: will
Mexico 8 2 28 China come back in 2017?
Fashion executives believe that the
slowdown is temporary. Indeed, over the long
Nigeria 8 2 16
term, the fundamentals of Chinas fashion
market are still sound: the increasing wealth of
Other 153 30 620 its middle class, the growth of mobile shopping,
and the increase in personal consumption. China
is still expected to contribute 28 percent of the
worlds new upper-middle and upper-class house-
holds between 2015 and 2025, versus the United
Global States 3 percent (Exhibit 20). In addition, China
503 100 1376 is expected to pull further macroeconomic levers
growth
in order to stimulate investment and consump-
tion. For instance, rating agency Moodys raised
Source McKinsey Global Institute its forecast for Chinas 2017 economic growth
58 59
The State of Fashion 2017
in the wake of significant fiscal and monetary 3. Urban engines 2017, fashion companies need to refine the way brands in the next year will be to nurture deeper
stimulus policies in 2016.50 Chinese authori- they deploy their product assortment at a city local relationships with clients in the cities that
ties have shored up the economy through cheap For many years, forecasters have been high- level, and assess where to invest in future growth. matter for them.
credit and policy support, including the central lighting urbanisation as a key trend. A new class Cities such as Tianjin in China and Delhi in India In addition to tailoring their strategies to
banks monetary easing and lowering banks of rapidly growing cities in newly influential are among the fastest-growing jewellery markets, local clients and growing urban centres, fashion
reserve requirement ratios and cutting interest markets is becoming wealthy enough to provide while one of the footwear hotspots is Mexico City. players that operate in emerging markets should
rates. Combined, these factors should offset the shopping hubs for consumers in a way that makes Winning in one city will not necessarily translate expect increased competition from local brands
reduction in gifting consumption that was them for the first time central to the evolution into winning across categories and vice versa. stepping up their game and professionalising to
eliminated through policy changes in recent of fashion. Over the last 30 years as many as 400 The importance of cities suggests that take advantage of the same opportunity. In the
years. million Chinese citizens moved to cities, but designs will have to be aimed at specific cities Indian market, for example, overseas mid-market
Chinese consumers will also have increasing the new wave of urbanisation taking hold now and specific demographics within them. Kuwait players such as H&M, Zara, Uniqlo, and Mango
access to fashion in 2017. E-tailers such as in China, India, and other populous nations is City in the Middle East, Guadalajara in Mexico, are now facing competition from Indias own
Alibaba and Shangpin are making fashion more focused this time on middle-weight cities, which and fourth-tier Chinese cities are becoming hubs largest retail groups, which are entering the
accessible for consumers across the country. are now beginning to reach key population for creativity and product inspiration. More fast-fashion space, aiming to compete not only
Additionally, the growth of mobile has been one thresholds, prompting the rise of urban centres broadly, we should see fashion companies shifting on price, but on product offering and speed
of the most significant developments for the that will provide continued growth opportuni- from basing decisions at the national market to market.53 Our analysis suggests, that in the
fashion industry in China. Historically, consump- ties for fashion companies.51 Pune in India and level, which has become a blunt instrument, and coming year more local competitors will try
tion of fashion had been driven by travel and Harbin in China, both middleweight cities in instead monitoring, strategizing, and activating similar moves in Africa, the Middle East, China,
tourism: Chinese consumers had to travel to their respective countries, will have seven million business on a city level. The challenge for global Korea, and other important growth markets.
America and Europe, and consumers from third- and eight million citizens, respec-
tier cities had to travel to Beijing or Shanghai to tively, in 2017almost as many as Kuwait City's skyline
Yasser Al-Zayyat/Getty Images
seek out fashion goods. However, the emergence London or Paris.52 As these second-
of mobile has made it easier for consumers to tier cities attract more and more
access global brands. residents, and workers and families
Global luxury goods will also become more continue to migrate from rural to
attractive in 2017. This will be driven by products urban settings, the opportunities for
arriving in China without delays and at the same fashion companies expand accord-
prices. The shortening of distances and concen- ingly. Over the next few years growth
tration of information will lead to a consolida- will shift globally toward the east and
tion of channels. With the growing integration of south, and stem from the urbanisa-
online-to-offline channels, Chinese consumers tion of emerging cities, as identified
wont need to worry about where to buy from and by McKinseys FashionScopea city-
paying different prices. level growth forecasting tool for the
Of course, there are also headwinds to fashion industry.
