Home / Knowledge / News / Fashion / Fashion key value-creating industry in 2016: Report
Fashion key value-creating industry in 2016: Report
22
Dec '16
Despite the wider economic slowdown in 2016, fashion has been a key value-creating industry for the world economy, says a recent report. Most of the industry value is captured by a small percentage of players, with the top 20 per cent creating 100 per cent of total economic profit and the bottom 20 per cent contributing an economic loss of 18 per cent.

Among the top 20 per cent are Adidas, Burberry, Chow Tai Fook, Richemont, Fast Retailing, Hermès, H&M, Inditex, L Brands, Luxottica, LVMH, M&S, Michael Kors, Next, Nike, Nordstrom, Pandora, Prada, Ralph Lauren and TJX. Fashion is essentially a winner-takes-all industry and a handful of companies that make the right decisions and execute flawlessly are the ones that reap the lion’s share of the rewards, says the State of Fashion 2017 report by McKinsey & Company.

After years of stable growth rates, the industry is expected to face a major slowdown in 2016, dipping from 5 per cent growth in 2015 to 2–2.5 per cent in 2016. As the McKinsey Global Fashion Index (MGFI) shows, this is the slowest growth fashion has seen in the past decade, a period during which the industry has consistently outpaced global GDP growth, having recorded 5.5 per cent between 2005 and 2015.

The negative impact on sales across all segments is the result of a volatile global environment, reduced tourism, and the economic slowdown in China. The lack of significant differences in performance of product categories for the most part suggests that the main driver of sales and profit is the positioning of each brand and the value proposition it communicates to consumers.

In terms of market segments, the biggest winners in 2016 have been affordable luxury and value, which outperformed all of the other segments by 1–1.5 percentage points, says the report. This is consistent with their growth over the past three years, which has seen a 6 per cent compound annual growth rate (CAGR) for value and 9 per cent for affordable luxury, the highest rate for any of the segments since 2013.

Profit margins of affordable luxury players are expected to continue to decline, especially after 2016, due to a pricing arbitrage disadvantage across geographies and fluctuating foreign exchange rates.

As indicated by the MGFI, the only segments that have seen sales and profit margins increase are discount and value players, which have increased their economic profit over the past 5 years and created significant value for the industry. The biggest losers, however, have been the luxury and mid-market segments, according to the report.

In 2016, athletic wear is projected to grow at 8.0–8.5 percent—more than twice as fast as any other category, states the report. This is consistent with its 10 percent CAGR of the past decade, driven by consumers’ more active lifestyles, the rise of ‘athleisure’, emerging brands in the high-end segments, and product innovations. (KD)

Fibre2Fashion News Desk – India


Must ReadView All

Courtesy: Fancycrave.com from Pexels

Apparel/Garments | On 22nd Jun 2018

EU's retaliatory duty on US apparel takes effect

As part of the three-pronged response outlined by the European...

India to be largest cotton producer in 2018-19: USDA

Textiles | On 22nd Jun 2018

India to be largest cotton producer in 2018-19: USDA

For the fourth consecutive season, India is expected to be the...

Organic Basics gets Polygiene help for advanced underwear

Apparel/Garments | On 22nd Jun 2018

Organic Basics gets Polygiene help for advanced underwear

Danish firm Organic Basics is working with Swedish company Polygiene, ...

Interviews View All

Siddharth Biyani
Mangalam Industries Pvt Ltd

‘The manufacturing sector is improving day-by-day, becoming better in...

Victor Chao
Esmetex

‘In future, clothing boundary lines will become increasingly blurred.’

Sanjay Desai & Ashish Mulani
True Colors

Digital textile printing will be the technology of the future

Sugandha Bhardwaj

<div>New Delhi-based Brinjal Designs Pvt Ltd manufactures home furnishing...

Anupam Arya

<div>Jaipur-based Fabriclore Retailing Pvt. Ltd. is attempting to revive...

John Kelley

Textile Events is one of the largest textile fair in the United Kingdom,...

Lynda Kelly
Suominen Corporation

Suominen Corporation is a manufacturer of nonwovens as roll goods for...

Paolo Ocleppo
Sandvik Hyperion

Paolo Ocleppo, Rotary Cutting Segment manager, Sandvik Hyperion discusses...

Silke Brand-Kirsch
Schlegel und Partner

Silke Brand-Kirsch, executive partner of Schlegel und Partner, a leading...

Jay Ramrakhiani
Occasions Elegance Wear

It is believed that by early 19th century, Varanasi weavers had moved away ...

Ritu Kumar
Label Ritu Kumar

‘Classics will return’ "There are a lot of people wearing western clothes ...

Judy Frater
Somaiya Kala Vidya

Among the many honours showered on Frater, including Fulbright and Ford...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

Leave your Comments


June 2018

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category


Related Categories:

Advanced Search