The State of Fashion 2024 - Cinema (2024)

Cinema

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Gael Morais 15/10/2024

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<p>The State</p><p>of Fashion</p><p>2024</p><p>2</p><p>The State</p><p>of Fashion</p><p>2024</p><p>ACKNOWLEDGEMENTS</p><p>The authors would like to thank Ángeles García-Manso, Olivia White and Liann Wu</p><p>from McKinsey’s London and New York offices respectively for their critical roles in</p><p>delivering this report. We would also like to thank Abhishek Goel for his significant</p><p>contribution to the MGFI article again this year.</p><p>A special thanks to all members of The Business of Fashion and the McKinsey</p><p>communities for their contributions to the research and participation in the</p><p>BoF-McKinsey State of Fashion 2024 Executive Survey and the BoF-McKinsey State of</p><p>Fashion 2024 Consumer Survey, especially the many industry experts who generously</p><p>shared their perspectives during interviews. In particular, we would like to thank Nima</p><p>Abbasi, David Allemann, Ana Andjelic, Rachel Arthur, Jean-Marc Bellaiche, Olivier</p><p>Bialobos, Frederic Court, Cyril Foiret, Gstaad Guy, Mun-il Han, Florian Heubrandner,</p><p>Norma Kamali, Erwan Rambourg, David Savman, Tony Wang and Andrew Wyatt.</p><p>The wider BoF team has also played an instrumental role in creating this report — in</p><p>particular, Marc Bain, Brian Baskin, Nick Blunden, Sheena Butler-Young, Cathaleen</p><p>Chen, Jael Fowakes, Fred Galley, Olivia Howland, Vikram Kansara, Sarah Kent,</p><p>Daniel-Yaw Miller, Alex Negrescu, Tamison O’Connor, Diana Pearl, Anna Rawling,</p><p>Darcey Sergison, Arunima Sharma, Charlene Teressa, Amy Warren, Robert Williams,</p><p>Anouk Vlahovic, Josephine Wood and Robb Young.</p><p>We would like to thank the following McKinsey colleagues for their special</p><p>contributions to the report creation and in-depth articles: Ekaterina Abramicheva,</p><p>Tera Allas, Sarah André, Magdalena Balcerzak, Mosa Barlass, Tom Bauer, Larissa Blau,</p><p>Pamela Brown, Marc Canal, Matthew Chapman, Becca Coggins, Daniel Crohmal,</p><p>Federico Cucinelli, Lindsay Delevingne, Sandrine Devillard, Gilles Djayep, Linda</p><p>Dommes, Victor Duran, Erik Eklöw, Guenter Fuchs, Ezra Greenberg, Gizem Günday,</p><p>Fiona Hampshire, Holger Harreis, Colin Henry, Steve Hoffman, Sara Hudson, Julia</p><p>Huang, Daniel Hui, Julian Hügl, Patricio Ibáñez, Jonatan Janmark, Younghoon Kang,</p><p>Dale Kim, Patrick Klinkoff, Simona Kulakauskaitė, Krzysztof Kwiatkowski, Nikolai</p><p>Langguth, Madé Lapuerta, Benjamin Lau, Leila Le Merle, Bridget Lousa, Karl-</p><p>Hendrik Magnus, Siddhant Malhotra, Ignacio Marcos, Dunja Matanovic, Dominik</p><p>Matuszewski, Jessica Moulton, Karin Östgren, Gizem Ozcelik, Jesko Perrey, Roger</p><p>Roberts, Dmitrii Rykunov, Amaury Saint Olive, Steve Saxon, Kandarp Shah, Marie</p><p>Strawczynski, Saga Stugholm, Alex Sukharevsky, Kimberly Te, Alexander Thiel,</p><p>Martha Torres, Alexis Trittipo, Jonathan Woetzel, Alexis Wolfer, Meri Yrjänen, Jackey</p><p>Yu, Isabell Zang, Rebecca Zhang and Daniel Zipser.</p><p>We’d also like to thank David Wigan for his editorial support, Amy Vien for her creative</p><p>input and direction and Diana Ejaita for the cover illustration.</p><p>5</p><p>The State of Fashion 2024</p><p>CONTENTS</p><p>10 Executive Summary</p><p>12 Industry Outlook</p><p>20 Global Economy</p><p>Theme 01. Fragmented Future</p><p>In-Depth: The Tumultuous Path to an Exit</p><p>Theme 02. Climate Urgency</p><p>34 Consumer Shifts</p><p>Theme 03. Vacation Mode</p><p>In-Depth: How China’s Tourists Will Return in 2024</p><p>Theme 04. The New Face of Influence</p><p>Gstaad Guy: Catering to the 1% with Social Media Wit</p><p>Theme 05. Outdoors Reinvented</p><p>On: Capitalising on the Perennial Sportswear Boom</p><p>60 Fashion System</p><p>Theme 06. Gen AI’s Creative Crossroad</p><p>In-Depth: Driving Growth Through Generative AI: An Executive Playbook</p><p>Theme 07. Fast Fashion’s Power Plays</p><p>Musinsa: Taking the K-Fashion Ecosystem Global</p><p>Theme 08. All Eyes On Brand</p><p>Dior: Balancing Tradition, Innovation and Scale</p><p>Theme 09. Sustainability Rules</p><p>Rachel Arthur: How the UN Wants Brands to Sell Sustainability</p><p>Theme 10. Bullwhip Snaps Back</p><p>PVH Corp: Transforming Supply Chains Through Trust and Transparency</p><p>112 McKinsey Global Fashion Index</p><p>7</p><p>Achim Berg</p><p>Achim Berg is a senior partner</p><p>in McKinsey’s Frankfurt office.</p><p>He is one of the co-founders of</p><p>McKinsey’s Apparel, Fashion &</p><p>Luxury group and was its global</p><p>leader from 2016 until September</p><p>2023. Achim is active in all relevant</p><p>sectors including clothing, textiles,</p><p>footwear, athletic wear, beauty,</p><p>watches and jewellery, accessories</p><p>and retailers, spanning from value</p><p>to luxury segments. As a global</p><p>fashion industry and retail expert,</p><p>he supports clients on a broad range</p><p>of strategic and top management</p><p>topics, as well as on operations and</p><p>sourcing-related issues.</p><p>Imran Amed</p><p>Imran Amed is one of the global</p><p>fashion industry’s leading writers,</p><p>thinkers and commentators, and is</p><p>founder, chief executive and editor-</p><p>in-chief of The Business of Fashion</p><p>(BoF), a modern media company and</p><p>the authoritative voice of the global</p><p>fashion and luxury industries.</p><p>Imran holds an MBA from Harvard</p><p>Business School and a B.Com from</p><p>McGill University. He was born</p><p>in Canada and holds British and</p><p>Canadian citizenship. Previously,</p><p>Imran was a management</p><p>consultant at McKinsey & Co.</p><p>Anita Balchandani</p><p>Anita Balchandani is a senior</p><p>partner in McKinsey’s London</p><p>office, and leads the UK Consumer</p><p>Practice while she is also part</p><p>of the global Apparel, Fashion &</p><p>Luxury group. She brings deep</p><p>expertise in sectors such as fashion,</p><p>luxury, beauty, specialty retail and</p><p>e-commerce. Anita works with</p><p>consumer and retail businesses as</p><p>well as PE houses across Europe</p><p>and North America in shaping</p><p>growth agendas, driving digital</p><p>transformation and designing</p><p>winning operating models.</p><p>Felix Rölkens</p><p>Felix Rölkens is a partner in</p><p>McKinsey’s Berlin office, and leads</p><p>McKinsey’s Apparel, Fashion &</p><p>Luxury group in EMEA. He works</p><p>with apparel, sportswear and</p><p>pure-play fashion e-commerce</p><p>companies in Europe and North</p><p>America on a wide range of topics</p><p>including strategy, operating</p><p>model and merchandising</p><p>transformations.</p><p>David Barrelet</p><p>David Barrelet is an associate</p><p>partner in McKinsey’s Munich</p><p>office, and is part of the leadership</p><p>of McKinsey’s Apparel, Fashion &</p><p>Luxury group in EMEA. He works</p><p>with fashion brands, retailers and</p><p>suppliers across Europe and Asia</p><p>on a variety of topics including</p><p>growth strategies, go-to-market</p><p>transformations and M&A.</p><p>Gemma D’Auria</p><p>Gemma D’Auria is a senior partner</p><p>in McKinsey’s Milan office and</p><p>has taken over the leadership</p><p>of McKinsey’s global Apparel,</p><p>Fashion & Luxury practice. She</p><p>has worked in North America,</p><p>Europe and the Middle East</p><p>supporting organisations in the</p><p>retail, fashion and luxury sectors in</p><p>driving transformations for higher</p><p>performance and health, including</p><p>building capabilities and developing</p><p>leadership capacity.</p><p>CONTRIBUTORS</p><p>8</p><p>Asina de Branche</p><p>Asina de Branche is a partner</p><p>at McKinsey’s Beijing office</p><p>and leads McKinsey’s Apparel,</p><p>Fashion & Luxury group in</p><p>China. She is an expert in apparel</p><p>transformations bringing holistic</p><p>impact by deployment of critical</p><p>value-enhancing recipes into</p><p>organisations including full</p><p>brand repositioning, network</p><p>restructuring, assortment efficiency</p><p>optimisation and organisational</p><p>change amongst others.</p><p>Marc Bain</p><p>The technology correspondent</p><p>atThe Business of Fashion, Marc</p><p>Bain reports on the innovations</p><p>reshaping the global fashion</p><p>industry and writes a weekly</p><p>tech newsletter. In his career as a</p><p>reporter, including several years</p><p>as the fashion reporter at Quartz,</p><p>he has covered all aspects of the</p><p>industry, from garment workers to</p><p>the runway, and in 2021 received an</p><p>award in business journalism.</p><p>Hannah Crump</p><p>As associate director of strategy at</p><p>The Business of Fashion, Hannah</p><p>Crump contributes to the execution</p><p>of special editorial projects, ranging</p><p>from case studies to in-depth</p><p>market reports. She partners with</p><p>industry experts to develop, edit</p><p>and produce data-driven research</p><p>and analysis for professionals in the</p><p>global fashion industry.</p><p>Joëlle Grunberg</p><p>Joëlle Grunberg is a partner in</p><p>McKinsey’s New York office and</p><p>is part of the Apparel, Fashion &</p><p>Luxury group in the</p><p>adjacent categories such as food, nature and</p><p>wellness. In 2023, these have ranged from Prada’s</p><p>pop-up café in London’s Harrods department store to</p><p>resort-based rollouts like Fendi’s,124 which extended</p><p>the luxury fashion brand’s aesthetics to design a</p><p>beach club for the Puente Romano Beach Resort in</p><p>Marbella, Spain, featuring personalised sailing boats</p><p>for guests of the luxury Costa del Sol destination.125</p><p>Loro Piana’s La Réserve à la Plage in Saint-Tropez,</p><p>France — consisting of a beach club and boutique — is</p><p>another example.126</p><p>And as customers’ travel itineraries expand</p><p>geographically, so too will pop-up ventures. Consider</p><p>Dior’s Dioriviera, which launched in 2018 to</p><p>showcase the brand’s annual beach collection in a few</p><p>select destinations.127 By summer 2023, Dioriviera</p><p>had reached nearly two dozen pop-up and concept</p><p>shop locations, extending beyond iconic spots such as</p><p>Beverly Hills, Saint-Tropez and Capri, setting up shop</p><p>further East in places like Bali and Phuket.128 129 130</p><p>Meanwhile, Coach launched its first Coach Airways-</p><p>themed pop-up in Malacca, Malaysia featuring a</p><p>concept store and café housed in a Boeing 747 jet,</p><p>selling ready-to-wear, bags and travel accessories.131</p><p>Fashion is also joining forces with hospitality to</p><p>reimagine experiences for travellers. For example,</p><p>the Four Seasons Hotel in Houston, Texas and</p><p>fashion membership club Vivrelle have partnered to</p><p>offer hotel guests complimentary access to an on-site</p><p>luxury “closet” of brands such as Prada, Gucci and</p><p>Dior.132 Saks Fifth Avenue has also rolled out Fifth</p><p>Avenue club concepts that offer personal styling,</p><p>trunk shows and special events at various Ritz-</p><p>Carlton and St Regis hotels.133</p><p>Now, many travellers are also looking to expand their</p><p>itineraries beyond traditional destinations ... perhaps as a nod</p><p>to a post-pandemic desire for freedom and escapism.</p><p>37</p><p>Consumer Shifts</p><p>Get Packing</p><p>The new travel era also has implications for category</p><p>preferences. With the BoF-McKinsey consumer</p><p>survey finding that nearly 40 percent of consumers</p><p>purchase new clothing to wear on their vacations,</p><p>resort fashion is a key beneficiary of travel’s</p><p>growth,134 135 spurring the appeal of bright, summery</p><p>labels ranging from Australia’s Zimmermann to</p><p>Brazil’s Farm Rio,136 137 as well as sales in the vacation</p><p>category from luxury e-tailers such as MyTheresa,</p><p>whose vacation category sales in 2022 were triple</p><p>2019 levels.138</p><p>Luxury brands have launched or refreshed</p><p>resortwear collections, often aiming to attract new</p><p>customers at more accessible prices. For example,</p><p>LVMH-owned Loewe — one of Lyst’s hottest brands</p><p>of the year — has continued to expand its Paula’s</p><p>Ibiza vacation line, riding on the success of its</p><p>popular totes made from woven palm leaves.139 140 But</p><p>resortwear is not just confined to luxury houses. In</p><p>the mass segment, for example, Mango launched a</p><p>designer collaboration in 2023 with California-based</p><p>lifestyle brand Simon Miller to create a colourful</p><p>capsule beachwear collection.141</p><p>Beyond the collections themselves, succeeding</p><p>in resortwear requires creative approaches to</p><p>marketing, such as influencer trips and buzzy local</p><p>activations. Recent launches of ready-to-wear lines</p><p>reflecting the spirit of travel include Louis Vuitton’s</p><p>LV By the Pool, with a branded activation at the iconic</p><p>Zuma restaurant in Mykonos, Greece, and Versace’s</p><p>La Vacanza in collaboration with musician Dua Lipa,</p><p>which debuted in the south of France.142 143</p><p>For fashion executives, travel’s rebound creates</p><p>an opportunity to view their global growth maps with</p><p>a new lens. As their customers seek out more unique,</p><p>off-the-beaten-path experiences, fashion players</p><p>should consider proactively identify emerging</p><p>hotspots, while innovating marketing initiatives and</p><p>piloting activations that resonate with 2024’s travel</p><p>zeitgeist. Partnerships with adjacent industries, such</p><p>as travel adventure, hotels, spas and restaurants,</p><p>can enable brands and retailers to create compelling</p><p>blended experiences no matter where customers find</p><p>themselves. Overall, the key will be to keep pace with</p><p>global customers, adapting to when, where and how</p><p>they want to shop when on the road.</p><p>Zimmermann 2023 resortwear collection. Simon Lekias / Isa Sanchez / Getty Images.</p><p>38</p><p>The State of Fashion 2024</p><p>How China’s</p><p>Tourists Will</p><p>Return in 2024</p><p>By Daniel Zipser, Asina de Branche, Steve Saxon, Jackey Yu and Liann Wu</p><p>IN-DEPTH</p><p>Consumer Shifts</p><p>For more than two decades, outbound travel</p><p>from mainland China was a major catalyst for the</p><p>growth of global tourism. In 2019, China accounted</p><p>for one-fifth of international tourism spending,</p><p>amounting to $255 billion as the result of a total of</p><p>166 million outbound trips.144 However, this growth</p><p>engine came to a halt with the Covid-19 pandemic</p><p>and the ensuing lockdowns.</p><p>After three years of restrictions, mainland</p><p>Chinese consumers are getting ready for new</p><p>travel adventures. For fashion brands and retailers</p><p>around the world, the return of China tourism</p><p>is a welcome silver lining to the current clouds</p><p>hanging over the country’s economy. However,</p><p>to maximise the opportunity, companies need to</p><p>prepare for consumers with different behaviours and</p><p>expectations than pre-pandemic.</p><p>Domestic Strength</p><p>With international borders closed through the</p><p>pandemic, domestic travel has thrived in mainland</p><p>China, currently on track to exceed pre-pandemic</p><p>levels in 2023.145 Despite the current economic</p><p>uncertainty affecting the country, consumers’</p><p>willingness to travel is robust. McKinsey consumer</p><p>research in Q3 2023 shows that travel is the category</p><p>Chinese consumers are most likely to splurge on,</p><p>exceeding other categories such as restaurants and</p><p>groceries.146 During the country’s eight-day Golden</p><p>Week holiday in October 2023, the Chinese took</p><p>nearly 826 million domestic trips, up over 70 percent</p><p>from last year.147 In 2024, this domestic momentum</p><p>is expected to continue, with mainland travel</p><p>flows reaching 110 percent to 120 percent of</p><p>pre-pandemic levels.</p><p>One major reason for the strength of domestic</p><p>tourism is local destinations have become</p><p>increasingly attractive. Hainan has emerged as a</p><p>top hotspot for tax-free shopping, where fashion</p><p>sales in April 2023 were 203 percent higher than C</p><p>hi</p><p>ne</p><p>se</p><p>to</p><p>ur</p><p>is</p><p>ts</p><p>a</p><p>nd</p><p>lu</p><p>xu</p><p>ry</p><p>fa</p><p>sh</p><p>io</p><p>n</p><p>sh</p><p>op</p><p>pe</p><p>rs</p><p>. T</p><p>om</p><p>oh</p><p>iro</p><p>O</p><p>hs</p><p>um</p><p>i/G</p><p>et</p><p>ty</p><p>Im</p><p>ag</p><p>es</p><p>.</p><p>In 2024, Chinese tourists are set to return</p><p>overseas, as outbound flows and spending</p><p>gradually return to near pre-pandemic levels.</p><p>However, evolving preferences and behaviours</p><p>adopted throughout the pandemic years mean</p><p>visitors from China will likely travel and shop</p><p>differently than before.</p><p>40</p><p>The State of Fashion 2024</p><p>pre-pandemic levels.148 The island is set to become</p><p>one of the world’s largest luxury retail markets in</p><p>the next five years and is expected to attract over 80</p><p>million visitors annually. In October 2023, luxury</p><p>travel retailer DFS announced a major project — its</p><p>largest ever — to build a “world-class, seven-star”</p><p>luxury retail and entertainment destination in</p><p>Hainan’s Yalong Bay by 2026 that will cover more</p><p>than 128,000 square metres and attract over 1,000</p><p>luxury brands.149</p><p>Outside of Hainan, retail in the mainland has</p><p>improved significantly as well. Top brands including</p><p>Hermès, Dior, Chanel and Louis Vuitton invested</p><p>heavily in their domestic footprints during the</p><p>pandemic by renovating flagship stores, opening</p><p>VIP salons and strengthening sales associate teams</p><p>to cater to local clientele.150 Luxury has also entered</p><p>domestic airports for the first time — in September</p><p>2023, DFS entered the domestic terminal at</p><p>Chongqing airport with a line-up of brands such as</p><p>Bulgari, Valentino and Versace.151 Higher duty-free</p><p>allowances on e-commerce purchases and the price</p><p>parity of brands with markets abroad decreasing</p><p>from up to 50 percent in the late 2010s to between</p><p>10 percent and 20 percent today, also incentivise</p><p>domestic spending.152</p><p>Given strong domestic options, experts forecast</p><p>a permanent repatriation of luxury spend. While</p><p>China’s 460 billion yuan ($63 billion) personal</p><p>luxury market will continue to grow in the long</p><p>term, domestic shopping may account for 60 percent</p><p>to 70 percent of the spend (and international 30</p><p>percent to 40 percent). McKinsey analysis indicates</p><p>a likely permanent reversal from pre-pandemic</p><p>levels of about 40 percent domestic and 60 percent</p><p>international.153</p><p>Outbound Returns</p><p>While domestic travel continues to surge, 2024 will</p><p>also see the long-awaited renaissance of Chinese C</p><p>hi</p><p>ne</p><p>se</p><p>to</p><p>ur</p><p>is</p><p>ts</p><p>a</p><p>nd</p><p>lu</p><p>xu</p><p>ry</p><p>fa</p><p>sh</p><p>io</p><p>n</p><p>sh</p><p>op</p><p>pe</p><p>rs</p><p>. T</p><p>om</p><p>oh</p><p>iro</p><p>O</p><p>hs</p><p>um</p><p>i/G</p><p>et</p><p>ty</p><p>Im</p><p>ag</p><p>es</p><p>.</p><p>Less Same More</p><p>1 Net intent calculated as the difference between the percentage of respondents who ‘will travel more’</p><p>and the percentage who ‘will travel less’</p><p>Note: Numbers are rounded and may not add to 100</p><p>Source: BoF-McKinsey State of Fashion 2024 Consumer Survey</p><p>Net</p><p>Intent1</p><p>255719 6%</p><p>50428 42%</p><p>394417 21%</p><p>345213 22%</p><p>Exhibit 9</p><p>Chinese consumers are planning both international and domestic travel</p><p>Chinese consumers’ future intent for travel,</p><p>% of respondents</p><p>Personal</p><p>Personal</p><p>Business</p><p>Business</p><p>D</p><p>om</p><p>es</p><p>tic</p><p>In</p><p>te</p><p>rn</p><p>at</p><p>io</p><p>na</p><p>l</p><p>41</p><p>Consumer Shifts</p><p>outbound travel. Outbound travel from the mainland</p><p>is recovering quickly, and may grow from almost 0</p><p>percent of pre-pandemic levels in 2022 to 50 percent</p><p>in 2023, with potential to almost double to 70 percent</p><p>to 100 percent in 2024. A full recovery could take</p><p>place by the end of 2024 or early 2025.154</p><p>What will drive outbound recovery among</p><p>Chinese consumers? Primarily, there is a burning</p><p>desire to go out and explore further afield again.</p><p>During the October Golden Week holiday, demand for</p><p>Alibaba’s Fliggy visa processing services were over</p><p>70 percent higher than May Day, China’s last major</p><p>national holiday. The number of outbound bookings</p><p>also hit a high for the year. Moreover, travel interest</p><p>spans both business and leisure.155 Some 39 percent</p><p>of respondents from the latest BoF-McKinsey State</p><p>of Fashion 2024 Consumer Survey plan to travel</p><p>more internationally for personal reasons, while 34</p><p>percent plan to travel more for business reasons.156</p><p>On the supply side, barriers to outbound travel</p><p>are also falling, leading to increased flight capacity.</p><p>Total seats in September 2023 reached over 50</p><p>percent of pre-pandemic levels and have consistently</p><p>risen week on week.157 Regulatory hurdles have also</p><p>eased as travel bans to more than 170 countries have</p><p>been lifted, adding momentum to the recovery.158</p><p>The regions that will likely benefit immediately are</p><p>those that are easiest logistically to get to, including</p><p>other East Asian countries and Southeast Asia — over</p><p>40 percent of surveyed consumers have expressed</p><p>interest in travelling to these regions in 2024.159</p><p>Outside of the “four-hour flight circle” around China,</p><p>tourism is also picking up in Australia and New</p><p>Zealand, United Arab Emirates, Turkey and Egypt,</p><p>according to Fliggy.160</p><p>The Experience Imperative</p><p>For Chinese tourists who return abroad, there has</p><p>been a fundamental change in priorities. Much higher</p><p>on tourist agendas is the desire for experiences.</p><p>According to the BoF-McKinsey consumer survey,</p><p>dining out and trying local cuisine are the most</p><p>popular travel activities (63 percent expect to do</p><p>more on the next trip), followed by being in nature</p><p>(58 percent) and sightseeing (57 percent). Shopping,</p><p>meanwhile, is in seventh position.161</p><p>While the shifting demand landscape suggests</p><p>big shopping hauls are lower on the list vis-à-vis other</p><p>activities, shopping data from tourism tax refund</p><p>company Global Blue points to spending on shopping</p><p>still being on track to recover in force. This year, in</p><p>Asia Pacific, the shopping spend of mainland Chinese</p><p>tourists is already 109 percent of 2019 levels. This has</p><p>been driven by a significant increase in the average</p><p>spend per shopper.162</p><p>In continental Europe, the shopping recovery</p><p>has been slower, with like-for-like in-store sales to</p><p>mainland Chinese tourists reaching 41 percent of</p><p>pre-pandemic levels,despite a 54 percent jump inair</p><p>capacity.163 Leading the recovery are ultra-high-</p><p>net-worth individuals, who are spending 28 percent</p><p>more per transaction on average.164 According to</p><p>Jean-Marc Bellaiche, the chief executive of French</p><p>luxury retailer Printemps, most business this year</p><p>has been from individual clients at a much higher</p><p>level compared to pre-Covid, while group travel —</p><p>which represented nearly a third of sales in 2019 —is</p><p>significantly down.165 Therefore, as travel normalises,</p><p>European stores could expect a recovery of shopping</p><p>spend close to pre-pandemic levels, though in</p><p>the near-term driven by value of shoppers rather</p><p>than volume.</p><p>New Shopping Priorities</p><p>When it comes to shopping, Chinese travellers now</p><p>have a more sophisticated set of expectations than</p><p>before the pandemic. To start, in-store experience is</p><p>a top priority. This is especially true in luxury: In the</p><p>latest McKinsey China Luxury Consumer Survey,</p><p>81 percent of consumers said they want to touch</p><p>and feel products, regardless of the initial discovery</p><p>channel.166 This means they now look for elevated</p><p>in-store experiences, full assortments, deep product</p><p>education and immersive interactions.</p><p>Digital expectations have also matured, as</p><p>61 percent of Chinese luxury consumers are true</p><p>omnichannel shoppers.167 This means they are</p><p>more likely to engage with brands that can interact</p><p>In 2023, in Asia Pacific, the shopping spend of mainland</p><p>Chinese tourists is already 109 percent of 2019 levels.</p><p>42</p><p>The State of Fashion 2024</p><p>through familiar digital ecosystems with features</p><p>such as scheduling appointments with Mandarin-</p><p>speaking associates, WeChat loyalty programmes as</p><p>well as personalised communications and services.</p><p>Category preferences have evolved. In personal</p><p>luxury, jewellery and watches are expected to gain 4</p><p>percentage points of share of discretionary spending</p><p>between 2023 and 2027, having overtaken handbags</p><p>as the top-spending category in 2023. One reason is</p><p>the belief that hard goods are more likely to retain</p><p>their value in an uncertain economic environment</p><p>than other categories. Ready-to-wear is expected to</p><p>lose 2 percentage points of share from 2023 to 2027.168</p><p>Lastly, demand is high for niche and</p><p>differentiated products for self-expression and</p><p>individuality. According to the McKinsey luxury</p><p>consumer survey, when it came to top factors that</p><p>consumers consider in a purchase, brand names fell</p><p>from number one in the ranking in 2019 to number</p><p>five in 2022. And 31 percent of Gen-Z (age 16 to 23) are</p><p>open to smaller brands, compared to just 22 percent</p><p>of Gen-X (39 to 54).169</p><p>How Should Brands and Retailers Respond?</p><p>Now is the time for brands and retailers to proactively</p><p>prepare for the return of the world’s largest outbound</p><p>travel population. This means strategically balancing</p><p>domestic and international needs and tailoring</p><p>shopping experiences to new expectations and</p><p>preferences.</p><p>First, higher standards for in-store experience</p><p>mean brands should consider maintaining</p><p>exceptional retail in domestic locations such</p><p>as Hainan or mainland cities, while deploying</p><p>investments in key international hubs popular among</p><p>Chinese travellers. This means creating shopping</p><p>spaces that offer elevated comfort and convenience,</p><p>alongside exclusive VIP services in destinations such</p><p>as the Ginza neighbourhood in Tokyo or famous</p><p>department stores such as Galeries Lafayette or La</p><p>Samaritaine in Paris.</p><p>Second, retailers awaiting the Chinese consumer</p><p>could rethink their digital playbooks to link with the</p><p>latest Chinese ecosystems, integrating a personal</p><p>touch and tailored offerings into Chinese apps</p><p>such as WeChat. Partnering with key opinion</p><p>leaders (KOLs) and other influencers on social</p><p>platforms such as Xiaohongshu or Douyin will</p><p>also help drive awareness and engagement with</p><p>hyper-digitised consumers.</p><p>Third, brands and retailers should consider</p><p>revamping their assortments to reflect the updated</p><p>tastes of the Chinese consumer. Successful</p><p>companies will pivot towards categories such as fine</p><p>watches and jewellery for affluent shoppers seeking</p><p>safe-haven indulgences and niche products for the</p><p>individualistic younger generation that will become</p><p>the future face of Chinese consumers.</p><p>Lastly, as global brands and retailers strive to win</p><p>back the Chinese shopper, they must not lose sight of</p><p>other key demographics like American and Middle</p><p>Eastern shoppers who play a large role in the market.</p><p>Achieving success in serving diverse clientele</p><p>while making the most of this unique Chinese</p><p>opportunity demands thoughtful, targeted moves</p><p>and commitment to creating inclusive experiences</p><p>that cater to a wide range of tastes and preferences.</p><p>43</p><p>Consumer Shifts</p><p>04.</p><p>The New Face</p><p>of Influence</p><p>It’s time for brand marketers to update their influencer</p><p>playbooks. A new guard of creative personalities</p><p>is gaining brands’ attention, winning trust and</p><p>fandom among key audiences. Working with these</p><p>personalities in 2024 will require a different type of</p><p>partnership, an emphasis on video and a willingness</p><p>to relinquish a degree of creative control.</p><p>KEY INSIGHTS</p><p>• 68 percent of consumers feel bothered by the amount of</p><p>sponsored content on social media and 65 percent rely less on</p><p>fashion influencers compared to previous years.</p><p>• Consumers increasingly demand authenticity, entertainment</p><p>and relatable personalities, unlocking a “new wave” of creators</p><p>who embrace less-polished aesthetics, quirkiness, humour and</p><p>vulnerability.</p><p>• To capture and hold the attention of consumers online in 2024,</p><p>fashion marketers will likely break free of tried-and-tested routines</p><p>and explore new avenues for partnering with creators.</p><p>44</p><p>The State of Fashion 2024</p><p>Capturing consumers’ attention online isn’t about to</p><p>get any easier for fashion businesses.</p><p>On Instagram, engagement rates have fallen,</p><p>by roughly 30 percent year on year in 2022,170 while</p><p>the reach of posts has diminished.171 Consumers</p><p>are showing signs of fatigue towards traditional</p><p>influencer marketing after years of being bombarded</p><p>with product promotions and brand announcements.</p><p>The BoF-McKinsey State of Fashion 2024 Consumer</p><p>Survey found that 68 percent of respondents were</p><p>unhappy about the high volume of sponsored content</p><p>on social media platforms and 65 percent were</p><p>turning less to fashion influencers than a few years</p><p>ago. Young consumers are becoming particularly</p><p>adept at tuning out the noise. One study found</p><p>Gen-Z loses active attention for advertising after just</p><p>1.3 seconds.172</p><p>Even in this environment, influencers continue</p><p>to be a powerful channel for brands to break through</p><p>the noise and connect with consumers, with the</p><p>influencer-marketing industry forecast to reach</p><p>$21.1 billion in 2023, up from $16.4 billion in 2022.173</p><p>However, the influencer landscape has been evolving</p><p>in the past few years as consumers increasingly</p><p>demand authenticity, entertainment and relatable</p><p>personalities, with this trend likely to gather</p><p>momentum in the year ahead.</p><p>According to the BoF-McKinsey consumer survey,</p><p>consumers are gravitating towards relatable and</p><p>authentic influencers far more than other attributes</p><p>Am</p><p>elia D</p><p>im</p><p>oldenberg at The Standard, London. D</p><p>ave Benett/G</p><p>etty Im</p><p>ages.</p><p>45</p><p>Consumer Shifts</p><p>such as an aspirational lifestyle or celebrity status.</p><p>Marketing and influencer firms echo these findings</p><p>— a 2023 survey found that, although beautiful and</p><p>aspirational content was effective, social media users</p><p>were more likely to follow influencers whom they</p><p>deem authentic and fun.174</p><p>The changing dynamics are reflected in where</p><p>users spend their time online. TikTok, often regarded</p><p>as a platform that promotes authenticity,175 has taken</p><p>the lead among some user groups. A March 2023 study</p><p>estimated that US adults spent nearly 56 minutes a</p><p>day on average on TikTok. By comparison, US adults</p><p>spent just over 30 minutes on average on Instagram.176</p><p>TikTok’s success, which has prompted Instagram to</p><p>emulate the platform with its Reels video feature,177 is</p><p>based largely on how it surfaces content, emphasising</p><p>measures such as the time users spend on a post and</p><p>whether they return.178 As a result, any creative and</p><p>entertaining content can reach a wide audience, even</p><p>if the creator doesn’t have a high number of followers.</p><p>The platform BeReal, meanwhile, saw surging user</p><p>growth in 2022, and while there are doubts about</p><p>its longevity,179 its emergence may well be a response</p><p>to the perceived inauthenticity of social media’s</p><p>large incumbents.</p><p>The New Guard</p><p>Though consumers have rewarded greater</p><p>authenticity online for some time, it is becoming</p><p>more pronounced as influencers emphasise their</p><p>individuality. Gen-Z in particular value pursuing</p><p>their own unique identities and appreciate diversity</p><p>among other attributes, according to a Stanford</p><p>University study.180 This generation’s favourite</p><p>platform for following influencers is TikTok,181</p><p>which was also deemed the best platform by Gen-Z</p><p>respondents for promoting a product through</p><p>influencers in a 2022 survey, surpassing both</p><p>YouTube and Instagram.182</p><p>While traditional influencers who convey an</p><p>aspirational lifestyle and command large audiences</p><p>are likely to remain important for fashion marketing,</p><p>other influencers who come across as less scripted or</p><p>polished are already gaining audiences. Quirkiness,</p><p>humour and vulnerability are helping this cohort</p><p>stand out. A case in point is Alix Earle, who has</p><p>built a following of nearly 6 million on TikTok,</p><p>not with any sort of viral hit but rather with her</p><p>apparent relatability and willingness to be herself.183</p><p>Madeline Argy’s TikTok confessionals, which</p><p>take the form of funny, rapid-fire videos such as a</p><p>tearful questioning of what DJs actually do, have</p><p>earned her roughly 5 million followers. And Sabrina</p><p>Bahsoon, who goes by Tube Girl, shot to fame posting</p><p>TikTok videos showing her dancing in the London</p><p>Underground, an act that’s been called “unapologetic</p><p>self-expression.”184</p><p>While the styles of these creators differ, what</p><p>Source: BoF-McKinsey State of Fashion 2024 Consumer Survey</p><p>Exhibit 10</p><p>Consumers prefer fashion influencers who are</p><p>relatable and authentic over other traits</p><p>Attributes consumers like about their favourite fashion influencers,</p><p>% of respondents</p><p>They are relatable 43</p><p>Their creative content</p><p>inspires me 37</p><p>They are experts</p><p>in fashion 23</p><p>They post authentic</p><p>content 40</p><p>They have celebrity</p><p>status 15</p><p>46</p><p>The State of Fashion 2024</p><p>unites them is their off-beat, personal approaches to</p><p>creating content, which reads as being authentic to</p><p>who they are rather than pursued purely for “likes” or</p><p>to convey an unattainable ideal. The most-followed</p><p>personality on TikTok is Khaby Lame, whose content</p><p>featuring his humorous silent commentary on</p><p>ridiculous online videos has attracted roughly 162</p><p>million followers.</p><p>Fashion brands are embracing these personalities</p><p>and seeing the benefits. Bahsoon featured in Hugo</p><p>Boss’ most-viewed TikTok post, which has garnered</p><p>more than 144 million views. Lame and Argy have</p><p>fashion partnerships as well. For the debut of creative</p><p>director Sabato de Sarno in September 2023, Gucci</p><p>asked Amelia Dimoldenberg, who became popular</p><p>conducting awkward interviews at a fried-chicken</p><p>establishment, to attend the event and interview</p><p>other guests.</p><p>Brands are also going down the path of creating</p><p>deeper partnerships with influencers than one-off</p><p>videos or fashion show invitations. For example,</p><p>luxury brands Loro Piana and Audemars Piguet are</p><p>working with the creator known as Gstaad Guy, who</p><p>built his following parodying the tastes and attitudes</p><p>of the ultra-wealthy. Both brands now dress Gstaad</p><p>Guy and regularly invite him to events, such as Loro</p><p>Piana’s Spring-Summer</p><p>2024 show in Milan and</p><p>Audemars Piguet’s Tokyo launch of its collaboration</p><p>with 1017 Alyx 9SM. Outside of luxury, online</p><p>retailer Revolve has created a size-inclusive line with</p><p>Remi Bader, a TikToker with 2.2 million followers</p><p>who became popular for her humorous, unfiltered</p><p>accounts of trying on clothing as a plus-size woman.