Deciphering the ‘state of fashion’ in 2024

With the global luxury industry starting 2024 with a clean slate, brands face the same question they encounter at the beginning of each new year: Will the next 12 months bring more of the same, or a major shift in trends and consumer demand? In their recent “State of Fashion 2024” report, McKinsey and the Business of Fashion (BOF) outlined some of the economic, technological, and consumer trends that could shape the experience of luxury and fashion brands in the year ahead. As usual, the report is comprehensive, delving into various areas such as the fashion industry's resilience amid economic ebbs and flows, regional growth disparities, and shifting consumer behavior. The word “uncertainty” resonates across executive sentiment, reflecting concerns over fragile consumer confidence in key markets like the US, Europe, and China. This sentiment underpins projections of modest retail sales growth, ranging from 2 percent to 4 percent for the year. To better understand the uncertainties of 2024, here are the key insights extracted from the report. Intensifying global economic challenges weigh on consumers In 2024, the global economic landscape confronting the fashion industry is set to remain turbulent, with the IMF forecasting a global GDP growth deceleration to 2.9 percent, down from 3 percent in 2023. This downturn, attributed to slowdowns in advanced economies, is marked by persistent inflation and cautious central bank policies. In Europe, the economic climate is particularly somber, overshadowed by geopolitical tensions and the lingering possibility of recession in major economies such as Germany and the UK. The Eurozone's tepid recovery, with GDP growth projected to inch up from 0.7 percent in 2023 to 1.2 percent in 2024, is marred by low consumer confidence and a persistent cost-of-living crisis. Meanwhile, in the US, though averting a full recession, there's an anticipation of GDP growth slowing to 1.5 percent in 2024, with consumer confidence undermined by factors such as the resumption of student loan repayments and high credit card debt. In contrast, China's economic challenges are unique – it’s grappling with deflation and a struggling property sector that is crucial to 25 percent of its economy. Despite high savings rates, consumer spending remains restrained, signaling a cautious approach to discretionary purchases. For the fashion industry, these disparate regional trends necessitate nuanced and carefully tailored strategies. Brands and retailers face the dual challenge of navigating a complex economic environment while balancing the need for strategic price adjustments against the backdrop of globally weakened consumer spending power. Climate crisis to hit brands where it hurts In 2024, the fashion industry confronts an urgent climate crisis, no longer a distant threat but an immediate challenge demanding action. The industry, responsible for 3 percent to 8 percent of global greenhouse gas emissions, faces escalating risks due to its reliance on regions severely impacted by climate change. From raw material production to manufacturing and logistics, every aspect of the industry is at risk. For instance, cotton production in major exporting countries like India and Pakistan has been hit hard by extreme weather, affecting global supply. Manufacturing hubs like Vietnam and Bangladesh face not only economic losses but also serious threats to worker health and safety due to rising temperatures and flooding. The report highlights the need for a significant shift in how the fashion industry addresses climate risks. This involves a comprehensive approach, integrating climate strategies into all business operations, from boosting resilience in supply chains to prioritizing worker safety with operational adjustments. Long-term commitments must also focus on innovation and sustainable practices, including the development of new materials and recycling methods. Moreover, collective action through industry-wide pacts and collaboration is essential to mitigate the industry's environmental impact. As the economic and human costs of climate change mount, the fashion industry must adapt swiftly and strategically to safeguard its future and contribute to global climate goals. Major shifts in travel and consumption In the wake of the Covid-19 pandemic, global travel is experiencing a significant resurgence, with McKinsey predicting travel flows will reach up to 110 percent of pre-pandemic levels by 2024. This rebound is fueled by the shift towards remote and hybrid work models, which has freed many from the constraints of office-based routines. In the US, for instance, full-time office work is now a requirement for only 39 percent of companies, down from 49 percent at the start of 2023. This flexibility has given rise to the trend of "workations," blending business trips with leisure, a phenomenon that's gaining traction globally. Concurrently, the intersection of travel and shopping is becoming increasingly pronounced, with luxury brands like LVMH and Kering reporting significant sales boosts driven by tourism, especially by American tourists in Europe. The report