Despite the challenges of her raw material costs, bigger fuel and shipping costs, increasing inflation, the war in Ukraine, and a cost-of-living crisis that is having a negative effect on consumer spending – the global state of fashion in 2023 will witness relative growth.
Figure 1: The global state of fashion in 2023 will witness relative growth. Courtesy: Collected.
A recently published report by McKinsey’s ‘The State of Fashion 2023: Holding onto growth as global clouds gather,’ stated that the recent, hyperinflation and depressed customer feelings have already resulted in lean growth rates in the second half of 2022. The slowdown is likely to continue through 2023. Despite that, the apparel industry has clear area-wise winners and performance within the sector.
Similarly, McKinsey’s report highlighted that there are expected to be clear area-wise alterations in performance within the sector. Whilst Europe is expected to witness lean growth in 2023, the US market is leaned to be more robust with likely growth of 5 to 10%.
Figure 2: Leading region-wise fashion performance in 2023.
In 2023, the fashion market will deliver moderately sluggish sales growth of between –2 and +3 percent, burdened by a shrinkage in the European market (predicted to drop between 1 and 4 percent). China and the USA are likely to fare better, increasing between 2 and 7 percent and between 1 and 6 percent, respectively.
The report also points out that the Middle East fashion market is expected to develop in 2023, along with parts of Asia Pacific, with many respondents planning to surge their operations in these areas in 2023. If these do become higher precedence territories, fashion brands will need to review, put in place, or boost trademark protection for these markets.
The Middle East conventionally has been costly across the board when it comes to trademark safety, but things are starting to move in the right direction. The UAE is now a party to the Madrid System and the Saudi Arabian Registry reduced its official fees earlier in the year, which will surely help. However, brands to plan their trademark protection tactically in this area is still very significant to make the most of their trademark budget.
How to navigate the fast-changing sourcing landscape
In such a scenario, in 2023, fashion brands and retailers, as well as, manufacturing countries will need strong sourcing diversification, supply chain agility, and sustainable operations to navigate the current crunch and effectively sail through 2023.
Figure 3: How to navigate the fast-changing sourcing landscape.
In terms of assessing a range of possible responses, the report discusses the major themes shaping the fashion economy. Reflecting in-depth research and numerous conversations with industry leaders, it reveals the key trends likely to shape the fashion landscape in the year ahead.
In dealing with inflation and geopolitical concerns – the report suggests that fashion companies that can adjust to the growing complexity by updating their operating models and fine-tuning their strategies for supply chain, sales channels, and digital marketing will be best positioned to weather the upcoming storm. Brands and retailers can lean into the following ten emerging consumer trends:
- Global economy:
- Amid global fragility, fashion brands will need careful planning to navigate the many uncertainties and recessionary risks that lie ahead in 2023.
- Regional realities. Understanding where to invest around the world has never been easy, but rising geopolitical uncertainty and uneven economic recoveries related to the COVID-19 pandemic, among other factors, will likely make it even more challenging in 2023. Brands can reevaluate regional growth priorities and hone their strategies so that they are more tailored to the geographies in which they operate.
- Consumer shifts:
- Two-track spending: Consumers may be affected differently by the potential economic turbulence in 2023. Which will increase the demand for resale, rental, and off-price products. Fashion brands should adapt their business models to protect customer loyalty and avoid diluting their brands.
- Gender-fluid fashion is gaining greater pull amid shifting consumer attitudes toward gender identity and expression. For many brands and retailers, the blurring of the lines between men’s wear and women’s wear will require rethinking their product design, marketing, and in-store and digital shopping experiences.
- Formal wear reinvented: Formal dress is taking on new meanings as consumers rethink how they dress for work, weddings, and other occasions. While offices and events will likely become more casual, special occasions may be led by statement-making outfits that consumers rent or buy to stand out when they do decide to dress up.
- Fashion system:
- Direct-to-consumer reckoning. Although brands across price segments and categories have embraced digital direct-to-consumer channels, mounting digital marketing costs and e-commerce readjustments have put the viability of the model into question.
- Sustainability: Sustainability remains to be a crucial theme in the report this year, as the top recognized the opportunity for the fashion industry in 2023. As the industry continues to grapple with its damaging environmental and social impact, consumers, regulators, and other stakeholders may increasingly scrutinize how brands communicate about their sustainability credentials.
- Future-proofing manufacturing: Continued disruptions in supply chains are a catalyst for a reconfiguration of global production. Textile manufacturers can create new supply chain models based around vertical integration, nearshoring, and small-batch production, enabled by enhanced digitization.
- Digital marketing reloaded. Recent data rules are spurring a new chapter for digital marketing as customer targeting becomes less effective and more costly. Brands will need to embrace creative campaigns and new channels, such as retail media networks and the metaverse, to achieve greater ROI on marketing spend and to gather valuable first-party data that can be leveraged to deepen customer relationships.