</p><p>Realising the importance and reach of these</p><p>personalities, brands are investing significantly in</p><p>their engagement — for example, Lame reportedly</p><p>closed a $450,000 contract with Hugo Boss to walk</p><p>its Milan Fashion Week show in 2022.185</p><p>As this new guard of creators joins traditional</p><p>influencers in fashion week front rows and in</p><p>brand marketing, it offers consumers contrasting</p><p>viewpoints and another channel for communicating</p><p>a brand’s message.</p><p>Be Creative</p><p>To be sure, capturing and holding the attention</p><p>of consumers online in 2024 will likely require</p><p>fashion marketers to break free of tried-and-</p><p>tested initiatives. In addition to collaborating with</p><p>celebrities and mega-influencers, they may also</p><p>need to dedicate resources to identify talent that</p><p>might not be on their current radars but offers</p><p>untapped possibilities.</p><p>When creating content, brands might want to</p><p>look beyond highly polished product promotions</p><p>and push boundaries by developing innovative and</p><p>surprising campaigns that resonate with followers</p><p>and reach new audiences. This will still require</p><p>campaigns to align with a brand’s core image and</p><p>values. In its own guidance to brands, TikTok</p><p>recommends creating “actionable entertainment”</p><p>that holds users’ attention and can gain greater reach</p><p>from the platform’s content algorithm, among other</p><p>benefits.186 Brands should also consider incorporating</p><p>humour, self-awareness and unfiltered tones into</p><p>short videos and other popular social media formats.</p><p>Because some of the most successful creators</p><p>build their own online worlds, brands that partner</p><p>with them might want to empower them with a degree</p><p>of creative control. Rather than simply gifting items</p><p>or sponsoring posts, they can collaborate closely to</p><p>integrate the brand’s presence into the influencer’s</p><p>content style. In the most ideal collaborations, a</p><p>brand finds an avenue to convey its message and</p><p>perspective in a manner that feels seamless and</p><p>authentic. Gucci, for example, partnered with TikTok</p><p>influencer Francis Bourgeois, who shares his passion</p><p>for trainspotting with his followers, in campaigns</p><p>such as the latest Gucci Gift and fashion week</p><p>activations inspired by the scenic countryside, as a</p><p>way to convey the joy and nostalgia of train travel.</p><p>Of course, fashion businesses should still exercise</p><p>diligence to minimise potential image risks when</p><p>taking new creative directions. But new directions</p><p>are also likely to lead to some of the greatest rewards.</p><p>Consumers are showing signs of fatigue towards traditional</p><p>influencer marketing after years of being bombarded with</p><p>product promotions and brand announcements.</p><p>47</p><p>Consumer Shifts</p><p>Gstaad Guy:</p><p>Catering to the 1%</p><p>with Social Media Wit</p><p>By Tamison O’Connor</p><p>EXECUTIVE INTERVIEW</p><p>The Gstaad Guy’s online parodies of the ultra-</p><p>wealthy have blossomed into a full-time business</p><p>for the pioneering influencer partnering with</p><p>exclusive luxury brands for ultra-high-net-worth</p><p>shoppers, highlighting how a niche genre of</p><p>influencer marketing is helping to inject newness</p><p>into how brands connect with their customers.</p><p>48</p><p>The State of Fashion 2024</p><p>G staad Guy — who keeps</p><p>his real identity a secret</p><p>— began making a name</p><p>for himself only a few years ago</p><p>in niche social media circles by</p><p>parodying the lives and tastes</p><p>of the ultra-rich through sharp,</p><p>satirical social commentary</p><p>delivered through fictional</p><p>personas: mainstay character</p><p>Constance, an old-money British</p><p>aristocrat who peppers his</p><p>conversations with French and</p><p>Italian and dresses head-to-toe</p><p>in LVMH’s “quiet luxury” bastion</p><p>brand Loro Piana, and guest-</p><p>star Colton, a happy-go-lucky,</p><p>nouveau-riche Gen-Z American.</p><p>His humour is carefully targeted:</p><p>many of Constance’s quips will sail</p><p>far above the heads of the average</p><p>Joe or Jane, but leave 1 percent</p><p>of the wealthy, who are used to</p><p>flitting between Gstaad, Monaco</p><p>and London, chortling. (According</p><p>to Forbes, a good chunk of its</p><p>Billionaires List is among</p><p>his following.)</p><p>Equally, luxury fashion</p><p>brands also get where Gstaad</p><p>Guy is coming from — to the</p><p>extent that several have entered</p><p>into partnerships with the social</p><p>media star. Loro Piana launched</p><p>600 limited editions of its Open</p><p>Knitted Walk shoes exclusively</p><p>for Gstaad Guy followers; the</p><p>collaboration sold out within</p><p>hours and became the fastest-</p><p>selling product the brand had ever</p><p>made, according to Forbes.</p><p>How did Gstaad Guy come about?</p><p>I was Facetiming [with] a close</p><p>friend of mine, who has a place</p><p>in Gstaad. He was complaining</p><p>about something he shouldn’t be</p><p>complaining about. I had never</p><p>been there at the time, but I knew</p><p>a lot of things about it purely</p><p>based on conversations with him.</p><p>I filmed one video on Snapchat,</p><p>making fun of things I’ve heard</p><p>him say, while really dialing up the</p><p>absurdity. I sent that video to his</p><p>mum, all in character, this fictional</p><p>character I coined Constance,</p><p>inspired by my friend. His family</p><p>and closest friends found the</p><p>video hilarious. His mum sent it to</p><p>all the Gstaad mums’ WhatsApp</p><p>group chats, which went to</p><p>different parents and students of</p><p>the Le Rosey boarding school [in</p><p>Switzerland]. And it then quickly</p><p>trickled into Gstaad-frequenting</p><p>Geneva, Monaco and London</p><p>communities.</p><p>My satirical social commentary</p><p>would focus on things that are</p><p>only really relatable to very few</p><p>in Gstaad, Monaco, Geneva and</p><p>Mayfair [in London]. By video</p><p>five, I think I had maybe 4,000</p><p>followers, I spoke about how</p><p>Constance loves his Loro Piana</p><p>vicuña gilet. A couple of weeks</p><p>later, I was told by the salesperson</p><p>at Loro Piana on Sloane Street</p><p>that people have been coming into</p><p>the store asking to buy the items</p><p>I was wearing in my video. And all</p><p>similar gilets had sold out.</p><p>I was accidentally selling</p><p>dozens of products that cost about</p><p>three grand, with under 5,000</p><p>followers. This has never been</p><p>done before; I knew it because I’ve</p><p>been on the other side. [I thought]</p><p>there’s really something here.</p><p>What is it about Gstaad Guy</p><p>that attracts your target</p><p>audience?</p><p>I was making fun of a place that’s</p><p>very inconvenient to access</p><p>through commercial means of</p><p>transport. It is three hours away</p><p>from any commercial airport.</p><p>49</p><p>Consumer Shifts</p><p>And it’s, frankly, too expensive</p><p>and too quiet for someone to just</p><p>stumble upon. So through travel</p><p>inconvenience, unaffordability and</p><p>the privacy of the Swiss mountains,</p><p>Gstaad just attracts some of the</p><p>world’s wealthiest people — people</p><p>that commute between their</p><p>chalets in Gstaad, townhouses in</p><p>London, chateaux in Saint-Tropez</p><p>and boats on the Mediterranean.</p><p>And because I was making jokes</p><p>about them and the way they live</p><p>their lives there, I was attracting</p><p>them.</p><p>In this influencer landscape</p><p>that is so saturated, what’s the</p><p>white space that you occupy?</p><p>I am in a very unique position,</p><p>where I have, through fiction,</p><p>created very authentic characters.</p><p>People have a deep connection</p><p>with the characters, likely because</p><p>of how authentic to their values</p><p>they are. Especially Constance.</p><p>And because of the rather</p><p>niche jokes I’m making. I have</p><p>the highest concentration today</p><p>of high-net-worth people of any</p><p>social media page globally, who</p><p>are being communicated things</p><p>that are delivered lightly through</p><p>tongue-in-cheek storytelling that’s</p><p>very digestible.</p><p>What has your Gstaad Guy</p><p>account led to in terms of</p><p>business opportunities?</p><p>Gstaad Guy is an atypical account.</p><p>With anything atypical, especially</p><p>in the luxury world, you don’t sell</p><p>it like you sell commodities. It’s</p><p>not, ‘Hey, here’s my price, buy or</p><p>leave it and move on.’ That’s bad</p><p>for the buyer and the seller. In</p><p>the world of luxury social-media</p><p>marketing, selling ad space</p><p>and having a very authentic</p><p>partnership are two very different</p><p>things.</p><p>For Gstaad Guy, I always had to</p><p>have a “tasting” for my potential</p><p>clients before they hired me as</p><p>their chef. And the way I always</p><p>played that game is: who is Gstaad</p><p>Guy in real life? What are the</p><p>products and items that he would</p><p>actually love? And let me just talk</p><p>about those things more and more.</p><p>I never thought I would have the</p><p>scale to convert the masses of</p><p>voyeurs. And I still don’t think I do.</p><p>But I know I have the storytelling</p><p>abilities to convert and elevate</p><p>customers of an existing brand to</p><p>new, better products, and to an</p><p>elevated perception of that brand.</p><p>Slowly, through storytelling, I</p><p>built a really strong connection</p><p>with my audience around a very</p><p>few, very high-end products, which</p><p>are historically very difficult to</p><p>market, and it gave the brands</p><p>no choice but to work with me. I</p><p>became their ambassador before</p><p>they asked me to. I think that’s</p><p>what every brand is looking for</p><p>now. Ad space is readily available,</p><p>but authentic connections with</p><p>an audience are scarce. If you</p><p>have the choice, who are you</p><p>going to choose? Obviously, the</p><p>person who has the most authentic</p><p>connection with your brand and</p><p>ideal customers, so it doesn’t seem</p><p>like an ad in your face.</p><p>Historically, luxury has been</p><p>very protective of the way that</p><p>brands are communicated.</p><p>Content poking fun at their</p><p>top customer base was not</p><p>something that they would have</p><p>typically engaged with. What’s</p><p>changed?</p><p>I think the only thing that’s</p><p>changed is that it’s been digitised.</p><p>The Gstaad Guy social posts. Gstaad Guy.</p><p>50</p><p>The State of Fashion 2024</p><p>If you look at the real conversion</p><p>of top clients around a truly</p><p>luxurious brand like Loro Piana,</p><p>it was never happening in a</p><p>magazine or on a billboard. It</p><p>was always happening at a dinner</p><p>table, among friends and like-</p><p>minded people. And the way the</p><p>items were discussed was always</p><p>through a passion for excellence</p><p>[and] often through the delivery of</p><p>comedy and relaxed nonchalance,</p><p>as one does at a group dinner.</p><p>If you’re smart and you’ve</p><p>made enough money to afford</p><p>this stuff, you know that luxury</p><p>is often ridiculous by design. Of</p><p>course, the brands can’t say that,</p><p>but the people at the dinner table</p><p>can, and that’s happened for</p><p>generations. … A brand can talk</p><p>about their excellences and about</p><p>how and why they create, but … as</p><p>a consumer, you don’t want to feel</p><p>like you’re being sold something</p><p>[and] during those off-the-record</p><p>moments where the founders of</p><p>the brands can talk to friends and</p><p>to ideal customers, they can add</p><p>that salt and pepper that makes</p><p>it digestible, and that’s what I do.</p><p>Digital salt and pepper.</p><p>What role do products play</p><p>in your business, given that</p><p>you are, first and foremost,</p><p>creating content? There’s a lot</p><p>of content that doesn’t have any</p><p>reference necessarily to any</p><p>products.</p><p>Consumerism is so deeply</p><p>integrated in the core of my</p><p>archetypes’ personalities and</p><p>desires. Their conversations are so</p><p>often about products, and why this</p><p>product is better than the other.</p><p>It really came as second nature to</p><p>my content and storytelling. From</p><p>my very first video, when I never</p><p>had any commercial intentions</p><p>or ideas, Constance was talking</p><p>about his favourite restaurants,</p><p>destinations, clothes and Loro</p><p>Piana gilet. It never seemed</p><p>inauthentic; I wasn’t talking about</p><p>the art of yoga and all of a sudden</p><p>selling toothpaste. I’ve just been</p><p>expressing who my characters</p><p>are, and how their buying desires</p><p>are all intrinsically linked to</p><p>their values and interests. Real</p><p>life connoisseurs like Constance</p><p>demand excellence in all</p><p>categories of their lives, regardless</p><p>of price, and if it isn’t excellent, it’s</p><p>à la poubelle.</p><p>Is that limiting the number of</p><p>brands you can work with?</p><p>Absolutely, and I think that’s a</p><p>great thing. I don’t want to become</p><p>a walking billboard. I’d rather be</p><p>authentic to the few things I love</p><p>personally and the few things my</p><p>characters love. Just like the real</p><p>Gstaad Guy types. Constance isn’t</p><p>fickle and he very rarely changes</p><p>his shopping, travel or dining habits.</p><p>In your case, scale almost works</p><p>against you because you want</p><p>to speak to a small community.</p><p>How do you think about this as</p><p>you become more famous?</p><p>The world’s obsession with scale</p><p>is a bad one, and I learned that</p><p>the hard way when I worked on a</p><p>start-up before this. I raised a lot of</p><p>money and all my investors said is,</p><p>“scale, scale, scale,” and we ended</p><p>up with two million users that we</p><p>could not convert financially. If I</p><p>had raised far less venture money</p><p>instead, and had 300,000 users</p><p>who were paying, that’s a much</p><p>better position to be in. And then</p><p>scale those paying customers very,</p><p>very slowly and make something</p><p>sustainable.</p><p>That’s the core of luxury. If</p><p>you have few people who love</p><p>your products and you just grow</p><p>that sustainably, you can remain</p><p>a luxury brand and you can get</p><p>your customers on the ladder of</p><p>slow elevation. That’s really my</p><p>ideal scenario — to continue to</p><p>elevate the storytelling, elevate the</p><p>product offering. … I intentionally</p><p>stay away from a lot of viral</p><p>moments on social media because</p><p>that’s not me. I’ll sometimes use</p><p>my Gen-Z hypebeast character</p><p>Colton to provide contrast and</p><p>perspective. But Constance, the</p><p>Gstaad Guy, is not fashion. He’s not</p><p>a trend. Gstaad Guy is a constant. I</p><p>don’t want him to give in to trends,</p><p>I don’t want him to give in to</p><p>fashion, because I want him to be</p><p>timeless, that’s how Gstaad Guy is</p><p>perceived.</p><p>This interview has been edited and condensed.</p><p>In the world of luxury social-media marketing,</p><p>selling ad space and having a very authentic</p><p>partnership are two very different things.</p><p>51</p><p>Consumer Shifts</p><p>05.</p><p>Outdoors</p><p>Reinvented</p><p>Technical outdoor wear has been propelled by</p><p>consumers’ post-pandemic embrace of healthier</p><p>lifestyles as well as “gorpcore,” and is likely to</p><p>accelerate even further in 2024. More outdoor</p><p>brands will likely launch lifestyle collections while</p><p>lifestyle brands embed technical elements into</p><p>collections, further blurring the lines between</p><p>functionality and style.</p><p>KEY INSIGHTS</p><p>• The recent reorientation of outdoor apparel and footwear into</p><p>the everyday wardrobe means brands will forge ever-closer ties</p><p>between style and utility.</p><p>• Competition in 2024 may increase across price points and</p><p>categories, with some outdoor brands skewing apparel towards</p><p>the high end, while others look to shake-up footwear.</p><p>• As the gorpcore trend cools, brands may begin to lean into</p><p>toned-down, “quiet outdoor” fashion.</p><p>52</p><p>The State of Fashion 2024</p><p>One lasting impact of the Covid-19 pandemic has been</p><p>soaring consumer interest in healthier lifestyles and</p><p>nature-focused activities,187 like camping, hiking and</p><p>boating. In the US, 82 percent of people said they had</p><p>participated in such outdoor activities, compared</p><p>to 60 percent in 2020,188 while nearly half of survey</p><p>respondents in the UK report spending more time</p><p>outdoors than prior to the pandemic.189 In China,</p><p>by the end of 2021, more than 400 million people</p><p>were taking part in outdoor sports,190 and between</p><p>2021 and 2023, the search volume in for “outdoor”</p><p>on Chinese marketplace Tmall surged more than</p><p>600 percent.191</p><p>This is, of course, good news for outdoor</p><p>sportswear brands, many of which have also been</p><p>riding the “gorpcore” trend that has picked up</p><p>steam over recent years. “Gorpcore” is a colloquial</p><p>term for trail-running mix (Good Ol’ Raisins and</p><p>Peanuts). Outdoor enthusiasts and young urbanites</p><p>alike have been gravitating to gorpcore’s functional,</p><p>outdoors-inspired fashion, such as shell jackets</p><p>and hiking-style sneakers. In 2022, revenues for</p><p>the outdoor category were 24 percent higher than</p><p>pre-pandemic times, drawing attention of financial</p><p>deal makers.192 Outdoor wear has been a highly</p><p>active investment category since the pandemic, with</p><p>deals involving brands and retailers like Moosejaw,</p><p>Marathon Sports and Topo Athletic.193 194</p><p>From Outdoors to the Mainstream</p><p>Many of the fastest-growing sports brands of recent</p><p>years have roots in outdoor performance but have</p><p>since transcended their core customer bases to attain</p><p>widespread popularity. In July 2023, The North Face</p><p>announced its 10th consecutive quarter of double-</p><p>digit revenue growth,195 while Amer Sports, backed by</p><p>a consortium led by Chinese sportswear giant Anta,</p><p>has said it plans to scale Salomon and Arc’teryx, two</p><p>of its brands that were born as niche ski and climbing</p><p>brands, respectively.196</p><p>A similar evolution is taking place with technical</p><p>and trail running brands such as Deckers-owned</p><p>Hoka and On, which found loyal customers within</p><p>running communities before their innovative,</p><p>high-comfort solutions found appeal with wider</p><p>audiences. On reported a 69 percent year-on-year</p><p>jump in revenue to $1.3 billion for 2022, exceeding</p><p>analyst expectations, while Hoka is on track to hit $2</p><p>billion in annual revenue.197 198</p><p>Luxury brands also have a toehold in the</p><p>outdoors. The North Face and Gucci collaboration,</p><p>unveiled in 2021, was one of the first big tie-ups</p><p>between luxury and outdoors. Since then, a wave of</p><p>performance-influenced footwear collaborations</p><p>have followed, including those from On and Loewe,</p><p>Hoka and Moncler, and barefoot shoe maker Vibram</p><p>and Balenciaga.199 In terms of apparel, Jil Sander and</p><p>Arc’teryx collaborated on a collection of sportswear-</p><p>infused mountain gear,200 while Adidas and</p><p>Moncler created a capsule collection of puffers and</p><p>track jackets.201 These partnerships have elevated</p><p>gorpcore, while celebrities like Kendall Jenner and</p><p>Bella Hadid have taken to combining high luxury</p><p>fashion with outdoor wear and hiking shoes.</p><p>Mid-market brands have been heading outdoors,</p><p>too: H&M’s summer 2023 “Move” collection featured</p><p>water-repellent parkas and convertible hiking</p><p>trousers, while Inditex’s loungewear and activewear</p><p>1 Only includes brands with at least 5,000 trades in H1 2023. Year-on-year trade growth:</p><p>Jan 1–July 31, 2023 vs. Jan 1–July 31, 2022</p><p>Source: StockX</p><p>Outdoor brands Other brands</p><p>Exhibit 11</p><p>Sneakers from outdoor brands On,</p><p>Salomon and Asics are among the</p><p>top sellers on resale platform StockX</p><p>StockX top five brands by trade growth, year-on-year</p><p>change (H1 2023 vs H1 2022),1</p><p>%</p><p>15,357</p><p>202</p><p>290</p><p>72</p><p>54</p><p>On SalomonMSCHF Asics Off-White</p><p>53</p><p>Consumer Shifts</p><p>Rihanna perform</p><p>s during the Super Bow</p><p>l LVII halftim</p><p>e show</p><p>. Kevin M</p><p>azur/G</p><p>etty Im</p><p>ages.</p><p>brand Oysho launched hiking boots within its</p><p>permanent range alongside a hiking collection</p><p>for women.202 Free People similarly expanded its</p><p>merchandise to include hiking sticks and trekking</p><p>poles.203</p><p>In the year ahead, brands are expected to forge</p><p>ever-closer ties between style and utility as lifestyle</p><p>brands deepen investment in the outdoors, and</p><p>outdoor brands increasingly court fashion-focused</p><p>customers.</p><p>As such, outdoor specialists are likely to more</p><p>closely align their products to everyday lifestyles.</p><p>Merrell, which started as a purveyor of high-</p><p>performance hiking boots, is among the brands to</p><p>have developed lifestyle footwear,204 while Icelandic</p><p>outerwear brand 66°North named Kei Toyoshima,</p><p>a menswear design consultant at Louis Vuitton, as</p><p>creative director in 2022 to enhance its appeal with</p><p>broader audiences.205</p><p>Meanwhile, luxury players from Dior to Burberry</p><p>are moving from one-off outdoor capsules to</p><p>permanent collections. Prada’s Linea Rossa technical</p><p>line has recently been sported by style makers</p><p>such as A$AP Rocky.206 In turn, outdoor labels</p><p>have started to borrow from the luxury playbook</p><p>by, for example, opening high-profile flagships and</p><p>pop-up experiences that elevate their brands. This</p><p>includes Arc’teryx’s latest flagship store in Osaka’s</p><p>Shinsaibashi neighbourhood, which features the</p><p>first Arc’teryx cafe with food inspired by the brand’s</p><p>Canadian roots, as well as a Japanese menu.207</p><p>Quieter Styles Ahead</p><p>However, as the gorpcore trend cools, brands may</p><p>be challenged to shapeshift their outdoor offerings.</p><p>Similar to how the “quiet luxury” aesthetic gained</p><p>popularity as consumer interest in streetwear waned,</p><p>“quiet outdoor” styles are likely to gain popularity in</p><p>the year ahead, with consumer preferences shifting</p><p>from flashy performance jackets and cargo trousers</p><p>to elevated garments with minimal logos while still</p><p>featuring technical fabrics.</p><p>Reflecting this dynamic, Arc’teryx chief</p><p>executive Stuart Haselden said in spring 2023 that</p><p>the company is investing in sub-brand Veilance to</p><p>cater to consumers looking for fashion-forward yet</p><p>minimalist technical clothing without the typical</p><p>gorpcore hallmarks.208 Outerwear label Goldwin</p><p>has introduced simple, loose suiting made from</p><p>ultra-lightweight wool and bamboo fibre,209 while</p><p>Roa Hiking, a brand favoured by rapper Drake, has</p><p>married a luxury aesthetic with functionality with</p><p>products such as thermal-lined trousers made from</p><p>water-repellent nylon fabric.210</p><p>When it comes to footwear, outdoor-style shoes</p><p>from performance brands that “sneakerheads”</p><p>started coveting in recent years are likely to gain</p><p>even more traction with consumers in 2024. On was</p><p>the fastest-growing sneaker brand in 2023 on resale</p><p>platform StockX, with trade activity up more than</p><p>15,000 percent year on year, while trade activity</p><p>for Salomon and Asics was up 202 percent and 72</p><p>percent respectively.211</p><p>This may spur brands to lean further into styles</p><p>that straddle utility and fashion and can be worn in</p><p>both urban and outdoor settings. For example, one of</p><p>Salomon’s top sellers is its Sportstyle XT-6 Gore-Tex</p><p>shoe, which features performance benefits but is</p><p>designed for use in daily life.212 The brand has teamed</p><p>up with Maison Margiela to launch an Autumn-</p><p>Winter 2023 collection including a “Cross Wader”</p><p>trainer which bridges technical performance and</p><p>style,213 building on the success of the two brands’</p><p>“Cross Low” sneaker worn by Rihanna at the 2023</p><p>Super Bowl.214</p><p>In the coming year, utility, durability and</p><p>performance may prove to be a good match for</p><p>consumers’ budgets, increasing the appeal of the</p><p>outdoor category. As such, brands across all price</p><p>segments should get ready to embrace the outdoors in</p><p>its new, blended form and find a place in the shifting</p><p>competitive landscape.</p><p>Indeed, competition may increase across price</p><p>points and categories, with some outdoor brands</p><p>The challenge for all brands will be to establish relevancy among</p><p>diverse customer segments, from technical outdoor-goers to</p><p>StockX customers, while staying true to the brand’s core.</p><p>54</p><p>The State of Fashion 2024</p><p>skewing apparel towards the high end (Arc’teryx,</p><p>The North Face) and capturing some of luxury</p><p>brands’ wallet share, while others look to further</p><p>shake-up the footwear market (Hoka, On, Salomon).</p><p>The challenge for all brands will be to establish</p><p>relevancy among diverse customer segments, from</p><p>technical outdoor-goers to StockX customers, while</p><p>staying true to the brand’s core. Otherwise, brands</p><p>may risk watering down their identities and losing</p><p>what makes them distinctive in the first place.</p><p>For outdoor brands looking to conquer fashion,</p><p>embracing a quieter aesthetic may be the key. On the</p><p>other hand, fashion brands making their foray into</p><p>outdoor wear may be able to crack the design code</p><p>but may have to rapidly scale capabilities and</p><p>suppliers to compete. Redefining the go-to-market</p><p>strategy to prioritise innovation and extensive</p><p>testing of materials for performance will likely</p><p>become table stakes.</p><p>Rihanna perform</p><p>s during the Super Bow</p><p>l LVII halftim</p><p>e show</p><p>. Kevin M</p><p>azur/G</p><p>etty Im</p><p>ages.</p><p>55</p><p>Consumer Shifts</p><p>On: Capitalising</p><p>on the Perennial</p><p>Sportswear Boom</p><p>By Daniel-Yaw Miller</p><p>EXECUTIVE INTERVIEW</p><p>The co-founder and executive</p><p>co-chairman of the Swiss</p><p>performance-footwear and</p><p>apparel brand, David Allemann,</p><p>reflects on why performance</p><p>sportswear companies can lean</p><p>into innovation, technology</p><p>and</p><p>collaborative relationships with</p><p>athletes to build credibility with</p><p>outdoor-focused consumers.</p><p>David Allemann,</p><p>Co-Founder and</p><p>Executive Co-Chairman,</p><p>On</p><p>O</p><p>n shoe collection. O</p><p>n.</p><p>56</p><p>The State of Fashion 2024</p><p>The way David Allemann</p><p>sees it, On’s expansion</p><p>from geeky, high-tech</p><p>running footwear into fashion-</p><p>forward sportswear is evolution,</p><p>not revolution. Having co-founded</p><p>the company in 2010 to make</p><p>quirky-looking running shoes</p><p>for top athletes and avid amateur</p><p>runners215 — whose prototype</p><p>made from cut-up garden hoses</p><p>is still proudly on display at On’s</p><p>Zurich headquarters — Allemann</p><p>has seen how a performance brand</p><p>like On can “naturally transition”</p><p>into the wider world of fashion,</p><p>while staying true to its sporting</p><p>credentials. The key, he says, is</p><p>credibility with consumers.</p><p>In the case of On, that “organic”</p><p>ability had multiple implications —</p><p>from distance running came trail</p><p>running and professional track and</p><p>field, then to the pivotal moment</p><p>in the company’s history when On</p><p>entered into a partnership with</p><p>tennis star-turned-investor Roger</p><p>Federer in 2019, capturing the</p><p>attention of not only gym-goers</p><p>and hobbyist runners, but enabling</p><p>it to continue expanding its global</p><p>footprintand product mix, to</p><p>generate a record net sales of</p><p>1.22 billion Swiss francs ($1.36</p><p>billion) in 2022, with apparel’s</p><p>contribution to the top line steadily</p><p>rising year on year.</p><p>With many consumers</p><p>continuing to embrace</p><p>performance wear as their</p><p>everyday “uniform,” Allemann</p><p>says there are plenty of growth</p><p>opportunities for performance-</p><p>sport brands.</p><p>The sportswear category</p><p>has become increasingly</p><p>competitive, with newer</p><p>entrants. But even as the market</p><p>gets more crowded and 2023</p><p>has been challenging generally,</p><p>On continues to grow. How</p><p>does the brand stay ahead and</p><p>consistently build desirability?</p><p>Generally, the performance-</p><p>sports space is a super interesting</p><p>one where there is so much</p><p>opportunity because we’ve just</p><p>seen that massive channel shift of</p><p>consumers, pretty much almost</p><p>making performance and sports</p><p>their new uniform. Driven by</p><p>the fact that consumers now</p><p>probably, on many days, are</p><p>working from home and have it</p><p>much easier to integrate sports</p><p>and potentially even nature if it’s</p><p>close by. ... In a sense, the market</p><p>has become much bigger and</p><p>we feel it’s because of the new</p><p>uniform. I think this benefits every</p><p>[brand] that comes from a true</p><p>performance and sports core.</p><p>In the case of On, we’ve been</p><p>working very hard over the last</p><p>13 years — it’s still a young brand</p><p>— to build at the intersection of</p><p>innovation, but also design and</p><p>sustainability, because we feel</p><p>if you get that formula right … I</p><p>think you [can] be relevant for the</p><p>consumer in this market.</p><p>How is the global consumer shift</p><p>towards embracing the outdoors</p><p>and healthy lifestyles impacting</p><p>the sportswear category?</p><p>Today it’s probably almost easier</p><p>to come from sports into fashion</p><p>than it is to go from fashion</p><p>into sports, because so much</p><p>[inspiration] is driven from</p><p>performance technology and</p><p>O</p><p>n shoe collection. O</p><p>n.</p><p>57</p><p>Consumer Shifts</p><p>from performance silhouettes. Of</p><p>course, you can create a sneaker</p><p>coming from fashion, but it’s just</p><p>much less credible. Also, if you think</p><p>about membrane jackets, technical</p><p>hoodies, track pants or even</p><p>backpacks, these are now so big in</p><p>fashion. But ultimately these are</p><p>all silhouettes that are originally</p><p>coming from the sports category to</p><p>make sportswear the new uniform.</p><p>If we look at fashion brands these</p><p>days they almost feed on sports</p><p>technology, whether it’s stretchable</p><p>fabrics or closure systems.</p><p>Presumably, the barriers</p><p>to entry to becoming a</p><p>performance footwear brand</p><p>are high, right?</p><p>To start in footwear, you have</p><p>to have high credibility when</p><p>it comes to the technology and</p><p>what uniqueness you bring to the</p><p>market. That absolutely is not a</p><p>given. I think we had this gem of</p><p>technology that for the first time</p><p>was not just a new foam, but was</p><p>really an engineering piece that we</p><p>brought to the market, and then</p><p>having all the speciality retailers</p><p>[selling our shoes] and seeing</p><p>the benefits [of the technology],</p><p>and also getting the whole</p><p>buy-in of athletes in the Boston</p><p>Marathon, like Hellen Obiri or the</p><p>On Athletics Club that we built</p><p>together with our athletes.</p><p>On brings athletes into the core</p><p>of its product development</p><p>process. Since 2019, you’ve had</p><p>a fruitful relationship with</p><p>Roger and with the athletes in</p><p>the On Athletics Club. Since</p><p>then, there have been many</p><p>examples of other performance</p><p>brands working with athletes</p><p>collaboratively. How important</p><p>will this way of working with</p><p>athletes be for the On brand</p><p>going forward?</p><p>For us, it’s always personal. When</p><p>we’re building partnerships, it’s</p><p>always a personal journey, and we</p><p>really feel that the brand and the</p><p>personality have to fit. We just feel</p><p>so fortunate to have Roger, Iga</p><p>[Świątek, winner of 2023’s French Roger Federer in ‘The Roger.’ On.</p><p>58</p><p>The State of Fashion 2024</p><p>Open] and Ben [Shelton, winner</p><p>of 2023’s Laver Cup in Vancouver,</p><p>Canada] on board.</p><p>Going back to the very origin of</p><p>On. … When we started developing</p><p>On, we always went to our</p><p>—back-then — lab in a carpenter</p><p>workshop and tested the shoes</p><p>or the new outsoles out, together</p><p>with our athlete friends. So it’s</p><p>always been the case for On that</p><p>innovation and athlete testing are</p><p>intrinsically connected.</p><p>It just happens now on a much</p><p>bigger scale. So we’re building that</p><p>scale and I feel the On Athletics</p><p>Club has given us an opportunity</p><p>to build almost a family of athletes,</p><p>who sometimes live together, train</p><p>together and are part of that On</p><p>Athletics Club, but are of course</p><p>also our daily testing ground of</p><p>every innovation step we take.</p><p>Iga is so involved in the</p><p>development of her shoe that we</p><p>keep iterating to make it even</p><p>better, and so it’s actually quite a</p><p>long process how we work together</p><p>to get the best out of it. It’s at the</p><p>very core of On, and it’s also not</p><p>something where we’re basically</p><p>saying, ‘Let’s bring in an athlete,</p><p>let’s get some ideas,’ and then</p><p>we do something together and</p><p>we move to the next athlete. It’s</p><p>long-term relationships.</p><p>How has On’s approach to</p><p>launching its apparel category</p><p>been evolving?</p><p>It’s fantastic to have Tim</p><p>[Coppens] on board [as our apparel</p><p>designer since 2022]. Tim has, I</p><p>think, this unique background,</p><p>being originally a snowboarder</p><p>and a skater, starting out with</p><p>sports brands, then crossing over</p><p>to fashion, then having his own</p><p>fashion brand. We feel this duality</p><p>in DNA that is part of our success</p><p>formula. Together with Tim,</p><p>we have continued to build the</p><p>apparel business for On.</p><p>It is hitting exactly at that</p><p>intersection where it’s with</p><p>the most technical fabrics with</p><p>ultralight membranes that win</p><p>ISPO awards — very technical, but</p><p>at the same time also accessible</p><p>and versatile so that you can make</p><p>it part of your uniform, whether</p><p>you’re road running, whether you’re</p><p>out on the trails, or whether</p><p>you’re travelling. So our apparel</p><p>addressed a range of activities</p><p>across a very active lifestyle.</p><p>You’ve also probably observed</p><p>how we’ve been opening our retail</p><p>experiences around the world.</p><p>There’s Regent Street [flagship</p><p>store in London], but already</p><p>more than 10 stores in China, as</p><p>well as US stores including New</p><p>York, LA and so on. Just to see how</p><p>apparel is embraced in our retail</p><p>experience again, gives us the feel</p><p>that we’re hitting the right spot. So,</p><p>for example, in some of our stores</p><p>in China, apparel is already 20</p><p>percent of the sales.</p><p>As a performance brand in the</p><p>sportswear category in China,</p><p>what is the On strategy for</p><p>penetrating that market?</p><p>We started in China quite a while</p><p>ago and it’s a fully Chinese team</p><p>that sits in Shanghai. We’ve pretty</p><p>much started the relationship with</p><p>the China market as we started</p><p>in a lot of the markets, where it’s</p><p>really about grassroots and</p><p>making</p><p>sure that you’re doing fun runs,</p><p>that we are connecting to the</p><p>training community, which is very</p><p>important in China as well, and</p><p>that we’re also physically present,</p><p>which is what we realised as in</p><p>other big, big markets. You have</p><p>to build that nucleus in different</p><p>cities but you can’t go after the full</p><p>market. So, in a similar sense, we</p><p>started in the major hubs in the</p><p>US and in London then [a pop-up</p><p>store] in Liverpool in the UK. We</p><p>started with Shanghai and Beijing</p><p>and are expanding from there.