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


Interviews View All

Headhonchos, Indian textile value chain

Headhonchos
Indian textile value chain

Adopt innovative techniques, go for automisation rather than being...

Manuj Terapanthi, Texaura

Manuj Terapanthi
Texaura

Transparent supply chain and fair trade will boost sustainable market

Vasanth Kumar, Max Fashion India

Vasanth Kumar
Max Fashion India

‘Traditional high-street retailers are now willing to offer franchisees to ...

Hardik Sanghvi,

Hardik Sanghvi

Idealin Fogging Systems has been engaged in designing and manufacturing...

Milva Morani,

Milva Morani

Brighi Technologies began in 1970 with trading and repairing sewing...

Urmil Arya,

Urmil Arya

Sushila International, a well established textile organisation established ...

Isabel Herranz, European School of Business & innovation

Isabel Herranz
European School of Business & innovation

Cutting-edge ideas like the Internet of Things and artificial intelligence ...

Silke Brand-Kirsch, Schlegel und Partner GmbH

Silke Brand-Kirsch
Schlegel und Partner GmbH

<div>Schlegel und Partner is the market research and consultancy company...

Alfonso Marra, Klopman

Alfonso Marra
Klopman

It was in 1968 that Klopman introduced the concept of poly/cotton workwear ...

Vaanee Bhatia, Gritstones Clothing

Vaanee Bhatia
Gritstones Clothing

<div>Delhi-based Gritstones Clothing offers quality and exemplary style...

Akta Adani, India Boulevard

Akta Adani
India Boulevard

India Boulevard is a San Francisco-based curated fashion marketplace that...

Sweta Tantia, Tahweave & Garo

Sweta Tantia
Tahweave & Garo

Designer Sweta Tantia owns Garo, a couture indutva or ethnicwear brand,...

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


November 2019

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

Follow us on instagram

Follow

Follow Fibre2Fashion On

Follow Fibre2Fashion On


Advanced Search