Asia set to lead global fashion recovery, finds McKinsey report

19 February 2018 4 min. read
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Asia is set to strut its stuff on the global fashion stage according to a report from management consulting firm McKinsey & Company, with the region’s fashion industry ready to lead the way in both international growth and innovation.

Strategy and management consulting firm McKinsey & Company has released its sophomore insights into the global fashion industry, forecasting a tripling in sales growth for the coming year after a period of stagnation. The rebound, however, will be mostly driven by developing markets, and especially by an Asian region which is primed to capitalise on its enormous economic clout.

Compiled in collaboration with online fashion industry authority The Business of Fashion (led by founder and CEO Imran Ahmed, a former McKinsey consultant in London), the McKinsey State of Fashion report further predicts the trends that will shape the year ahead, including an increasing consumer taste for personalisation and online convenience, along with industrial developments in artificial intelligence and disruptive technologies.

“Many incumbents with developed countries as their core markets face a stagnating sales outlook and profitability. Furthermore, adoption of disruptive technologies like advanced robotics, mobile internet, advanced analytics, virtual and augmented reality and artificial intelligence is accelerating, with the potential to disrupt entire industries – including fashion,” the report stated.Forecasted fashion industry sales growth, 2017-2018While total sales growth is tipped to triple across the globe (from 1.5% to between 3.5% and 4.5%), the projected boost is far from evenly spread across continents and regions, with emerging markets set to significantly outperform the traditional fashion economies of the West.

The growth forecasts for North America (1% - 2%) along with the developed markets of Europe and APAC (2% - 3%) are well shaded by the emerging markets of Europe, the Middle East, Africa and Latin America (between 5% and 6.5%), and totally dwarfed by the up to 7.5% in projected growth for the rising markets of the Asia Pacific.By 2018 more than half of apparel and footwear sales will originate outside of Europe and North AmericaAs a ready demonstration of this increasing industry tilt toward the East and South, sales of apparel and footwear in emerging markets this year are for the first time set to eclipse those of Europe and North America, with Asia accounting for 40% of the total global sales and its online apparel market alone forecast to reach a worth $1.4 trillion in just the next two years.

This shift in the global balance of industry power is perhaps further reflected in the levels of optimism expressed by fashion executives surveyed in differing markets, where the 58% of respondents in emerging markets who expect conditions to get better or at least remain the same in the coming year sharply contrasts with the 68% of their counterparts in established markets who imagine business will get worse.Asian trailblazers

Yet, the report notes that it’s not just a matter of Asia’s status as a global focal point for sales and the competition for new consumers which is driving the region’s growing influence. “Global influence is not gained solely by scale or purchasing power. What has been helping to push Asia closer to the fashion industry’s centre of gravity is a combination of supply chain leadership, tech innovation and Asian-led international investments,” the report states.

“The region is increasingly the source of technology innovations. Asia now boasts two-thirds of the world’s 45 e-commerce unicorns, and China is one of the world’s most active digital investment and startup environments”, the authors continue, concluding, “Asia is no longer waiting for Western companies to step up. Asian players will assert their power and leadership even more through pioneering innovations and global-scale investment and expansion.”