</p><p>Building that community first</p><p>is really important for us because</p><p>the community is also what carries</p><p>you. For us, it’s very much about our</p><p>mission to ignite human spirit through</p><p>movement. To have that movement,</p><p>you have to have a community</p><p>around you. That is at the core.</p><p>Have you found any interesting</p><p>differences between, say, the</p><p>Chinese market and other</p><p>markets?</p><p>Yes. What we realised is that for</p><p>example the speciality stores —</p><p>the grassroots [speciality] retail</p><p>partners that helped us grow</p><p>across the rest of the world — exist</p><p>less in China and so we realised</p><p>that we have to, to a certain extent,</p><p>build that on our own. That’s</p><p>also why we have almost as many</p><p>stores, or probably as many stores,</p><p>opened in China alone as we have</p><p>in the rest of the world. These</p><p>[On] stores or retail experiences</p><p>become a hub for building our</p><p>community. Then a lot, of course,</p><p>crosses over into the digital</p><p>sphere. But [in China] you have to</p><p>build that grassroots community</p><p>yourself.</p><p>This interview has been edited and condensed.</p><p>59</p><p>Consumer Shifts</p><p>Fashion</p><p>System</p><p>06. Gen AI’s Creative Crossroad</p><p>07. Fast Fashion’s Power Plays</p><p>08. All Eyes on Brand</p><p>09. Sustainability Rules</p><p>10. Bullwhip Snaps Back</p><p>06.</p><p>Gen AI’s Creative</p><p>Crossroad</p><p>KEY INSIGHTS</p><p>• According to McKinsey analysis, as much as one-fourth of</p><p>generative AI’s potential value in fashion may be driven by use</p><p>cases in design and product development.</p><p>• 73 percent of fashion executives said generative AI will be a</p><p>priority for their businesses in 2024, but just 28 percent have tried</p><p>using it in creative processes for design and product development.</p><p>• Equity funding for generative AI-focused start-ups skyrocketed in</p><p>2023, reaching $14.1 billion in the first half of the year alone.</p><p>After generative AI’s breakout year in 2023, use</p><p>cases are emerging across creative industries,</p><p>including fashion. Capturing the value of this</p><p>transformative technology in 2024 will require</p><p>fashion players to look beyond automation and</p><p>explore its potential to augment the work of</p><p>human creatives.</p><p>61</p><p>Fashion System</p><p>Disruptive technologies in the workplace generally</p><p>fall into three categories — those that enhance</p><p>existing skills while creating new ones; those that</p><p>replace skills while reducing the need for others; and</p><p>those that fall somewhere in between. So where does</p><p>one of 2023’s buzziest technologies216 — generative</p><p>artificial intelligence — fit? For creative teams in the</p><p>fashion industry, the year ahead could help them find</p><p>the answer.</p><p>Gen AI — algorithms pre-trained on large</p><p>volumes of data such as text, images and code, often</p><p>fine-tuned with other corporate data, that can create</p><p>new, complex content — had a breakout year in 2023</p><p>as powerful new tools hit the market. By January,</p><p>two months after its launch, ChatGPT reached</p><p>an estimated 100 million users, a record pace of</p><p>growth at the time.217 Multiple platforms and tools</p><p>have since entered the market, and a dizzying array</p><p>of start-ups are seeking to leverage these, while</p><p>strong open-source alternatives are challenging</p><p>proprietary models.</p><p>While the technology’s use is nascent in</p><p>many industries, it’s accelerating. If its trajectory</p><p>continues, it could be one of the most transformative</p><p>technologies for the fashion industry in a long while.</p><p>Early experiments have offered a promising start, but</p><p>the transformative power of gen AI will become more</p><p>evident as use cases move beyond one-off projects and</p><p>become embedded within fashion’s value chain.218</p><p>The overall financial impact of gen AI on the</p><p>industry is potentially significant. According to</p><p>recent McKinsey analysis, as much as one-fourth</p><p>of the value is expected to be driven by use cases at</p><p>the design and product development stage of the</p><p>value chain.219</p><p>It’s no surprise then that gen AI is on industry</p><p>executives’ radars. The BoF-McKinsey State of</p><p>Fashion 2024 Survey of global fashion executives</p><p>found 73 percent of respondents said gen AI will be an</p><p>important priority for their businesses in 2024. Yet</p><p>while many are experimenting with the technology,</p><p>just 28 percent said their businesses had tried it for</p><p>design and product, indicating fashion companies</p><p>are not yet capturing its value in the creative process.</p><p>Caution is understandable. The technology</p><p>could impact jobs and workflows. The fashion</p><p>A Casablanca campaign created with gen AI. Casablanca.</p><p>62</p><p>The State of Fashion 2024</p><p>industry has also seen a fair share of technological</p><p>enthusiasm that has swiftly sputtered — notably, the</p><p>metaverse. Based on rate of progress and investment,</p><p>however, gen AI is likely to offer a different story. The</p><p>technology has more practical applications than the</p><p>metaverse, making it more attractive to businesses</p><p>and investors. Equity funding for gen AI-focused</p><p>start-ups skyrocketed in 2023, reaching $14.1 billion</p><p>in the first half of the year alone, compared with</p><p>$3.5 billion in 2021 and $2.5 billion in 2022.220 A</p><p>significant share of the surge was due to Microsoft’s</p><p>January announcement of its $10 billion, multiyear</p><p>deal with OpenAI, the research laboratory behind</p><p>ChatGPT.221 In the second half of the year, Amazon</p><p>announced a $4 billion investment in the artificial</p><p>intelligence start-up Anthropic, pushing 2023’s</p><p>investments in gen AI even higher.222</p><p>A Range of Applications</p><p>Part of gen AI’s potential lies in the array of tasks</p><p>to which it can be applied, and fashion businesses</p><p>are already beginning to adopt it in several concrete</p><p>ways. However, the focus so far has been on one-off</p><p>use cases with clear advantages when it comes to</p><p>cost, efficiency or customer experience, rather than</p><p>those with potential for wider industry disruption.</p><p>Online shopping assistance is one area where</p><p>it is making its mark.223 Online retailer Zalando</p><p>announced the launch of a beta ChatGPT-based</p><p>natural language-powered shopping assistant in</p><p>spring 2023 that allows a visitor to its site to ask</p><p>questions and get answers as well as customised</p><p>product recommendations.224 Kering, Mercari and</p><p>Shopify have similarly introduced AI chatbots.225</p><p>Brands using the technology to write product</p><p>descriptions for their sites include Snipes, a sneaker</p><p>and streetwear retailer, and Adore Me, the lingerie</p><p>company recently acquired by Victoria’s Secret.</p><p>Shopify, meanwhile, has introduced a gen-AI writing</p><p>assistant for merchants.226 227</p><p>Other brands have begun exploring gen AI tools</p><p>in one-off creative and marketing projects.228 Ganni</p><p>used the technology at its Spring/Summer 2024</p><p>runway show for an installation that let guests ask</p><p>Exhibit 12</p><p>Though still an emerging technology, more than half of</p><p>fashion executives say their companies are using gen AI</p><p>Source: BoF-McKinsey State of Fashion 2024 Executive Survey</p><p>Used regularly (it is</p><p>embedded in our workflows) 4</p><p>Used occasionally</p><p>(on a case-by-case basis) 21</p><p>Used experimentally (we are</p><p>not yet using it systematically) 37</p><p>Do not use, but we are working</p><p>with third parties who use it 14</p><p>Never used it 18</p><p>Don’t know 4</p><p>Marketing —</p><p>writing copy 34</p><p>26Marketing —</p><p>visual content</p><p>Organisational and</p><p>corporate support</p><p>functions</p><p>26</p><p>Digital shopping and</p><p>customer experience 25</p><p>Supply chain and</p><p>logistics 13</p><p>Store operations and</p><p>experience 8</p><p>Design and product</p><p>development 28</p><p>Use cases,</p><p>% of respondents</p><p>Adoption of generative AI in the workplace,</p><p>% of respondents</p><p>63</p><p>Fashion System</p><p>questions and receive answers reflecting</p><p>Ganni’s</p><p>point of view. Luxury label Casablanca created a</p><p>campaign for its Spring/Summer 2023 collection</p><p>by partnering with an AI artist and using image</p><p>generator Midjourney.229 Casablanca creative</p><p>director Charaf Tajer said human talent and</p><p>creativity were required to produce the richly hued,</p><p>stylised campaign set against a desert landscape in</p><p>Mexico. But he also acknowledged efficiency gains</p><p>as a result of bypassing all the planning and costs of</p><p>in-person photo shoots, among other benefits.</p><p>By Design</p><p>Specific gen AI deployments like Zalando’s and</p><p>Casablanca’s have piqued the interest of both the</p><p>wider industry and consumers. But the technology</p><p>has not yet been systematically scaled beyond pilot</p><p>projects. Ultimately, the greatest value may lie in</p><p>using gen AI in an end-to-end way that enables and</p><p>enhances creativity.</p><p>Use cases may differ across segments of the</p><p>industry. In fast fashion, gen AI can accelerate the</p><p>design process, injecting more agility from trend</p><p>detection to product development and by leveraging</p><p>analytics data to rapidly produce large numbers</p><p>of new designs. Meanwhile in luxury, gen AI could</p><p>become an additional medium in the designer’s</p><p>repertoire, allowing them to experiment with rapid</p><p>iterations, compile mood boards that draw from</p><p>diverse sources and curate the output. It can equip</p><p>less technically skilled designers with the ability to</p><p>visualise their concepts. The unexpected results</p><p>produced by AI tools can even provide inspiration.</p><p>Fashion brands Collina Strada and Heliot Emil</p><p>have leaned into this space to craft their Spring/</p><p>Summer 2024 collections. Both fed images of</p><p>previous looks into a gen-AI tool to produce new</p><p>designs that could be refined with text prompts.230</p><p>Online retailer Revolve also used the technology for</p><p>a series of eye-catching, colourful billboards and</p><p>dropped a limited capsule collection with garments</p><p>from the campaign, with further experiments under</p><p>way.231 Meanwhile, Spanish brand Desigual launched</p><p>an on-demand collection that was designed using AI</p><p>tools.232</p><p>Companies developing gen AI software for</p><p>fashion say the technology can reduce manual tasks</p><p>that take days to mere hours or even seconds. AiDA</p><p>(short for AI-based Interactive Design Assistant)</p><p>reportedly can produce a dozen fashion templates</p><p>within 10 seconds.233 The system uploads sketches,</p><p>materials and colour palettes to a virtual mood board</p><p>with the help of a tagging tool for accelerated product</p><p>searches. AiDA then creates templates that designers</p><p>can finesse and augment. Cala, a fashion supply chain</p><p>interface that includes gen AI in its design tools, can</p><p>help designers produce more than 100 sketches in a</p><p>single day, according to co-founder Andrew Wyatt.</p><p>Curation is Key</p><p>In fashion, human skill and creativity often hold the</p><p>key to brand differentiation. Rather than diminishing</p><p>them, gen AI used properly can free designers from</p><p>manual tasks to focus on creative work. Human</p><p>designers will remain key, while gen AI will enable</p><p>their roles to be orientated around curation. This</p><p>potential must be communicated clearly to creatives</p><p>to ensure the technology is adopted without</p><p>undermining the role of the designer.</p><p>As the number of gen AI adopters in fashion</p><p>expands and the technology evolves, it will require</p><p>more than a superficial understanding of its role in</p><p>enhancing and unlocking creativity. It holds exciting</p><p>potential for companies to create unique gen AI</p><p>models that enable them to infuse their brand DNA</p><p>across design processes, rather than relying on the</p><p>generic output of image generators. For creatives,</p><p>success will hinge on the support and infrastructure</p><p>of their ecosystems that enable them to move from</p><p>manual creators to true creative curators. When</p><p>implemented effectively, the technology can benefit</p><p>and amplify the creative process, thus augmenting</p><p>human capability, while retaining the artistic skills</p><p>and knowledge of designers. Ultimately, say experts,</p><p>human-centred innovation will likely be the most</p><p>important use of AI.234</p><p>In fashion, human skill and creativity often</p><p>hold the key to brand differentiation.</p><p>64</p><p>The State of Fashion 2024</p><p>Driving Growth</p><p>Through Generative AI:</p><p>An Executive Playbook</p><p>By Roger Roberts and Kimberly Te</p><p>IN-DEPTH</p><p>Fashion System</p><p>Exhibit 13</p><p>Generative AI can add value across the fashion value chain</p><p>Illustrative</p><p>1 List is non-exhaustive</p><p>Source: McKinsey analysis</p><p>Gen AI use</p><p>cases</p><p>Value chain</p><p>stage</p><p>Product development</p><p>and innovation</p><p>Supply chain</p><p>and logistics</p><p>Sales and customer</p><p>experienceMarketing</p><p>Example</p><p>vendors1</p><p>AiDLab Adobe Firefly</p><p>Cala Google AI</p><p>Midjourney OpenAI</p><p>Raspberry.ai</p><p>Runway</p><p>Stable Diffusion</p><p>Threekit Yoona.ai</p><p>C3.ai</p><p>Google AI</p><p>Gladly</p><p>Google AI</p><p>Perfect</p><p>Shopify</p><p>Veesual</p><p>Copy.ai</p><p>Jasper</p><p>LaLaLand.ai</p><p>Runway</p><p>UKG</p><p>Aisera</p><p>Beamery</p><p>Genie AI</p><p>Moonhub</p><p>Sap</p><p>Zoom</p><p>Store</p><p>operations</p><p>Organisation and</p><p>support functions</p><p>• Write briefs</p><p>for a product</p><p>collection using</p><p>analytics</p><p>• Generate</p><p>mood boards,</p><p>visual imagery</p><p>and creative</p><p>inspiration using</p><p>briefs/brand DNA</p><p>from previous</p><p>collections</p><p>• Convert sketches</p><p>into numerous 3D</p><p>product designs</p><p>and tech packs</p><p>for production</p><p>• Hyper-personalise</p><p>loyalty programmes</p><p>and offers based</p><p>on customer</p><p>preferences,</p><p>generating</p><p>custom content</p><p>• Accelerate</p><p>marketing content</p><p>creation, such as</p><p>copywrite drafts</p><p>and campaign</p><p>photoshoots</p><p>• Enrich social</p><p>data channels</p><p>using sentiment</p><p>analysis and</p><p>consumer data</p><p>to pivot content</p><p>and messaging</p><p>accordingly</p><p>• Draft research</p><p>packs on brands,</p><p>vendors and</p><p>suppliers</p><p>• Augment real-</p><p>time demand</p><p>forecasting</p><p>by combining</p><p>insights from</p><p>multiple datasets</p><p>• Tailor product</p><p>return offerings</p><p>to individual</p><p>customer</p><p>preferences,</p><p>identifying</p><p>products to return</p><p>and facilitating</p><p>customised</p><p>exchanges</p><p>• Enhance digital</p><p>experiences,</p><p>such as virtual</p><p>clothing try-ons,</p><p>displaying</p><p>products on</p><p>AI-generated</p><p>models</p><p>• Enhance</p><p>customer service</p><p>and clienteling</p><p>through</p><p>advanced virtual</p><p>assistants</p><p>• Draft product</p><p>descriptions for</p><p>e-commerce</p><p>sites</p><p>• Accelerate store</p><p>layout design</p><p>with 3D designs</p><p>and simulations</p><p>• Provide real-time</p><p>store insights to</p><p>assist managers</p><p>and employees</p><p>• Create</p><p>individualised</p><p>training materials</p><p>based on roles</p><p>• Automate support</p><p>tasks such as HR</p><p>and accounting</p><p>report generation</p><p>or legal drafting</p><p>• Improve talent</p><p>acquisition,</p><p>streamlining</p><p>candidate sourcing</p><p>through advanced</p><p>algorithms that dive</p><p>deep into professional</p><p>networks to identify</p><p>and screen the</p><p>best candidates</p><p>Generative artificial intelligence has the potential to</p><p>augment, accelerate and automate fashion business</p><p>capabilities — from writing code to supporting</p><p>design to empowering sales teams. While gen AI</p><p>comes with risks, executive teams can learn best by</p><p>doing. The fastest learners will develop a playbook</p><p>for obtaining bottom-line benefits.</p><p>AI-generated cam</p><p>paign. Revolve.</p><p>66</p><p>The State of Fashion 2024</p><p>Generative AI (gen AI) offers a plethora of</p><p>opportunities to build new capabilities across the</p><p>fashion value chain, from inspiration mood boards</p><p>to marketing campaigns and virtual shopping</p><p>assistants. As new use cases emerge and the stakes</p><p>become higher, there is an opportunity for leadership</p><p>teams to move from “thinking to doing,” while</p><p>retaining a human-centred approach tied strongly</p><p>to brands’ core values. Forward-looking companies</p><p>may want to develop a playbook for executives, which</p><p>could help them navigate the new technology and</p><p>guide them in effectively applying gen AI throughout</p><p>their organisations.</p><p>Setting Priorities for Impact</p><p>In the rush to unlock gen AI’s potential, it would be</p><p>easy to take an opportunistic approach, jumping</p><p>into applications in the hope that some of them</p><p>hit the mark. More productively, senior leaders</p><p>and their organisations can focus on impact to the</p><p>core business and build a portfolio of use cases</p><p>that offer both short-term benefits and broader,</p><p>more transformational potential.</p><p>Establishing</p><p>collaboration early on between business and</p><p>technology functions will be critical when deciding</p><p>where to focus and when identifying funding and</p><p>assessing feasibility. While initial moves will likely</p><p>fall outside “business as usual” investment, they</p><p>can be integrated with broader tech and IT strategy</p><p>investments in the next planning cycle.</p><p>Companies have been making fast progress</p><p>in putting gen AI into action. Amazon is testing</p><p>AI-generated customer product review summaries</p><p>on its homepage to help customers quickly distil</p><p>the high volumes of reviews.235 Google offers hyper-</p><p>realistic clothing try-on, using AI-generated clothes</p><p>and models.236 Across the fashion and luxury value</p><p>chain, companies will likely see the largest profit</p><p>gains from gen AI in product design and assortment,</p><p>followed by content-focused marketing, and sales</p><p>and customer experience, according to McKinsey</p><p>forecasts. Further gains are likely to be made by</p><p>increasing productivity in organisational support</p><p>functions such as HR and finance.237</p><p>To maximise the gen AI opportunity, executive</p><p>teams typically need to deliver early impact while</p><p>laying the foundations for future scale. The pace</p><p>of expansion is likely to depend on technology</p><p>and talent readiness. For instance, producing</p><p>AI-generated marketing materials could be a quick</p><p>win for some organisations, while others might view</p><p>this as a longer-term play if data and platforms are</p><p>not ready. Talent upskilling is often needed and can</p><p>demand an accelerated approach to building learning</p><p>journeys for current staff, targeted hiring and smart</p><p>partnering. Tech and talent foundations will, of</p><p>course, need investment and a commitment to new</p><p>ways of working.</p><p>Shaping Teams for Impact</p><p>Gen AI implementation is typically a team activity.</p><p>Teams should be structured around sets of</p><p>opportunities and use cases, while close collaboration</p><p>across business units and between functions (legal,</p><p>risk, HR, finance) and technology and engineering</p><p>teams will be essential. Internal and external</p><p>recruiting should focus on the skills necessary for</p><p>important use cases, shifting from a role-centric to</p><p>a skills-centric model. Consider a brand that seeks</p><p>to use gen AI to personalise online ads to individual</p><p>customers. Required skills could include design,</p><p>data analytics and prompt engineering. Such a team</p><p>might comprise a product manager, marketing lead,</p><p>copywriter, designer, data scientist, specialised</p><p>engineers (machine learning, data, cloud) and a risk</p><p>specialist.</p><p>A shared, central “control tower” can orchestrate</p><p>and choreograph these fast-moving teams — giving</p><p>them the support, shared skills and sustained</p><p>funding. A council of senior leaders in business,</p><p>legal, tech and product roles can provide purposeful</p><p>governance that balances speed and risk. Often</p><p>AI-driven initiatives are decentralised and siloed,</p><p>which can limit success. A central team could</p><p>coordinate organisation-wide development of the</p><p>technology platform and set-up guardrails for risk</p><p>and compliance, enabling faster and more effective</p><p>progress through centralised coordination. The</p><p>central team could also preside over technical</p><p>infrastructure, employee upskilling, internal</p><p>communications and change management. Finally,</p><p>leaders could exhibit an open and exploratory</p><p>mindset and help teach employees how gen AI</p><p>can help them work better. Allaying fears while</p><p>encouraging hands-on learning is likely to be a key</p><p>to success.</p><p>AI-generated cam</p><p>paign. Revolve.</p><p>67</p><p>Fashion System</p><p>Tech and Partnership Choices</p><p>While full outsourcing is rarely optimal, partnerships</p><p>with platforms, tools and talent providers are often</p><p>part of brands’ plans for gen AI adoption. Given few</p><p>businesses might have the resources to train models</p><p>from scratch, we see two main approaches to tech</p><p>delivery: First, brands can fine-tune third-party</p><p>foundation models (e.g. from Cohere, Google or</p><p>OpenAI) or open-source alternatives like those</p><p>released by Mistral or Meta. Second, brands can</p><p>consider deploying specialised applications that</p><p>build on existing foundation models but are tailored</p><p>to specific uses — like Jasper’s marketing content</p><p>tools or Cala’s AI-assisted design platform that</p><p>provides creative suggestions and converts ideas to</p><p>production-ready designs.238 239 Most organisations</p><p>will need a blend of both. Finally, hard-to-find</p><p>talent may be provided through tech partners and</p><p>vendors — but leaders will likely want to ensure they</p><p>are also building in-house skills and knowledge via</p><p>these relationships.</p><p>Partnerships can often yield faster gen AI</p><p>adoption by unlocking the use of state-of-the art</p><p>applications and tools that accelerate impact.</p><p>Fine-tuning pre-trained foundation models by</p><p>blending in-house data and documents could</p><p>ensure acceptable output quality if handled well.</p><p>Likewise, gen AI-based software applications build</p><p>on top of foundation models and offer user-friendly</p><p>interfaces. There is an ever-growing range of tools</p><p>from established providers (e.g. Adobe’s Firefly for</p><p>Enterprise platform)240 and fashion-focused players,</p><p>such as CLO, which converts ideas to production-</p><p>ready designs.241 A portfolio of partners will be</p><p>Exhibit 14</p><p>A generative AI team should contain specialised</p><p>squad members and executive sponsors</p><p>Sample squad structure</p><p>ML. Ops</p><p>Engineer</p><p>Software</p><p>Engineer</p><p>Domain</p><p>Expert</p><p>Cloud</p><p>Engineer</p><p>UI/UX</p><p>Designer(s)</p><p>Data</p><p>Engineer</p><p>Product</p><p>Manager</p><p>Risk/Legal</p><p>/Ethics</p><p>Specialist</p><p>Data</p><p>Scientist</p><p>Business</p><p>Lead</p><p>Tech / Engineering / Data Product Business</p><p>Executive sponsorship:</p><p>designated sponsor and</p><p>committee to own end-to-end</p><p>privacy and ensure execution</p><p>Squad members will vary</p><p>based on use case, industry</p><p>and context</p><p>Source: Rosales, Aldo et. al, McKinsey & Company</p><p>68</p><p>The State of Fashion 2024</p><p>Hard-to-find talent may be provided through tech partners and</p><p>vendors — but leaders will likely want to ensure they are also</p><p>building in-house skills and knowledge via these relationships.</p><p>M</p><p>etam</p><p>orphix AI fashion w</p><p>eek look. AI fashion w</p><p>eek.</p><p>69</p><p>Fashion System</p><p>needed at most fashion companies, rather than one</p><p>or two.</p><p>In one example of a fashion-tech partnership,</p><p>designer Norma Kamali partnered with AI creative</p><p>studio Maison Meta to fine-tune gen AI models using</p><p>content from the Kamali’s 56 years of designs. Kamali</p><p>said she hopes to use gen AI to preserve her creative</p><p>legacy and empower her brand’s future. She sees close</p><p>collaboration with tech partners as a key to success,</p><p>where they iterate to improve tools and identify</p><p>new practical applications in her business. Kamali</p><p>completed gen AI coursework at the Massachusetts</p><p>Institute of Technology to learn more about AI and to</p><p>encourage her employees to experiment with AI tools</p><p>in their daily work.242</p><p>Navigating Risks</p><p>As fashion companies embrace the potential of gen</p><p>AI, balancing enthusiasm with caution is likely to be</p><p>a key to success. Notable areas of risk include bias,</p><p>the effect on creativity, intellectual property rights</p><p>and data protection.</p><p>Gen AI outputs are based on data from which</p><p>they are trained, and biased data can have negative</p><p>consequences on customers and other audiences.</p><p>Brands and their partners should carefully construct</p><p>comprehensive datasets and ensure data teams</p><p>include diverse backgrounds and perspectives. In</p><p>addition, while gen AI can augment creativity,243</p><p>overreliance on models trained exclusively on past</p><p>designs could also inhibit creativity. Designers</p><p>can instead use gen AI as a “thought partner,”</p><p>critically evaluating gen AI outputs as “inspiration,”</p><p>experimenting with ideas and building on outputs to</p><p>create net-new designs.</p><p>Fashion brands and designers should be</p><p>especially careful of the risks related to intellectual</p><p>property (IP). Foundation models are trained on</p><p>massive amounts of internet-sourced data and IP.</p><p>Organisations should consider how their creative</p><p>designs are shared online,</p><p>Americas.</p><p>She focuses on growth strategy,</p><p>international expansion of brands</p><p>and commercial transformation</p><p>in the US and Europe. Before</p><p>re-joining McKinsey, Joëlle served</p><p>20 years as a C-suite leader of</p><p>well-known fashion and footwear</p><p>brands, most recently as global</p><p>president at Wolverine Boston</p><p>Brands (Sperry, Saucony, Keds) and</p><p>as the CEO of Lacoste Americas.</p><p>Janet Kersnar</p><p>As executive editor at The Business</p><p>of Fashion in London, Janet</p><p>Kersnar has a multifaceted content</p><p>role. With more than 25 years of</p><p>experience as a business journalist</p><p>at leading publishing houses</p><p>including The Economist Group,</p><p>Janet is a member of BoF’s senior</p><p>leadership team and is part of BoF</p><p>Insights, a fashion industry think tank.</p><p>Ewa Starzyńska</p><p>Ewa Starzyńska is an engagement</p><p>manager in McKinsey’s London</p><p>office and is part of the Apparel,</p><p>Fashion & Luxury group in</p><p>EMEA. She works with fashion</p><p>and luxury companies as well as</p><p>investors across Europe, on topics</p><p>such as e-commerce, strategy,</p><p>merchandising, value creation and</p><p>M&A.</p><p>9</p><p>W ith clouds brewing on the horizon,</p><p>recent years might provide a sense</p><p>of how the fashion industry will ride</p><p>out 2024.</p><p>The industry has shown its resilience in recent</p><p>years, having achieved more than double the levels</p><p>of economic profit in 2022 than in all years between</p><p>2010 and 2020 except for one, yet by 2023 the industry</p><p>was facing challenges that were both persistent and</p><p>deepening. On a regional basis, Europe and the US</p><p>experienced slow growth throughout the year, while</p><p>China’s initially strong performance decelerated in</p><p>the second half. Though the picture for luxury was</p><p>more positive than the rest of the market in the first</p><p>half of 2023, consumers’ appetite to shop for fashion</p><p>was diminishing across the board by the second half,</p><p>leading to slowing sales and uneven performance.</p><p>Even luxury began to feel the heat after a lengthy</p><p>period of growth that benefitted the entire industry.</p><p>Looking to 2024, fashion leaders are anticipating</p><p>further headwinds and are uncertain about prospects</p><p>for the year ahead. Indeed, the word most often</p><p>mentioned by executives in the BoF-McKinsey State</p><p>of Fashion 2024 Executive Survey was “uncertainty.”</p><p>Consumer confidence will remain fragile, although</p><p>for different reasons in key markets of the US,</p><p>Europe and China. As a whole, the fashion industry is</p><p>predicted to achieve year-on-year retail sales growth</p><p>of between 2 percent and 4 percent in 2024.</p><p>Aside from economic challenges, one pressure</p><p>point that cannot be ignored in the year ahead is</p><p>the climate crisis. After numerous extreme weather</p><p>events in 2023, leading companies are likely to</p><p>bolster their resilience to climate impacts in 2024.</p><p>Inaction is no longer an option: extreme climate</p><p>events are already placing the lives and livelihoods</p><p>of fashion workers in danger and could put at risk an</p><p>estimated $65 billion of apparel exports by 2030.</p><p>How should fashion companies prepare? With</p><p>cost-saving tactics mostly exhausted, the focus is</p><p>expected to be on growing sales, underpinned by</p><p>new pricing and promotion strategies, rather than</p><p>volume increases — across the industry, net intent</p><p>to raise prices is more than 50 percent, according to</p><p>the BoF-McKinsey Executive Survey. Cost pressures</p><p>are predicted to abate, with less than 20 percent</p><p>of executives expecting the cost of goods sold and</p><p>selling, general and administrative expenses to rise</p><p>more than 5 percent.</p><p>In 2024, the industry is expected to bear</p><p>the impact of fluctuations in demand that have</p><p>punctuated the past few years. It is during such times</p><p>that supply chains experience a “bullwhip effect,”</p><p>in which small sales variations cause high levels</p><p>of volatility, leading to factory underutilisation,</p><p>layoffs and delayed infrastructure investments. To</p><p>navigate these challenges, fashion brands should</p><p>consider investing in developing more transparent</p><p>Riding Out</p><p>the Storm</p><p>EXECUTIVE SUMMARY</p><p>10</p><p>The State of Fashion 2024</p><p>and collaborative relationships with their suppliers.</p><p>Meanwhile, fashion supply chains could be under</p><p>increased scrutiny amid incoming regulations on</p><p>several fronts. This includes new sustainability</p><p>rules in the European Union and the US, which</p><p>will require brands and manufacturers to double</p><p>down on initiatives aimed at cutting greenhouse gas</p><p>emissions and waste, while building business models</p><p>that protect and preserve natural resources. The fast-</p><p>fashion industry, which has already been buffeted by</p><p>a cohort of companies like Shein and Temu that are</p><p>not only faster and cheaper but also fuelled by big</p><p>marketing budgets, may be particularly pressured by</p><p>these new regulations.</p><p>When seeking to identify growth levers, one area</p><p>that respondents to the BoF-McKinsey Executive</p><p>Survey said they are homing in on is generative AI,</p><p>where there is significant potential in creativity-</p><p>focused use cases in design and product development.</p><p>Some 73 percent of executives expect to prioritise</p><p>gen AI in 2024, but many may face a talent gap, given</p><p>that just 5 percent said they are ready to make best</p><p>use of the technology.</p><p>Marketing is another area of focus. After years of</p><p>relying on performance marketing, brand marketing</p><p>may increasingly take centre stage in the year ahead,</p><p>with 71 percent of executives planning to spend</p><p>more on brand marketing than in 2023 in a bid to</p><p>cultivate emotional connections with customers.</p><p>At the same time, brands may find consumers are</p><p>more demanding when it comes to authenticity and</p><p>relatability, leading to a shift towards influencers</p><p>who are more quirky, vulnerable and less-polished.</p><p>Forward-looking companies should consider leaning</p><p>into this new wave of content creators to enhance</p><p>their brand stories.</p><p>As consumers travel with renewed enthusiasm</p><p>in the year ahead, fashion companies may need to</p><p>revamp how they engage with consumers who are</p><p>shopping abroad. For the first time since the Covid-19</p><p>pandemic, travel levels in 2024 are projected to</p><p>exceed those in 2019. Chinese travel to overseas</p><p>destinations is expected to reach between 70 percent</p><p>and 100 percent of pre-pandemic levels in 2024. As</p><p>these shoppers return, there is a growing desire for</p><p>brand experiences and traditional shopping trips</p><p>in both tourist destinations and second-tier cities.</p><p>Alongside a return to travel, there is also a shift to</p><p>spending more time outdoors, which will likely drive</p><p>up demand for outdoor wear in 2024, further blurring</p><p>the lines between functionality and style.</p><p>All told, executives are bracing for a strategically</p><p>challenging year ahead. Fashion leaders need to plan</p><p>carefully for a range of different scenarios, become</p><p>better equipped to manage pricing and get ready to</p><p>accelerate when the storm begins to clear.</p><p>Looking to 2024, fashion leaders are anticipating further</p><p>headwinds and are uncertain about prospects for the year</p><p>ahead.</p><p>11</p><p>Executive Summary</p><p>Fashion industry executives looking</p><p>towards 2024 are on edge. The most</p><p>prominent sentiment among fashion</p><p>leaders is “uncertainty,” according to the</p><p>BoF-McKinsey State of Fashion 2024 Executive</p><p>Survey.1 Causes for concern include geopolitical</p><p>events, weakened economies and the continuing</p><p>impact of high interest rates. Yet executives also</p><p>see some reason for optimism in specific markets</p><p>and segments.</p><p>Looking ahead to 2024, 26 percent of respondents</p><p>to the survey conducted in early September expected</p><p>conditions to improve year on year, 37 percent</p><p>expected conditions remain the same and 38 percent</p><p>expected the situation to worsen, marking the biggest</p><p>divide in executives’ expectations for the year ahead</p><p>since the inception of the BoF-McKinsey survey in</p><p>2017.2 Yet the outbreak of the Israel-Hamas war in</p><p>October underscores the uncertain environment,</p><p>raising questions about whether a regional widening</p><p>of the conflict could impact the global economy and</p><p>have ramifications for the fashion industry.</p><p>Geopolitics continue to be a firm fixture on</p><p>as they could be used to</p><p>train external models. Likewise, without a watchful</p><p>eye on licensing terms, third-party models could</p><p>employ an organisation’s data and IP for their own</p><p>use. Similarly, companies should ensure that they are</p><p>not sharing confidential and customer-sensitive data</p><p>with models and gen AI applications.</p><p>Building secure and scalable IT infrastructure</p><p>is imperative. In most cases, this is likely to come</p><p>from cloud providers, but tech teams internally</p><p>must set expectations and share accountability.</p><p>Quality assurance, including content moderation, is</p><p>likely to be an ongoing activity, throughout the life</p><p>of the model and after it is released into production.</p><p>Ongoing monitoring of model performance and</p><p>output will likely be key to maintaining high</p><p>standards for any brand.