contend with. While the internal macroeconomic In the global low-growth envi-
foundation is solid, pending foreign and inter- ronment, what growth does exist will
national economic policy in the United States be highly granular and uneven when
due to the upcoming political transition can viewed by categories. It is important,
directly impact Chinese consumption. Further, therefore, to look at cities specifically
an economic stimulus does not directly translate through a category lens. For example,
to the consumer buying more. For example, after according to projections from Fash-
years of rapid growth, brands will also have to ionScope, between now and 2025
reckon with the fact that peoples closets are full, Hong Kong may be the number
customers are becoming more discerning, and an one city for jewellery sales and the
increasing numbers of Chinese consumers are number two for bags and luggage,
putting more effort into acquiring new experi- yet it is not even in the top ten fast-
ences as well as learning, personal improvement, est-growing cities for clothing or
and health. footwear. When making decisions in
60 61
The State of Fashion 2017
Q&A 3 INTERNATIONAL VOGUE EDITORS ON URBANISATION AND ON THE MOOD IN THEIR MARKETS
And in China, because it was compli- Another very distinctive demo- Obviously when
ANGELICA CHEUNG
cated to start with, its even more graphic in the country is the millen- youve just lost
difficult for people to catch whats nial consumer, a segment many
millions on the
happening, she concedes. luxury brands are turning their focus
EDITOR-IN-CHIEF OF VOGUE CHINA
This is what Vogue China is towards and one that Cheung under- stock market,
trying to do: introduce a certain stands well, having this year launched you are not in
Cautiously optimistic about Chinas structure into a chaotic market, Vogue Me, a bimonthly spin-off the mood to
comeback in 2017 she adds, referring to the magazines
newer services providing creative
magazine targeting Chinas post-
1990s generation.
go out and buy
diamonds or an
and marketing solutions for luxury Its a totally different gener-
Herms bag,
brands. ation. You need to know how their
Cheung is optimistic that the mind works and how you influence
she concedes.
People here are not easily and health. Anything to do with a Chinese market will get back on them and who influences them. Its Some kind of
impressed anymore, cautions healthy lifestyle and a healthy self, track, likening much of the current the Me Generation. Its about my market adjust-
Angelica Cheung, editor-in-chief of she adds. spending slowdown to a passing identity, its about my feelings, its ments affect how
Vogue China. Now, even in China, These and other consumer mood among consumers that is an about how I see the world. Theyre people spend,
consumers look at their wardrobe changes have added another layer inevitable consequence of the vola- not just a younger version [of the but usually
and they have everything, so they of complexity for brands trying to tility of the Chinese stock market existing consumer]. Thats why I
thats quite
say, Okay, if I get anything new, it penetrate deeper into China, espe- in 2016 and ongoing questions was adamant I wouldnt call it Vogue
must be for a good reason. cially at a time when its economy around the long-term stability of the Girl or Teen Vogue [because] I dont temporary.
An increasingly discerning, has been slowing. Deceleration of property market. want people to mistake me for just
educated and fragmented consumer Chinese market growth has taken Obviously when youve just doing a younger Vogue.
profile is not the only issue that a heavy toll on the global luxury lost millions on the stock market, Young Chinese consumers like
luxury brands will have to unpick in industry, which has come to rely you are not in the mood to go out the readers of Vogue Me have signif-
China next year. Now that Chinese heavily on the region and given rise and buy diamonds or an Herms icant spending power but they also
are spending overseas, they put to concerns about its future. bag, she concedes. Some kind of have very different attitudes and
more effort into experiences and Everything is changing; the market adjustments [do] affect how values in comparison to the next
learning, personal improvements world is changing; China is changing. people spend, but usually thats generation up. Typically, they are less
quite temporary. wedded to brands and more open
The ongoing urbanisation to mixing global brands with local
of the country and growth of its labels and at a variety of price points.
third- and fourth-tier cities provide As for whether local brands
longer-term growth opportunities, will be a growth vector in 2017,
believes Cheung. China is still a Cheung is cautiously optimistic. I
growing market andthere are a lot went to the shopping mall a couple
of other Chinese cities still waking of months ago andI feel that a lot
up to this whole new world [of of the Chinese brands are doing
luxury fashion]. much better products now because
You cant really treat China as theyve been learning fastsome of
one whole thing. The North, South, them are becoming a lot stronger.
East, West, Centre they are all Unfortunately, they came
different. The climate is different, into the market when all the inter-
the lifestyle can be different, the national brands had a great growth
language is often very different period. But now its coming into a
and what they are influenced by is slight adjustment period so its a
Vogue x Bvlgari Event In Beijing
VCG/ Getty Images different. confusing period [for them ahead].
