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: Asmara Group

Apparel/Garments | On 20th Sep 2018

Fragmented nature of Indian apparel sector major challenge

A major challenge for the Indian apparel sector is its fragmented...

Courtesy: Aditya Birla Retail

Apparel/Garments | On 20th Sep 2018

Indian Aditya Birla Retail to be acquired by Samara-Amazon

India’s Aditya Birla Group has signed a deal to sell Aditya Birla...

India's 2018-19 forward cotton export contract up by 100%

Textiles | On 20th Sep 2018

India's 2018-19 forward cotton export contract up by 100%

Rise in demand from China, lower domestic prices and depreciation of...

Interviews View All

Md Hanifur Rahman, Aman Group

Md Hanifur Rahman
Aman Group

The level of understanding the job role and organisational requirements...

Karan Toshniwal, Orange O Tec

Karan Toshniwal
Orange O Tec

Contemporary industry is paying more and more attention to the...

Dharmendra Shah, Ozone PB Spintex Limited

Dharmendra Shah
Ozone PB Spintex Limited

‘We have made huge investments to ensure quality yarn production.’

Rikesh Mistry,

Rikesh Mistry

Jupiter Comtex Pvt Ltd, established in 1973, started its textile machinery ...

Carolin Russ,

Carolin Russ

Weko, Weitmann & Konrad GmbH & Co KG, based in south Germany, is...

Ashish M Amin,

Ashish M Amin

Premier Looms is a leading provider of cutting-edge machinery and...

Kevin Nelson, TissueGen

Kevin Nelson
TissueGen

Kevin Nelson, Chief Scientific Officer, TissueGen discusses the growing...

Iago Castro Asensio, RCfil Distribuciones S.L.

Iago Castro Asensio
RCfil Distribuciones S.L.

Iago Castro Asensio, International Business Manager of RCfil...

Ayyappa Nagubandi, Broadcast Wearables Pvt Ltd

Ayyappa Nagubandi
Broadcast Wearables Pvt Ltd

Hyderabad-based Broadcast Wearables has come up with the country's first...

Chandani Sahi, By Chandani

Chandani Sahi
By Chandani

By Chandani is a womenswear prêt couture brand with fusion silhouettes by...

Karan Arora, Karan Arora

Karan Arora
Karan Arora

Bridal couture created with rich Indian heritage, exquisite craftsmanship...

Pranav Mishra, Huemn

Pranav Mishra
Huemn

Designers Pranav Mishra and Shyma Shetty’s Huemn is known for its...

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


September 2018

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

news category


Related Categories:

Advanced Search