</p><p>Navigating these risks can enable leaders to</p><p>pursue gen AI responsibly in a fast-changing world.</p><p>Governance will need to be flexible and ready to</p><p>adapt at speed. Organisations that take a human-</p><p>centred approach — considering the impact of gen</p><p>AI on employees, customers and communities, and</p><p>prioritising user needs and experiences — are more</p><p>likely to succeed.</p><p>Scaling Up</p><p>Gen AI is redefining the art of the possible. Very</p><p>rapidly constraints have shifted from technology</p><p>limitations to the creativity of leaders in applying it to</p><p>their businesses. In this context, hands-on learning</p><p>should be a goal of its own — and learning rates may</p><p>soon separate winners from losers. According to an</p><p>International Data Corporation report, 40 percent</p><p>of worldwide retailers and brands are experimenting</p><p>with gen AI, while 21 percent are investing in gen AI</p><p>applications.244 Likewise, over the next three years,</p><p>up to 74 percent of retail and e-commerce companies</p><p>plan to increase gen AI spending.245</p><p>To enable successful employee adoption,</p><p>organisations could provide training programmes</p><p>to onboard employees and offer resources that help</p><p>them use gen AI. Such programmes can help upskill</p><p>employees and educate them on benefits, highlighting</p><p>how gen AI can expand their capabilities and reduce</p><p>repetitive tasks, rather than eradicate jobs.</p><p>Leaders can set the tone. To help drive responsible</p><p>gen AI adoption, leaders could foster creativity by</p><p>creating psychologically safe environments where</p><p>users feel empowered to experiment and learn by</p><p>doing, while investing in internal communication and</p><p>change management. While gen AI’s profit potential</p><p>is high, the challenge of bringing these possibilities</p><p>to life is very much a human-centred one.</p><p>70</p><p>The State of Fashion 2024</p><p>07.</p><p>Fast Fashion’s</p><p>Power Plays</p><p>Fast-fashion competition will likely become even</p><p>fiercer in the year ahead. Challengers, led by Shein</p><p>and Temu, are changing tactics around price, customer</p><p>experience and speed. Success for disruptors and</p><p>incumbents will likely hinge on their ability to</p><p>adapt to evolving consumer preferences, while</p><p>navigating regulations that may impact the industry.</p><p>KEY INSIGHTS</p><p>• The third generation of fast-fashion companies have captured</p><p>consumers’ attention. 40 percent of US consumers and 26 percent</p><p>of UK consumers have shopped at Shein or Temu in the past 12 months.</p><p>• The success of much of the third generation is underpinned by</p><p>several operating model innovations that make fashion faster and</p><p>cheaper than ever, including agile manufacturer-to-consumer</p><p>supply chains and data-driven product design.</p><p>• In 2024, this generation of fast fashion is likely to face some</p><p>challenges amid evolving standards from regulators and consumers</p><p>alike on topics ranging from sustainability to trade practices.</p><p>71</p><p>Fashion System</p><p>In 2023, fast fashion accelerated. Following in the</p><p>footsteps of e-commerce giant and market leader</p><p>Shein, a cohort of challengers has upended the</p><p>competitive landscape by producing fashion quicker</p><p>and cheaper than before.246 The first generation</p><p>of fast-fashion heavyweights, like H&M and Zara,</p><p>that introduced the concept of trendy runway-</p><p>inspired fashion at affordable prices has before been</p><p>challenged by a second generation of digital-first</p><p>fast-fashion players like Asos and Boohoo. Now, a</p><p>third generation of companies is making its mark.</p><p>Rising players include Temu — a marketplace owned</p><p>by China-based PDD Holdings, which overtook</p><p>Amazon as the most-downloaded shopping app in</p><p>the US and in most of the other 16 markets in which</p><p>it operates just months after launching;247 Turkey-</p><p>based Trendyol, a marketplace backed by Chinese</p><p>internet giant Alibaba; and Cider, a US-based retailer</p><p>targeting Gen-Z with a third-generation fast-fashion</p><p>business model.</p><p>These companies, with their ultra-low prices</p><p>and rapid turnover of trendy styles, have captured</p><p>the attention of consumers in western markets. Two</p><p>companies stand out in this regard: Shein and Temu</p><p>(which are the focus of this analysis). According to</p><p>the BoF-McKinsey State of Fashion 2024 Consumer</p><p>Survey, 40 percent of US consumers have shopped</p><p>at Shein or Temu in the past 12 months; in the UK,</p><p>a newer market for the retailers, that figure is at 26</p><p>percent. Meanwhile, consumers indicate they are</p><p>looking to increase their spend with these players:</p><p>net future purchase intent for Shein and Temu is,</p><p>on average, 18 percentage points higher than that of</p><p>first-generation competitors.248</p><p>Ultra-low prices are integral to the success of the</p><p>business model. Shein’s average SKU price of $14 is</p><p>significantly lower than H&M’s $26 and Zara’s $34.249</p><p>Turnaround times from trend capture to product</p><p>availability are also condensed: Shein aims for 10</p><p>days, under half the 21-day minimum elsewhere.250</p><p>However, this speed does not always translate to</p><p>delivery times — customers often wait weeks for</p><p>parcels to arrive for the sake of trendy designs and</p><p>low prices. Customer loyalty is built on more than</p><p>just price or speed — the third generation of players is</p><p>also transforming the customer experience through</p><p>gamification, micro-incentives and social media</p><p>communities.251</p><p>Updating the Model</p><p>Undergirding the third generation are several</p><p>operating model innovations:</p><p>Agile, scalable manufacturer-to-consumer</p><p>supply chains: Some third-generation companies</p><p>have developed large networks of suppliers who often</p><p>manufacture exclusively for them. For Shein, which</p><p>was initially built with a first-party, owned-inventory</p><p>model (before introducing a third-party, cross-</p><p>category marketplace in 2023), strict performance</p><p>management of suppliers drives reliability, while</p><p>direct-to-consumer delivery from China enables</p><p>rapid scalability with low inventory risk. Temu,</p><p>meanwhile, operates purely as a marketplace, finding</p><p>manufacturers with excess capacity and onboarding</p><p>them to sell unbranded goods directly to consumers</p><p>in a low-price “B2B2C” model.252 While Temu’s</p><p>prices are often between 10 percent and 40 percent</p><p>lower than Shein’s, the retailer has faced challenges</p><p>relating to quality control and reliability.253 254</p><p>Data-driven product design and testing:</p><p>At Shein, products are designed or selected using</p><p>demand-driven trend modelling, which includes</p><p>a range of data inputs from current trends to viral</p><p>products to consumer perception. Shein adds</p><p>between 2,000 and 10,000 items to its app every day</p><p>and produces in small batches; to maintain a tight</p><p>grip on inventories, hit rates comparing product</p><p>page visits to sales are evaluated in real time.255</p><p>Temu’s approach also evaluates hit rates to feed back</p><p>information to sellers on trends and demand levels</p><p>Customer loyalty is built on more than solely price or speed</p><p>— the third generation of players is transforming the customer</p><p>experience through gamification, micro-incentives</p><p>and social media communities.</p><p>72</p><p>The State of Fashion 2024</p><p>for their products.256</p><p>Loyal and growing customer bases: Third-</p><p>generation retailers have focused on building large,</p><p>deeply engaged, loyal communities. Shein’s multi-</p><p>layered affiliate marketing influencer programme,</p><p>paired with organic social community building,</p><p>has driven viral user growth and low customer</p><p>acquisition costs.257 Temu is investing in marketing</p><p>in a bid to scale rapidly, posting more than double</p><p>the number of Facebook ads in the US than Shein,</p><p>and more than four times as many as Amazon. It</p><p>reportedly spent $14 million for two 30-second slots</p><p>during the 2023 Super Bowl, while market analysis</p><p>suggests its quarterly marketing investments are</p><p>nearly $500 million.258 259</p><p>High app adoption rates and engagement</p><p>tactics: Shein uses extensive in-app gamification,</p><p>allowing customers to earn loyalty points by</p><p>undertaking a variety of steps, including setting</p><p>up an account, uploading reviews, watching</p><p>livestreams and participating in outfit challenges.260</p><p>Temu similarly offers rewards to customers who</p><p>invite friends to join and keeps users engaged with</p><p>in-app games. Temu’s conversion rate is as high as</p><p>10 percent, compared with an industry average of 2</p><p>percent. Its retention rates rival those of Amazon,</p><p>Shein and Walmart.261 262</p><p>Pushing Back</p><p>While they may have developed loyal customer</p><p>bases, these third-generation fast-fashion companies</p><p>are also subject to public and regulatory scrutiny.</p><p>Consumers are increasingly aware of fast fashion’s</p><p>role in the wider industry’s negative impact on the</p><p>environment, while policy makers in key markets —</p><p>notably the US and EU — are considering new laws</p><p>to address the fast-fashion industry’s alleged role in</p><p>a culture of overconsumption and make-take-waste.</p><p>Against this backdrop, some of the core tenets</p><p>of the third-generation fast-fashion business model</p><p>are becoming less attractive. The use of small-</p><p>batch, reactive production has been positioned by</p><p>some players as part of a “zero-waste” sustainability</p><p>narrative. However, this type of production is also</p><p>linked to rapid trend cycles, which go hand in hand</p><p>with ultra-cheap products that are often quickly</p><p>discarded.263 Some third-generation players have</p><p>attempted, not always successfully, to promote a</p><p>more sustainable, ethical side to their businesses</p><p>through marketing campaigns. Shein’s recent</p><p>influencer campaign to refashion the perception of its</p><p>supply-chain ethics, in which a group of influencers</p><p>were invited to a Shein innovation centre, was seen</p><p>as an attempt to gloss over the company’s alleged</p><p>association with unethical practices.264</p><p>Many trade and tax bodies are considering new</p><p>standards that address the way in which some third-</p><p>generation fast-fashion companies have dealt with</p><p>“de minimis” trade laws in jurisdictions like the US,</p><p>where import taxes are less for shipping individual</p><p>orders directly to customers from factories</p><p>abroad, rather than in bulk — a common practice</p><p>among third-generation fast-fashion players.265 US</p><p>legislators are currently debating two bipartisan bills</p><p>related to de minimis exceptions and customs and</p><p>border scrutiny, which in their current form could</p><p>mean that exporters from countries such as China</p><p>(including major third-generation fast-fashion</p><p>players) would no longer be eligible for de minimis</p><p>exceptions and would instead face enhanced customs</p><p>and border scrutiny.266</p><p>The long-term prospects of the third-generation</p><p>business model may face some challenges as</p><p>The Temu shopping app. Shutterstock.</p><p>73</p><p>Fashion System</p><p>players mature. For example, while Temu’s large</p><p>performance marketing spend and discounts have</p><p>so far helped the company to grow, it remains to be</p><p>seen if it will be able to maintain its current strategy,</p><p>which requires significant investments in customer</p><p>acquisition and razor-sharp logistics.267</p><p>The Imperative to Adapt</p><p>The scene has been set for further disruption in</p><p>the industry. In the face of incoming regulations,</p><p>increasing public scrutiny and falling valuations</p><p>(Shein’s $100 billion 2022 valuation reportedly</p><p>dropped to $66 billion in 2023), third-generation</p><p>players may not be able to settle into their business</p><p>models just yet and may need to adapt again.268</p><p>Shein is attempting to diversify its strategy in a</p><p>bid to maintain its leading position. The company is</p><p>experimenting with offline retail, including pop-ups</p><p>and shops-in-shops.269 It has formed a joint venture</p><p>with Forever 21 to expand its US offline experience,</p><p>and has also recently acquired the Missguided brand</p><p>in the UK.270 271 In response to import tax restrictions,</p><p>Shein is also expanding its supply chain beyond</p><p>its network of manufacturers in China, building</p><p>warehouses in Europe, the US and Canada, as well as</p><p>factories in Brazil.272</p><p>As Shein adapts its model to face the new</p><p>challenges — from a network of low-cost</p><p>manufacturers largely in China to new suppliers</p><p>elsewhere in the world, and from a direct-to-consumer</p><p>Exhibit 15</p><p>Three generations of fast-fashion companies are</p><p>underpinned by an evolution in speed and innovation</p><p>1 Examples are non-exhaustive</p><p>2 Timeline is approximate and relative. Shein date shown as 2012, when company became a fully</p><p>integrated retailer in its recognisable form (the business was founded in 2008 under a different,</p><p>smaller model); Trendyol date shown as 2018, when company received majority investment from</p><p>Alibaba Group (the business has operated since 2010 on a smaller, more localised scale)</p><p>Source: McKinsey analysis</p><p>Fast fashion’s</p><p>evolution</p><p>Timeline2</p><p>Example</p><p>companies1</p><p>1st generation 2nd generation 3rd generation</p><p>H&M Primark Zara Asos Boohoo Missguided Shein Trendyol Cider Temu</p><p>Original runway-to-high street</p><p>retailers offering trend-driven</p><p>fashion at affordable prices</p><p>Digital-first players with</p><p>quicker turnaround times and</p><p>rapid DTC logistics</p><p>The latest challengers with</p><p>ultra-fast trend-to-production</p><p>times and ultra-low prices</p><p>Pre-2000 2000 2005 2010 2015 2020 2022</p><p>74</p><p>The State of Fashion 2024</p><p>online model to offline or omnichannel retail —</p><p>what has been its competitive edge could face some</p><p>dilution and the stickiness of its core customer base</p><p>may be challenged.</p><p>The “everything store” marketplace model</p><p>might hold the key to potential success for players.</p><p>Shein has piloted the model in the US and Brazil</p><p>and has indicated potential to expand in 2024.273</p><p>The retailer is even beginning to enter luxury</p><p>fashion, with listings from some luxury brands</p><p>posted by third-party sellers making their way onto</p><p>its marketplace (although the authenticity of these</p><p>items is, as yet, unverified).274</p><p>In 2024, market disruption may gather pace,</p><p>with third-generation fast-fashion companies</p><p>doubling down on marketplaces to expand across</p><p>categories, price points and consumer segments.</p><p>Customer engagement is likely to remain a key</p><p>differentiator, as third-generation players use their</p><p>strong communities and gamification tactics to</p><p>increase average basket size, seeking to grow profits</p><p>and safeguard a viable business model for the future.</p><p>The industry as a whole could feel the effects of these</p><p>third-generation players: companies might want</p><p>to take note of their most successful strategies to</p><p>capture the attention of the modern consumer.</p><p>Shoppers at a Shein pop up inside a Forever 21 store. Allen J. Schaben/Getty Images.</p><p>75</p><p>Fashion System</p><p>US and UK respondents who shopped at the retailer in the</p><p>last 12 months,</p><p>%</p><p>UK</p><p>Primark NextH&M Asos Zara TemuShein</p><p>45</p><p>20</p><p>31</p><p>12</p><p>34</p><p>15</p><p>27</p><p>US</p><p>26</p><p>24</p><p>9</p><p>26</p><p>10</p><p>23</p><p>Temu SheinH&M Forever</p><p>21</p><p>Fashion</p><p>Nova</p><p>Zara</p><p>4</p><p>Asos</p><p>Third-generation fast-fashion players</p><p>Incumbents</p><p>Source: BoF-McKinsey State of Fashion 2024 Consumer Survey</p><p>Fast Fashion’s Power Plays</p><p>US and UK respondents who shopped</p><p>at the retailer in the last 12 months,</p><p>%</p><p>G</p><p>en</p><p>-Z</p><p>(1</p><p>8–</p><p>24</p><p>)</p><p>M</p><p>ill</p><p>en</p><p>ni</p><p>al</p><p>s</p><p>(2</p><p>5–</p><p>42</p><p>)</p><p>G</p><p>en</p><p>-X</p><p>(4</p><p>3–</p><p>55</p><p>)</p><p>B</p><p>oo</p><p>m</p><p>er</p><p>s</p><p>(5</p><p>6+</p><p>)</p><p>Shein Temu</p><p>30 14</p><p>25 21</p><p>11 17</p><p>2021</p><p>Exhibit 16</p><p>Third-generation fast-fashion players have</p><p>attracted shoppers in the US and UK</p><p>Shein and Temu are commanding</p><p>interest among consumers across</p><p>age groups</p><p>76</p><p>US and UK respondents,</p><p>%</p><p>Share of wallet1</p><p>Indexed to</p><p>H&M</p><p>Net purchase intent2</p><p>Indexed to H&M</p><p>1 Share of wallet calculated as total stated retailer spend as a percentage of total stated fashion spend.</p><p>Includes those who did not shop with the retailer</p><p>2 Net purchase intent calculated as difference between percentage of consumers who expect to buy</p><p>more from the retailer and percentage of consumers who expect to buy less from the retailer in the</p><p>next two to three years</p><p>US and UK respondents’ perception of retailers,</p><p>%</p><p>Low High</p><p>Offers the lowest prices</p><p>H&M TemuZara Shein</p><p>Offers a broad range of products</p><p>H&M SheinZara Temu</p><p>Has a fun and gamified shopping</p><p>experience</p><p>H&M TemuZara Shein</p><p>Is creating buzz on social media</p><p>H&M TemuZara Shein</p><p>H&M TemuShein</p><p>−14pp</p><p>+34pp</p><p>UK</p><p>−4pp</p><p>H&M TemuShein</p><p>+16pp</p><p>US</p><p>in Numbers</p><p>High net intent to spend indicates more growth</p><p>is on the way for third-generation players</p><p>These companies stand out for not only their low prices</p><p>but also choice, experience and social buzz</p><p>In a proprietary survey of consumers in the UK</p><p>and US, we find that shoppers from all age groups</p><p>are increasingly turning to third-generation fast-</p><p>fashion retailers such as Shein and Temu.</p><p>77</p><p>Musinsa:</p><p>Taking the K-Fashion</p><p>Ecosystem Global</p><p>By Janet Kersnar</p><p>Mun-il Han, has helped build</p><p>the fast-growing South Korean</p><p>fashion e-retailer, and has</p><p>created what he believes is a</p><p>differentiating business model</p><p>that benefits up-and-coming</p><p>brands, their Gen-Z customers</p><p>and Musinsa itself. Now, riding</p><p>the wave of K-culture’s surging</p><p>global popularity, Musinsa is</p><p>doubling down on international</p><p>expansion.</p><p>EXECUTIVE INTERVIEW</p><p>Mun-il Han,</p><p>Chief Executive,</p><p>Musinsa</p><p>78</p><p>The State of Fashion 2024</p><p>Having a global presence</p><p>and recognition would</p><p>have been hard to</p><p>imagine only just a few years</p><p>ago for Korea’s fashion industry,</p><p>which is increasingly on global</p><p>brands’ radars thanks in large</p><p>part to fashion’s ability to</p><p>benefit from the recent surge in</p><p>popularity of K-films and series,</p><p>according to Mun-il Han, who</p><p>became CEO of the Seoul-based</p><p>fashion marketplace in 2022 at</p><p>the age of 33. “When I look back</p><p>[in 2018 when I joined] fashion</p><p>marketplace Musinsa, it usually</p><p>was quite rare that a CEO or a top</p><p>executive of a global brand would</p><p>actually come to Seoul, and even</p><p>if they did, they wouldn’t stay very</p><p>long,” he recalled. “That has very</p><p>much changed.”</p><p>But Musinsa wasn’t going to</p><p>wait around for global recognition</p><p>to make its own mark on Korea’s</p><p>fashion industry. Starting out in</p><p>e-commerce’s early days in 2001</p><p>as an online platform for sneaker-</p><p>loving high school kids to share</p><p>street fashion photos, Musinsa has</p><p>grown into a fashion marketplace</p><p>that it says comprises a community</p><p>of 13 million, largely Gen-Z fans,</p><p>with a 2023 funding round that</p><p>reportedly valued the company at</p><p>approximately $2.76 billion.</p><p>According to Han, Musinsa</p><p>has taken a different approach</p><p>than other fashion e-tailers by</p><p>focusing on the sellers — that is,</p><p>the 8,000 local and global brands</p><p>selling their apparel and footwear</p><p>on its Korean platform or via its</p><p>app, including independent brands</p><p>it helps fund and support by, for</p><p>example, providing marketing and</p><p>innovative initiatives to connect</p><p>them directly with customers. One</p><p>such initiative was its first-ever</p><p>“Musinsa Season Preview” event,</p><p>where customers could visit four</p><p>offline venues in Seoul to share</p><p>their thoughts alongside those of</p><p>a panel of industry experts on the</p><p>Spring/Summer 2024 collections</p><p>from 30 local brands, which could</p><p>then adjust pricing and inventory</p><p>based on the feedback.</p><p>Beyond Korea, Musinsa is now</p><p>present in 13 countries, selling</p><p>around 800 Korean brands.</p><p>Han said one of the markets</p><p>where K-fashion is in increasing</p><p>demand is Japan, where it set up a</p><p>subsidiary in 2021 and has become</p><p>the company’s largest global</p><p>market.</p><p>With bands like BTS, Blackpink</p><p>and most recently New Jeans</p><p>(the latter a Musinsa brand</p><p>ambassador), K-pop’s star just</p><p>seems to keep rising higher.</p><p>Analysts at Bernstein recently</p><p>said the K-pop industry could</p><p>generate annual revenue of</p><p>approximately $10 billion by</p><p>2030, or roughly double 2023’s</p><p>level. How is K-fashion riding</p><p>that wave?</p><p>I don’t think the global impact of</p><p>K-pop is fully hitting home to us</p><p>in Korea. It’s not just K-pop stars</p><p>but also K-celebrities who are</p><p>really gaining global exposure with</p><p>the popularity of K-content or for</p><p>movies and dramas. Especially</p><p>fashion and luxury brands, they</p><p>are leveraging K-pop stars and</p><p>signing them on as their brand</p><p>ambassadors. We can indirectly</p><p>feel the extent to which these pop</p><p>stars now have so much influence</p><p>and power.</p><p>We’re still in the incipient</p><p>stages, but I think when these</p><p>artists or musicians share their</p><p>daily lives on social media, that’s</p><p>when fans really take interest.</p><p>Then also when people watch</p><p>K-content like movies and dramas</p><p>and they see how Korean people</p><p>or celebrities dress or what their</p><p>lifestyle is like, people gradually</p><p>start to become familiar with their</p><p>lifestyle and their dress.</p><p>It’s a bit like what happened</p><p>with hip-hop. People who were</p><p>doing hip-hop in Korea wanted</p><p>to emulate that way of life and</p><p>consume the brands that were part</p><p>of that. We feel that K-content is</p><p>now at a similar juncture, where</p><p>it’s being exported abroad. It’s</p><p>taken a while for fashion to have a</p><p>distinct connection with K-culture</p><p>but it’s starting to happen. At</p><p>Musinsa, we want to leverage</p><p>that opportunity to really expand</p><p>our global footprint, after having</p><p>grown very rapidly by mainly</p><p>focusing on the online fashion</p><p>market in Korea.</p><p>Ever since Musinsa became</p><p>a fully fledged fashion</p><p>retail platform in the 2010s,</p><p>fashion retail generally has</p><p>been undergoing disruption</p><p>and change. What has been</p><p>Musinsa’s role in this? Does</p><p>Musinsa consider itself one of</p><p>the disruptors?</p><p>We definitely see ourselves as a</p><p>disruptor. Korea’s fashion market</p><p>in the past was very much led</p><p>by the department stores — you</p><p>only had a handful of brands that</p><p>were able to launch in department</p><p>stores and that were recognised</p><p>as bonified brands. Whereas with</p><p>the emergence of a platform such</p><p>as ours, we see many new brands</p><p>emerging to create a fashion</p><p>ecosystem.</p><p>Back in 2001, we started as</p><p>an online community. It was a</p><p>79</p><p>Fashion System</p><p>community where young people</p><p>were able to freely exchange</p><p>information and narratives about</p><p>fashion and lifestyle that they</p><p>were interested in. This was a very</p><p>active community, a community</p><p>where we were also able to</p><p>introduce overseas street fashion</p><p>brands that Koreans may not have</p><p>been familiar with and introduce</p><p>some local brands that were up</p><p>and coming.</p><p>Right from the beginning, we</p><p>had a very strong understanding of</p><p>what young people wanted, what</p><p>their needs were. At the same time,</p><p>brands were looking for channels</p><p>to sell their products and large</p><p>companies also wanted to do</p><p>business online but weren’t really</p><p>aware of what young people like</p><p>and need.</p><p>In terms of that ecosystem,</p><p>how does it enable Musinsa</p><p>to differentiate itself in</p><p>an increasingly crowded</p><p>e-retailing market?</p><p>If we look at this from a platform</p><p>perspective, the China-based</p><p>platforms are really doing well in</p><p>terms of gamification. But in Korea,</p><p>I don’t think we see any notable</p><p>results with gamification. Rather</p><p>than that, I think the biggest</p><p>differentiator of our company</p><p>compared to other e-commerce</p><p>platforms is that we really zero in</p><p>on managing the sellers.</p><p>Also, we focus more on what</p><p>I would call the “essence” rather</p><p>than things like gamification. What</p><p>I mean by that is, people who are</p><p>interested in fashion or lifestyle</p><p>through our community are able to</p><p>ask questions about fashion. They</p><p>are able to get recommendations</p><p>from other people within the</p><p>community. We don’t think that</p><p>algorithms alone provide the best</p><p>recommendations, so we try to mix</p><p>our curation with the data to come</p><p>up with the best recommendation</p><p>for our customers.</p><p>A Musinsa Standard store in Hongdae, Seoul,</p><p>South Korea. Musinsa (above).</p><p>A Musinsa “Season Preview” display in Seoul, South Korea. Musinsa (right).</p><p>80</p><p>The State of Fashion 2024</p><p>We’ve always had the</p><p>philosophy that we focus on the</p><p>seller. Because of the success of</p><p>Amazon, most of the e-commerce</p><p>players at that time were more</p><p>focused on the buyer side. What</p><p>we had in mind was something</p><p>more like a content business, like</p><p>Netflix and Spotify, while also</p><p>focusing more on the needs of the</p><p>seller, the fashion brands on our</p><p>platform, the small independent</p><p>brands who have a little bit more</p><p>of a personality or individuality.</p><p>What does partnering with</p><p>up-and-coming designers</p><p>entail? Why do you want to</p><p>work with these designers?</p><p>The key for our business is to</p><p>be able to secure good, talented</p><p>new brands, and even enter</p><p>agreements in which they sell</p><p>with us exclusively. … We feel the</p><p>right formula is to really study</p><p>what their needs are as they are</p><p>rising, support them to address</p><p>those needs, and build a good</p><p>relationship and thereby build a</p><p>fashion ecosystem.</p><p>Just like Netflix invests in</p><p>production companies, or like</p><p>YouTube secures a lot of great</p><p>creators on its platform by</p><p>providing them with various</p><p>tools, Musinsa partners with and</p><p>invests in brands, that investment</p><p>can provide everything from</p><p>marketing content to interest-free</p><p>loans to help fund their production</p><p>plans or tools on our platform like</p><p>how-to videos.</p><p>After a brand joins us, we’re</p><p>able to see very quickly the type of</p><p>reception it is getting, how much</p><p>feedback there is [from customers</p><p>on the platform], along with sales</p><p>figures. So, we’re able to quickly</p><p>identify if a brand is really growing</p><p>or if there are any issues that need</p><p>to be addressed. That’s not to say</p><p>that we provide equal amounts of</p><p>support to all our brands. We try</p><p>to sow as many seeds as possible</p><p>and then when we see there is</p><p>explosive growth of a certain high-</p><p>potential brand, we really try to</p><p>support them so that we can grow</p><p>together.</p><p>In 2023, Musinsa secured $190</p><p>million of series C funding, led</p><p>by investment company KKR.</p><p>Given that you’ve long focused</p><p>on 20-somethings in Korea,</p><p>what are your plans for taking</p><p>Musinsa’s ‘K-ecosystem’ to</p><p>different demographics and</p><p>other markets?</p><p>First, we are broadening our</p><p>customer base to include</p><p>individuals in their late 20s and</p><p>30s, due to focus on offering an</p><p>extended range such as high-end</p><p>brands.</p><p>Offline and online are both</p><p>important but basically 99.9</p><p>percent of our sales occur online,</p><p>so we have to continue to motivate</p><p>our consumers to come online to</p><p>shop. But people do want to try on</p><p>the clothes before they buy, and</p><p>so that’s why we’re expanding our</p><p>offline presence. We opened our</p><p>offline flagship stores in Daegu</p><p>and Seoul in late 2023. As for our</p><p>private brand, Musinsa Standard,</p><p>we have a store in Busan scheduled</p><p>to open at the end of 2023.</p><p>Our global expansion strategy</p><p>involves a gradual introduction</p><p>of westernised global brands and</p><p>will evolve with emerging brands</p><p>too. It’s been about a year since we</p><p>launched our app test cases to run</p><p>alongside the platform [for non-</p><p>Korean markets]. Currently it’s in</p><p>phase one and we have about 800</p><p>Korean brands on that app. Phase</p><p>two should happen around the end</p><p>of [2024] when we believe we will</p><p>be able to carry foreign brands too.</p><p>These would be very westernised</p><p>types of brands and that would</p><p>help enhance the visibility of the</p><p>Korean brands as well. Then in</p><p>phase three we’re thinking it could</p><p>be in Tokyo, Bangkok or Singapore</p><p>or anywhere else, but to really</p><p>grow the platform to incubate</p><p>these other new brands.</p><p>This interview has been edited and condensed.</p><p>81</p><p>Fashion System</p><p>08.</p><p>All Eyes</p><p>On Brand</p><p>Brand marketing will likely be back in the limelight</p><p>in the year ahead as the fashion industry confronts</p><p>a shifting landscape in which performance</p><p>marketing no longer reigns. Consumers’ emotional</p><p>connections to brands will likely be critical as</p><p>fashion marketers reorientate their playbooks to</p><p>emphasise long-term brand-building strategies.</p><p>KEY INSIGHTS</p><p>• Fashion marketers need to find new ways to engage shoppers</p><p>given the increasingly onerous costs of performance marketing</p><p>and the introduction of data privacy regulations restricting</p><p>customer targeting.</p><p>• 71 percent of fashion executives plan to spend more on brand</p><p>marketing in 2024 than previously, while 46 percent intend to do</p><p>so for performance marketing, according to the BoF-McKinsey</p><p>State of Fashion 2024 Executive Survey.</p><p>• Brands may lean into marketing to refine how they establish</p><p>emotional connections with consumers and will likely collaborate</p><p>across the fashion industry and adjacent sectors in a bid to build</p><p>compelling brand stories.</p><p>82</p><p>The State of Fashion 2024</p><p>Brand-building isn’t what it used to be. After years of</p><p>leaning heavily on instantly trackable performance</p><p>marketing, the fashion marketing landscape is</p><p>shifting. A convergence of factors, including pressures</p><p>on discretionary spend, is sharpening consumer</p><p>appetite for entertaining brand storytelling that</p><p>captures their aspirations and interests, well beyond</p><p>the products on offer.275 Spurring this change are the</p><p>increasing costs of performance marketing alongside</p><p>new data privacy regulations restricting customer</p><p>targeting, forcing marketers to find different ways to</p><p>engage with shoppers.</p><p>Many fashion leaders now plan to reprioritise</p><p>marketing spend. According to the BoF-McKinsey</p><p>State of Fashion 2024 Executive Survey, 71 percent</p><p>of executives plan to increase brand marketing spend</p><p>in 2024, while 46 percent intend to do the same for</p><p>performance marketing.276 This marks a fundamental</p><p>shift for many fashion companies, including direct-</p><p>to-consumer labels that have built their brands using</p><p>the trackable, targeted performance-marketing</p><p>playbook.277</p><p>While brand marketing by its very nature doesn’t</p><p>enable the same depth of trackable insights as</p><p>performance marketing, it does offer other benefits</p><p>— notably, done effectively, it can help brands to</p><p>stand out in an increasingly saturated media world.</p><p>Brand marketing is also proving to be pivotal in</p><p>transforming a label’s market position, while often</p><p>helping it capture entirely new customer bases.</p><p>Identity Revamp</p><p>Effective brand marketing needs to employ a multi-</p><p>pronged strategy over time, rather than one-off</p><p>moments. Sustained, holistic brand marketing</p><p>can transform brand images, as several recent</p><p>examples show.</p><p>Germany-based Hugo Boss launched an image</p><p>reboot with heavy investment in brand marketing</p><p>that aimed to attract young consumers. With newly</p><p>differentiated branding for “Hugo,” aimed at Gen-Z,</p><p>and “Boss,” aimed at Millennials, it updated its logo</p><p>and other visual cues and enlisted ambassadors</p><p>like Hailey Bieber, rolling out a star-studded web</p><p>and out-of-home campaign and hosting events</p><p>including see-now-buy-now fashion shows and</p><p>sponsoring sporting events to feature its new</p><p>streetwear-influenced looks. In March 2023, the</p><p>company announced the first full-year results since</p><p>the rebrand, attributing record sales of €3.65 billion</p><p>($3.85 billion) in large part to the “momentum”</p><p>throughout 2022 it gained from the new-look Boss</p><p>and Hugo brands.278</p><p>Italian luxury house Ermenegildo Zegna Group</p><p>Exhibit 17</p><p>More executives expect to increase spending on</p><p>brand marketing than performance marketing</p><p>Change in marketing spend by type in 2024 vs 2023,</p><p>% of respondents</p><p>463915</p><p>71236</p><p>Less Same More</p><p>Performance marketing</p><p>Brand marketing</p><p>Source: BoF-McKinsey State of Fashion 2024 Executive Survey</p><p>+25pp</p><p>83</p><p>Fashion System</p><p>began a refresh of its Zegna menswear brand in the</p><p>run-up to its initial public offering in 2021. The brand</p><p>streamlined and modernised its image, dropping</p><p>“Ermenegildo” from its name and condensing three</p><p>sub-brands into one modern, slick Zegna-branded</p><p>umbrella. The company also collaborated with luxury</p><p>streetwear label Fear of God to tap into a broader,</p><p>younger audience as</p><p>part of a wider casualisation</p><p>campaign, which expanded Zegna’s brand authority</p><p>from tailored suits to luxury leisurewear for the</p><p>modern quiet luxury consumer.279 280 281 Zegna’s</p><p>full-year 2022 sales rose 16 percent year on year to</p><p>€1.5 billion($1.6 billion).</p><p>Meanwhile, New Balance has used collaborations</p><p>as a part of its broader strategy to elevate the</p><p>brand and drive demand. In addition to targeted</p><p>inventory allocation across channels, product drops</p><p>and marketing investments, the sneaker brand</p><p>leveraged tie-ups with image-driving partners, such</p><p>as JJJJound, Miu Miu, Joe Freshgoods and Aimé</p><p>Leon Dore, while tapping ALD’s Teddy Santis to be</p><p>creative director of New Balance Made in USA.282</p><p>These actions have reinforced New Balance’s brand</p><p>positioning, with it ranking as one of the best-selling</p><p>brands on sneaker resale platforms Goat, StockX and</p><p>Flight Club.283 284 285</p><p>The Brand Marketing Toolkit</p><p>As consumers crave greater connection and</p><p>authenticity from brands, marketing efforts will</p><p>home in on brand storytelling and emotional affinity</p><p>through multiple avenues.