62 63
The State of Fashion 2017
Im the only editor-in-chief I know to shop, and Kuwaits market is all Its just like We all A lot of people dont understand this been an awakening that you can
who was a retailer, says Deena about the natives. You dont see speak Spanish [but] we do two issues every month, create amazing products [here] and
Miami and
Aljuhani Abdulaziz, the Saudi foreigners as much. says Karla Martinez, the editor-in- people will want them.
Los Angeles but were
princess who was appointed editor- I think that Doha has defi- chief of Vogue Mexico and Vogue So far, Brazil, Mexico and
in-chief of Vogue Arabia, a new nitely tried to learn from Dubais or comparing very different Latin America. Colombia have dominated the scene
Cond Nast edition that launched mistakes, she says. So Doha has Washington culturally so one First we do the Latin America both in terms of spending power and
in 2016 as a digital-first publica- always separated itself as trying to to New York. of my biggest edition, which means the whole the influence of their local fashion
tion. The print magazine is due to be the cultural centre, a little bit We are global challenges is region except Brazil [which has its weeks. Theres [already] a lot more
be released across the Middle East of a sophisticated outlook But citizens. to be sure that own separate edition of Vogue in people buying local Mexican and
and North Africa (MENA) region in Jeddah has become interesting and Portuguese] and the Caribbean. Colombian design [and] when the
were speaking
early 2017. Vogue Italy just did an event there We also put special local inserts dollar and the euro are so strong,
Its 250 million women; though its not where the [biggest]
to these different in our edition for [distribution in] you get less of us Latin Americans
21 countries. Arabs are ready for spending is. Riyadh is definitely countries. Chile, Peru and Colombia and then [shopping in Europe and North
Vogue; its long overdue, adds where the money is. we do our Mexican edition, which America but] that is an opportunity
Abdulaziz, who for 10 years owned In addition to their unique obviously goes to Mexico. for our own fashion industries here,
a multibrand designer fashion demographics and variety of Martinez, who was appointed she explains.
boutique called DNA with branches wealth profiles, the major cities in June 2016, explains: We all speak Now, even more Latin
in Riyadh, Saudi Arabia and Doha, of the MENA region can have Spanish but [were] very different American retailers are beginning to
Qatar. very divergent styles and tastes. culturally [so] one of my biggest accent their international product
Highlighting the diversity of Designs popular in Jeddah are not challenges is to be sure that were offering with local designers
the Arab market region, Abdulaziz necessarily popular in Riyadh, for speaking to these different countries. scouted at growing South American
points to the very distinctive nature example, even though they are both Especially now that the Latin fashion weeks held in Buenos Aires,
of the urban markets that she will in the same country, Saudi Arabia. American region has really come into Argentina, Santiago, Chile and
target next year. Beirut, Lebanon Its just like [the differences its own in terms of [local] fashion. Lima, Peru. Peru has a huge cotton
and Cairo, Egypt remain very between] Miami and Los Angeles Colombia has had an amazing industry and now they have some
important but the region has experi- or comparing Washington to New fashion industry for years [and] now interesting fashion too, she says.
enced instability. York, she says. We are global youve got people like Johanna Ortiz Some regional retailers have
Kuwait City is very inter- citizens. who has built an amazing business. recently begun to source hard-to-
esting and cool and I think it will In Mexico, theres a lot of amazing find merchandise from smaller
keep on going for a long time. The textile industry artisans [and] in Central American fashion weeks in
reason is that the natives, at one Buenos Aires, for example, you Guatemala, Honduras and Panama.
point, started to understand that can get really cool [unique] mens I think people are kind of special-
they dont necessarily have to travel fashion. So I think theres kind of ising in what they do best.
64 65
The State of Fashion 2017
McKinsey
most important in predicting growth. of high-income households.