notes that 80 percent of respondents plan to shop for fashion items while traveling in the upcoming year, with 28 percent expecting to spend more than in the previous year. As travel habits evolve, the fashion industry is recalibrating its strategies to capture this mobile consumer segment. While traditional fashion capitals like Paris and London continue to draw tourists, there's a growing appetite for less conventional destinations such as Edinburgh, Lisbon, and Osaka. Changing face of influence (and influencers) Capturing consumer attention online is becoming increasingly challenging for fashion businesses in 2024. Instagram, a previously dominant platform for engagement, has seen a significant drop in both engagement rates and post reach. The report reveals a growing weariness of traditional influencer marketing, with 68 percent of respondents expressing dissatisfaction with the volume of sponsored content and 65 percent turning away from fashion influencers. Instead, a new guard of influencers, characterized by their authenticity and unique content styles, is resonating strongly with Gen Z consumers. This demographic shows a clear preference for TikTok, which has surpassed platforms like Instagram in daily usage time. Influencers like Alix Earle, Madeline Argy, and Sabrina Bahsoon have gained substantial followings by embracing their individuality and relatability, moving away from polished, aspirational content. Fashion brands are adapting to this shift, engaging in deeper partnerships with these new influencers. Examples include Hugo Boss featuring Bahsoon in a highly-viewed TikTok post and Gucci collaborating with Amelia Dimoldenberg for a creative project. These partnerships go beyond traditional sponsorships, with brands integrating influencers into their marketing campaigns and events in more meaningful and authentic ways. To capture consumer attention in 2024, fashion marketers must innovate beyond polished campaigns, embracing humor, self-awareness, and the unique creative styles of this new generation of influencers. The rise (and rise) of the great outdoors The aftermath of the Covid-19 pandemic has catalyzed a surge in consumer interest in outdoor activities and healthier lifestyles, a trend that has significantly benefited the outdoor sportswear industry. In the US, participation in activities like camping and hiking has seen a remarkable increase, from 60 percent in 2020 to 82 percent recently. This shift is mirrored in the UK and China, with nearly half of UK respondents reporting more time spent outdoors and over 400 million Chinese engaging in outdoor sports by the end of 2021. This rising trend has buoyed the "gorpcore" fashion movement, blending outdoor functionality with urban style, leading to a 24 percent revenue increase for the outdoor category over pre-pandemic levels. Brands with roots in outdoor performance, such as The North Face and Salomon, are experiencing significant growth and expanding beyond their core customer base. Luxury brands are capitalizing on the outdoor trend through noteworthy collaborations such as The North Face and Gucci, as well as On and Loewe. This crossover has witnessed a fusion of distinctive styles, with luxury brands incorporating performance features and outdoor brands embracing fashion-forward designs. However, as the gorpcore trend cools, a shift towards "quiet outdoor" styles is emerging, focusing on minimalistic designs while retaining technical features. This evolution is reshaping the competitive landscape across price segments, challenging brands to maintain their unique identities while appealing to a broader customer base that values both utility and style. What does it all mean for China? In 2024, the Chinese fashion market is navigating a landscape of economic recalibration and evolving consumer behavior. The economy, transitioning from rapid growth to a more stable phase, is encountering deflationary pressures and a cooling property market, both crucial to its economic vitality. This shift has implications for consumer spending, marked by a noted rise in savings rates and a cautious approach to discretionary spending. Despite these challenges, there remains a nuanced optimism within the Chinese fashion sector. The luxury market, in particular, continues to demonstrate resilience, buoyed by a domestic consumer base with a growing appetite for high-end fashion. This trend is underscored by the search volume for "outdoor" on Tmall, which surged by over 600 percent between 2021 and 2023, reflecting a burgeoning interest in lifestyle and wellness-oriented fashion. However, the overall outlook for the Chinese fashion industry remains tempered by broader economic uncertainties. With global influences and internal market dynamics at play, the sector is poised at a crossroads, balancing between maintaining growth momentum and adapting to the new economic realities. The path ahead for China's fashion industry will likely be defined by its ability to innovate and resonate with a consumer base that is increasingly discerning and value-conscious.

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Deciphering the ‘state of fashion’ in 2024