</p><p>One way this can be done is by leveraging the</p><p>personalities behind a brand, such as the founder or</p><p>creative director. Think Miu Miu (Miuccia Prada)</p><p>or Loewe and JW Anderson (Jonathan Anderson)</p><p>or Jacquemus (Simon Porte Jacquemus) — labels</p><p>that featured in the recent quarterly Lyst index of</p><p>fashion’s most prominent brands.286 Underscoring</p><p>how many consumers gravitate towards the people</p><p>who personify and drive a brand,287 organic content</p><p>can be created around these personalities in</p><p>authentic, personable ways.</p><p>However, there are other ways to build</p><p>communities that don’t rely on a brand’s stand-out</p><p>personality. In the case of Nike, bold ad campaigns</p><p>featuring high-profile athletes have over the years</p><p>created a perception around the brand for focusing</p><p>on social causes.288 Meanwhile, as heritage luxury</p><p>brands have shown, there’s plenty of scope for</p><p>storytelling that pivots around other aspects of</p><p>their brands’ unique qualities. Hermès, for example,</p><p>has long employed deep brand stories that evoke</p><p>A Jacquem</p><p>us pop-up. Jacquem</p><p>us.</p><p>Chief marketing officers and their teams will need a laser-</p><p>sharp focus on customer perception and cross-funnel strategy,</p><p>working with creatives and brand specialists as well as data,</p><p>finance and strategy leaders to form a cohesive brand story.</p><p>84</p><p>The State of Fashion 2024</p><p>A Jacquem</p><p>us pop-up. Jacquem</p><p>us.</p><p>a history of craftmanship. At Tiffany & Company,</p><p>the brand was revitalised after its acquisition by</p><p>LVMH, balancing established brand stories and</p><p>new campaigns with stars like musicians Jay-Z and</p><p>Beyoncé to access a new generation of consumers.289</p><p>There’s also a brand marketing opportunity by</p><p>creating memorable shopping moments. Connecting</p><p>emotionally with consumers has become increasingly</p><p>difficult in a world of ever-shortening attention</p><p>spans. However, by meeting consumers in the real</p><p>world with activations that span channels, brands</p><p>can capture attention and build a more pervasive</p><p>presence in customers’ lives. Immersive stores,</p><p>featuring visually striking spaces and interactive,</p><p>multisensory experiences, can be employed here.290</p><p>291 A range of brands have already been experimenting</p><p>with boldly designed pop-ups which often have the</p><p>additional benefit of serving as ideal backdrops for</p><p>shoppers’ social media posts. Examples include</p><p>Jacquemus’s handbag vending machines, Chanel’s</p><p>perfume-themed diner, H&M’s immersive collection</p><p>launches and Pretty Little Thing’s themed influencer</p><p>showroom.292 293 294 295</p><p>Melding marketing strategies with adjacent</p><p>industries such as music, film and sports, is also</p><p>helping fashion brands remain relevant with</p><p>customers. In 2024, brands may consider investing</p><p>further in cross-industry collaborations, joint</p><p>ventures and sponsorships.296 LVMH announced its</p><p>“premium” sponsorship deal of the 2024 summer</p><p>Olympic and Paralympic Games in Paris, with plans</p><p>for individual brands to make standout contributions</p><p>in the run-up to the games.297 298 Following on the</p><p>heels of LVMH’s news, Kering-owner François-</p><p>Henri Pinault announced that his family’s holding</p><p>company Artémis had closed a multi-billion-dollar</p><p>deal to acquire a majority stake in Hollywood talent</p><p>giant Creative Artists Agency, perhaps a precursor to</p><p>fashion players inking more cross-cultural deals.299</p><p>Creating Long-Lasting Affinity</p><p>Succeeding as a brand in 2024 may require a shift in</p><p>priorities — selectively using brand-building tools</p><p>to develop compelling brand stories, supported by</p><p>a long-term strategy and underpinned by the right</p><p>talent and channel investments.</p><p>Chief marketing officers and their teams will</p><p>need a laser-sharp focus on customer perception</p><p>and cross-funnel strategy, working with creatives</p><p>and brand specialists as well as data, finance and</p><p>strategy leaders to form a cohesive brand story. After</p><p>years of focusing on performance marketing, CMOs</p><p>must now invest in hiring and training teams to</p><p>bolster brand marketing capabilities, ensuring that</p><p>the marketing department contains both brand and</p><p>performance marketing specialists that can work</p><p>closely together. Indeed, more companies may hire</p><p>chief brand officers as brands take a more holistic</p><p>view of their storytelling and marketing efforts.</p><p>Undergirding this is a focus on the long-term</p><p>story. This will require a mentality shift, with impact</p><p>measurement focused on longer-term, strategic</p><p>horizons, rather than instant return on investment —</p><p>while blockbuster marketing campaigns can generate</p><p>immediate buzz, maintaining consumer attention</p><p>thereafter is a challenge. Consumers expect to see</p><p>brand stories that are consistent and authentic; the</p><p>success of purpose-led brands such as Patagonia</p><p>are proof points. Brand marketing may need to be</p><p>maintained with consistent storytelling throughout</p><p>consumers’ day-to-day lives, from large-scale events</p><p>to touchpoints on social media. However, 2024</p><p>won’t be about generating more and more content,</p><p>or perpetually refreshing brand identities. Now, the</p><p>focus needs to be on “less is more,” with carefully</p><p>crafted storytelling that amplifies a brand’s clear,</p><p>coherent personality.</p><p>86</p><p>The State of Fashion 2024</p><p>Dior:</p><p>Balancing Tradition,</p><p>Innovation and Scale</p><p>By Robert Williams</p><p>Having piloted Dior’s image</p><p>through the tenures of a</p><p>succession of designers and</p><p>three CEOs, Olivier Bialobos is</p><p>now working to drive the luxury</p><p>brand’s growth and desirability</p><p>at unprecedented scale.</p><p>EXECUTIVE INTERVIEW</p><p>Olivier Bialobos,</p><p>Deputy Managing</p><p>Director, Communication</p><p>and Image, Dior</p><p>Image credit: Karim Zeriahen</p><p>87</p><p>Fashion System</p><p>During 18 years at Christian</p><p>Dior, Olivier Bialobos has</p><p>established himself as the</p><p>French couture house’s 360-degree</p><p>communications maven amid an</p><p>ever-widening scope of projects</p><p>to craft a varied, yet consistent</p><p>message and glorify the Dior name.</p><p>Bialobos joined the company</p><p>in 2006 during the heyday of</p><p>former womenswear creative</p><p>director John Galliano — then</p><p>was charged with building a stable</p><p>platform amid frequent creative</p><p>turnover under Raf Simons and</p><p>a studio-designed interregnum</p><p>before the blockbuster tenure</p><p>of Maria Grazia Chiuri since</p><p>2016. On the menswear side, his</p><p>work intersected with creative</p><p>director Kris Van Assche, and then</p><p>Kim Jones, as well as Victoire</p><p>and Cordelia de Castellane to</p><p>design jewellery and homeware,</p><p>respectively.</p><p>Still, Dior’s message of dreamy</p><p>glamour and couture excellence</p><p>came across more strongly than</p><p>ever as owner LVMH continued</p><p>to invest heavily in celebrating</p><p>the prized asset, the first brand in</p><p>chairman Bernard Arnault’s luxury</p><p>empire.</p><p>In addition to multi-million-</p><p>dollar runway spectacles</p><p>throughout the year — from</p><p>Paris Couture Week to far-flung</p><p>travel shows to weekend-long</p><p>experiences for high jewellery</p><p>collectors — the brand has invested</p><p>in establishing itself as a cultural</p><p>institution through museum</p><p>exhibitions</p><p>as well as countless</p><p>artist collaborations and celebrity</p><p>partnerships.</p><p>In 2021, Bialobos’ remit</p><p>expanded to include oversight</p><p>of Dior’s beauty division, the</p><p>first time the units have shared a</p><p>C-suite executive since Parfums</p><p>Christian Dior and Christian Dior</p><p>Couture in the 1960s. Then under</p><p>new CEO Delphine Arnault in</p><p>2023, Bialobos was elevated to the</p><p>role of deputy managing director</p><p>in a consecration of his long-term</p><p>contribution to and vision for the</p><p>French house.</p><p>Dior revenue has been growing</p><p>in recent years, and Citi</p><p>estimates that it will rise to</p><p>€10.2 billion ($11.4 billion) in</p><p>2024 from €8.7 billion ($9.3</p><p>billion) in 2022. How does this</p><p>change the job of marketing a</p><p>luxury brand?</p><p>It isn’t the scale that makes the</p><p>job different so much as the</p><p>period we’re living in. There’s so</p><p>many communications tools that</p><p>have appeared and you need to</p><p>always be adapting to. Twenty</p><p>years ago, there was no Instagram,</p><p>no TikTok, not to mention all</p><p>the more specific platforms in</p><p>countries like China and Japan.</p><p>Now we’re also seeing new</p><p>opportunities related to TV thanks</p><p>to streaming platforms like Netflix,</p><p>Apple TV.</p><p>All of this means that,</p><p>compared to the past, we have to</p><p>produce much more content. Not</p><p>so long ago, you were doing one ad</p><p>campaign, maybe a little film every</p><p>season. Marketing the fashion side</p><p>was essentially just pictures. And</p><p>we didn’t have so many collections</p><p>to promote either.</p><p>When operating across so</p><p>many channels, what steps can</p><p>marketers and communicators</p><p>take to avoid saturating</p><p>the market, to avoid being</p><p>overexposed? Can couture</p><p>brands adopt the performance-</p><p>driven approaches that are</p><p>increasingly popular, or would</p><p>that be antithetical to the idea</p><p>of luxury?</p><p>Desirability — not just visibility</p><p>— has to be the target. That’s</p><p>always been part of Dior from the</p><p>beginning. There’s no recipe, but it</p><p>all has to do with values somehow.</p><p>Mr Dior had a vision with strong</p><p>values: creativity, exceptional</p><p>savoir-faire, inventiveness,</p><p>audacity. Don’t forget that this</p><p>was just after the [Second World</p><p>War]. Those values remain very</p><p>important to us today; then we</p><p>could also add sustainability.</p><p>Performance marketing</p><p>is about playing the game, it’s</p><p>normal. But while you have to</p><p>work on your current clients and</p><p>make them dream, you also have to</p><p>work on your potential clients, and</p><p>make them dream. You promote</p><p>the product properly and strongly,</p><p>but then you also create emotions.</p><p>‘Designer of Dreams’ [Dior’s</p><p>retrospective museum exhibit</p><p>that has been shown at the</p><p>Musée des Arts Decoratifs</p><p>(in Paris, Victoria & Albert</p><p>in London and Long Museum</p><p>in Shanghai] seems to mainly</p><p>address the latter priority,</p><p>which a lot of people would just</p><p>call ‘brand marketing,’ although</p><p>on quite a large scale. You also</p><p>recently opened Dior’s own</p><p>fashion museum — La Galerie</p><p>Dior in Paris, the world’s largest</p><p>museum devoted to a single</p><p>designer. What is the strategy</p><p>behind those museum projects?</p><p>We wanted ‘Designer of Dreams’</p><p>to be a mix of our heritage and also</p><p>Dior today, presented in a modern</p><p>way. It’s been a huge success —</p><p>88</p><p>The State of Fashion 2024</p><p>normally the MAD gets 400,000</p><p>visitors per year, during ‘Designer</p><p>of Dreams’ it had 800,000 people</p><p>in six months.</p><p>What’s very important is to</p><p>make people dream, and with this</p><p>show some people who don’t care</p><p>about fashion, they escape and</p><p>dream for hours. It’s about when</p><p>you get out of the Galerie Dior or</p><p>the V&A with stars in your eyes —</p><p>and now Dior means something</p><p>to you.</p><p>What’s also great is we have a</p><p>huge range of products, starting</p><p>with a fragrance or even a lipstick,</p><p>up to an haute couture dress. So, if</p><p>you love Dior you can buy into the</p><p>brand at every level.</p><p>You’ve been responsible for the</p><p>‘One Dior’ image since 2021</p><p>— meaning you oversee image</p><p>and communications for Dior’s</p><p>cosmetics now too. What were</p><p>the most important steps you’ve</p><p>taken towards unifying the Dior</p><p>message across fashion and</p><p>beauty?</p><p>You need a common thread — a</p><p>fil rouge we would say in French</p><p>— between fashion and beauty.</p><p>That’s very interesting and</p><p>pretty challenging because it’s</p><p>two different timetables: You</p><p>don’t often create a lipstick or a</p><p>fragrance in less than two years,</p><p>while we can create a [fashion]</p><p>collection in four months.</p><p>But both can focus on the icons</p><p>and the codes, to become one voice</p><p>— which is stronger and louder.</p><p>We’re unifying the messages</p><p>and the energy.</p><p>More and more of Dior’s</p><p>perfume ads have been re-shot</p><p>with clothes, reflecting the</p><p>current designers’ aesthetic</p><p>on the couture side, or they’ve</p><p>started to feature the updated</p><p>logo and typefaces from 2017</p><p>more prominently.</p><p>It’s not just the clothes, now.</p><p>One of Maria Grazia Chiuri’s</p><p>favourite photographers, Brigitte</p><p>[Niedermair], recently shot the</p><p>J’Adore campaign. We are using</p><p>more and more of the same visual</p><p>language overall.</p><p>There are also some of the</p><p>same ambassadors across beauty</p><p>and fashion, like Jisoo [from South</p><p>Korean band Blackpink].</p><p>Dior has navigated the</p><p>transitions from John Galliano</p><p>to Raf Simons to Maria Grazia</p><p>Chiuri. What did you learn</p><p>from managing that creative</p><p>turnover?</p><p>I was very fortunate to work with</p><p>all those incredible designers,</p><p>who each had a vision; each had</p><p>a different way of working or of</p><p>finding inspiration. John was</p><p>taking research trips, making</p><p>these research books that were</p><p>sort of like his version of a mood</p><p>board, then spending hours in</p><p>these very closed-door fittings</p><p>with just his immediate deputies.</p><p>Raf was more focused on art and</p><p>artists. With Maria Grazia, it’s</p><p>more open, it’s about visiting</p><p>ateliers, reading tonnes of books,</p><p>trying to have a conversation —</p><p>with artisans, with people. She</p><p>isn’t trying to put the light on</p><p>herself.</p><p>Ultimately our designers</p><p>are constantly reinterpreting or</p><p>sublimating our codes because it’s</p><p>about storytelling, and creating</p><p>dreams. All the designers are</p><p>immersing themselves in the</p><p>archives.</p><p>How can the codes and values of a</p><p>brand like Dior change over time?</p><p>For the codes, Dior has long been</p><p>associated with its flagship bar</p><p>jacket or cannage stitching. But</p><p>other motifs can become codes</p><p>over time, like how Maria Grazia</p><p>revived the Toile de Jouy and made</p><p>it a stamp of the brand.</p><p>In terms of values, the notion</p><p>of femininity has evolved over the</p><p>years and under every designer.</p><p>Maria Grazia brought something</p><p>about not just femininity but</p><p>feminism that was really a very</p><p>strong statement.</p><p>She was convinced it was the</p><p>right thing and she had a vision.</p><p>She didn’t want to fight — there’s</p><p>something negative about that —</p><p>but rather she wanted to promote</p><p>something.</p><p>In 2017, she’s been very</p><p>criticised in fashion because of a</p><p>T-shirt [reading “We Should All Be</p><p>Feminists”]. Today I receive calls</p><p>from museums all over the world</p><p>to have this outfit.</p><p>Are there any other lessons</p><p>you’d like to share about</p><p>marketing a luxury brand?</p><p>Mr Dior used to say, ‘Tradition</p><p>needs to be disrupted so that</p><p>it always remains modern and</p><p>desirable.’ That’s a quote I use</p><p>almost every day.</p><p>This interview has been edited and condensed.</p><p>LVMH is part of a group of investors who, together,</p><p>hold a minority interest in The Business of</p><p>Fashion. All investors have signed shareholders’</p><p>documentation guaranteeing BoF’s complete</p><p>editorial independence.</p><p>89</p><p>Fashion System</p><p>09.</p><p>Sustainability</p><p>Rules</p><p>The era of the fashion industry self-regulating</p><p>sustainability is drawing to a close around the</p><p>world. Across jurisdictions, new rules could have a</p><p>widespread impact on both consumers and fashion</p><p>players. Brands and manufacturers need to revamp</p><p>business models to align with the changes ahead.</p><p>KEY INSIGHTS</p><p>• As many as 16 pieces of legislation relating to fashion and textiles</p><p>were under discussion in late 2023 in the EU alone, with the first</p><p>coming into force in 2024.</p><p>• The regulations span the entire fashion value chain, from product</p><p>design to marketing,</p><p>and will impact consumers and companies</p><p>globally.</p><p>• Regulatory competence cannot be limited to a brand’s</p><p>sustainability team, but rather should be embraced throughout the</p><p>C-suite and integrated across functions.</p><p>90</p><p>The State of Fashion 2024</p><p>The fashion industry is heading for a reality check. By</p><p>the end of 2024, self-regulation of sustainability may</p><p>no longer be an option.300 Many new rules around the</p><p>world are set to mandate action on everything from</p><p>textiles production and chemicals use to recycling</p><p>and waste.</p><p>While some industry progress is evident, the</p><p>pace of transformation falls short of what is needed</p><p>to prepare for impending regulations. Across the</p><p>industry, the polluting use of fossil fuels continues to</p><p>dominate production while circular business models</p><p>are still in their infancy. If progress continue at the</p><p>current pace, clothing and footwear consumption</p><p>is expected to increase by over 60 percent, from</p><p>62 million tonnes in 2022 to 102 million tonnes in</p><p>2023.301</p><p>With the industry struggling to move forward,</p><p>regulators are stepping in. Leading the charge is</p><p>the EU as it pursues a vision for a climate-neutral,</p><p>circular economy, with growth decoupled from</p><p>the consumption of finite resources.302 303 The</p><p>EU’s textiles vision is encapsulated in its Strategy</p><p>for Sustainable and Circular Textiles, passed in</p><p>June 2023, which envisages an industry defined by</p><p>products made with respect for the environment and</p><p>social rights. As many as 16 pieces of legislation are</p><p>currently under discussion, with the first coming to</p><p>force in 2024. The window for brands to prepare to</p><p>comply is narrowing quickly.304</p><p>The Heat is On</p><p>With fashion responsible for significant emissions,</p><p>pollution and waste, regulators are set to require</p><p>companies to both fix their own operations and</p><p>force higher standards in their supply chains.</p><p>The regulations apply across key areas of activity,</p><p>impacting consumers and companies within and</p><p>outside the EU.</p><p>Product design: Up to 80 percent of a product’s</p><p>environmental impact is determined in the design</p><p>phase and is baked into materials and dyes.305 The</p><p>EU’s flagship Ecodesign for Sustainable Products</p><p>Regulation (ESPR), set to come into full effect</p><p>by 2025, sets minimum design standards for all</p><p>individual products sold within the EU. This includes</p><p>requirements around recyclability, durability,</p><p>reusability, repairability and use of hazardous</p><p>substances. Digital product passports that collect</p><p>and share this information with consumers are</p><p>expected to become required by law.306</p><p>Marketing: Greenwashing is high on consumer</p><p>and regulatory agendas, with the claims of many</p><p>companies seen as vague or misleading. The new</p><p>EU Green Claims Directive curbs greenwashing by</p><p>requiring sustainability-related declarations and</p><p>statements to be specific, backed by evidence, verified</p><p>by independent bodies and communicated clearly.307</p><p>France has already taken the first step, requiring</p><p>large companies to put carbon labels on all clothing</p><p>sold in the country.</p><p>Waste management: Less than 1 percent of</p><p>fashion textiles are recycled308 and a truckload of</p><p>products are sent to landfill or incinerated somewhere</p><p>in the world every second.309 310 An amendment to the</p><p>Waste Framework Directive is calling for Extended</p><p>Producer Responsibility, which already exists in</p><p>France, and which requires companies to finance</p><p>the collection, sorting and recycling of textile waste.</p><p>Fees are expected to vary based on production output</p><p>and pollution levels caused, a principle known as</p><p>“eco-modulation.” All EU countries will be required</p><p>to launch textile collection programmes by 2025</p><p>and the destruction of unsold goods is expected</p><p>to be banned.311</p><p>Reporting: Despite huge volumes of corporate</p><p>environment, social and governance (ESG) disclosure,</p><p>companies still struggle to secure sufficient data</p><p>and performance metrics or define economic</p><p>activities that can be considered sustainable. A lack</p><p>of comparability across brands inhibits effective</p><p>decision making among investors and consumers.</p><p>The upcoming Corporate Sustainability Reporting</p><p>Directive (CSRD) requires companies to report</p><p>on ESG activities via a standardised framework.</p><p>Meanwhile, the Corporate Sustainability Due</p><p>Diligence Directive mandates environmental and</p><p>human rights diligence and action plans across the</p><p>value chain.312</p><p>Notably, the requirement for standardised,</p><p>comprehensive public disclosures has become a</p><p>lightning rod of debate in the fashion industry, with</p><p>some executives concerned about the amount of data</p><p>and analysis required. At a recent conference, the</p><p>head of sustainability at Puma said that the brand</p><p>had been publishing reports for 20 years but was</p><p>“nowhere near being able to fulfil the requirements</p><p>of CSRD.”313 314</p><p>The impact of the EU’s new rules are expected</p><p>91</p><p>Fashion System</p><p>1 EU Strategy for Sustainable and Circular Textiles implements the commitments of the European</p><p>Green deal and the Circular Economy Action Plan to reinvent the entire lifecycle of textile and</p><p>footwear products</p><p>2 In the EU, adopted directives still need to be translated into national law by each member state within</p><p>a two-year period. Adopted regulations go into force immediately</p><p>Source: McKinsey analysis</p><p>Jurisdiction Status Regulations and directives</p><p>EU</p><p>(Under the EU</p><p>Strategy for</p><p>Sustainable</p><p>Textiles)1</p><p>Adopted2 Waste Framework Directive: Mandates Extended Producer Responsibility (EPR),</p><p>requiring brands to pay for end-of-life waste treatment</p><p>Corporate Sustainability Reporting Directive: Requires companies to report on</p><p>environmental and social activities using a standardised methodology</p><p>Corporate Sustainability Due Diligence Directive: Requires environmental and</p><p>human rights-diligence and improvements across the value chain</p><p>Proposed Eco-design for Sustainable Product Regulation (ESPR): Mandates ecological</p><p>design and circularity requirements to be practised at the product level,</p><p>supported by digital product passports</p><p>Waste Shipment Regulation: Facilitates the transportation of waste for recycling</p><p>and reuse in the EU and bans illegal waste shipments to the Global South</p><p>Ban on Destruction of Goods: Limits destruction of unsold or retained textile</p><p>products, encouraging the repair or reuse of goods</p><p>Green Claims Directive: Addresses “greenwashing” and introduces requirements</p><p>on various aspects of consumer-facing product claims</p><p>Draft Microplastic Legislation: Aims to reduce the release of microplastics into the</p><p>environment across manufacturing stages</p><p>Revision of the Textile Labelling Regulation: Streamlines physical and digital</p><p>product label requirements on composition and origin of textile products</p><p>US Adopted California SB 253: Requires businesses with more than $41 billion of annual</p><p>revenue operating in the state to report scope one through scope three emissions</p><p>Proposed New York Fashion Sustainability and Social Accountability Act: Requires supply-</p><p>chain transparency, ESG disclosures and due diligence for apparel companies</p><p>conducting business in New York with annual global revenue of $100 million</p><p>Fabric Act: Protects US garment workers by improving worker conditions,</p><p>reforming pay scales and investing in domestic production</p><p>Sustainability regulations impacting fashion and</p><p>textiles are on the horizon</p><p>Exhibit 18</p><p>Sustainability regulations impacting</p><p>fashion and textiles are on the horizon</p><p>92</p><p>to extend beyond the region’s borders, especially</p><p>into Asia, where 70 percent of the EU’s textiles</p><p>are manufactured.321 In addition, lawmakers in</p><p>other regions are progressing their own initiatives.</p><p>In the US, the New York Fashion Sustainability</p><p>and Social Accountability Act plans to hold major</p><p>brands accountable for ESG impacts and supply-</p><p>chain traceability.322 In the UK, the Green Claims</p><p>Code aims to stem greenwashing, while China has</p><p>committed to peaking carbon emissions before 2030</p><p>and become carbon neutral by 2060.323</p><p>As the regulatory landscape</p><p>evolves, the year</p><p>ahead presents an opportunity for fashion executives</p><p>to revamp their business models. But this will likely</p><p>require a holistic approach rather than targeting</p><p>select parts of the value chain:</p><p>Traceability: Achieving full supply-chain</p><p>visibility across all tiers of manufacturing will be a</p><p>critical enabler for regulatory compliance. However,</p><p>many brands currently have limited visibility over</p><p>their suppliers at best, and therefore lack reliable</p><p>and standardised data to make meaningful progress.</p><p>Advances in blockchain and other technologies</p><p>may enable more transparent and efficient</p><p>Clothes in landfill. Anadolu Agency/Getty Images.</p><p>93</p><p>Fashion System</p><p>monitoring. Adidas, for example, has achieved</p><p>material traceability at scale by using TrusTrace’s</p><p>digital traceability platform, which is also used</p><p>by companies including Renfro Brands and Brooks</p><p>Running.315</p><p>Sourcing and production: As upstream supply-</p><p>chain activities account for the majority of carbon</p><p>emissions in apparel, there may be a sharper focus on</p><p>decarbonising material and garment production.316</p><p>In the production process, main decarbonisation</p><p>levers include energy efficiency and energy transition</p><p>initiatives. As brands shift to more sustainable</p><p>materials, they may look for new suppliers or</p><p>join strategic alliances. Kering, for example, has</p><p>established supplier-focused sourcing standards and</p><p>created the MaterialInnovation Lab dedicated to the</p><p>sourcing of sustainable materials and fabrics,317 while</p><p>Hermès has partnered with start-up MycoWorks’ to</p><p>secure access to its engineered mycelium.318</p><p>Design: New requirements for circularity are</p><p>expected to shake up the design process. For example,</p><p>a focus on longevity and durability may demand fresh</p><p>attention to details such as stitching and seams.</p><p>Equally, materials that cannot be separated in</p><p>recycling may need to be avoided, meaning designers</p><p>may need to think more creatively about design</p><p>choices. Design libraries may increasingly support</p><p>material selection, while 3D sampling may reduce</p><p>use of resources. Packaging design is also impacted,</p><p>with new rules emerging around composition of</p><p>labels and tags and elimination of single-use plastics.</p><p>End-of-life waste: To minimise production</p><p>and waste, new business models are coming to</p><p>the fore. Resale continues to grow through brand</p><p>partnerships with secondhand marketplaces, such</p><p>as The RealReal or Vestiaire Collective. In-house</p><p>programmes offering resale, rental and repair are</p><p>gaining traction as well. There is also an opportunity</p><p>to accelerate closed-loop recycling. Stockholm-based</p><p>Renewcell is ramping up the world’s first at-scale</p><p>fibre-to-fibre recycling factory. In partnership</p><p>with global brands like H&M, Inditex and Levi’s,</p><p>Renewcell plans in 2024 to reach full capacity of</p><p>120,000 tonnes, or the equivalent to 600 million</p><p>T-shirts.319 Fully embedding these new materials</p><p>into supply chains remains a challenge, however —</p><p>Renewcell recently cited slower-than-expected sales</p><p>of its cellulosic pulp to fibre producers.320</p><p>A Greener Horizon</p><p>While regulations are being finalised, brands need</p><p>to capitalise on this grace period to get ahead.</p><p>Regulatory competence is a critical muscle brands</p><p>need to build and is one that few have today. And</p><p>given the fundamental challenge regulation poses to</p><p>some segments, such as fast fashion, procrastination</p><p>is ill-advised.</p><p>Brands should consider establishing a squad</p><p>of regulatory experts. This squad can review the</p><p>laws relevant to the business, conduct materiality</p><p>assessments and advise on implications for the</p><p>organisation. However, regulation ultimately cannot</p><p>be outsourced to a single team. All C-suite executives</p><p>need to build knowledge, align strategies within</p><p>the regulatory programme, identify capabilities</p><p>and tools required for change, and disseminate</p><p>knowledge across respective departments.</p><p>Additionally, brands should consider viewing</p><p>regulation as an opportunity rather than a threat.</p><p>For example, regulation may spur demand for certain</p><p>materials, creating supply and peaking demand. This</p><p>could be transformed into a competitive advantage by</p><p>strategically gaining access to innovative materials</p><p>in short supply.</p><p>Finally, industry associations and trade groups,</p><p>such as the Council of Fashion Designers of America</p><p>or the European Fashion Alliance, have a major role</p><p>to play in shaping policy. Corporate leaders should</p><p>consider engaging with such groups, contributing</p><p>to discussions and galvanising stakeholders to</p><p>co-create effective regulation between policy makers</p><p>and the industry.</p><p>All C-suite executives need to build knowledge,</p><p>align strategies within the regulatory programme, identify</p><p>capabilities and tools required for change, and disseminate</p><p>knowledge across respective departments.</p><p>94</p><p>The State of Fashion 2024</p><p>Rachel Arthur:</p><p>How the UN Wants</p><p>Brands to Sell</p><p>Sustainability</p><p>By Sarah Kent</p><p>As sustainability regulations become</p><p>more prominent in 2024, the</p><p>sustainable fashion advocacy lead at</p><p>the UN Environment Programme,</p><p>Rachel Arthur, breaks down why</p><p>marketers should have a bigger role</p><p>in efforts to improve the way the</p><p>fashion industry operates, including</p><p>adjusting communication to help</p><p>break the cycle of overproduction</p><p>and overconsumption.</p><p>EXECUTIVE INTERVIEW</p><p>Rachel Arthur,</p><p>Advocacy Lead for</p><p>Sustainable Fashion,</p><p>UN Environment</p><p>Programme</p><p>Image credit: Holly Falconer</p><p>95</p><p>Fashion System</p><p>In June 2023, the United</p><p>Nations published a report</p><p>with a radical message for</p><p>fashion brands: stop pushing</p><p>overconsumption.324</p><p>“The Sustainable Fashion</p><p>Communication Playbook”</p><p>published by the United Nations</p><p>Environment Programme and</p><p>UN-backed Fashion Industry</p><p>Charter for Climate Action took</p><p>aim at the core of fashion’s business,</p><p>examining the role marketing</p><p>plays in driving the cycle of</p><p>overproduction and overconsumption</p><p>that underpins the industry’s</p><p>environmental impact.325</p><p>It’s an issue signatories to the</p><p>UN Fashion Charter, who include</p><p>many of the world’s biggest brands,</p><p>have pledged to tackle. But it</p><p>also strikes at the heart of one of</p><p>fashion’s biggest sustainability</p><p>hurdles: businesses geared towards</p><p>driving more consumption will</p><p>always be part of the problem.</p><p>Increasingly, regulators are</p><p>looking to tackle the challenge</p><p>from various angles, looking at</p><p>ways to make brands responsible</p><p>for textile waste and incentivise</p><p>designing for long life and</p><p>circularity. But the role marketing</p><p>plays has been overlooked, said</p><p>Rachel Arthur, a sustainability</p><p>strategist and sustainable fashion</p><p>advocacy lead at UNEP.</p><p>That needs to change, but that</p><p>doesn’t mean the end of fashion, it</p><p>just means a new focus, she said.</p><p>Rachel, you spearheaded the</p><p>playbook project. Why did you feel</p><p>like this was the thing to focus on?</p><p>This started on the UNEP side with</p><p>a piece of work that was looking at</p><p>the role of communication to help</p><p>drive change and inspire action</p><p>within the industry.</p><p>Typically, a piece of work like</p><p>that would lead to a consumer-facing</p><p>campaign on the need for greater</p><p>sustainability within the fashion sector</p><p>[or] more sustainable consumption.</p><p>Actually, the outcome from strategy</p><p>was that while that kind of work</p><p>was possible and viable and could</p><p>be considered necessary, there</p><p>seemed to be a much more powerful</p><p>lever to consider, not just looking at</p><p>what consumers could do, but why</p><p>consumers were consuming in the</p><p>way that they were.</p><p>That comes down to primarily</p><p>the brands and then the media,</p><p>and the ecosystem that surrounds</p><p>them. The industry is so good</p><p>at creating desire. But we’re</p><p>making people fall in love with</p><p>something that isn’t serving us</p><p>on a planetary basis. The primary</p><p>message put forward is based</p><p>on a linear economic model and</p><p>on messages fundamentally of</p><p>overconsumption.</p><p>These job functions need</p><p>to be part of this conversation.</p><p>Communication needs to be</p><p>aligned to sustainability. The</p><p>playbook basically is the “how.”</p><p>What are</p><p>the key recommendations?</p><p>Basically, there’s a role for marketing,</p><p>there’s a role for storytelling.</p><p>Brands need to make sure that</p><p>everything they’re doing in</p><p>sustainability is matched by what</p><p>they’re putting out in the world.</p><p>Within the playbook, we spell</p><p>that out, with [a set of] pillars of work.</p><p>First, how do we ensure we’re</p><p>not greenwashing or putting</p><p>forward anything in the way of</p><p>misinformation? I’d say that’s kind</p><p>of table stakes. This is not new to</p><p>the industry, but unpacking it is</p><p>quite complex and it’s evolving fast</p><p>as more policy comes in.</p><p>Then we start moving into areas</p><p>that are newer, and I think typically</p><p>where the communication</p><p>professional has more of a forte</p><p>or skill set that can be brought to</p><p>the table that hasn’t existed here</p><p>previously. This is where we’re</p><p>looking at culture change.</p><p>We clearly call out that we</p><p>need to eradicate messages of</p><p>overconsumption. This is probably</p><p>the heaviest area [of what we are</p><p>outlining] in terms of complexity</p><p>in practice. Marketers are ‘KPI’d’</p><p>on how much they can sell, so this</p><p>is going against that logic.</p><p>But we really present positive</p><p>solutions. We’re not trying to do</p><p>away with fashion as it exists,</p><p>but change the focus of it. From a</p><p>marketer’s standpoint, it’s about</p><p>saying, how can we put more of our</p><p>effort, energy, creativity, budget</p><p>towards circular solutions?