Looking at more detailed segments, the The main anticipated shift involves
more surprising the answers become. jewellery growing in relative importance at the
FashionScope
It is widely acknowledged that growth expense of clothing. Two main factors are behind
in fashion is shifting to China and emerging this development. First, urban consumers should
countries in Asia Pacific. The FashionScope be able to redirect a larger share-of-wallet from
analysis indicated that by 2025 approximately basic needsclothing and food itemsto discre-
31 percent of global fashion sales will come from tionary needs such as healthcare, education,
China, while another 11 percent will come from recreation, and personal purchases, including
One of the most dramatic aspects of global development is the the emerging countries in Asia Pacific. Today jewellery. This shift is happening particu-
these two regions combined account for just 30 larly fast in China; while basic consump-
growing power of cities and the extreme growth and concentra-
percent of sales. As these regions grow, the share tion, including clothing, accounted to almost
tion in a limited number of megacities. According to McKinsey of more developed regionsespecially Europe 70 percent of consumer spending in 1985, this
Global Institute, the worlds top 600 cities (in terms of absolute and North Americawill decrease. figure is projected to be roughly 30 percent in
GDP growth) are expected to drive almost two-thirds of global More interesting is the concentration of 2025. Second, growth in the number of house-
economic growth by 2025.54 This urbanisation is also seen in that growth in cities, particularly those of emerg- holds in China and India, which are traditional
the developed world, but massive urbanisation will continue ing-market countries. These countries have more jewellery-consuming countries, and the general
than 400 middleweight cities, which are expected growth of high-income householdswhich are
across emerging markets, which is where three-quarters of
to account for 50 percent of global GDP growth expected to grow by 78 percent globally over the
these large cities are located. In 2025, there will be 60 cities by 2025. Between 2015 and 2025, the majority of next ten yearswill likely have a direct impact on
with a population of at least 10 million, or megacitiesmore the top ten fastest-growing fashion cities are in the growth of jewellery sales over the long term.
than double todays number of urban behemothswhere GDP emerging market nations, including Shanghai, What it takes to win in one category in one
will exceed $250 billion. Tianjins GDP, for example, will be the Chongqing, Shenzhen, Mexico City, and Delhi. city is not necessarily the same as what it will
size of Swedens GDP in 2025. Nonetheless, mature cities remain important in take in a different category in the same city, or the
This extreme growth concentration offers an immense terms of absolute size, and are also continuing to same category in a neighbouring city. At a time
grow. New York, Tokyo, and London in particular when organic growth is essential but resources
opportunity for fashion brands and retailers. Accordingly, Fash-
remain some of the biggest fashion markets for investment are in short supply, FashionScope
ionScope is a tool developed by McKinsey to help them navigate across all categories (Exhibit 21). offers granular insight into the specific drivers of
and prioritise cities and focus resources in targeted market- The most unexpected insights come from success for each category in each geography.
entry plans. looking closely at what drives growth in specific
66 67
The State of Fashion 2017
2025
Mumbai, and Shanghai
will enter the rank
New York (2) Hong Kong (2) Los Angeles (2) Shanghai (5) Tokyo (2)
London (3) Tokyo (3) Tokyo (3) Beijing (6) New York (3)
Los Angeles (4) Los Angeles (4) London (4) Chongqing (8) Seoul (5)
Shanghai (9) London (5) Houston (6) New York (2) Osaka (4)
Osaka (5) Mexico City (7) Dallas (8) Guangzhou () London (8)
Rhein-Ruhr (6) Buenos Aires (8) Washington (7) Shenzhen () Singapore (7)
68 69
The State of Fashion 2017
ALWAYS CONNECTED
ON TO OTHERS
Product review and
Always connected, experience sharing
shopping around on blogs and other
the clock, but time MORE CONSCIOUS social media
constrained Values oriented
and in search
for authenticity
Source McKinsey
70 71
The State of Fashion 2017
underlying attitudes and behaviours that drive meaning and a connection to brands.
millennial consumers to spend their money In 2017 fashion companies should consider
on fashion, starting with the fact that they tailoring their strategies for the old and the
should not be categorised as a single group but young not by focusing on their age, but by iden-
as distinct attitudinally driven segments of tifying the distinct values that resonate with
consumers. According to the 2016 McKinsey members of those two groups.
72 73
The State of Fashion 2017
74 75
THE FASHION SYSTEM
LESSONS IN
programmes and open-to-buy. Decisions in the the course of 2017 as brands release the figures
higher-end segments to change the timing of the for their full retail seasons. At the moment it
FASHION
sell-in process will have ripple effects across the is not clear how many SKUs sold out after the
entire industry as all brands face the need to adjust see-now, buy-now collections were released,
to the best competitive model and number of whether brands and retailers replenished those
product drops for their business.
