Asia set to lead global fashion recovery, finds McKinsey report

19 February 2018

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.”

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OC&C survey of 15,000 consumers uncovers distinct Gen Z characteristic

30 January 2019

An emerging borderless tribe; that’s how OC&C Strategy Consultants has characterised Generation Z following a comprehensive study of the globe’s youngest generation.

As the older members of Generation Z reach maturity, born from the mid-to-late-nineties and on, the international strategy and management firm OC&C Strategy Consultants has undertaken an in-depth study of the world’s generational habits and perspectives, describing those of Gen Z as belonging to an emerging borderless tribe – hungry for uniqueness but with the most globally consistent attitudes and behaviours.  

In an effort to gain a clearer understanding and insight for business and retailers into the youngest generation, OC&C altogether surveyed more than 15,000 respondents across four generations (Baby Boomers, Gen X, the Millennials and Gen Z) residing in nine countries, including 2,000 citizens in China, with Gen Z’s accounting for approximately one fifth of the Chinese population and 30 percent of world’s overall total.Chinese Gen Z ratio of household spend compared to globe

The findings of the survey demonstrate that while Gen Z is similar to its Millennial predecessor in certain respects, such as featuring experience-led and socially conscious consumers, the younger cohort has developed some distinct traits which set them apart – fittingly, one example being the desire as individuals to stand-apart. The other defined markers however may strike as an immediate contradiction; Gen Z is the most likely to be influenced by peers, and as a group is the most closely aligned in behavior and perspective at a global level.

The ready explanation to this apparent contradiction is of course social media. As stated by the report, whereas Generation X, the Millennials and Gen Z – the latter soon to account for one third of all consumers worldwide – may all shop online and are all influenced by social media, Gen Z’s list of influence extends further on digital media channels; “Brands’, friends’ and celebrities’ social media and blogs have bigger influences for Gen Z than for older generations.”

“China’s Generation Z are the first Chinese generation to be born in a fully digital age,” said Adam Xu, who was recently made Partner with OC&C. “They are an extremely tech-savvy crowd, willing to share their feelings and experiences in forms of online reviews, blog posts and other means of self-expression. Chinese Gen Z are more likely to make their social media public compared to their Western counterparts who prefer to limit their social media audience to people they know in real life. This suggests that information sharing extends even further beyond their immediate circles for Chinese Generation Z, a trend that presents immense marketing potential if leveraged appropriately.”

One area where this is apparent is in terms of brand discovery channels, with Gen Z’s citing a friend’s influence in 21 percent of recent occasions where they’d been introduced and subsequently purchased an item from a fresh brand, compared to 14 percent of Baby Boomers and Gen X’s and 17 percent of Millennials. The influence of social media and the internet can also be evidently credited for Gen Z’s sharing the greatest cross-border similarities in behaviours and attitudes compared to other generations.Social responsibility priorities for Gen Z As to those shared behaviours and opinions, Gen Z is distinctly socially-minded, or its members at least state a variety of social concerns as having a greater level of priority than their generational peers – building on the Millennial mind-set. Issues such as human rights, diversity, and building local communities all attract concern at far higher levels than the generational average, while for the Gen Z’s of China, environmental-friendly consumption features prominently – at 25 percent compared to the 13 percent global Gen Z average.

While those of Gen Z expect brands to adhere to high ethical standards, and are for example more willing to take extra steps to research a brand’s supply-chain and employment practices before making a purchase, the stated environmental concerns of the newest generation don’t necessarily translate however to broader purchasing activity, with its shoppers favouring passing trends and showing the lowest tendency to preference products that can be used repeatedly. This would suggest opportunities for brands which can meet both the Gen Z need for individual style while leading on social and ethical issues.

And for those same brands, retailers and manufacturer looking to the Gen Z market, it may be worth noting than the Chinese segment of young consumers – most still just teenagers or even younger – account for a massive 13 percent of direct or influenced total household spending in the country – 10 percent of that from their very own pockets – against comparative overall figures of just 3 percent in the US and UK. “These statistics are enough to urge brands to rethink their business strategy if they want to capitalise on China’s booming market,” concludes OC&C Strategy associate partner Veronica Wang.