</p><p>Can you outline what you mean</p><p>by circular solutions?</p><p>Ultimately, you’ve got to start</p><p>with people buying less, but then</p><p>you might look at other ways of</p><p>consumption — resale, rental,</p><p>keeping what you’ve got for longer,</p><p>so the repair market, with the last</p><p>thing on the list being recycling</p><p>before you buy something that’s</p><p>completely new and unsustainable.</p><p>There’s a lot of room within that</p><p>for exploration, creativity.</p><p>And it is important here to</p><p>recognise that there isn’t one size</p><p>fits all. Sustainable consumption</p><p>looks different in different</p><p>markets. In some markets, we</p><p>know that basic needs still need</p><p>to be met, so we’re not asking for</p><p>reduction in consumption as a</p><p>blanket global view.</p><p>[But] the third section is about</p><p>‘reimagine values,’ and this section</p><p>96</p><p>The State of Fashion 2024</p><p>could underpin all of it. We’re</p><p>trying to inspire people to think</p><p>and aspire to something different.</p><p>We call [fashion marketers]</p><p>‘architects of desire,’ so how can</p><p>we redirect aspiration towards</p><p>sustainable lifestyles?</p><p>You’ve already alluded to the</p><p>tension underlying this work:</p><p>you’re essentially trying to</p><p>encourage marketers to start</p><p>selling something that is at odds</p><p>with their current KPIs and</p><p>where it’s not clear what the</p><p>business model is. How does this</p><p>fit with broader conversations</p><p>around sustainability?</p><p>It is the elephant in the room. I</p><p>think most businesses along that</p><p>sustainability journey now recognise</p><p>that, but that doesn’t mean they’re</p><p>yet willing to address it at the board</p><p>level or the senior executive level.</p><p>This is new, not in the sense</p><p>that nobody knows about it, but it’s</p><p>not yet been a true conversation.</p><p>What we have been trying to do</p><p>with the playbook is to say this</p><p>needs to be on the table.</p><p>It’s not on the shoulders of</p><p>those who work in a communication</p><p>capacity, of course, but if you look</p><p>at the bigger picture of what the</p><p>playbook is talking about, it is</p><p>addressing the system’s challenge,</p><p>which is to say that we can push as</p><p>hard as we possibly want with all of</p><p>the evolution that is needed, but we</p><p>won’t get anywhere within that if</p><p>we don’t also look at volume.</p><p>When we talk about systems,</p><p>regulation often comes up as</p><p>a lever for change. What role</p><p>should policy play?</p><p>We’re seeing policy come down</p><p>the line that is focused on the</p><p>green claim side of things, but it</p><p>is interesting starting to think</p><p>about what that could look like</p><p>from a sustainable consumption</p><p>standpoint and what might be</p><p>indeed possible within all of that.</p><p>The fourth section of the</p><p>[playbook’s] principles is called</p><p>‘drive advocacy.’ It looks at a</p><p>couple of lenses. Obviously, how</p><p>do we push for greater education</p><p>from a broad consumer-based</p><p>standpoint? Within that,</p><p>we talk about the internal lever</p><p>that communicators can help</p><p>play to help ensure that there’s</p><p>accountability for change within</p><p>the business. Also [they can]</p><p>help play a role within the policy</p><p>landscape, recognising that a lot</p><p>of these businesses are incredibly</p><p>powerful and that there could</p><p>be an opportunity from a very</p><p>competitive standpoint to advocate</p><p>for wider change that facilitates</p><p>sustainability in a wider sense.</p><p>How do you see the regulatory</p><p>landscape at the moment?</p><p>There’s so many things going</p><p>on within the policy landscape,</p><p>which are interesting, potentially</p><p>exciting, highly complex and</p><p>bewildering for a lot of the</p><p>industry to get their head around.</p><p>The green claims side of things,</p><p>the industry is kind of ready for</p><p>it. Everybody just wants that</p><p>guidance. Yes, there are going to</p><p>be hurdles to actually get people</p><p>on the right page, but just having</p><p>black and white, ‘this is what you</p><p>can and this is what you can’t do,’</p><p>it’s going to be really helpful for</p><p>everybody. And it also helps level</p><p>the playing field.</p><p>In a wider sense, I think we’re</p><p>at an interesting juncture in terms</p><p>of policymakers recognising this</p><p>role of consumption as a result</p><p>of unsustainable production.</p><p>The waste side of things is a very</p><p>interesting lever. We have to</p><p>recognise in this conversation</p><p>around overconsumption just how</p><p>much waste there is in terms of the</p><p>stuff that was [never sold].</p><p>What we also really need to see</p><p>is incentives for businesses around</p><p>doing ‘the right thing.’ On the one</p><p>hand, that’s [encouraging the use</p><p>of ] sustainable preferred materials</p><p>so consumption that is happening</p><p>is less impactful, but also do we</p><p>push for circular solutions to be more</p><p>easily facilitated or incentivised?</p><p>I’m not sure that we’re seeing that</p><p>play out fully as yet but I think all of</p><p>those things combined — which we</p><p>know is not going to happen overnight</p><p>— would be incredibly beneficial.</p><p>Are things missing from the</p><p>conversation, and in particular</p><p>the policy conversation?</p><p>This elephant in the room around</p><p>production levels and volume.</p><p>It’s really interesting to think</p><p>about what that looks like at a</p><p>policy level. While we see certain</p><p>regions looking at reducing, for</p><p>instance, fast fashion, I think</p><p>there’s a much bigger picture that</p><p>isn’t necessarily in there, which is</p><p>looking at consumption behaviour,</p><p>and how that’s perpetuated by an</p><p>overproduction model and how we</p><p>look at that holistically in terms</p><p>of the way that businesses are</p><p>measured on success.</p><p>Lastly, the area that we don’t</p><p>include as much as we should is</p><p>around the worker side. How do</p><p>we ensure that garment workers</p><p>are being paid a living wage or</p><p>the right amount for what they’re</p><p>creating. What does that look like</p><p>in a world of creating less?</p><p>This interview has been edited and condensed.</p><p>97</p><p>Fashion System</p><p>10.</p><p>Bullwhip</p><p>Snaps Back</p><p>Changes in consumer demand have resulted in the</p><p>“bullwhip effect,” where cuts to orders increase</p><p>in magnitude at different parts of a supply chain,</p><p>putting pressure on fashion’s suppliers. Now, if supply</p><p>is to keep pace with anticipated renewed demand,</p><p>brands and retailers should consider focusing on</p><p>transparency and bolstering strategic partnerships.</p><p>KEY INSIGHTS</p><p>• Demand volatility has disproportionately impacted upstream</p><p>suppliers. Factories that were at full capacity in 2021 have been</p><p>operating at 30 percent to 40 percent below capacity in 2023.</p><p>• 73 percent of chief procurement officers expect this volatility will</p><p>be one of the top challenges affecting supplier relationships over</p><p>the next five years.</p><p>• Manufacturing experts believe the third quarter of 2024 may be</p><p>the earliest that textile factories see capacity improvements.</p><p>98</p><p>The State of Fashion 2024</p><p>Far from resolving in 2024, the fashion industry’s</p><p>supply-chain volatility of the past few years is</p><p>set to continue. Upstream apparel</p><p>suppliers</p><p>and manufacturers have undergone significant</p><p>disruption, where changes in consumer demand</p><p>have resulted recently in a sharp decline in factory</p><p>utilisation, widespread layoffs, and delayed</p><p>investments. As brands and retailers look to scale up</p><p>capacity to meet renewed demand, they may start to</p><p>feel the repercussions of recent upstream strains.</p><p>This turmoil is known as the “bullwhip effect,”326</p><p>a phenomenon where changes in consumer demand</p><p>escalate across the value chain. In the case of fashion,</p><p>changes in consumer demand are magnified at</p><p>each step from retailers to garment manufacturers</p><p>to yarn and raw material suppliers. In the face</p><p>of falling demand, each part of the supply chain</p><p>overcompensates by reducing forecasts, lowering</p><p>production and decreasing order volumes — often</p><p>driven by communication gaps and forecasting</p><p>inaccuracies.</p><p>The bullwhip effect reached fashion in 2020</p><p>and 2021 as retailers contended with pandemic-</p><p>related disruptions when products arrived late</p><p>and overcompensated for inventory shortages by</p><p>ordering too much stock. When post-pandemic</p><p>inflationary pressures and economic uncertainty</p><p>arose in the second half of 2022, making consumers</p><p>more cautious than anticipated, retailers were left</p><p>with billions of dollars in unsold goods.327 As a result,</p><p>many orders for the upcoming 2023 season were</p><p>reduced or cancelled.</p><p>The pullback has disproportionately impacted</p><p>upstream suppliers. Across seven of the world’s</p><p>biggest textile exporting countries, fabric exports</p><p>dropped nearly 20 percent in the last quarter of 2022</p><p>Exhibit 19</p><p>The “bullwhip effect” disproportionately impacts upstream suppliers</p><p>who have seen up to a 50 percent drop in order volumes</p><p>Demand across the supply chain,1 year-on-year change Q1 2023 vs Q1 2022,</p><p>%</p><p>1 Approximate changes in order demand as proxied by export trade data from seven top textile</p><p>producing markets: China, Hong Kong, Germany, Italy, India, Pakistan, Turkey. Includes cotton and</p><p>synthetic fabrics, yarns and fibers</p><p>Source: UN Comtrade data, McKinsey analysis</p><p>Consumers</p><p>and brands Suppliers</p><p>0 to �5</p><p>�20 to �30</p><p>�30 to �40</p><p>�50+</p><p>Finished goods YarnsFabrics Raw materials</p><p>99</p><p>Fashion System</p><p>compared to the year prior, followed by a 40 percent</p><p>drop in yarn exports in the first quarter of 2023.328</p><p>Factories that were at full capacity in 2021 may have</p><p>been operating at 30 percent to 40 percent below</p><p>capacity in 2023, according to industry experts.329</p><p>It’s a similar story for textile machinery players.</p><p>Swiss manufacturer Rieter reported a 63 percent</p><p>year-on-year drop in orders in the first half of 2023,</p><p>citing weakening demand for spinning technology.330</p><p>Smaller manufacturers with limited resources</p><p>have been the most affected. The managing director</p><p>of a manufacturer in Pakistan estimated that as much</p><p>as 30 percent of the country’s textile factories have</p><p>closed.331 In India, spinning mills have requested</p><p>aid from the government,332 while many operate at</p><p>a loss.333 Other manufacturing hotspots such as Sri</p><p>Lanka and Vietnam have entirely shut operations in</p><p>some factories.</p><p>The Bullwhip Snaps</p><p>The bullwhip effect has only made more urgent</p><p>the humanitarian crisis occurring within</p><p>textile-producing countries. For starters, a large</p><p>share of textile and garment workers live on low</p><p>wages and have little if any savings to fall back</p><p>on. Today, the increased stress on factories could</p><p>increase the risk of labour abuses, such as wage theft</p><p>and union busting.</p><p>In China, the world’s largest textile producer,</p><p>the number of worker strikes and protests rose in</p><p>2023.334 According to the China Labour Bulletin,</p><p>more than 700 factory strikes in the first half of</p><p>2023 took place, compared to 800 in all of 2022. In</p><p>Pakistan, loss of cotton crops from floods, shifts in</p><p>production and lower exports contributed to over</p><p>one million of its eight million textile workers losing</p><p>jobs. Textile employment levels also fell by tens of</p><p>thousands in key markets such as Bangladesh, Sri</p><p>Lanka, Cambodia and Turkey in 2023.335</p><p>This supply-chain volatility is not expected to</p><p>subside in the near term. A McKinsey survey of chief</p><p>procurement officers (CPOs) in September 2023</p><p>found that 73 percent believe demand volatility</p><p>will be one of the top challenges to affect supplier</p><p>A production line at a textile factory in China. Zhao Qirui/Getty Images.</p><p>100</p><p>relationships over the next five years.336 However,</p><p>the third quarter of 2024 is the earliest that textile</p><p>factories might see some capacity improvement.337</p><p>But even then, the consequences of the bullwhip</p><p>effect may continue to linger. Layoffs and delayed</p><p>investments may mean the industry is insufficiently</p><p>prepared to scale up capacity quickly.</p><p>Worker displacement and skills loss may create</p><p>major challenges for the industry. In Vietnam,</p><p>for example, competition for qualified labour is</p><p>intensifying with other industries — suppliers to</p><p>Apple, Lego and automotive players are among those</p><p>expanding operations and attracting former textile</p><p>workers in the country.338 Factories short on staff</p><p>and dealing with hiring and training new employees</p><p>could face longer production timelines.</p><p>Brands and retailers not prepared for these shifts</p><p>could incur higher expenses to compensate for the</p><p>potential delays. For example, they may need to pay</p><p>for expedited shipping, overtime work or additional</p><p>warehouse space. Those that try to rush production</p><p>face other costs, such as increased quality issues that</p><p>can damage a company’s reputation with consumers.</p><p>Many companies are rethinking their supply</p><p>chains to de-risk manufacturing. According to</p><p>McKinsey’s CPO survey, 54 percent of executives</p><p>expect to increase reshoring or nearshoring in</p><p>2024.339 Others are thinking about rebalancing</p><p>their sourcing footprint by sourcing from multiple</p><p>countries. However, these approaches are not</p><p>without challenges. Finding and contracting new</p><p>suppliers, or partnering more closely with existing</p><p>strategic ones, can be costly. Companies can also</p><p>run into manufacturing limitations compared to</p><p>traditional sourcing hubs or face new regulatory and</p><p>compliance factors.</p><p>Another consequence of the slowdown is that</p><p>suppliers have fallen behind in critical investments in</p><p>new infrastructure for both speed and sustainability.</p><p>More than 70 percent of fashion’s greenhouse gas</p><p>emissions stem from upstream activities, such</p><p>as producing and finishing textiles.340 Yet, textile</p><p>players say costs are high for upgrading machinery</p><p>or adopting greener practices.341 Without a steady</p><p>stream of orders, they are postponing capital</p><p>expenditure on such initiatives. Unifi, a US-based</p><p>manufacturer of recycled and synthetic fibres, has</p><p>delayed machinery replacements from 2024 to 2026</p><p>to offset slowing demand.342</p><p>With sustainability regulations coming into effect</p><p>in the EU and elsewhere that mandate companies</p><p>disclose environmental impacts in their supply</p><p>chains, and the push from investors for companies</p><p>to disclose data about scope three emissions (that is,</p><p>indirect emissions),343 the risk may only increase for</p><p>brands and retailers.</p><p>Navigating Disruption</p><p>In the year ahead, brands might consider placing</p><p>greater emphasis on making their supply chains</p><p>more resilient to mitigate future risks. First and</p><p>foremost, transparency and communication among</p><p>all stakeholders in the supply chain will likely</p><p>be paramount in facilitating better information-</p><p>sharing and joint demand forecasting. According to</p><p>McKinsey’s survey, 70 percent of chief procurement</p><p>officers believe that improving demand transparency</p><p>with suppliers through systems and processes is</p><p>critical in navigating market turmoil.344</p><p>Cultivating strategic partnerships with key</p><p>suppliers could also be considered and could include</p><p>longer term contracts with not only direct suppliers,</p><p>but also tier two, tier three and tier four partners</p><p>that are vital to a business. One potential benefit of</p><p>such a long-term commitment is that</p><p>executive radars — 62 percent of respondents to</p><p>the survey cited geopolitical instability as the top</p><p>risk to growth, while economic volatility is cited</p><p>Destination</p><p>Unknown</p><p>INDUSTRY OUTLOOK</p><p>12</p><p>The State of Fashion 2024</p><p>by 55 percent.</p><p>Inflation concerns appear to be diminishing.</p><p>Among surveyed respondents, 51 percent cited</p><p>inflation compared to 78 percent in the previous</p><p>year’s survey, perhaps an acknowledgement that</p><p>central bank policies are starting to achieve their</p><p>intended results, after inflation rates began rising to</p><p>historic highs in the US and Europe in 2022.3</p><p>As for business performance, top-line year-on-</p><p>year growth is expected to be lacklustre in 2024, at</p><p>between 2 percent and 4 percent globally, according</p><p>to the McKinsey Fashion Growth Forecasts.</p><p>However, regional and country variations in both</p><p>luxury and non-luxury segments will be evident.4</p><p>Non-Luxury’s Steady Path</p><p>Overall, non-luxury retail sales growth is forecast</p><p>to remain steady year on year in 2024 at between 2</p><p>percent and 4 percent. In Europe, non-luxury growth</p><p>of between 1 percent and 3 percent is expected,</p><p>after recording 5 percent in the first half of 2023</p><p>and 1 percent to 3 percent in the second half, due</p><p>to slumping consumer confidence and declining</p><p>household savings, among other factors.5 When</p><p>taking into account the forecasted high core inflation</p><p>of around 3 percent to 4 percent, the growth outlook</p><p>Exhibit 1</p><p>Slower but normalised growth is anticipated across regions in 2024</p><p>Retail sales year-on-year growth by region and segment,</p><p>%</p><p>Note: Growth forecasts reflective of inflation; growth rates calculated on actuals expressed</p><p>in local currencies</p><p>Source: McKinsey State of Fashion Forecasts; McKinsey Global Fashion Index</p><p>US ChinaEurope</p><p>Non-</p><p>Luxury</p><p>Luxury</p><p>−13</p><p>−1</p><p>24</p><p>0 to −2</p><p>2 0 to 2</p><p>−10</p><p>1012</p><p>1 to 3</p><p>−3</p><p>4 to 6</p><p>−27</p><p>−8</p><p>1</p><p>49</p><p>1 to 3</p><p>10</p><p>H1 H2</p><p>2023E 2024E2020 2021 2022</p><p>−18</p><p>5</p><p>9</p><p>1 to 3</p><p>13</p><p>1 to 3</p><p>−25</p><p>10</p><p>15</p><p>5 to 7</p><p>16</p><p>3 to 5</p><p>16</p><p>40</p><p>32</p><p>1 to 3</p><p>4 to 62 to 4</p><p>H1 H2</p><p>2023E 2024E2020 2021 2022</p><p>H1 H2</p><p>2023E 2024E2020 2021 2022</p><p>13</p><p>Industry Outlook</p><p>is even more limited.6</p><p>In the US, non-luxury growth is forecast at</p><p>0 percent to 2 percent amid declining consumer</p><p>sentiment.7 Slightly slower increases in the rate of</p><p>inflation — forecast at around 2 percent to 3 percent</p><p>in 2024 — may result in mildly more positive growth.</p><p>However, a “soft landing” is forecast if, as expected,</p><p>the country avoids outright recession, helping</p><p>inflation to get under control more quickly than in</p><p>Europe.8 E-commerce activity is expected to pick</p><p>up after the post-pandemic slowdown in which</p><p>consumers rebalanced spend towards in-store retail.</p><p>Among survey respondents, 64 percent identified</p><p>owned online channels as a more important growth</p><p>driver than in the previous year.9</p><p>In China, non-luxury demand remains relatively</p><p>weak compared to historical growth rates, reflecting</p><p>economic uncertainty and subdued consumer</p><p>confidence. Even so, growth is projected to outpace</p><p>that of the US and Europe, at 4 percent to 6 percent.</p><p>Positive factors include subdued inflation and</p><p>the ongoing expansion of the middle class, which</p><p>is underpinning demand for contemporary and</p><p>premium fashion. Consumer sentiment shifts</p><p>towards trading down are also bolstering the</p><p>large mass-market segment. More opportunities</p><p>within growth categories such as sportswear and</p><p>outdoor wear will likely be supurred by government</p><p>initiatives and shifting consumer preferences for</p><p>healthier lifestyles and wellbeing.10</p><p>Luxury’s Restraint</p><p>Luxury’s global retail sales growth is forecast to</p><p>slow to between 3 percent and 5 percent in 2024,</p><p>from between 5 percent and 7 percent in 2023, as</p><p>consumers restrain spending after a post-pandemic</p><p>shopping surge.11</p><p>In Europe, year-on-year growth of between 3</p><p>Exhibit 2</p><p>Uncertainty reigns as executives reveal no clear consensus</p><p>on the outlook for 2024</p><p>Expectations for how fashion industry conditions will evolve in the year ahead compared to prior year,</p><p>% of respondents</p><p>Better Same Worse</p><p>Note: Numbers are rounded and may not add to 100</p><p>Source: BoF-McKinsey State of Fashion 2024 Executive Survey, BoF-McKinsey State of Fashion 2023 Executive</p><p>Survey, BoF-McKinsey State of Fashion 2022 Executive Survey</p><p>383726Expectations for 2024</p><p>562816Expectations for 2023</p><p>92962Expectations for 2022</p><p>14</p><p>The State of Fashion 2024</p><p>percent and 5 percent is predicted in 2024, compared</p><p>to 10 percent in the first half of 2023 and 5 percent to 7</p><p>percent in the second half of the year. An anticipated</p><p>rise in inbound tourism, boosted by Paris’ hosting</p><p>of the Olympic and Paralympic Summer Games,</p><p>will likely be a growth driver, as will a pipeline</p><p>of store openings in tier two and tier three cities</p><p>across Europe.12 13</p><p>In the US, luxury is expected to grow at 2 percent</p><p>to 4 percent year on year in 2024, compared to 1</p><p>percent in the first half of 2023 and between 1 percent</p><p>and 3 percent in the second half. This would represent</p><p>a return to the long-term pace, with slightly stronger</p><p>sales driven by higher-end aspirational brands.</p><p>However, the luxury boom of recent years is not likely</p><p>be rekindled. Rather, stabilisation at a lower level is</p><p>expected. A strong dollar against, for example, the</p><p>euro may also lead to some spend shifting abroad.14</p><p>As for China, luxury growth of 4 percent to 6</p><p>percent is expected, compared to 16 percent in the</p><p>first half of 2023, which dropped to between 1 percent</p><p>and 3 percent in the second half. Though moving in</p><p>the right direction, the projected growth rate in the</p><p>year ahead stands in sharp contrast to 2020’s 32</p><p>percent and 2021’s 40 percent. Renewed uptake of</p><p>international travel may dampen domestic demand,</p><p>as affluent consumers resume shopping for luxury</p><p>outside the country. However, it’s worth noting that</p><p>the size of China’s luxury market remains almost</p><p>double what it was in 2019.15</p><p>While the biggest fashion markets are seeing</p><p>only tepid signs of renewed growth, others may be</p><p>more compelling. When asked about the countries</p><p>or regions they believe will be the most promising</p><p>in the year ahead compared to 2023 in the survey</p><p>conducted in September, executives cited the Middle</p><p>East (51 percent net intent), India (39 percent net</p><p>intent) and Asia Pacific (34 percent net intent). North</p><p>69%</p><p>Exhibit 3</p><p>Companies are planning price increases to combat continued inflation,</p><p>with 25 percent of executives expecting increases of over 5 percent</p><p>Expected change in retail sales prices across all products/categories in 2024,</p><p>% of respondents</p><p>Note: Numbers are rounded and may not add to 100</p><p>Source: BoF-McKinsey State of Fashion 2024 Executive Survey</p><p>More than 5% 25</p><p>1% to 5% 44</p><p>No change 18</p><p>−4% to 0% 6</p><p>−5% or less 6</p><p>15</p><p>Industry Outlook</p><p>Fashion shoppers in Europe. Shutterstock.</p><p>America and China recorded 8 percent and 3 percent</p><p>respectively, while Western Europe was negative 11</p><p>percent.16</p><p>As for expanding physical footprints, the US,</p><p>Middle East and Asia Pacific stand out as priorities,</p><p>with executives reporting net intent of 44 percent, 45</p><p>percent and 45 percent respectively. North America</p><p>is the biggest investment destination, with 48 percent</p><p>of executives citing footprint expansion plans in the</p><p>region, compared to 44 percent in Western Europe.17</p><p>Eyes on the Prize</p><p>In 2024, 71 percent of surveyed executives said</p><p>they will focus on increasing sales, compared to 63</p><p>percent the previous year.18 Achieving that growth</p><p>will likely require laser-sharp attention on pricing</p><p>and promotion strategies, with a large portion of</p><p>investment directed to potential quick wins.</p><p>Indeed, pricing strategies are likely to be</p><p>particularly critical given weakening prospects for</p><p>volume growth. Net intent to raise prices across the</p><p>industry is 50 percent, with 69 percent of executives</p><p>planning to lift prices, compared to 58 percent a year</p><p>ago. Among the surveyed executives, 44 percent expect</p><p>to raise prices by up to 5 percent, while</p><p>it can provide</p><p>a supplier with cash flow to invest in industrial</p><p>and sustainability improvements at its facilities,</p><p>according to Florian Heubrandner, executive vice</p><p>president of global textiles at Lenzing, a wood-based</p><p>cellulosic fibre manufacturer.</p><p>Brands should also continue to actively</p><p>champion workers’ rights. This includes ensuring</p><p>fair wages, job protection, safe working conditions</p><p>and opportunities for professional development</p><p>for factory workers. Beyond enabling two-way</p><p>communication with suppliers about this, companies</p><p>can take steps on their own. Adidas, among other</p><p>companies, has established a worker hotline to</p><p>enable workers to voice complaints that it can then</p><p>work to resolve.345 Similar initiatives include PVH’s,</p><p>which includes setting up representative workplace</p><p>committees for all workers employed by key suppliers</p><p>by 2025.346</p><p>The upheavals of recent years have made clear</p><p>that fashion companies and their suppliers not only</p><p>depend on each other to succeed, but also endure</p><p>challenges together. 2024 will likely provide further</p><p>evidence as to why.</p><p>101</p><p>Fashion System</p><p>PVH Corp:</p><p>Transforming Supply</p><p>Chains Through Trust</p><p>and Transparency</p><p>By Janet Kersnar</p><p>Fashion supply chains continue</p><p>to experience the knock-on</p><p>effects of wider geopolitical,</p><p>macroeconomic and consumer</p><p>shifts, all of which may intensify</p><p>in 2024. David Savman believes</p><p>there are multiple ways that</p><p>retailers, brands and their</p><p>suppliers can learn to thrive</p><p>together in this environment.</p><p>EXECUTIVE INTERVIEW</p><p>David Savman,</p><p>Chief Supply Chain</p><p>Officer, PVH Corp</p><p>102</p><p>The State of Fashion 2024</p><p>They thrive, we thrive” is a</p><p>catchphrase that captures</p><p>David Savman’s approach</p><p>to running PVH’s supply chain.</p><p>Since leaving H&M in 2022 to</p><p>become the chief supply chain</p><p>officer of the US owner of Tommy</p><p>Hilfiger and Calvin Klein, Savman</p><p>has put relationships front and</p><p>centre across a supply chain that</p><p>relies on around 300 garment</p><p>manufacturers in approximately</p><p>30 countries, building on PVH</p><p>initiatives such as its first supply-</p><p>chain financing programme that</p><p>provides suppliers with better</p><p>financing rates based on their</p><p>sustainability performance.</p><p>As he explains, having strong</p><p>relationships across a supply chain</p><p>“is the way we do business; it gives</p><p>you a possibility to stand ready</p><p>when whatever happens.”</p><p>After the turbulence caused</p><p>by the Covid-19 pandemic,</p><p>how would you characterise</p><p>the impact on supply-chain</p><p>relationships between brands,</p><p>retailers and their suppliers?</p><p>It became clear during the</p><p>pandemic which relationships</p><p>were really strategically strong,</p><p>transparent and reliable, and</p><p>which ones were not. It is also clear</p><p>that the suppliers that were able to</p><p>use their relationships with brands</p><p>and retailers to find more-[long-</p><p>term] solutions are the ones now</p><p>working with the best [partners]</p><p>in the market. There are a lot of</p><p>brands and retailers out there,</p><p>[and] it’s much more important</p><p>for everyone to work with strong</p><p>business partners from whatever</p><p>side.</p><p>Both suppliers and retailers</p><p>are more cautious in how each of</p><p>us progresses. Who do you work</p><p>with? Why do you work with</p><p>them? What’s the value that we</p><p>bring to the table? What’s our</p><p>common goal? Are we equally</p><p>vested in what we’re going after? It</p><p>becomes much more obvious that</p><p>it is a win-win relationship [when</p><p>both partners] have answers</p><p>to those questions [that align].</p><p>It’s part of a transformation in</p><p>the way we think about supply-</p><p>chain partnerships for the last</p><p>10 years, but the pandemic really</p><p>accelerated that.</p><p>Even if you run your own</p><p>company in a good way, there are</p><p>still fluctuations in the market that</p><p>affects the whole market, right?</p><p>We want to be transparent both in</p><p>terms of being up-front and candid</p><p>about what we see changing, but</p><p>also having frequent data flows to</p><p>make sure we have the same view</p><p>of reality all the time. Of course,</p><p>that’s not super easy on a day-to-</p><p>day basis due to a lot of reasons.</p><p>In terms of the day to day,</p><p>what are you doing to ensure</p><p>the transformation you’ve</p><p>mentioned continues to happen?</p><p>I’ve been in this industry and in</p><p>this field for many, many years. I</p><p>don’t think I’ve ever spoken to</p><p>suppliers as much as I have in</p><p>the last 10 months, first [because</p><p>of ] being brand new at PVH, but</p><p>also to build on what I’m hearing</p><p>[about] what are their pain points,</p><p>what works for them, what doesn’t</p><p>work for them. How do we do this</p><p>better? What is it that’s important</p><p>for them to know? When do they</p><p>actually need to know it?</p><p>What has surprised me</p><p>through all of the conversations</p><p>is seeing that there is still a big</p><p>upside for the fashion retail</p><p>industry to take bigger steps in</p><p>how much more systematic and</p><p>granular we need to be when we</p><p>look at demand planning, supply</p><p>planning, inventory management,</p><p>regardless [of where we are based].</p><p>Each and every one of us has to be</p><p>sharper [in all those areas], with</p><p>supply models that are more agile,</p><p>precise and diverse than before</p><p>— everyone needs allocation</p><p>algorithms that are flexible.</p><p>You’ve mentioned inventory</p><p>— how should companies</p><p>be thinking of inventory</p><p>management in the year ahead?</p><p>I think what the industry needs,</p><p>and what we’re doing a lot at</p><p>PVH, is [creating a mindset that]</p><p>inventory is the most valuable</p><p>asset we have, not only from a</p><p>financial perspective, but also in</p><p>terms of where capital is employed.</p><p>… You can’t afford today to not</p><p>make amazing products, at least</p><p>not from where we stand. You</p><p>also cannot afford to not be very</p><p>granular in your demand planning,</p><p>in your inventory planning, in</p><p>your supply models, and really</p><p>treat your inventory as the most</p><p>precious thing you have. That’s</p><p>where you put all your effort, your</p><p>creativity. That’s how your brand</p><p>comes to life with the consumer.</p><p>It’s also how you run a sustainable,</p><p>efficient business model around a</p><p>fashion retailer.</p><p>Where will the conversations</p><p>around offshoring, nearshoring</p><p>and onshoring head?</p><p>The important part of this is to ask</p><p>why you do it, and that comes back</p><p>to treating inventory as one of the</p><p>most important things you have.</p><p>To be able to have good inventory,</p><p>take care of that inventory, make</p><p>it available to your consumer and</p><p>“</p><p>103</p><p>Fashion System</p><p>be responsive, you need to have</p><p>production in different parts of the</p><p>world. We are a global company. So,</p><p>it’s going to be nearshore to one</p><p>market and far away from another</p><p>one.</p><p>I think that the [terms]</p><p>nearshoring and onshoring</p><p>are a bit un-modern in a global</p><p>company. Does a global brand like</p><p>PVH need a multiple country-</p><p>of-origin sourcing strategy to be</p><p>able to run great availability with</p><p>less inventory? Absolutely. Does</p><p>it involve asking, ‘Am I going to</p><p>nearshore?’ No. But it’s still a</p><p>valid point that you need a diverse</p><p>sourcing strategy, especially if</p><p>you’re a brand active in every part</p><p>of the world.</p><p>For companies like PVH with</p><p>supply chains that are global,</p><p>a key part of sustainability —</p><p>being able to trace where fibres</p><p>and materials are sourced</p><p>— is even more complex given</p><p>the amount of information</p><p>that needs to flow through</p><p>multiple supply-chain tiers.</p><p>Technology advances have</p><p>helped, including the use of</p><p>blockchain. But would you say</p><p>advances in traceability and</p><p>other moves towards more</p><p>supply-chain sustainability</p><p>would be accelerating now if it</p><p>weren’t for regulators pressing</p><p>for change?</p><p>It’s a tough question to answer.</p><p>I don’t know if it’s accelerated</p><p>or not. Probably. [But] it’s what</p><p>the consumer wants. It’s what</p><p>the store associates and your</p><p>[other] staff want. It is what the</p><p>shareholders and the financial</p><p>markets want. We all want it to</p><p>move as quickly as possible, so if</p><p>anyone has managed to accelerate</p><p>it, that’s … a positive thing.</p><p>No one in this industry wants</p><p>to hide where our fibres are</p><p>from. That doesn’t exist. It’s just</p><p>a complex thing. It’s how it has</p><p>built up for hundreds of years. … It</p><p>doesn’t come from bad intention,</p><p>but now when we go back,</p><p>there</p><p>is untangling to do. A lot of them</p><p>have already been done, and a lot</p><p>of these technologies will help.</p><p>There’s the critical human</p><p>side of the supply chain that</p><p>often doesn’t get discussed</p><p>as much as it should. What</p><p>can executives of retailers</p><p>and brands do to uphold</p><p>social rights in supply chains,</p><p>regardless of economic cycles</p><p>or headwinds that we might be</p><p>facing in 2024?</p><p>The answer is to run a much more</p><p>granular, precise supply chain. If I</p><p>go to my biggest suppliers and say,</p><p>‘Here is how we see it, and we’re</p><p>going to update you, and I’m going</p><p>to do it on each and every level of</p><p>the supply chain,’ I know that [the</p><p>impact of any consumer demand</p><p>shifts] is going to be smaller</p><p>for everyone. If we talk to each</p><p>other often enough and we have a</p><p>strong strategic relationship, you</p><p>trust that what I say is accurate.</p><p>Therefore, you won’t add 20 percent,</p><p>or you won’t remove 20 percent,</p><p>from your operations. In contrast,</p><p>if you don’t trust me and you do</p><p>add upside or remove downside,</p><p>the next level will do the same.</p><p>The problem is when you don’t</p><p>have this, they’re sitting blind, and</p><p>then if all of a sudden demand</p><p>totally disappears, or triples, they</p><p>struggle to handle it, and this</p><p>will impact their employees. The</p><p>solution is based on better data</p><p>and integrated systems, but it’s</p><p>also based on something as simple</p><p>as trust, and making sure that</p><p>you do what you say you’re going</p><p>to, if you do that over and over ...</p><p>they’re with you on that journey.