Early results from the see-now, buy-now
items after the show, and how accurately they
forecasted demand for the remainder of the IMMEDIACY
collections launched in September 2016 point season. Even if the financial results are positive,
to the possible evolution of this model. Beside there are questions surrounding the impact of Tommy Hilfiger and Burberry are
its novelty factor, which has garnered media this new model on production and manufac- two of the largest and most
attention and served as a valuable marketing turing processes, and the investment required to
platform, the brands pioneering the model are get there. More importantly for high-end brands, committed players to adopt the
reporting positive figures. For instance, straight there is uncertainty about how it may impact so-called See Now, Buy Now
after the Tommy x Gigi runway event, several creativity.
of the under-$100 pieces were already sold The optimum model is not clear cut and the
experiment to their operating
out online.64 The day after Burberrys show, its decision to adopt a new cycle will likely depend model. What can these disrup-
tions tell us about how fashion
Courtesy Burberry
Regent Street boutique sold out several styles on the creative process, the brand, the product
from the collection before noon, and many key category, and a companys distribution, among
pieces appeared to be sold out on the brands other factors. That said, brands are prepared to
immediacy might evolve in 2017?
website within the week.65 Bergdorf Goodman adopt new models if the consumer forces ulti- by Imran Amed and Robin Mellery-Pratt
declared that it had its largest Tom Ford day mately trump the status quo.
76
The State of Fashion 2017
important to help Burberry join all of the dots, he While critics have suggested that this more respon- As Bailey says, Everyone is changing the way they
explains, so that audiences around the world avoid a trans- sive design approach leads to increased levels of plagia- live, work, shop, eat our industry is not immune to
actional relationship whether they be in store, on social rism in the industry, it does offer appreciable commer- that change, and our customers are not immune to those
platforms, or elsewhere. cial advantage. Accounts who wouldnt normally buy on a changes [either].
80 81
The State of Fashion 2017
GLOSSARY
88 89
The State of Fashion 2017
END NOTES
1 McKinsey Global Institute, McKinsey FashionScope. 25 Rachel Sanderson, Roberto Cavalli axes 200 jobs as part of 45 Bernstein, Analyst Report LVMH, October 2016. 2016 https://www.businessoffashion.com/articles/intelligence/
2 International Monetary Fund, List of Countries by Projected restructuring, Financial Times, October 12, 2016, https://www. 46 Deborah Weinswig, How athleisure is lighting up lackluster tommy-hilfiger-gigi-hadid-fashion-immediacy-direct-to-consumer
GDP, October 21, 2016, http://statisticstimes.com/economy/coun- FT.com/content/07ad7fa0-9085-11e6-a72e-b428cb934b78; clothing sales, Forbes, http://www.forbes.com/sites/deborahwein- 70 BoF McKinsey Global Fashion Survey.
tries-by-projected-gdp.php George Wilson, M&S set to announce hundreds of job cuts, swig/2016/03/11/how-athleisure-is-lighting-up-lackluster-cloth- 71 Jae-Hee Chang and Phu Huynh, ASEAN in transformation: The
3 International Monetary Fund, World Economic Outlook Update, Financial Times, September 4, 2016, https://www.FT.com/ ing-sales/#30bfd5465684 future of jobs at risk of automation, International Labour Organiza-
January 2016, http://www.imf.org/external/pubs/FT/weo/2016/ content/8991a806-7295-11e6-b60a-de4532d5ea35. 47 James R Clapper, Statement for the Record, US Senate Armed tion, July 2016, http://www.ilo.org/public/english/dialogue/actemp/
update/01/. 26 Limei Hoang, How Burberry is operationalising see Services Committee, Worldwide Threat Assessment of the US Intel- downloads/publications/2016/asean_in_transf_2016_r2_future.pdf.
4 Ibid. now, buy now, Business of Fashion, September 17, 2016, ligence Community, February 9, 2016, https://www.armed-services. 72 Adidas first speedfactory lands in Germany, Adidas, December
5 Ibid. https://www.businessoffashion.com/articles/intelligence/ senate.gov/imo/media/doc/Clapper_02-09-16.pdf. 9, 2015, http://www.adidas-group.com/en/media/news-archive/
6 Financial Times, LVMH: http://markets.FT.com/data/equities/ how-burberry-is-operationalising-see-now-buy-now. 48 Mehreen Khan, Pound slumps to 168-year low Financial press-releases/2015/adidas-first-speedfactory-lands-germany/.
tearsheet/summary?s=MC:PAR; Kering: http://markets.FT.com/data/ 27 Kari Hamanaka, One-hour delivery now reality for American Times, October 12, 2016, www.FT.com/fastFT/2016/10/12/ 73 Bernstein, Analyst Report LVMH, October 2016.
