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2023 may represent uncertainty for many industries, but for retail fashion brands, consumers are still flocking to sustainable luxury retail brands.
First, the bad news: most fashion brands are not very promising
according to Fashion-McKinsey State of Fashion Business 2023 SurveyThe majority in fashion – 84 percent of industry executives – expect zero growth or declining market conditions in 2023. This is a significant change from the survey conducted in 2022, when 91 percent of executives predicted that market conditions would improve or remain the same. This is not surprising; Price inflation has taken a brutal toll on fashion brands, complicated by the Ukraine conflict. European fashion retailersStruggles to move products in the global economic downturn.
Fast fashion brands like H&M and Zara Hundreds of shops across Eastern Europe have closed due to the conflict, and rising prices haven’t helped European consumers return to old-school “retail therapy.” Many fashion brands like Zara and H&M has seen sales growth. By 2022, most will want to cut costs. H&M It recently cut 1500 jobs By 2022, nearly $190 million in savings will be achieved. According to the survey, 64 percent of European fashion brand executives expected market conditions to worsen.
According to the report, retailers are also positioning themselves for lower spending among the drivers of fast fashion: the youth. “we will see [younger and less affluent] “Customers spend more carefully on on-demand items and often wait for promotions before making a purchase,” said Richard A. Hein, CEO of retail group Urban Outfitters in August 2022. That’s not surprising, but it could spell trouble for U.S. retail brands, which saw a 36 percent increase in discounts on products in 2022 over 2021.
In 2023, more than 97 percent of survey respondents said they expect selling costs, including higher cost of goods sold and general and administrative expenses, to further cut into profit margins. And that’s if budget-conscious shoppers can afford it.
“Seventy-six percent of Gen-Z and 79 percent of Millennials report that they are dipping into savings, taking out more loans, or taking on more jobs to manage their money.
According to the report, three-quarters of retail fashion brand executives plan to raise prices to cover costs. It’s a move that could scare away the critical demographic they’re looking for now—Gen Z. Sustainable fashion options As price risk increases.
The good news: sustainability is hot right now.
according to Fashion-McKinsey Business According to the report, retail fashion brands in the sustainability space, or those that develop sustainable alternatives, have the best chance of capturing new audiences.
According to the report, sustainable clothing options, such as sales and clothing rentals, are growing—and new business models are taking hold with brands such as Lululemon, Dr. Martens, and Patagonia, among others, offering them in recent years either on their own or through third-party sales. Parties.
“Resale revenue is expected to grow to $47 billion in 2025, up from $15 billion in 2022 — 11 times more than apparel retail as a whole, albeit from a lower level,” the study reports.
The luxury market is still strong and is leading the way against market trends, according to brands ThredUp, catering to luxury buyers’ demand for name brands and affordable prices. Luxury consumers are prime movers for marketers, driving luxury product revenues above inflation.
“According to McKinsey’s analysis of publicly listed companies, the luxury segment’s top line grew 27 percent in the first half of 2022, compared to the same period in 2021,” the report said. Luxury groups such as LVMH and Kering have reported double-digit growth for the first nine months of 2022 and raised their revenue forecasts.
What it means for marketers:
Businesses may need to raise prices, and there is a limit to how much discounting can be sustainable for retail brands. As retailers face more competition from digital resale outlets like ThredUp, marketers must be creative in reimagining how to appeal to key demographics like Gen Z. This means getting ahead of the curve and creatively matching marketing strategy to consumer priorities. Gen Z is likely to return to physical stores or through apparel merchandising campaigns. Luxury brand sustainable e-commerce.
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