</p><p>That builds the possibility for</p><p>them to continue to grow their</p><p>business. It’s like it’s the absolutely</p><p>best thing that can happen to us,</p><p>that our suppliers continue to</p><p>thrive, and invest in innovation,</p><p>sustainable solutions, circularity,</p><p>technology and so on. The day they</p><p>don’t, then I’m troubled.</p><p>This interview has been edited and condensed.</p><p>The solution is based on better data,</p><p>but it’s also based on something as</p><p>simple as trust.</p><p>104</p><p>The State of Fashion 2024</p><p>McKinsey</p><p>Global</p><p>Fashion</p><p>Index</p><p>The fashion industry demonstrated remarkable</p><p>resilience in 2022. The luxury segment in particular</p><p>propelled growth through price increases, offsetting</p><p>the weaknesses of other segments. However, the</p><p>future remains unclear against a backdrop of ongoing</p><p>headwinds, from geopolitical tensions, inflationary</p><p>pressures and slumping consumer confidence to the</p><p>Chinese economy’s slower-than-expected recovery.</p><p>KEY INSIGHTS</p><p>• After a record 2021, industry economic profit stabilised at similar levels in 2022, with</p><p>macro challenges offset by strong revenues and cost discipline which protected</p><p>margins.</p><p>• Excluding luxury and affordable luxury, however, the industry’s 2022 performance</p><p>would have been negative, with the mid-market segment particularly under pressure.</p><p>In luxury, there were also clear winners: about 98 percent of the luxury segment’s total</p><p>economic profit was generated by the four largest players.</p><p>• Value creators outnumbered value destroyers for the second year in a row. However,</p><p>there are signs of increased polarisation, with the industry’s “Super Winners”</p><p>increasing their share of economic profit from 84 percent to 99 percent.</p><p>• In this year’s list of Super Winners, luxury group LVMH rose to the number one spot.</p><p>Sportswear players continued to perform strongly amid a reshuffling of the pack, led</p><p>by Nike in second place.</p><p>• The industry faced economic uncertainty and diminished consumer confidence</p><p>in 2023. However, it is likely it will maintain its economic profitability for the year,</p><p>primarily thanks to the resilient luxury segment.</p><p>Resilience Buoyed</p><p>by Luxury</p><p>106</p><p>The State of Fashion 2024</p><p>Exhibit 20</p><p>After a strong recovery in 2021, industry economic profit</p><p>was maintained in 2022</p><p>Total economic profit (EP), index (2010=100)</p><p>EBITA</p><p>margin, %</p><p>N</p><p>YoY economic</p><p>profit change, %</p><p>313 333 342 352 355 359 366 372 382 382 368 362 354</p><p>11.5 11.5 11.5 11.3 11.1 10.7 10.3 10.5 10.8 10.3 6.2 12.3 11.9</p><p>Source: McKinsey Global Fashion Index</p><p>0 4 −7 −12 −17 −24 42 24 −14 371−198 −6</p><p>2010 2011 2012 2013 2014 2015 2016 2017 2018 2019</p><p>100 100 105 97 85 71</p><p>54</p><p>76</p><p>−79</p><p>94</p><p>215 203</p><p>81</p><p>2020 2021 2022</p><p>Leveraging financial data from nearly 400 public</p><p>companies, the McKinsey Global Fashion Index</p><p>(MGFI) helps decision makers evaluate the fashion</p><p>industry’s most important segments, product</p><p>categories and markets. The index primarily tracks</p><p>financial development and value creation through</p><p>the lens of economic profit (EP), calculated as the</p><p>difference between a company’s current adjusted</p><p>operating profit (minus taxes) and its cost of capital.</p><p>EP also reflects value created over time, allowing</p><p>the index to gauge how much a company invests to</p><p>generate its results.</p><p>In this eighth edition of the MGFI, we first</p><p>unpack the industry’s historical EP composition and</p><p>development, then we analyse individual segments,</p><p>showing where value was created or eroded. We look</p><p>at the performance of companies that have risen</p><p>to the top as “Super Winners,” unpack a crisis in</p><p>inventories and share our outlook for the coming year.</p><p>Resilient Performance</p><p>The fashion industry achieved a strong financial</p><p>performance in 2022, led by the luxury segment’s</p><p>economic profit contribution. EP held steady near</p><p>the high-tide level created in 2021, suggesting</p><p>stabilisation and reflecting a recovery in consumer</p><p>sentiment as pandemic effects started to fade. Our</p><p>EP index, baselined to 100 in 2010, hit 203 at the end</p><p>of 2022, just 12 points lower than the record set in</p><p>2021.</p><p>Industry performance was resilient despite</p><p>significant challenges, including geopolitical</p><p>uncertainty (such as the Russian invasion of Ukraine)</p><p>and accelerating inflation, which put disposable</p><p>income under heavy pressure. The industry</p><p>generated revenue gains while keeping a firm grip</p><p>on costs, leading to average adjusted EBITA margins</p><p>of almost 12 percent, slightly ahead of the 11 percent</p><p>long-term average. Capital intensity, which refers to</p><p>107</p><p>McKinsey Global Fashion Index</p><p>the assets required to generate income, decreased</p><p>6 percent compared to 2019, despite a significant</p><p>increase in revenues of 12 percent. Decision makers</p><p>were hesitant to commit to significant investments,</p><p>resulting in a relatively modest 4 percent increase in</p><p>capital investment since 2019.</p><p>The key to the industry’s relatively strong</p><p>performance in 2022 was pricing-led growth. The</p><p>luxury segment in particular showed that it can raise</p><p>prices without significantly impacting demand.347</p><p>Large players were most proficient at managing these</p><p>price rises. However, price adjustments were not</p><p>restricted to the top end of the market. Companies</p><p>including Inditex and Uniqlo have shown that</p><p>implementing well-managed pricing strategies can</p><p>effectively support profitability.348 349</p><p>Our analysis of industry dynamics over the past</p><p>three years (2019-2022) suggests that high levels of</p><p>EP can be largely attributed to margin performance.</p><p>McKinsey’s sensitivity analysis shows that margin</p><p>was twice as important as capital turn in shaping</p><p>EP trajectory. A 1.3 percentage point improvement</p><p>in margins from 2019 to 2022 was the main driver</p><p>sustaining the current elevated EP levels.</p><p>Luxury on Top</p><p>In a year of economic challenges and accelerating</p><p>inflation, only two segments were able to improve</p><p>on their performance in 2021. Luxury and affordable</p><p>luxury saw average EP rise 36 percent and 10</p><p>percent respectively — a result reflecting successful</p><p>repricing strategies and the resilient spending power</p><p>of higher-income consumers. Due to the uncertain</p><p>environment, shopping behaviours have further</p><p>Exhibit 21</p><p>Luxury was the main segment driving economic profit</p><p>while others, particularly the mid-market, suffered</p><p>Average economic profit by value segment, index (2010=100)</p><p>Source: McKinsey Global Fashion Index</p><p>Luxury</p><p>Mid-market Value/discount</p><p>Affordable luxury Premium/bridge</p><p>19</p><p>66</p><p>90</p><p>Long-</p><p>term avg</p><p>(2010–2018)</p><p>2021 2022</p><p>+36% 23</p><p>52</p><p>Long-</p><p>term</p><p>avg</p><p>(2010–2018)</p><p>2021 2022</p><p>−20%42</p><p>25</p><p>37</p><p>Long-</p><p>term avg</p><p>(2010–2018)</p><p>2021 2022</p><p>−20%30</p><p>15</p><p>57</p><p>37</p><p>Long-</p><p>term avg</p><p>(2010–2018)</p><p>2021 2022</p><p>−34%</p><p>5 4 5</p><p>Long-</p><p>term avg</p><p>(2010–2018)</p><p>2021 2022</p><p>+10%</p><p>Excluding Inditex, the mid-</p><p>market EP dropped by �64%</p><p>between 2021 and 2022</p><p>108</p><p>The State of Fashion 2024</p><p>Exhibit 22</p><p>Luxury also saw the greatest margin improvements</p><p>EBITA margin by value segment,</p><p>%</p><p>Source: McKinsey Global Fashion Index</p><p>2022 2010–2012 margin range2019–2021 average2021 2010–2018 average</p><p>Affordable</p><p>luxury</p><p>Premium/</p><p>bridge</p><p>Mid-market</p><p>Value/</p><p>discount</p><p>10.3</p><p>8.7</p><p>24.1</p><p>10.2</p><p>11.5</p><p>11.8</p><p>12.4</p><p>9.7</p><p>25.2</p><p>10.8</p><p>13.7</p><p>9.5</p><p>8.3</p><p>20.4</p><p>10.1</p><p>Luxury</p><p>8.3</p><p>6.6</p><p>19.6</p><p>8.9</p><p>8.6</p><p>0 2 4 6 8 10 12 14 16 18 20 22 24 26</p><p>Excluding Inditex, the mid-market EBITA margin</p><p>was 9% in 2021 and fell to 7.1% in 2022</p><p>diverged, with high-income shoppers broadly</p><p>maintaining their spending on fashion while lower-</p><p>income consumers cut discretionary spending.350 It is</p><p>worth noting that while affordable luxury improved</p><p>its year-on-year EP, the segment only amounts</p><p>to a small portion of the market. Meanwhile, the</p><p>premium/bridge, mid-market and value/discount</p><p>segments suffered.</p><p>In a bell curve pattern, the extremes of premium/</p><p>bridge and value/discount suffered less than the</p><p>middle ground, seeing 20 percent declines in EP</p><p>compared with a mid-market EP decline of 34</p><p>percent (including Inditex) and 64 percent (excluding</p><p>Inditex). That said, the mid-market still produced</p><p>more EP in aggregate than its long-term average,</p><p>recording an EP index level of 37, compared with</p><p>15 on average between 2010 and 2018. Premium/</p><p>bridge and value/discount also outperformed their</p><p>long-term averages but by smaller amounts.</p><p>While affordable luxury recorded a 10 percent</p><p>EP gain in 2022, the segment was unable to improve</p><p>on its 2010-2018 average. Luxury, however, reached</p><p>new highs, more than quadrupling its long-term</p><p>2010-2018 average. Luxury now accounts for nearly</p><p>half of the industry’s total EP, with an EP index of</p><p>90. Its performance would have been even more</p><p>exceptional if online pure players were omitted from</p><p>the analysis. These pure players generally posted</p><p>negative or much lower levels of EP. Meanwhile,</p><p>premium/bridge and mid-market produced an EP</p><p>index of 42 and 37 respectively, while value/discount</p><p>achieved 30.</p><p>Among individual luxury companies, LVMH</p><p>posted a record performance, with revenue of €79.2</p><p>109</p><p>McKinsey Global Fashion Index</p><p>billion (approximately $83 billion) and profit from</p><p>recurring operations of €21.1 billion ($22 billion),</p><p>both up 23 percent year on year.351 Hermès also</p><p>had an exceptional year, with a 29 percent increase</p><p>in revenue.352 These results partially reflected the</p><p>primacy of companies that were able to secure higher</p><p>prices while maintaining strong demand.</p><p>The strong performance of the luxury segment</p><p>was evident in both margins and revenues. Luxury’s</p><p>average adjusted EBITA margin widened from</p><p>the pre-pandemic historical average by about 5</p><p>percentage points, and 1 percentage point from</p><p>2021, to 25.2 percent. This was on the back of an</p><p>18 percent increase in revenues, driven partly by</p><p>price increases. Elsewhere, margins held steady or</p><p>were slightly narrower. For example, mid-market</p><p>margins contracted to 8.3 percent from 9.7 percent</p><p>the previous year. Value/discount margins of 9.5</p><p>percent were about 2 percentage points lower</p><p>than pre-pandemic, partly driven by strong price</p><p>competition and increases in the cost of goods sold.</p><p>Value Creation and Destruction</p><p>To be sure, the fashion industry has had to contend</p><p>with myriad challenges in recent years. Even before</p><p>the pandemic, a relatively small group of players</p><p>was responsible for generating the majority of EP.</p><p>The pandemic led to weaker performance across the</p><p>board, albeit with exceptions. Now, there are signs of a</p><p>return to the traditional pattern of polarisation, with</p><p>the top 20 percent of companies driving industry</p><p>EP. This group saw a slight increase in overall profit</p><p>contribution of 4 percentage points, accounting for</p><p>125 percent of the industry’s EP at the end of 2022.</p><p>Meanwhile, the bottom 20 percent accounted</p><p>for most of the industry’s losses, equivalent to an</p><p>EP of negative 30 percent compared to negative 25</p><p>percent in 2021. Still, the cohort was significantly</p><p>less value destructive than pre-pandemic, with an</p><p>improvement of approximately 50 percentage points</p><p>since 2019. In the middle, a small amount of EP (5</p><p>percent of the distribution) was produced by 60</p><p>percent of companies.</p><p>Segment Deep Dive: Luxury</p><p>Luxury has experienced extremely rapid</p><p>growth in recent years, and its EP is now six</p><p>times 2010 levels, accounting for 44 percent</p><p>of the industry’s total. This growth trajectory</p><p>continued in 2022, with luxury EP growing</p><p>36 percent, spurred by record EBITA margins</p><p>of 25 percent. Still, growth is expected to</p><p>stabilise amid macroeconomic headwinds</p><p>and slower growth in China.</p><p>EP in luxury (including publicly listed</p><p>companies only) is driven by just four players:</p><p>LVMH, Hermès, Richemont and Kering. These</p><p>powerhouses accounted for 98 percent of</p><p>the segment’s EP in 2022, although the first</p><p>signs of growth normalisation are beginning</p><p>to emerge in 2023.371 Of the four, Kering</p><p>recorded the smallest EP growth.</p><p>Exhibit 23</p><p>The industry is once again showing</p><p>signs of increased polarisation</p><p>Fashion companies’ contribution to industry economic profit by</p><p>ranked quintile,</p><p>%</p><p>Source: McKinsey Global Fashion Index</p><p>−176</p><p>−39</p><p>115</p><p>2020</p><p>Top 20% 21–80% Bottom 20%</p><p>−114</p><p>217</p><p>2016</p><p>-3</p><p>−73</p><p>173</p><p>2017</p><p>1</p><p>−62</p><p>162</p><p>2018</p><p>0</p><p>−80</p><p>190</p><p>2019</p><p>−10</p><p>118</p><p>2021</p><p>−25</p><p>7</p><p>125</p><p>2022</p><p>5</p><p>−30</p><p>110</p><p>The State of Fashion 2024</p><p>The long-term trend in the fashion industry</p><p>has been that there are more value destroyers than</p><p>value creators. In 2021, that started to change as</p><p>value destroyers faltered, resulting in bankruptcies,</p><p>mergers and acquisitions. The proportion of value</p><p>destroyers fell to 45 percent, compared to 68 percent</p><p>in 2020, marking the first year since 2014 that</p><p>creators outnumbered destroyers. In the most recent</p><p>financial year, the new equilibrium remained stable,</p><p>with destroyers accounting for a share only slightly</p><p>higher than the previous year at 47 percent. Luxury</p><p>and affordable luxury saw the highest number of</p><p>new value creators, while the mid-market saw the</p><p>highest number of new value destroyers. Prada is</p><p>an example of a new value creator, with a 21 percent</p><p>increase in revenues in 2022 driven by growing</p><p>brand momentum, particularly for youth-focused</p><p>Miu Miu.353 However, mid-market players accounted</p><p>for about 50 percent of the value destruction in 2022.</p><p>In 2022, the top 20 companies saw EP levels rise</p><p>on aggregate, and the group continued to have an</p><p>outsized impact on overall EP. But of the 99 percent</p><p>of EP attributable to the top 20, 81 percent was</p><p>generated by the top 10. That said, value creators</p><p>outside the top 20 contributed more to EP than they</p><p>did for most of the past decade. Meanwhile, value</p><p>destroyers were proportionately less destructive,</p><p>with a similar EP level to previous years representing</p><p>a smaller proportion of total EP.</p><p>Super Winners</p><p>It is no secret that fashion is a winner-takes-all</p><p>industry, with the top companies dominating</p><p>the global value pool. This year, our list of Super</p><p>Winners contains five new entrants, reflecting</p><p>shifts in consumer behaviour after the Covid-19</p><p>pandemic. Meanwhile, four of the top seven are</p><p>luxury companies, highlighting the importance of</p><p>the segment. Also, sportswear saw a recalibration</p><p>while some retailers rebounded.</p><p>In the luxury segment, LVMH was the standout</p><p>performer, rising one place to take the top spot,</p><p>achieving significant growth particularly in its</p><p>fashion and leather goods category in Europe, US and</p><p>Japan. The next-best performing luxury player was</p><p>Hermès, which rose from fifth to fourth place due</p><p>to its strong performance in international markets,</p><p>while Richemont</p><p>jumped three places to fifth,</p><p>with growth driven by momentum in retail and the</p><p>Americas.354 Kering was seventh and Tapestry rose</p><p>13 places to 16th.</p><p>Leisure and sportswear brands saw positive</p><p>momentum as consumers continued to prioritise</p><p>healthy lifestyles. However, with more people</p><p>returning to the office as well as spending time</p><p>outdoors, the picture was slightly more mixed than</p><p>last year. China’s Anta moved from ninth to 11th</p><p>place. On the flipside, Lululemon rose from 11th to</p><p>10th position, boosted by a net revenue increase</p><p>of 30 percent, attributed to product innovation, a</p><p>focus on consumer experiences and strategic market</p><p>expansion.355 Retailers including Dicks Sporting</p><p>Goods and JD Sports remained on the list, with the</p><p>former holding steady in 12th place, while JD moved</p><p>down four places to 19th.</p><p>Elsewhere, the past year saw strong performance</p><p>by off-price multi-brand retailers, including TJX</p><p>Companies and Ross. TJX remained in sixth place on</p><p>the Super Winners, and Ross was ninth, rising from</p><p>eighth place last year.</p><p>Macy’s was the biggest mover in the group, rising</p><p>321 places to secure the 20th spot on the list. Four</p><p>other new entrants also made the list, including</p><p>American department store Dillard’s climbing 21</p><p>places to claim the 13th position. These department</p><p>stores experienced a strong rebound post-pandemic</p><p>in 2021, reflecting consumers’ eagerness to return</p><p>to in-person shopping after lockdowns and social</p><p>distancing measures were lifted. However, despite</p><p>a range of actions taken by department stores,</p><p>including Macy’s restructuring efforts announced</p><p>in 2020356 and Dillard’s tight inventory control</p><p>strategy,357 the business model remains challenged,</p><p>with many experiencing a growth slowdown or even</p><p>decline in sales during the financial year 2022. New</p><p>entrant Tapestry climbed 13 places to 16th, with</p><p>performance attributed to the momentum of its</p><p>key brands such as Coach and Kate Spade as well</p><p>as the execution of its “acceleration programme”</p><p>to cut costs and improve margins.358 359 Footwear</p><p>manufacturer Crocs reached 17th place, climbing</p><p>from 24th last year, after record 2022 revenues as</p><p>a result of exceptional demand for the Crocs and</p><p>Heydude brands.360 Lastly, Signet Jewelers, the</p><p>world’s largest diamond jewellery retailer, saw a</p><p>significant 50 percent increase in fiscal 2022 sales,</p><p>driven by a 56 percent growth in brick-and-mortar</p><p>sales, resulting in an upward move from 33rd to 18th</p><p>111</p><p>McKinsey Global Fashion Index</p><p>Exhibit 24</p><p>Luxury leads the Super Winners, while sports players reshuffle</p><p>Top 20 players by economic profit, 2022,</p><p>USD (millions)</p><p>1 LVMH includes economic profit from Tiffany & Company</p><p>Source: McKinsey Global Fashion Index</p><p>Rank change vs</p><p>2019–2021</p><p>Market cap change</p><p>Dec. 2019–Sept. 2023</p><p>Inditex 3,738 Unchanged</p><p>Hermès 3,084 +1</p><p>TJX Companies 2,610 Unchanged</p><p>Kering 2,344 −3</p><p>Ross 1,178 +1</p><p>Lululemon 1,041 +1</p><p>Anta 961 −2</p><p>Dick’s Sporting Goods 855 Unchanged</p><p>Dillard’s 733 +21</p><p>Next 637 −1</p><p>Pandora 609 −1</p><p>Tapestry 576 +13</p><p>Crocs 554 +7</p><p>Signet Jewelers 532 +15</p><p>Macy’s 477 +321</p><p>JD Sports 509 −4</p><p>LVMH1 7,376 +1</p><p>Fast Retailing 1,290 Unchanged</p><p>Nike 3,801 −1</p><p>Richemont 2,746 +12</p><p>New entrants Market cap grew above market average (>1.2×)</p><p>Market cap grew below market average (</p><p>brands.372</p><p>113</p><p>McKinsey Global Fashion Index</p><p>some companies from falling into an inventory trap.</p><p>With year-on-year revenues under pressure in 2022,</p><p>inventories expanded in the third quarter without</p><p>declining materially by the end of the year.</p><p>On the Horizon</p><p>In the coming year, the dampening effect of the</p><p>economic environment on consumer sentiment will</p><p>likely continue. This will put pressure on brands to</p><p>deliver value for money, as well as standout customer</p><p>experiences. Meanwhile, China’s slower-than-</p><p>expected recovery suggests a persistent constraint</p><p>on demand.</p><p>At the time of writing, the macroeconomic</p><p>situation is in a state of flux. There are tentative signs</p><p>that the worst of the post-pandemic effects is abating,</p><p>and inflation is softening in many economies.</p><p>However, uncertainty looms large; as recent</p><p>geopolitical conflicts unfold, inflation is still high by</p><p>historical standards and consumer wallets remain</p><p>squeezed.363 Across the MGFI cohort, revenues grew</p><p>5 percent year on year in the first half of 2023. Again,</p><p>the strongest performers were in the luxury segment,</p><p>which saw 14 percent growth, while the mid-market,</p><p>premium/bridge and value/discount segments</p><p>managed just 3 percent.</p><p>Among luxury Super Winners, LVMH reported</p><p>17 percent growth in the first half of 2023 and</p><p>Hermès 25 percent.364 Outside the Super Winner</p><p>list, Prada, Hugo Boss and Moncler posted revenue</p><p>gains of 20 percent, 22 percent and 24 percent</p><p>respectively.365 However, the luxury industry</p><p>appears to be experiencing growth normalisation</p><p>driven by signs of a slowdown in the US and tighter</p><p>economic conditions in China. LVMH announced its</p><p>third quarter results in October 2023, resulting in a</p><p>share price drop of 7 percent, putting the share price</p><p>down almost 25 percent since April. Luxury groups</p><p>Kering and Richemont also felt the impact, falling</p><p>more than 2 percent and 4 percent, respectively.366</p><p>367 Sportswear also showed signs of resilience. On,</p><p>Asics and Lululemon reported second quarter 2023</p><p>revenues of 52 percent, 29 percent and 18 percent</p><p>respectively.368 Sportswear giant Nike saw better-</p><p>than-expected first quarter results in September</p><p>2023, indicating that demand remains strong despite</p><p>consumer challenges.369 Meanwhile, travel is high</p><p>on consumer agendas, reflecting a post-pandemic</p><p>appetite for new experiences. As a result, luggage</p><p>specialist Samsonite had a good first half, seeing</p><p>revenue gains of 40 percent compared to 2022.370</p><p>One reassuring trend is that the industry has</p><p>been able to maintain its margins, which averaged</p><p>15 percent in the first half of 2023 (for unadjusted</p><p>EBITA) — just 0.2 percentage points lower than the</p><p>year prior. Again, luxury was the primary driver of</p><p>performance, sustaining average margins of more</p><p>than 25 percent. In other segments, average margins</p><p>were around 11 percent. Analysts expect margins</p><p>to hold steady over the remainder of 2023 and into</p><p>2024. However, this comes with a warning that the</p><p>recovery is fragile.</p><p>Based on revenue and profitability trajectories,</p><p>and our review of expert analysis, the most likely</p><p>path forward is for the industry to hold steady over</p><p>the coming period. That means the MGFI cohort will</p><p>likely broadly maintain EP levels thanks to a strong</p><p>luxury segment. However, the current uncertain</p><p>economic environment could potentially lead to</p><p>further deterioration in performance before the end</p><p>of the year, putting struggling players under even</p><p>greater pressure, further increasing EP polarisation.</p><p>Segment Deep Dive:</p><p>Online Pure Players</p><p>After 2021’s highs, the online pure play</p><p>segment came down to earth with a bump.</p><p>In 2022, the online market stagnated or</p><p>contracted in some regions, exposing players</p><p>that were previously lauded for their focus</p><p>on growth rather than profitability. Amid high</p><p>interest rates and investor demands, online</p><p>pure players have shifted their focus from</p><p>growth and market share gains to improving</p><p>their bottom lines. Luxury specialists such as</p><p>MyTheresa and Farfetch faced bottom-line</p><p>challenges, despite the growth of the luxury</p><p>market. Meanwhile, mass-market businesses</p><p>such as Boohoo, Zalando, Asos and About You</p><p>posted negative EP, amid intense competition</p><p>from third-generation fast-fashion players</p><p>such as Temu and Shein.373 Other headwinds</p><p>included inventory pressures, supply chain</p><p>disruptions and high return rates.</p><p>114</p><p>The State of Fashion 2024</p><p>Source: McKinsey Global Fashion Index</p><p>Exhibit 25</p><p>In 2022, the top 20 companies increased their EP while others shrank</p><p>Total economic profit by top 20 players, value creators and value destroyers, index (2010=100),</p><p>%</p><p>EP is highly concentrated at the top.</p><p>Out of the 99%, 81% is contributed by the top 10</p><p>EP created by top 20 companies</p><p>EP created by value creators, excl. EP from top 20</p><p>EP created by value destroyers</p><p>Share of</p><p>companies</p><p>that are value</p><p>destroyers, %</p><p>Total EP =</p><p>31</p><p>73</p><p>(73%)</p><p>46</p><p>−19</p><p>100</p><p>2010</p><p>29</p><p>81</p><p>(81%)</p><p>50</p><p>−30</p><p>100</p><p>2011</p><p>36</p><p>95</p><p>(91%)</p><p>48</p><p>−39</p><p>105</p><p>2012</p><p>40</p><p>98</p><p>(100%)</p><p>48</p><p>−48</p><p>97</p><p>2013</p><p>47</p><p>95</p><p>(111%)</p><p>44</p><p>−53</p><p>85</p><p>2014</p><p>52</p><p>94</p><p>(133%)</p><p>38</p><p>−61</p><p>71</p><p>2015</p><p>54</p><p>90</p><p>(167%)</p><p>33</p><p>−69</p><p>54</p><p>2016</p><p>53</p><p>102</p><p>(134%)</p><p>36</p><p>−62</p><p>76</p><p>2017</p><p>54</p><p>117</p><p>(124%)</p><p>44</p><p>−67</p><p>94</p><p>2018</p><p>59</p><p>122</p><p>(150%)</p><p>37</p><p>−78</p><p>81</p><p>2019</p><p>45</p><p>182</p><p>(84%)</p><p>93</p><p>−59</p><p>215</p><p>2021</p><p>47</p><p>201</p><p>(99%)</p><p>70</p><p>−68</p><p>203</p><p>2022</p><p>68</p><p>73</p><p>−172</p><p>−79</p><p>2020</p><p>19</p><p>Exhibit 26</p><p>In 2022, inventory challenges escalated above</p><p>pre-pandemic historical averages</p><p>Inventory value as a percentage of revenues by quarter, 2015-2022,</p><p>%</p><p>Source: McKinsey Global Fashion Index</p><p>Q4 Q1 Q1 Q1Q1 Q1Q1 Q1Q2 Q2 Q2Q2 Q2Q2 Q2Q3 Q3 Q3Q3 Q3Q3 Q3Q4 Q4 Q4Q4 Q4Q4 Q4</p><p>20162015 2017 2018 2019 2020 2021 2022</p><p>21.5</p><p>18.5</p><p>22.0</p><p>20.0</p><p>21.0</p><p>19.0</p><p>18.0</p><p>19.5</p><p>22.5</p><p>20.5</p><p>Yearly</p><p>average,</p><p>%</p><p>19.1 18.9 18.8 19.3 19.4 21.1 19.6 20.7</p><p>2015–2018 average</p><p>19.1</p><p>19.0</p><p>19.2</p><p>22.5</p><p>19.6</p><p>20.7</p><p>19.3</p><p>20.4</p><p>21.3</p><p>19.9</p><p>19.7</p><p>21.7</p><p>20.3</p><p>19.3</p><p>19.619.5</p><p>19.8</p><p>19.1</p><p>20.5 20.6</p><p>19.4</p><p>20.2</p><p>19.8</p><p>20.5 20.4</p><p>19.5</p><p>21.3</p><p>20.5</p><p>21.2</p><p>18.8</p><p>115</p><p>McKinsey Global Fashion Index</p><p>Affiliate marketing</p><p>A process where an affiliate partner,</p><p>for example an online blog, publishes</p><p>a link in its channel, promoting a</p><p>product or service from a merchant,</p><p>such as a retailer. The affiliate earns a</p><p>commission for providing a specific</p><p>result, typically a sale, to the merchant.</p><p>Artificial intelligence (AI)</p><p>Computer systems performing tasks</p><p>by mimicking the problem-solving</p><p>and decision-making capabilities of</p><p>humans, often used to process large</p><p>amounts of data for predictive purposes.</p><p>Athleisure</p><p>A hybrid fashion category that</p><p>combines athletic with casual,</p><p>everyday styles — for example jogging</p><p>bottoms in athletic fabrics.</p><p>Baby boomers</p><p>Demographic cohort born circa</p><p>1946-1964, following the “Silent</p><p>Generation.”</p><p>Blockchain</p><p>A digital database containing</p><p>encrypted information that can be</p><p>simultaneously used and shared</p><p>within a large, decentralised, publicly</p><p>accessible network.</p><p>BoF-McKinsey State of Fashion</p><p>2024 Executive Survey</p><p>A proprietary annual joint survey from</p><p>The Business of Fashion and McKinsey</p><p>polling international fashion</p><p>executives and experts about their</p><p>business sentiment, investment plans</p><p>and industry trends. For the 2024</p><p>survey, 435 respondents took part</p><p>between August and October 2023.</p><p>BoF-McKinsey State of Fashion</p><p>2024 Consumer Survey</p><p>A proprietary annual joint survey from</p><p>The Business of Fashion and McKinsey</p><p>polling consumers from the US, UK</p><p>and China to understand consumer</p><p>sentiment, purchase behaviour and</p><p>brand attitudes. For the 2024 survey,</p><p>2,955 respondents took part between</p><p>August and October 2023.</p><p>Brand marketing</p><p>Marketing focused on top-of-funnel</p><p>conversion, based on long-term</p><p>strategies that involve continuously</p><p>promoting a brand’s story, identity and</p><p>reputation through, for example, in-</p><p>person events or ad campaigns.</p><p>Bullwhip effect</p><p>A supply-chain phenomenon in which</p><p>small changes in consumer demand</p><p>magnify moving up the value chain</p><p>from retailers to manufacturers.</p><p>California</p><p>Consumer Privacy Act</p><p>The state law aimed at enhancing data</p><p>protection and privacy that went into</p><p>effect on Jan. 1, 2020.</p><p>Circularity</p><p>An economic system aiming to</p><p>eliminate waste and pollution,</p><p>lengthen product lifecycles, promote</p><p>the continual use of resources and</p><p>minimise resource inputs.</p><p>Closed-loop recycling</p><p>A process whereby textile product</p><p>waste (both post-production and post-</p><p>consumer) is recycled into new textile</p><p>products so that the materials remain</p><p>in constant circulation (garment-to-</p><p>garment).</p><p>Computer vision</p><p>A subfield of artificial intelligence</p><p>in generative AI, which enables the</p><p>understanding of visual data (e.g.</p><p>images, videos). It supports visual</p><p>capabilities such as object recognition,</p><p>image classification and anomaly</p><p>detection, enabling use cases like</p><p>social media analysis and campaign</p><p>video creation.</p><p>Consumer sentiment</p><p>A measurement of how optimistic</p><p>consumers feel about their finances,</p><p>the economy and purchasing behaviour.</p><p>Cost of goods sold (COGS)</p><p>An income statement item reporting</p><p>the total costs of creating a product or</p><p>service that has been sold.</p><p>Covid-19</p><p>Coronavirus disease 2019 is an</p><p>infectious disease caused by</p><p>severe acute respiratory syndrome</p><p>coronavirus 2 and was classified as</p><p>a pandemic by the World Health</p><p>Organisation on March 11, 2020.</p><p>Decarbonisation</p><p>The reduction or elimination of</p><p>carbon dioxide emissions from a</p><p>process, such as textile manufacturing,</p><p>through low-carbon power sources.</p><p>Deflation</p><p>A reduction in the general level of prices.</p><p>De minimis tax</p><p>A law set by national tax officials that</p><p>sets a minimum value of imported</p><p>goods before certain custom duties</p><p>and tax rates are applied.</p><p>Direct-to-consumer (DTC)</p><p>Selling products directly to the end</p><p>consumer instead of through third-</p><p>party retailers, wholesalers and so on.</p><p>Discretionary goods</p><p>Goods that consumers deem are not</p><p>essential, such as travel, dining out</p><p>or entertainment, as well as fashion</p><p>and beauty items, including apparel,</p><p>footwear and accessories.</p><p>Dry powder</p><p>Cash or liquid securities that private</p><p>equity and venture capital funds have</p><p>available for investment.</p><p>EBITA</p><p>An income statement item that is</p><p>arrived at by deducting amortisation</p><p>from earnings before interest and</p><p>taxes, which is an alternative measure</p><p>of income a company makes from its</p><p>core operations.</p><p>EBITA margin</p><p>A measurement of a company’s EBITA</p><p>as a percentage of its total revenue.</p><p>Eco-modulation</p><p>The notion of penalising the</p><p>use of materials perceived to be</p><p>environmentally harmful, while</p><p>rewarding the use of those deemed to</p><p>be better.</p><p>Economic profit (EP)</p><p>A measure defined as currency-</p><p>adjusted Net Operating Profit Less</p><p>Adjusted Taxes (NOPLAT) minus</p><p>capital charge (Weighted Average</p><p>Cost of Capital, or WACC, multiplied</p><p>by invested capital). Economic Profit</p><p>reflects the economic value created by</p><p>a company’s operating activities and</p><p>investments.</p><p>Environmental, social and</p><p>corporate governance (ESG)</p><p>investing</p><p>An investment strategy that screens</p><p>potential investments based on</p><p>environmental, social and corporate</p><p>governance criteria, as well as</p><p>financial performance.</p><p>EU Strategy for Sustainable and</p><p>Circular Textiles</p><p>The overarching textiles vision of</p><p>the European Union to achieve</p><p>full product circularity by 2030,</p><p>which includes over several specific</p><p>directives targeting different points of</p><p>the value chain.</p><p>Extended Producer Responsibility</p><p>(EPR)</p><p>An environmental policy approach</p><p>that holds producers responsible for</p><p>end-of-life consequences of their goods.</p><p>First-party (1P) data</p><p>Data collected from customers via a</p><p>brand or retailer’s own channels (such</p><p>as a website, app or in store), enabling</p><p>businesses to use data in a privacy-</p><p>complaint and cost-effective way.</p><p>Foundation models (FMs)</p><p>Large deep learning models trained</p><p>on vast quantities of unstructured,</p><p>unlabelled data that can be used for</p><p>a wide range of tasks out of the box</p><p>or adapted to specific tasks through</p><p>fine-tuning, powering generative AI</p><p>capabilities. Examples of these models</p><p>are GPT-4, PaLM, DALL-E 2 and</p><p>Stable Diffusion.</p><p>Freight</p><p>Goods transported from place to place</p><p>by land, sea or air.</p><p>G20</p><p>The group of 20 brings together the</p><p>world’s developed and emerging</p><p>economies that form more than 80</p><p>percent of global GDP. G20 members</p><p>include Argentina, Australia, Brazil,</p><p>Canada, China, France, Germany,</p><p>India, Indonesia, Italy, Japan, Mexico,</p><p>Russia, South Africa, Saudi Arabia,</p><p>South Korea, Turkey, the UK, the US</p><p>and the EU. (Spain is also invited as a</p><p>permanent guest.)</p><p>Gamification</p><p>The practice of incorporating gaming</p><p>elements and mechanics, such as collecting</p><p>points or badges, into retail experiences</p><p>to influence consumer behaviour.</p><p>General Data Protection</p><p>Regulation (GDPR)</p><p>The EU’s law on data protection and</p><p>privacy, implemented in 2018.</p><p>Generation-Z (Gen-Z)</p><p>The demographic cohort born circa</p><p>1996–2012, following the Millennial</p><p>generation.</p><p>Generative AI (gen AI)</p><p>A type of artificial intelligence</p><p>that describes machine learning</p><p>algorithms capable of generating</p><p>text, images or other forms of media.</p><p>Gen AI can be viewed as a sub-branch</p><p>within deep learning, which is a sub-</p><p>field in artificial intelligence.</p><p>Gorpcore</p><p>Outerwear designed with both fashion</p><p>and utility elements, originally a</p><p>colloquial term for a trail running</p><p>snack, “Good Ol’ Raisins and Peanuts.”</p><p>Greenhouse gas emissions</p><p>Greenhouse gases vented to the earth’s</p><p>atmosphere as a result of human activity;</p><p>includes carbon dioxide and equivalents</p><p>that can cause climate change.</p><p>Greenwashing</p><p>Communication that suggests</p><p>a company or its products are</p><p>environmentally friendly in a way</p><p>that is misleading, exaggerated or not</p><p>reflected in overall business practices.</p><p>Gross domestic profit (GDP)</p><p>As a measure of economic health, it</p><p>is the total monetary or market value</p><p>of all the finished goods and services</p><p>produced within a country’s borders in</p><p>a specific time period.