- Organization overhaul. Successful execution of strategies in 2023 will in part hinge on a company’s alignment around key functions. Fashion executives need a new vision for what the organization of the future will require, focusing on attracting and retaining top talent, as well as on elevating teams and critical C-suite roles to execute priorities such as sustainability and digital acceleration.
How Bangladesh apparel manufacturers will fare in 2023
In contrast, despite the challenges persisting in the global fashion consumer market, the whole apparel demand is really strong. This is reflected in the readymade garment (RMG) manufacturing countries – especially in Bangladesh. Major apparel factories have reported that they are witnessing full capacity till June. While, in the Christmas period, the industry observed significant order growth.
Figure 4: Key consumer trends.
Shovon Islam, Managing Director, Sparrow Group and Chairman of the BGMEA’s Standing Committee on Press and Publicity said to Textile Today, “Fundamentally, the whole fashion apparel industry is very strong and its sales are pretty strong too. For instance, in the Christmas period, fashion sales were really strong across the EU and USA.”
“Overall the fashion market situation is very strong – which is reflected in McKinsey report – growth in the USA is quite strong. Especially women and kids are the winning categories. Although the EU is a little bit weak still it is quite good.”
Figure 5:Shovon Islam, Managing Director, Sparrow Group, Chairman at BGMEA’s Standing Committee.
“Most importantly, anything that is fashion is the clear winner. Not the basic items, rather, good quality fashionable polo T-shirts, casual fashionable shirts are in high demand. For example, my shirt factory is full up to June. And I do not make dress shirts, but rather, casual fashionable shirts – which are fully booked. The same scenario persists in the women category. As we make fashionable ladies’ wear – we are fully booked till June. This tells us that the state of fashion in 2023 is very bright and strong.”
Shovon Islam also added that, in the bottom category, the order is slow, at the same time, in the overall order scenario, order overflow – which was seen in the initial quarter of 2022 – is not there and Shovon Islam stresses that it is due to buyers’ mistake.
“But the brands and buyers are optimistically cautious about their inventory. Because, in the calendar year 2022, brands and buyers have over-bought knitwear and denim categories of garments in the wrong manner. Which is not a fault of the consumer market or the manufacturers. So, brands and buyers have an inventory problem in bought knitwear and denim categories. Similarly, they have scarcity in other garment categories.”
Shovon Islam added that this scenario persists among all the leading brands and buyers, he told, “I have talked to all the top retailers in the world and they all are in the same boat. As a result, we manufacturers are facing challenges – due to buyers’ mistake of wrong buying – as Bangladesh predominantly produces knitwear and denim. That is why we witness a shrink in orders in both knitwear and denim categories.”
“Still the overall market scenario is robust, though it is not as strong as our apparel export target, despite that we will observe sustained growth in 2023. And McKinsey report’s reflection is clearly depicted in our order situation.”
In terms of sourcing shift – Shovon Islam added, “Although USA and EU buyers are placing orders in China, they are not doing it happily. Rather, buyers are sourcing from China due to the country’s capacity and capability. At the same time, they do not want to put everything in the same basket and put everything in Bangladesh. Yes, a lot of buyers are sourcing garments from Vietnam but US and EU buyers are not happy either – because a lot of Vietnamese apparel factories are owned by Chinese entrepreneurs. And western buyers fear that Xinxiang cotton might end up in their garments made in Vietnam. So, it is a bit of a risky factor.”
As for China’s strategy, the BGMEA leader opined that China is moving away from apparel manufacturing and refocusing on other high-end industries. He added, “At the same time, China is producing fashion apparel for its domestic market. They are reducing their dependency on US apparel buyers – which is one of the reasons, we witness that the country is sourcing fewer garments from abroad. And Bangladesh’s apparel export to China is going down every year.”
In terms of the Asia-Pacific and Middle East apparel market boost in McKinsey report and what Bangladesh apparel industry should do, Shovon Islam said, “A few years back, Bangladesh apparel industry took the initiative to develop the new market as part of apparel export diversification. And we are getting good results in new markets – namely, India, South Korea, Japan, Australia, etc. Already, the export earning has crossed $6 billion in new markets.”
On a different note, Shovon Islam said, “China is working strongly to capture the Middle Eastern apparel market. I personally know that China has specifically launched programs to capture the Middle East apparel market. Big Chinese fashion makers have set up their new marketing and R&D wing, developing fabric and styles to capture the Middle East apparel market. Because China believes that the Middle East apparel market will grow significantly and McKinsey report also says that.”
Bangladesh’s apparel industry should also put focus on the Middle East apparel market. Because in the Middle East market, our penetration is very low. And the Middle East apparel market demand is a bit different – which is more on the high-end quality garment side. So, we should focus on this aspect of the Middle East apparel market.”