equities/tearsheet/forecasts?s=KER:PAR. apparel, WWD, March 21, 2016, http://wwd.com/business-news/ pound-slumps-to-168-year-low. 74 2016 Preqin Global Private Equity & Venture Capital Report,
7 McKinsey, Global Economics Intelligence Quarterly Executive retail/one-hour-delivery-american-apparel-10395620/. 49 Alan Yuhas, Congress will abandon Trans-Pacific Partner- https://www.preqin.com/docs/reports/2016-Preqin-Global-Pri-
Survey September 2016. 28 Limei Hoang, Designer shake-up at Belstaff , Business of Fashion, ship deal, White House concedes, The Guardian, November 13, vate-Equity-and-Venture-Capital-Report-Sample_Pages.pdf.
8 McKinsey Global Institute, Debt and (not much) deleveraging, July 1, 2106, https://www.businessoffashion.com/articles/bof-exclu- 2016 https://www.theguardian.com/business/2016/nov/12/ 75 Rachel Sandersson,Private equity embraces Italian fashion
Februar 2015 sive/belstaff-frederik-dyhr-steps-down-delphine-ninous-named-col- tpp-trade-deal-congress-obama. revival, Financial Times, July 6, 2015, https://www.FT.com/content/
9 McKinsey, The Modernization of the Chinese Consumer, October lection-creative-director. 51 McKinsey FashionScope 2013 revised 2016. d1a01d6e-20a0-11e5-ab0f-6bb9974f25d0.
2016. 29 Nicole Puglise, Fashion brand Zara accused of copying LA artist's 52 Ibid. Infographic 2016 -1 BoF McKinsey Global Fashion Survey.
10 Can American retailers kick their discounts addiction?, Business designs, The Guardian, July 21, 2016, https://www.theguardian.com/ 53 Suneera Tandon, India will finally get affordable, homegrown Infographic 2016 -2 World Bank, https://www.worldbank.org/en/
of Fashion, April 28, 2016, https://www.businessoffashion.com/ fashion/2016/jul/21/zara-accused-copying-artist-designs-fashion. versions of Zara and H&M, Quartz India, July 27, 2016, http:// publication/global-economic-prospects.
articles/intelligence/can-american-retailers-department-stores-jcrew 30 Chloe Gray, The cycle of fast fashion, Zero Magazine, April 28, qz.com/724268/india-will-finally-get-affordable-homegrown-ver- Infographic 2016 -3 Erika Adams, Can American Retailers
-gap-quit-the-discounting-promotions-drug. 2016, http://www.zero-magazine.co.uk/the-cycle-of-fast-fashion/. sions-of-zara-and-hm/. Kick Their Discounts Addiction?, Business of Fashion, April 28,
11 Discount malls bring Gucci within reach of more Chinese, 31 Cotton Lifestyle Monitor, http://lifestylemonitor.cottoninc.com/ 54 McKinsey CityScope. 2016, https://www.businessoffashion.com/articles/intelligence/
Business of Fashion, March 19, 2015, https://www.businessoffashion. consumer/ 55 McKinsey Global Institute, Urban World: The Global Consumer To can-american-retailers-department-stores-jcrew-gap-quit-th
com/articles/news-analysis/luxury-discount-malls-bring-gucci-with- 32 Imran Amed, Business of Fashion, May 13, 2016, https://www. Watch, April 2016. e-discounting-promotions-drug.
in-reach-chinese; Outlet malls booming in China as department stores businessoffashion.com/articles/right-brain-left-brain/sustainabil- 56 How Charlotte Simone built a multi-million dollar Infographic 2016 -4 McKinsey Global Fashion Index.
feel the pinch, South China Morning Post, updated August 23, 2016, ity-is-out-responsible-innovation-is-in-copenhagen-fashion-sum- scarf brand, Business of Fashion, October 10, 2016, https:// Infographic 2016 -5 McKinsey, Unleashing Fashion Growth City by
http://www.scmp.com/property/hong-kong-china/article/2007950/ mit-environment-nike-patagonia www.businessoffashion.com/articles/news-analysis/ City: McKinsey's "FashionScope".
outlet-malls-booming-china-department-stores-feel-pinch. 33 H&M, Global Change Award, http://sustainability.hm.com/en/ how-to-build-a-multi-million-dollar-fashion-empire-with-a-scarf. Infographic 2016 -6 McKinsey Global Fashion Index.
