What: The fifth edition of the report co-produced by Business of Fashion and McKinsey.

Why it is important: In addition to exploring scenarios and interviewing experts, this report is based on a worldwide interview of fashion executives from various horizons, opening up new questions or confirming trends within the industry.

McKinsey evaluates that in 2020, fashion companies will see their profit crumble from +4% last year to -90%. This is in relation to two scenarios, ‘earlier recovery’ and ‘later recovery’, which, at best, foresees a return to 2019 levels of activities within Q3 2022. The report does not detect nor indicates trends that were not already visible last year, however, they are all very significantly accelerated by the pandemic:

• The virus is here to stay until international vaccines have played their part, leading to a global recession, itself lowering the global demand for consumer goods (estimated from 0% to -15% in worst-case scenarios),
• A rush to digital as many brands will have to reassess their retail footprint in the light of actual profitability (interestingly, some players are also questioning the ROI KPIs of their stores and how to consider them as part of their marketing set up), due to the foreseeable scarcity of tourists in the near future, and the need to manage the fear of local customers when it comes to gathering in physical spaces,
• Structural changes affecting the way the industry works: reducing or optimizing the size of the collections, reviewing relationships to suppliers and partners (including by ensuring the fairness of treatment), and learning how to work differently in a very volatile context. On top of that, scaling circularity as a way to promote sustainability will be on the top agenda of many leaders from the industry.

All the elements identified in the report were already spotted and described in our White Paper, released at the beginning of November.

The state of fashion 2021