12 Does anyone expect to pay full price anymore?, Business of sustainability/about/hm-conscious/hm-conscious-foundation/glob- 57 Sijia Jiang, Alibaba's new payment system lets virtual reality Infographic 2016 -7 Google, https://www.google.co.uk/?gfe_
Fashion, November 24, 2105, https://www.businessoffashion.com/ al-change-award.html. shoppers pay by nodding, Reuters, October 12, 2016, http://www. rd=cr&ei=frgbWI-JM4b38AeDsqvgBw#q=fashion+restruc-
articles/intelligence/does-anyone-expect-to-pay-full-price-anymore. 34 Sara Tardiff, Nike Expands Campus in Belgium to reuters.com/article/us-alibaba-ant-financial-vr-idUSKCN12C1N8. turing+2014/2015/2016.
13 Genderless fashion: a fad or the future?, Drapers, April 8, 2016, Become More Eco-Friendly, Architectural Digest, June 58 McKinsey Global Institute, Urban World: The Global Consumer To Infographic 2016 -8 Limei Hoang, How Burberry is operation-
https://www.drapersonline.com/product-and-trade-shows/gender- 3, 2016, http://www.architecturaldigest.com/story/ Watch, April 2016. alising see now, buy now, Business of Fashion, September 17,
less-fashion-a-fad-or-the-future/7006302.article. nike-expands-campus-belgium-more-eco-friendly. 59 Fashionista, August 2016. 2016, https://www.businessoffashion.com/articles/intelligence/
14 Google, https://www.google.com/trends/explore?q=plus-size. 35 Max Seddon, Russia learns to live with the fallen 60 PEW Research Center; Bank of America, Goldman Sachs; US how-burberry-is-operationalising-see-now-buy-now.
15 Dolce & Gabbana reveals first hijab and abaya collection, Time, rouble, Financial Times, April 3, 2016, https://www.ft.com/ Census. Infographic 2016 -9 Limei Hoang, Designer Shake-Up at Belstaff ,
January 5, 2016, http://time.com/4168571/dolce-gabbana-hijab/. content/71e95674-f66f-11e5-96db-fc683b5e52db. 61 Holly Ellyatt, How trillion-dollar millennials are spending their Business of Fashion, July 1, 2016, https://www.businessoffashion.com/
16 London show reflects global boom in Islamic fashion, The 36 Lidia Kelly, Russians' real disposable income falls at fastest pace cash, CNBC, August 17, 2015, http://www.cnbc.com/2015/08/17/ articles/bof-exclusive/belstaff-frederik-dyhr-steps-down-delphine-ni-
Guardian, May 29, 2016, https://www.theguardian.com/fashion/2016/ since 2009: data, Reuters, September 19, 2016, http://uk.reuters.com/ how-trillion-dollar-millennials-are-spending-their-cash.html. nous-named-collection-creative-director.
may/29/london-show-reflects-global-boom-in-islamic-fashion. article/us-russia-economy-income-idUKKCN11P1L9. 62 McKinsey Millennial Survey June 2016. Infographic 2016 -10 Cotton Lifestyle Monitor, http://lifestylemon-
17 McKinsey, Unleashing Fashion Growth City by City: McKinsey's 37 Lauren Sherman, The Price of Transparency, The Business of 63 Nicole Diamant, Athleisure & the rise of wellness tribes, Inter- itor.cottoninc.com/consumer/
"FashionScope". Fashion June 17, 2016, https://www.businessoffashion.com/articles/ brand, http://interbrand.com/views/athleisure-rise-wellness-tribes/. Infographic 2017-1 Global Elections Calendar, The National Demo-
18 Alanna Petroff, Amazon has quietly launched 7 in-house intelligence/the-price-of-transparency. 64 Tyler McCall, The clothes were the least important thing on the cratic Institute, https://www.ndi.org/electionscalendar/.
clothing brands, Money CNN, February 24, 2016, http://money.cnn. 38 Max Seddon, Russia learns to live with the fallen Tommy x Gigi runway, Fashionista, September 10, 2016, http://fash- Infographic 2017-2 McKinsey Global Institute.
com/2016/02/24/news/companies/amazon-fashion-retail-clothing/ rouble, Financial Times, April 3, 2016, https://www.ft.com/ ionista.com/2016/09/tommy-hilfiger-gigi-hadid-fall-2016. Infographic 2017-3 McKinsey FashionScope.
19 George Anderson, Whats killing depart- content/71e95674-f66f-11e5-96db-fc683b5e52db. 65 Tyler McCall, For Burberry, see now, buy now seems to be Infographic 2017-4 Jemma Brackebush, How mobile is overtaking
ment stores?, Forbes, November 23, 2015, http:// 39 Chinese tourism to Russia jumps 63%, working, Fashionista, September 21, 2016, http://fashionista. desktop for global media consumption, in 5 charts, June 14, 2016,
www.forbes.com/sites/retailwire/2015/11/23/ Russia Today, June 10, 2016, https://www.rt.com/ com/2016/09/burberry-september-2016-see-now-buy-now. Zeniths Media Consumption Forecasts, retrieved from: http://digiday.
whats-killing-department-stores/#7631657415cd. business/346065-china-russia-tourists-rise/. 66 Kate Abnett, Are see now, buy now shows driving com/publishers/mobile-overtaking-desktops-around-world-5-charts/.
20 Limei Hoang, Virtual reality hits NYFW, Business of Fashion, 40 Beijing-Havana direct flight helps boost tourism: Chinese Ambas- sales?, Business of Fashion, September 22, 2016, https:// Infographic 2017-5 McKinsey Global Institute: Urban World: The
September 7, 2016, https://www.businessoffashion.com/articles/ sador to Cuba, China Daily, December 29, 2015, http://europe.china- www.businessoffashion.com/articles/intelligence/ Global Consumer To Watch, April 2016.
news-analysis/virtual-reality-coming-to-nyfw. daily.com.cn/business/2015-12/29/content_22851723.htm. are-see-now-buy-now-shows-driving-sales. Infographic 2017-6 Worldwide health club industry
21 Rachel Arthur, Hands-on with Tommy Hilfigers in-store virtual 41 Amie Ferris-Rotman, Russia Welcomes Growing Wave of Red 67 Lauren Sherman and Kate Abnett, BoF's Guide to the revenue by region from 2009 to 2015 (in billion US dollars),
reality catwalk experience, Forbes, October 25, 2015, http://www. Tourists From China, Wall Street Journal, October 31, 2016, http:// Changing Fashion Calendar Tracks New Operating Models Statista, https://www.statista.com/statistics/273065/
forbes.com/sites/rachelarthur/2015/10/25/hands-on-with-tom- www.wsj.com/articles/russia-welcomes-growing-wave-of-red-tour- and Approaches Brand by Brand, The Business of Fashion, total-revenue-of-the-health-club-industry-worldwide/.
my-hilfigers-in-store-virtual-reality-catwalk-experience/#65734d- ists-from-china-1477825201. October 3, 2016 https://www.businessoffashion.com/articles/ Infographic 2017-7 Kate Abnett, Are see now, buy now
ba128a. 42 International Monetary Fund, List of Countries by Projected news-analysis/a-guide-to-fashion-immediacy shows driving sales?, Business of Fashion, September 22, 2016,
22 Eurostat; Moodys Analytics; BLS; McKinsey analysis. GDP, October 21, 2016, http://statisticstimes.com/economy/coun- 68 Limei Hoang, How Burberry is Operationalising 'See https://www.businessoffashion.com/articles/intelligence/
23 FRED Economic Research, https://fred.stlouisfed.org/series/ tries-by-projected-gdp.php Now, Buy Now', The Business of Fashion, September 17, 2016 are-see-now-buy-now-shows-driving-sales.
RETAILIRSA. 43 International Monetary Fund, World Economic Outlook Update, https://www.businessoffashion.com/articles/intelligence/ Infographic 2017-8 Berginsight, http://www.berginsight.com/
24 CBOE Currency Volatility Index, http://www.cboe.com/micro/ January 2016, http://www.imf.org/external/pubs/FT/weo/2016/ how-burberry-is-operationalising-see-now-buy-now reportpdf/productsheet/bi-lba3-ps.pdf
evz/introduction.aspx; October 2016 Market Summary, Cotlook A update/01/. 69 Lauren Sherman, How Tommy Hilfiger Is Rewiring For Infographic 2017-9 BoF McKinsey Global Fashion Survey.
Index, https://www.cotlook.com/information/cotlook-monthly/. 44 ibid. Fashion Immediacy, The Business of Fashion, September 6, Infographic 2017-10 Dealogic, McKinsey Analysis.
90 91
CONTACTS
For any questions on the report or further discussion, please contact a member of
McKinsey's Apparel, Fashion & Luxury global leadership team:
FBIO STUL
SENIOR PARTNER, SO PAULO
Fabio_Stul@mckinsey.com
92