</p><p>Gross merchandise value (GMV)</p><p>Also known as gross merchandise</p><p>volume, this metric is the total value</p><p>of sales generated or facilitated</p><p>by a company, including through</p><p>customer-to-customer or peer-to-</p><p>peer platforms. GMV is calculated</p><p>before accrued expenses (such as</p><p>costs associated with advertising and</p><p>marketing, delivery costs, discounts</p><p>and returns) are deducted.</p><p>GLOSSARY</p><p>116</p><p>The State of Fashion 2024</p><p>Hybrid working</p><p>A flexible way for employees to split</p><p>their working hours between an office</p><p>and their homes.</p><p>Influencer marketing</p><p>A type of social media marketing</p><p>based on endorsements and product</p><p>mentions from influencers.</p><p>K-pop</p><p>Short for popular music in South Korea.</p><p>McKinsey Global Fashion Index</p><p>(MGFI)</p><p>A proprietary and copyrighted</p><p>McKinsey tool that provides a global</p><p>and holistic benchmark for the entire</p><p>fashion industry. The MGFI was</p><p>first created for The State of Fashion</p><p>2017 to track industry performance</p><p>through three key variables: sales,</p><p>operating profit and economic profit.</p><p>MGFI comprises an extensive list of</p><p>public companies spanning market</p><p>segments, product categories and</p><p>geographies. The analysis of public</p><p>companies is built with data from</p><p>McKinsey Corporate Performance</p><p>Analytics Tool (McKinsey CPAT).</p><p>Mergers & acquisitions (M&A)</p><p>The combining of two or more</p><p>companies through various types</p><p>of financial transactions, including</p><p>mergers, acquisitions, consolidations,</p><p>tender offers or the purchase of assets.</p><p>Metaverse</p><p>The envisioned future iteration of the</p><p>internet that is made up of 3D virtual</p><p>spaces linked within a perceived</p><p>virtual universe. In a broader sense, it</p><p>often refers to not just virtual worlds,</p><p>but the full spectrum of virtual reality,</p><p>augmented reality and the internet.</p><p>Millennials</p><p>The demographic cohort born circa</p><p>1982 to 1995, also referred to as</p><p>Generation-Y (based on Generation-X,</p><p>the preceding generation).</p><p>Natural language processing</p><p>(NLP)</p><p>A sub-field of artificial intelligence</p><p>used to analyse and understand</p><p>human language, and perform tasks</p><p>such</p><p>as sentiment analysis, entity</p><p>recognition and language translation.</p><p>Large language models support NLP</p><p>capabilities, powering use cases like</p><p>document management, chatbots and</p><p>virtual assistants.</p><p>Nearshoring</p><p>The practice of a business moving</p><p>its activities or manufacturing to a</p><p>geographic location that is closer to</p><p>the end consumer market.</p><p>Off-price channel</p><p>A trading format based on discount</p><p>pricing. Off-price retailers or</p><p>retailers operating off-price channels</p><p>are typically independent of</p><p>manufacturers and buy large volumes</p><p>of branded goods directly from them.</p><p>The model relies on the purchase of</p><p>overproduced, or excess, branded</p><p>goods at a lower price.</p><p>Performance marketing</p><p>A form of advertising whereby</p><p>affiliates or marketing companies</p><p>are only paid for the results achieved</p><p>through, for example, influencer</p><p>marketing and search engine</p><p>marketing.</p><p>Price parity</p><p>The concept of a product or service</p><p>sold at the same price across all</p><p>channels or regions.</p><p>Price segment</p><p>The company segmentation based on</p><p>a Sales Price Index, which provides a</p><p>range of prices for a standard basket</p><p>of products within each segment</p><p>and company’s home market.</p><p>The companies in the McKinsey</p><p>Global Fashion Index and the BoF-</p><p>McKinsey State of Fashion Survey are</p><p>categorised in six segments, which</p><p>are based on a price index across a</p><p>wide basket of goods and geographies.</p><p>The segments comprise (from lowest</p><p>to highest price segment): value/</p><p>discount, mid-market, premium/</p><p>bridge, affordable luxury, and luxury.</p><p>Quiet luxury</p><p>A fashion movement embracing</p><p>understated, high-quality clothing</p><p>as everyday essentials, often without</p><p>logos.</p><p>Radio-frequency identification</p><p>(RFID)</p><p>A wireless system of tags that uses</p><p>radio waves to identify and track an</p><p>object, e.g. when tracking items along</p><p>a supply chain.</p><p>Regenerated fibre</p><p>Fibre created from pre-existing fibres</p><p>whose cellulose areas are dissolved in</p><p>chemicals and rebuilt into new fibres</p><p>by viscose method.</p><p>Regenerative materials</p><p>Materials that are bio-based, reusable,</p><p>non-toxic and non-critical. They</p><p>are organic and can be made from</p><p>by-products of agricultural processes</p><p>or can be grown and harvested</p><p>responsibly.</p><p>Repatriation</p><p>The process of sending money back</p><p>to one’s home country; in relation</p><p>to shopping, this refers to when a</p><p>consumer spends money domestically</p><p>rather than abroad.</p><p>Reshoring</p><p>The practice of returning the</p><p>production and manufacturing of</p><p>goods to the company’s original country.</p><p>Selling, general and</p><p>administrative expenses (SG&A)</p><p>An income statement item stating</p><p>all costs not directly tied to making a</p><p>product or service.</p><p>Set-jetting</p><p>A travel trend where consumers are</p><p>inspired to travel to a destination seen</p><p>in film or on television.</p><p>Strategic buyer</p><p>Company or investors that typically</p><p>acquire 100 percent of a company or</p><p>asset, whose acquisition will drive</p><p>synergies to their existing portfolio; in</p><p>contrast to a private equity buyer who</p><p>looks to grow and sell after a period</p><p>of time.</p><p>Super Winners</p><p>The top 20 fashion players by</p><p>economic profit (based on economic</p><p>profit for 2022) according to The State</p><p>of Fashion.</p><p>Sustainability</p><p>Within a business context,</p><p>sustainability refers to businesses</p><p>making decisions in terms of</p><p>environmental, social, human</p><p>and corporate governance impact</p><p>for the long term and relates to</p><p>how a company’s products and</p><p>services contribute to sustainable</p><p>development.</p><p>Third-party (3P) data</p><p>Data purchased from external sources</p><p>such as aggregators that are not the</p><p>original collectors of the data. The</p><p>third parties purchase data from other</p><p>sources across the web to aggregate,</p><p>segment and resell it.</p><p>Traceability</p><p>The ability to identify and monitor</p><p>the history, distribution, location</p><p>and application of materials, parts</p><p>and finished goods to understand the</p><p>sustainability practices relating to a</p><p>product.</p><p>Travel flow</p><p>The total number of kilometres</p><p>travelled by paying airline passengers,</p><p>used as a proxy for travel demand.</p><p>Turnaround time</p><p>A term used in fashion to describe the</p><p>lead time between a product’s design</p><p>and development to delivery.</p><p>UN Sustainability Development</p><p>Goals (SDG)</p><p>A collection of 17 objectives aimed at</p><p>ending global poverty, protecting the</p><p>planet and universally improving the</p><p>quality of life for all, implemented</p><p>in 2016.</p><p>Unstructured data</p><p>Data that lacks a consistent format</p><p>or structure (e.g. text, images and</p><p>audio files) and typically require</p><p>more advanced techniques to extract</p><p>insights. Gen AI can input and</p><p>output unstructured data, which was</p><p>previously difficult.</p><p>Ultra-high-net-worth individual</p><p>A term used to describe an individual</p><p>with investable assets in excess of $30</p><p>million.</p><p>Use case</p><p>A targeted application to a specific</p><p>business challenge that produces one</p><p>or more measurable outcomes. For</p><p>example, in marketing, generative</p><p>AI could be used to generate creative</p><p>content such as personalised emails.</p><p>Value creator</p><p>A company that creates value</p><p>generates positive economic profit —</p><p>that is, its operating profit exceeds its</p><p>dollar cost of capital (profit above 0).</p><p>Value destroyer</p><p>A company that destroys value</p><p>generates negative economic profit —</p><p>that is, its dollar cost of capital exceeds</p><p>its operating profit (profit below 0).</p><p>Vertical integration</p><p>A corporate strategy that occurs when</p><p>one company acquires a producer,</p><p>vendor, supplier, distributor or other</p><p>related company along the same value</p><p>chain.</p><p>Virtual sampling</p><p>A digitised, three-dimensional product</p><p>development process, enabling</p><p>designers to create virtual samples</p><p>simulating movement, stretch and use.</p><p>117</p><p>1 BoF-McKinsey State of Fashion</p><p>2024 Survey</p><p>2 BoF-McKinsey State of Fashion</p><p>2024 Survey; BoF-McKinsey State of</p><p>Fashion 2023 Survey</p><p>3 BoF-McKinsey State of Fashion</p><p>2024 Survey; BoF-McKinsey State of</p><p>Fashion 2023 Survey</p><p>4 McKinsey Fashion Growth Forecasts</p><p>2024</p><p>5 McKinsey Fashion Growth Forecasts</p><p>2024</p><p>6 “Confronting inflation and low</p><p>growth”, OECD Economic Outlook,</p><p>September 2023, https://www.</p><p>oecd.org/economic-outlook/</p><p>september-2023/</p><p>7 McKinsey Fashion Growth Forecasts</p><p>2024</p><p>8 “Confronting inflation and low</p><p>growth”, OECD Economic Outlook,</p><p>September 2023, https://www.</p><p>oecd.org/economic-outlook/</p><p>september-2023/</p><p>9 BoF-McKinsey State of Fashion</p><p>2024 Survey</p><p>10 McKinsey Fashion Growth</p><p>Forecasts 2024</p><p>11 McKinsey Fashion Growth</p><p>Forecasts 2024</p><p>12 “Global Luxury Retail: Identifying</p><p>and Realising Opportunities”, Savills,</p><p>April 18, 2023, https://pdf.euro.savills.</p><p>co.uk/global-research/global-luxury-</p><p>retail-2023-outlook-.pdf</p><p>13 McKinsey Fashion Growth</p><p>Forecasts 2024</p><p>14 McKinsey Fashion Growth</p><p>Forecasts 2024</p><p>15 McKinsey Fashion Growth</p><p>Forecasts 2024</p><p>16 BoF-McKinsey State of Fashion</p><p>2024 Survey</p><p>17 BoF-McKinsey State of Fashion</p><p>2024 Survey</p><p>18 BoF-McKinsey State of Fashion</p><p>2024 Survey</p><p>19 BoF-McKinsey State of Fashion</p><p>2024 Survey</p><p>20 BoF-McKinsey State of Fashion</p><p>2024 Survey; BoF-McKinsey State of</p><p>Fashion 2023 Survey</p><p>21 BoF-McKinsey State of Fashion</p><p>2024 Survey</p><p>22 BoF-McKinsey State of Fashion</p><p>2024 Survey</p><p>23 McKinsey Fashion Growth</p><p>Forecasts 2024</p><p>24 Pierre-Olivier Gourinchas,</p><p>“Resilient Global Economy Still</p><p>Liming Along, With Growing</p><p>Divergences”, IMF blog, October</p><p>10, 2023, https://www.imf.org/</p><p>en/Blogs/Articles/2023/10/10/</p><p>resilient-global-economy-still-</p><p>limping-along-with-growing-</p><p>divergences#:~:text=According%20</p><p>to%20our%20latest%20</p><p>projections,well%20below%20</p><p>the%20historical%20average.</p><p>25 “World Economic Outlook Update:</p><p>Near-Term Resilience, Persistent</p><p>Challenges”, International Monetary</p><p>Fund, July 2023, https://www.</p><p>imf.org/en/Publications/WEO/</p><p>Issues/2023/07/10/world-economic-</p><p>outlook-update-july-2023</p><p>26 Lisa Shalett, “Why Higher Interest</p><p>Rates May Not Go Away”, Morgan</p><p>Stanley, Oct. 11, 2023, https://</p><p>www.morganstanley.com/ideas/</p><p>treasury-yields-2023-will-they-</p><p>keep-rising?subscribed=true&dis=</p><p>em_20231011_wm_5ideasarticle&et_</p><p>mid=515189&et_mkid=&sfmc_</p><p>id=197145770</p><p>27 Mark John, “Global central</p><p>banks unite in ‘higher for longer’</p><p>credo”, Reuters, September</p><p>22, 2023, https://www.reuters.</p><p>com/markets/rates-bonds/</p><p>global-central-banks-unite-higher-</p><p>longer-credo-2023-09-21/</p><p>28 Jeffrey Condon, Krzysztof</p><p>Kwiatkowski, Sven Smit, “Global</p><p>Economics Intelligence executive</p><p>summary, August 2023”, McKinsey,</p><p>September 20, 2023, https://www.</p><p>mckinsey.com/capabilities/strategy-</p><p>and-corporate-finance/our-insights/</p><p>global-economics-intelligence-</p><p>executive-summary-august-2023</p><p>29 “Economic forecast for Germany”,</p><p>European Commission, September</p><p>11, 2023, https://economy-finance.</p><p>ec.europa.eu/economic-surveillance-</p><p>eu-economies/germany/</p><p>economic-forecast-germany_en</p><p>30 “GDP monthly estimate, UK:</p><p>August 2023”, Office for National</p><p>Statistics, October 12, 2023,</p><p>https://www.ons.gov.uk/economy/</p><p>grossdomesticproductgdp/bulletins/</p><p>gdpmonthlyestimateuk/august2023</p><p>31 “Bank rate maintained at</p><p>5.25% - September 2023”,</p><p>Bank of England, https://www.</p><p>bankofengland.co.uk/monetary-</p><p>policy-summary-and-minutes/2023/</p><p>september-2023</p><p>32 “World Economic Outlook:</p><p>Navigating Global Divergences”,</p><p>International Monetary Fund,</p><p>October 2023, https://www.imf.</p><p>org/en/Publications/WEO/</p><p>Issues/2023/10/10/world-economic-</p><p>outlook-october-2023</p><p>33 “October 2023: Flash</p><p>Consumer Confidence Indicator</p><p>for EU and euro area”, European</p><p>Commission, October, 2023, https://</p><p>economy-finance.ec.europa.eu/</p><p>economic-forecast-and-surveys/</p><p>business-and-consumer-surveys/</p><p>latest-business-and-consumer-</p><p>surveys_en</p><p>34 “World Economic Outlook Update:</p><p>Near-Term Resilience, Persistent</p><p>Challenges”, International Monetary</p><p>Fund, July 2023, https://www.</p><p>imf.org/en/Publications/WEO/</p><p>Issues/2023/07/10/world-economic-</p><p>outlook-update-july-2023</p><p>35 “World Economic Outlook:</p><p>Navigating Global Divergences”,</p><p>International Monetary Fund,</p><p>October 2023, https://www.imf.</p><p>org/en/Publications/WEO/</p><p>Issues/2023/10/10/world-economic-</p><p>outlook-october-2023</p><p>36 “World Economic Outlook:</p><p>Navigating Global Divergences”,</p><p>International Monetary Fund,</p><p>October 2023, https://www.imf.</p><p>org/en/Publications/WEO/</p><p>Issues/2023/10/10/world-economic-</p><p>outlook-october-2023</p><p>37 “Resumption of Federal</p><p>Student Loan Payments”, National</p><p>Credit Union Administration,</p><p>October 2023, https://ncua.gov/</p><p>regulation-supervision/letters-</p><p>credit-unions-other-guidance/</p><p>resumption-federal-student-loan-</p><p>payments</p><p>38 Ayelet Sheffey, “Student-loan</p><p>payments are resuming in 3 months –</p><p>and borrowers might not be ready for</p><p>the ‘sizeable shock’ to their wallets”,</p><p>Business Insider, June 26, 2023,</p><p>https://www.businessinsider.com/</p><p>what-will-happen-when-student-</p><p>loan-payments-resume-sizeable-</p><p>shock-2023-6?r=US&IR=T</p><p>39 Federal Reserve Bank of New</p><p>York, “Total Household Debt</p><p>Reaches $17.06 Trillion in Q2</p><p>2023; Credit Card Debt Exceeds $1</p><p>Trillion”, August 2023, https://www.</p><p>newyorkfed.org/newsevents/news/</p><p>research/2023/20230808#:~:text</p><p>=Credit%20card%20balances%20</p><p>increased%20by,marking%20a%20</p><p>4.6%25%20quarterly%20increase.</p><p>40 McKinsey & Company Strategy</p><p>& Corporate Finance Practice, Risk</p><p>Practice, and the McKinsey Global</p><p>Institute, “2023, a Testing Year: Will</p><p>the Global macro-scenario range</p><p>widen or narrow?”, McKinsey &</p><p>Company, July 2023</p><p>41 Nicholas R. Lardy, “How serious</p><p>is China’s economic slowdown?”,</p><p>Peterson Institute for International</p><p>Economics, August 17, 2023,</p><p>https://www.piie.com/blogs/</p><p>realtime-economics/how-serious-</p><p>chinas-economic-slowdown</p><p>42 Alexandra Stevenson, “New</p><p>Trouble Roils China Evergrande,</p><p>Fueling Real Estate Crisis Fears”,</p><p>The New York Times, September</p><p>28, 2023, https://www.nytimes.</p><p>com/2023/09/28/business/china-</p><p>evergrande-trading-halted.html</p><p>43 “World Economic Outlook Update:</p><p>Near-Term Resilience, Persistent</p><p>Challenges”, International Monetary</p><p>Fund, July 2023, https://www.</p><p>imf.org/en/Publications/WEO/</p><p>Issues/2023/07/10/world-economic-</p><p>outlook-update-july-2023</p><p>44 Sustaining Growth through the</p><p>Recovery and Beyond”, World Bank,</p><p>June 2023</p><p>45 China Gross Savings Rate, CEIC,</p><p>https://www.ceicdata.com/en/</p><p>indicator/china/gross-savings-</p><p>rate#:~:text=China%20Gross%20</p><p>Savings%20Rate%20was,of%20</p><p>16.5%25%20in%20Dec%201962.</p><p>46 The Economist, “America’s</p><p>pandemic savings are running</p><p>out”, August 21, 2023, https://</p><p>www.economist.com/</p><p>graphic-detail/2023/08/21/americas-</p><p>pandemic-savings-are-running-out</p><p>47 Francois de Soyres, Dylan</p><p>Moore, Julio Ortiz, “Accumulated</p><p>Savings During the Pandemic: An</p><p>International Comparison with</p><p>Historical Perspective”, The Federal</p><p>Reserve, June 23, 2023, https://</p><p>www.federalreserve.gov/econres/</p><p>notes/feds-notes/accumulated-</p><p>savings-during-the-pandemic-an-</p><p>international-comparison-with-</p><p>historical-perspective-20230623.html</p><p>48 McKinsey ConsumerWise Global</p><p>Sentiment Data, August 2023, China</p><p>n=1,000, US n=4,000, EU n=5,000</p><p>(France, Germany, Italy, Spain, UK)</p><p>49 Nicholas R. Lardy, “How serious</p><p>is China’s economic slowdown?”,</p><p>Peterson Institute for International</p><p>Economics, August 17, 2023,</p><p>https://www.piie.com/blogs/</p><p>realtime-economics/how-serious-</p><p>chinas-economic-slowdown</p><p>50 IMF, “World Economist Outlook,</p><p>October 2023, https://www.imf.</p><p>org/en/Publications/WEO/</p><p>Issues/2023/10/10/world-economic-</p><p>outlook-october-2023</p><p>51 McKinsey ConsumerWise Global</p><p>Sentiment Data, August 2023, China</p><p>n=1000, US n=4000, EU n=5000</p><p>(across France, Germany, Italy, Spain,</p><p>UK)</p><p>52 “China: Consumer confidence</p><p>crisis will have far-reaching</p><p>effects”, Financial Times, October</p><p>13, 2023, https://www.ft.com/</p><p>content/bae8f56b-d2f2-489f-b0cb-</p><p>8ccc384c40d2?</p><p>53 Jeffrey Condon, Krzysztof</p><p>END NOTES</p><p>118</p><p>The State of Fashion 2024</p><p>Kwiatkowski, Sven Smit, “Global</p><p>Economics Intelligence executive</p><p>summary”, McKinsey, July 21,</p><p>2023, https://www.mckinsey.</p><p>com/capabilities/strategy-and-</p><p>corporate-finance/our-insights/</p><p>global-economics-intelligence-</p><p>executive-summary-june-</p><p>2023Ryosuke</p><p>54 Reserve Bank of India, “Consumer</p><p>Confidence Survey”, October 6,</p><p>2023, https://m.rbi.org.in/scripts/</p><p>PublicationsView.aspx?id=22051</p><p>55 “The World Bank In India”, The</p><p>World Bank, https://www.worldbank.</p><p>org/en/country/india/overview</p><p>56 McKinsey analysis leveraging CPA</p><p>Analytics comparison of Fashion</p><p>Industry Assets vs. Market Indices,</p><p>October 2023</p><p>57 Expert interviews and McKinsey</p><p>analysis using Pitchbook, October 2023</p><p>58 Pitchbook, October 2023</p><p>59 McKinsey analysis and expert</p><p>interviews</p><p>60 Expert interviews and McKinsey</p><p>Analysis based on Mergermarket &</p><p>Pitchbook</p><p>61 McKinsey analysis and expert</p><p>interviews</p><p>62 McKinsey analysis and expert</p><p>interviews</p><p>63 Pitchbook</p><p>64 McKinsey proprietary analysis</p><p>based on largest PE fund public</p><p>reports, Mergermarket, Gainpro and</p><p>other publicly available data</p><p>65 Mergermarket</p><p>66 McKinsey proprietary analysis</p><p>based on largest PE fund public</p><p>reports, Mergermarket, Gainpro and</p><p>other publicly available data</p><p>67 S&P Capital IQ, press search,</p><p>NASDAQ</p><p>68 McKinsey Analysis leveraging</p><p>CPA Analytics data on fashion assets,</p><p>October 2023</p><p>69 McKinsey Analysis leveraging</p><p>CPA Analytics data on fashion assets,</p><p>October 2023</p><p>70 MGFI Analysis 2023 and expert</p><p>interviews</p><p>71 Ermenegildo Zegna Group, FY</p><p>2022 Financial Results, April 6, 2023,</p><p>https://s29.q4cdn.com/118983938/</p><p>files/doc_financials/2022/q4/</p><p>Zegna-FY2022-Earnings-Investor-</p><p>Deck-FINAL-FINAL.pdf</p><p>72 MGFI Analysis 2023</p><p>73 Gabrielle Fonrouge, “Shein opens</p><p>up about forced labor, data privacy</p><p>as it looks to clear key hurdles before</p><p>possible U.S. IPO”, CNBC, 19 October</p><p>2023</p><p>74 Nicole Goodkind, “Kim Kardashian</p><p>may be the hero the IPO market</p><p>needs”, CNN Business, 20 July 2023</p><p>75 Carol Ryan, “Heard on the</p><p>Street: Birkenstock’s IPO Is Due</p><p>Next Week. Don’t Mention Crocs.”,</p><p>The Wall Street Journal, October</p><p>8, 2023, https://www.wsj.com/</p><p>livecoverage/stock-market-today-</p><p>dow-jones-10-06-2023/card/</p><p>heard-on-the-street-birkenstock-s-</p><p>ipo-is-due-next-week-don-t-mention-</p><p>crocs--A7lB4KaWDW25EtJVXCYz</p><p>76 Melissa Eddy and Santul Nerkar,</p><p>“Birkenstock, the German Sandal</p><p>Maker, Raises $1.48 Billion in Its I.P.O.”,</p><p>New York Times, 11 October 2023</p><p>77 Expert</p><p>Interviews</p><p>78 Pitchbook</p><p>79 Dealogic, Eurostat, DG ECFIN,</p><p>Global - April 2023</p><p>80 Sarah Kent, “Is Fashion</p><p>Sleepwalking Into the Climate</p><p>Crisis?”, The Business of Fashion,</p><p>August 7, 2023, https://www.</p><p>businessoffashion.com/articles/</p><p>sustainability/fashion-climate-</p><p>change-crisis-hot-record-investor/</p><p>81 “Climate and weather related</p><p>disasters surge five-fold over 50</p><p>years, but early warnings save lives –</p><p>WMO report”, United Nations News,</p><p>September 1, 2021, https://news.</p><p>un.org/en/story/2021/09/1098662</p><p>82 Matt McGrath, Mark Poynting,</p><p>“Climate change: July set to be world’s</p><p>warmest month on record”, BBC, July</p><p>27, 2023, https://www.bbc.co.uk/</p><p>news/science-environment-66322608</p><p>83 Zeke Hausfather, “State of the</p><p>climate: 2023 now likely hottest</p><p>year on record after extreme</p><p>summer”, Carbon Brief, July 26,</p><p>2023, https://www.carbonbrief.org/</p><p>state-of-the-climate-2023-now-</p><p>likely-hottest-year-on-record-after-</p><p>extreme-summer/</p><p>84 Isabella Kwai, “Extreme Weather</p><p>Hits Europe, and It’s Not Over</p><p>Yet”, The New York Times, July 28,</p><p>2023, https://www.nytimes.com/</p><p>article/europe-heat-wave-forecast.</p><p>html?searchResultPosition=2</p><p>85 Matina Stevis-Gridneff, Niki</p><p>Kitsantonis, “Greece Battles Its Most</p><p>Widespread Wildfires on Record”,</p><p>The New York Times, August</p><p>23, 2023, https://www.nytimes.</p><p>com/2023/08/23/world/europe/</p><p>greece-wildfires-athens.html</p><p>86 Niki Kitsantonis, Isabella Kwai,</p><p>“Extreme Rains Cause Flooding</p><p>in Bulgaria, Greece and Turkey,</p><p>Killing 14”, The New York Times,</p><p>Sept, 6, 2023, https://www.nytimes.</p><p>com/2023/09/06/world/europe/</p><p>greece-turkey-floods-bulgaria.html</p><p>87 Chris Buckley, “Storms Deluge</p><p>Hong Kong and Other Southern</p><p>Chinese Cities”, The New York Times,</p><p>September 8, 2023, https://www.</p><p>nytimes.com/2023/09/08/world/asia/</p><p>china-hong-kong-floods.html</p><p>88 Kristoffer Tigue, “The Climate</p><p>Crisis Is Here Now, Experts Warn, as</p><p>Death Tolls From Summer Disasters</p><p>Mount”, Inside Climate News, August</p><p>18, 2023, https://insideclimatenews.</p><p>org/news/18082023/climate-crisis-</p><p>here-now-experts-warn-as-death-</p><p>tolls-from-summer-disasters-mount/</p><p>89 Christopher Flavelle, “Record</p><p>Number of Billion-Dollar Disasters</p><p>Shows the Limits of America’s</p><p>Defenses”, The New York Times,</p><p>September 12, 2023, https://www.</p><p>nytimes.com/2023/09/12/climate/</p><p>billion-dollar-disasters.html</p><p>90 David Lawder, “IMF sees</p><p>drought causing Argentina</p><p>contraction of 2.5% in 2023”,</p><p>Reuters, July 25, 2023, https://</p><p>www.reuters.com/world/americas/</p><p>imf-sees-drought-causing-argentina-</p><p>contraction-25-2023-2023-07-25/</p><p>91 Kate Whiting, “’The era of global</p><p>boiling has arrived’ – plus other</p><p>nature and climate stories to read this</p><p>week”, World Economic Forum, July</p><p>31, 2023, https://www.weforum.org/</p><p>agenda/2023/07/europe-wildfires-</p><p>nature-climate-crisis/</p><p>92 Jessica Whitt, Scott Gordon, “This</p><p>is the economic cost of extreme</p><p>weather”, World Economic Forum,</p><p>January 17, 2023, https://www.</p><p>weforum.org/agenda/2023/01/</p><p>extreme-weather-economic-cost-</p><p>wef23/</p><p>93 David Winter, Manuela Kiehl,</p><p>“The global economic costs of climate</p><p>change inaction”, Oxford Economics,</p><p>December 20, 2022, https://www.</p><p>oxfordeconomics.com/resource/</p><p>the-global-economic-costs-of-</p><p>climate-inaction</p><p>94 McKinsey ConsumerWise Global</p><p>Consumer Sentiment Data, August 2023</p><p>95 Sarah Kent, “Why Fashion Didn’t</p><p>Show Up for Climate Week?”, The</p><p>Business of Fashion, September 22,</p><p>2023, https://www.businessoffashion.</p><p>com/articles/sustainability/</p><p>new-york-climate-week-fashion/</p><p>96 Jason Judd, Angus Bauer, Sarosh</p><p>Kuruvilla, Stephanie Williams,</p><p>“Higher Ground? Fashion’s</p><p>Climate Breakdown and its Effect</p><p>for Workers”, ILR Global Labor</p><p>Institute; Schroders, September</p><p>13, 2023, https://www.ilr.cornell.</p><p>edu/sites/default/files-d8/2023-</p><p>09/Higher%20Ground%20</p><p>Executive%20Summary%20REV%20</p><p>%28v1%29%20%281%29.pdf</p><p>97 Prashant Natikar et al., “Effect</p><p>of global warming on silk farming:</p><p>A review”, The Pharma Innovation</p><p>Journal, January 1, 2023, https://</p><p>www.thepharmajournal.com/</p><p>archives/2023/vol12issue3/</p><p>PartAN/12-3-445-572.pdf</p><p>98 Cathleen Chen, “Climate</p><p>Change Is Making Fashion’s Supply</p><p>Chain Problems Worse”, Business</p><p>of Fashion, 16 September 2022,</p><p>https://www.businessoffashion.</p><p>com/briefings/global-markets/</p><p>climate-change-is-making-fashions-</p><p>supply-chain-problems-worse/</p><p>99 Kate Whiting, “’The era of global</p><p>boiling has arrived’ – plus other</p><p>nature and climate stories to read this</p><p>week”, World Economic Forum, July</p><p>31, 2023, https://www.weforum.org/</p><p>agenda/2023/07/europe-wildfires-</p><p>nature-climate-crisis/</p><p>100 Bella Webb, “Climate change is</p><p>coming for fashion’s supply chains”,</p><p>Vogue Business, November 10, 2022,</p><p>https://www.voguebusiness.com/</p><p>sustainability/climate-change-is-</p><p>coming-for-fashions-supply-chains</p><p>101 Shawn Baldwin, “How drought</p><p>cost America’s cotton industry</p><p>billions”, CNBC, November 23, 2022,</p><p>https://www.cnbc.com/2022/11/23/</p><p>how-drought-cost-americas-cotton-</p><p>industry-billions.html</p><p>102 Jason Judd, J. Lowell Jackson,</p><p>“Repeat, Regain or Renegotiate? The</p><p>Post-COVID Future of the Apparel</p><p>Industry”, ILR Institute Cornell</p><p>University, July 2021, https://cornell.</p><p>app.box.com/s/5x56ntii3rmmmbe9o</p><p>lam3f5pk5ic1czi</p><p>103 Sarah Kent, “How Much Will</p><p>Climate Change Cost Fashion?”,</p><p>Business of Fashion, September 13,</p><p>2023, https://www.businessoffashion.</p><p>com/articles/sustainability/extreme-</p><p>weather-climate-change-cost-fashion-</p><p>supply-chain-cornell-schroders/</p><p>104 Kevin Leung, “A greener future</p><p>for ocean freight”, Economist</p><p>Impact, September 14, 2021, https://</p><p>impact.economist.com/ocean/</p><p>ocean-and-climate/a-greener-future-</p><p>for-ocean-freight</p><p>105 Jasper Verschuur, Elco E. Koks,</p><p>Jim W. Hall, “Systemic risks from</p><p>climate-related disruptions at ports”,</p><p>Nature Climate Change, July 20, 2023,</p><p>https://www.nature.com/articles/</p><p>s41558-023-01754-w</p><p>106 Somini Sengupta, “Climate Risks</p><p>Loom Over Panama Canal, a Vital</p><p>Global Trade Link”, The New York</p><p>Times, August 25, 2023, https://www.</p><p>nytimes.com/2023/08/25/climate/</p><p>panama-canal-drought-global-trade.</p><p>html</p><p>107 McKinsey Travel, Logistics &</p><p>Infrastructure Practice, Global Air</p><p>Traffic Demand scenarios, June 2023</p><p>108 The Flex Report, Q3 2023, https://</p><p>www.flex.scoopforwork.com/stats</p><p>109 Steve Deane, “77+ Bleisure</p><p>Travel Statistics”, Stratosjects, 2022,</p><p>https://www.stratosjets.com/blog/</p><p>bleisure-travel-statistics/</p><p>110 Roger Sands, “Bleisure Travel</p><p>Rapidly Increasing At Hotels And</p><p>119</p><p>Resorts”, Forbes, June 9, 2022,</p><p>https://www.forbes.com/sites/</p><p>rogersands/2022/06/09/bleisure-</p><p>travel-rapidly-increasing-at-hotels-</p><p>and-resorts/?sh=5da4a4ec902b</p><p>111 “How Global Luxury Travel Trends</p><p>Will Impact Fashion”, Business of</p><p>Fashion, July 4, 2023, https://www.</p><p>businessoffashion.com/articles/</p><p>luxury/how-global-luxury-travel-</p><p>trends-will-impact-fashion/</p><p>112 The BoF-McKinsey State of</p><p>Fashion 2024 Consumer Survey</p><p>113 Dan Rang, “Paris returns to</p><p>pre-Covid tourist numbers”,</p><p>Tourism Review, Jun. 6, 2023,</p><p>https://www.tourism-review.com/</p><p>paris-reports-excellent-tourist-</p><p>numbers-news13302</p><p>114 Noah Vickers, Jonathan Prynn,</p><p>“London tourism roaring back amid</p><p>visitor surge”, Evening Standard,</p><p>Aug. 1, 2023, https://www.standard.</p><p>co.uk/news/london/london-tourism-</p><p>visitors-economy-international-</p><p>arrivals-summer-b1097836.html</p><p>115 The BoF-McKinsey State of</p><p>Fashion 2024 Consumer Survey</p><p>116 “The New Normal: Unexpected</p><p>Travel Trends in 2023”, Expedia,</p><p>https://www.expedia.com/</p><p>see/2023traveltrends-expedia?mc</p><p>icid=cp.2023traveltrends-expedia.</p><p>trends-exp</p><p>117 “Expedia Summer Travel Forecast</p><p>2023”, Expedia, April 11, 2023,</p><p>https://www.prnewswire.com/</p><p>news-releases/expedia-summer-</p><p>travel-forecast-flight-searches-up-25-</p><p>interest-surging-for-international-</p><p>destinations-301794475.html</p><p>118 Anny Polyzogopoulou, “Film-</p><p>Induced Tourism: The Case of</p><p>Game of Thrones and Dubrovnik”,</p><p>By Arcadia, 22 January, 2019,</p><p>https://www.byarcadia.org/post/</p><p>film-induced-tourism-the-case-of-</p><p>game-of-thrones-and-dubrovnik</p><p>119 Andrew Smart, “Japanese</p><p>clothing brand Uniqlo to open</p><p>first Scottish Store”, The National,</p><p>2 August, 2023, https://www.</p><p>thenational.scot/news/23696139.</p><p>japanese-clothing-brand-uniqlo-</p><p>open-first-edinburgh-store/</p><p>120 “Chanel Opens Its First Pop-Up</p><p>Boutique in Scotland”, Homes &</p><p>Interiors, 16 June, 2023, https://</p><p>homesandinteriorsscotland.</p><p>com/2023/06/</p><p>chanel-pop-up-boutique-scotland/</p><p>121 “The brand new Louis Vuitton</p><p>Café by Timeo in Taormina”, L’Officiel</p><p>Ibiza, 3 August, 2023, https://www.</p><p>lofficielibiza.com/travel/louis-</p><p>vuitton-cafe-by-timeo-taormina-bar</p><p>122 Orin Carlin, “You can</p><p>literally swim in a Louis Vuitton</p><p>pool this summer”, Hello, 8</p><p>August, 2023, https://www.</p><p>hellomagazine.com/hfm/499657/</p><p>louis-vuitton-pool-zuma-mykonos/</p><p>123 Razorfish and Vice Media Group,</p><p>“Razorfish Study Finds 47 Percent</p><p>of Travelers Believe Spending a Lot</p><p>of Money on a Trip Could Dilute</p><p>a More Immersive, Authentic</p><p>Experience”, Business Wire, June</p><p>29, 2022, https://www.businesswire.</p><p>com/news/home/20220629005320/</p><p>en/Razorfish-Study-Finds-47-of-</p><p>Travelers-Believe-Spending-a-Lot-</p><p>of-Money-on-a-Trip-Could-Dilute-</p><p>a-More-Immersive-Authentic-</p><p>Experience</p><p>124 Harrods, https://www.harrods.</p><p>com/en-gb/restaurants/prada-caffe</p><p>125 Andrea Jiménez, “World’s</p><p>first Fendi beach club opens in</p><p>Marbella”, Sur, July 4, 2023,</p><p>https://www.surinenglish.com/</p><p>malaga/marbella-san-pedro/</p><p>worlds-first-fendi-beach-club-opens-</p><p>marbella-20230703095619-nt.html</p><p>126 “Loro Piana brings Italian</p><p>elegance to La Réserve à la Plage</p><p>de Saint-Tropez”, Chic Riviera, 31</p><p>May, 2023, https://chicriviera.com/</p><p>en/2023/05/31/loro-piana-apporte-</p><p>lelegance-italienne-a-la-reserve-a-la-</p><p>plage-de-saint-tropez/</p><p>127 Mimosa Spencer, “Dior Expands</p><p>Dioriviera Beach Collection With</p><p>Pop-Ups in China, US”, WWD, Apr.</p><p>5, 2021, https://wwd.com/feature/</p><p>exclusive-dior-expands-dioriviera-</p><p>beach-collection-with-pop-ups-in-</p><p>china-u-s-1234792649/</p><p>128 L’Officiel Singapore, “Dioriviera</p><p>heads to Malaysia their first pop-up</p><p>store”, June 10, 2023, https://www.</p><p>lofficielsingapore.com/fashion/</p><p>dioriviera-heads-to-malaysia-first-</p><p>pop-up-store-desaru</p><p>129 Gordon Ng, “Heed the Call of</p><p>a Dioriviera Summer”, Female,</p><p>3 July, 2023, https://www.</p><p>femalemag.com.sg/gallery/fashion/</p><p>dioriviera-christian-dior-summer-</p><p>capsule-collection-2023/</p><p>130 “Dioriviera heads to Malaysia</p><p>their first pop-up store”, L’Officiel</p><p>Singapore, 10 June, 2023, https://</p><p>www.lofficielsingapore.com/fashion/</p><p>dioriviera-heads-to-malaysia-first-</p><p>pop-up-store-desaru</p><p>131 Kevin Rozario, “Coach Airways</p><p>May Be a Short-Lived, But Valuable,</p><p>Flight of Fancy”, Forbes, July 30,</p><p>2023, https://www.forbes.com/</p><p>sites/kevinrozario/2023/07/30/</p><p>coach-airways-may-be-a-short-lived-</p><p>but-valuable-flight-of-fancy</p><p>132 Brad Packer, “Four Seasons Hotel</p><p>Houston Partners With Vivrelle</p><p>to Offer Guests Complimentary</p><p>On-Demand Luxury Accessories”,</p><p>Four Seasons, Mar. 6, 2023,</p><p>https://press.fourseasons.com/</p><p>houston/hotel-news/2023/</p><p>vivrelle-partnership/</p><p>133 David Moin, “Saks extends its</p><p>brand of personal service to luxury</p><p>resorts”, WWD, June 1, 2023,</p><p>https://wwd.com/business-news/</p><p>retail/saks-brings-its-fifth-avenue-</p><p>club-personal-service-to-luxury-</p><p>resorts-1235664105/</p><p>134 Madeleine Rotheby, “This</p><p>summer, fashion is all about the</p><p>return of the resort”, i-D, Aug. 15.</p><p>2023, https://i-d.vice.com/en/article/</p><p>qjvzkb/this-summer-fashions-all-</p><p>about-the-return-of-resort</p><p>135 Alexis Bennett Parker, “Out of</p><p>Office: These Brands Are Made for</p><p>Vacation”, Vogue, April 27, 2023,</p><p>https://www.vogue.com/article/</p><p>vacation-dress-brands</p><p>136 Marc Bain, “What Zimmermann</p><p>Did Right”, The Business of</p><p>Fashion, Aug. 11, 2023, https://</p><p>www.businessoffashion.</p><p>com/briefings/luxury/</p><p>what-advent-and-zimmermann-got-</p><p>right-with-1-billion-deal/</p><p>137 Cathaleen Chen, “How to</p><p>Take a Brand From Local to</p><p>Global”, The Business of Fashion,</p><p>June 10, 2022, https://www.</p><p>businessoffashion.com/articles/</p><p>retail/farm-rio-global-expansion-</p><p>contemporary-womenswear/</p><p>138 Tamison O’Connor, “Luxury</p><p>seizes vacation dressing boom”, The</p><p>Business of Fashion, May 2, 2022,</p><p>https://www.businessoffashion.com/</p><p>articles/luxury/luxury-seizes-the-</p><p>vacation-dressing-boom/</p><p>139 Robert Williams, “Loewe’s Brand</p><p>Within a Brand: Is This the New Way</p><p>to Do Diffusion?”, The Business of</p><p>Fashion, July 16, 2020, https://www.</p><p>businessoffashion.com/articles/</p><p>luxury/loewe-jonathan-anderson-</p><p>paulas-ibiza-lvmh-acquired/</p><p>140 Andrea Bossi, “Loewe crowned</p><p>the world’s hottest fashion brand”,</p><p>Fashionista, July 19, 2023, https://</p><p>fashionista.com/2023/07/</p><p>lyst-index-top-popular-brands-</p><p>products-2023-q2-loewe</p><p>141 Alison Cohn, “Mango’s first</p><p>designer collaboration is a summer</p><p>vibe,” Harper’s Bazaar, May 22,</p><p>2023 https://www.harpersbazaar.</p><p>com/fashion/designers/a43958907/</p><p>simon-miller-mango-collaboration/</p><p>142 Orin Carlin, “You can</p><p>literally swim in a Louis Vuitton</p><p>pool this summer”, Hello,</p><p>Aug. 8, 2023, https://www.</p><p>hellomagazine.com/hfm/499657/</p><p>louis-vuitton-pool-zuma-mykonos/</p><p>143 Madeleine Rotheby, “This</p><p>summer, fashion is all about the</p><p>return of the resort”, i-D, 15 August,</p><p>2023, https://i-d.vice.com/en/article/</p><p>qjvzkb/this-summer-fashions-all-</p><p>about-the-return-of-resort</p><p>144 Peden Bhutia, “The emergence of</p><p>a new Chinese traveler”, Skift, March</p><p>2023, https://skift.com/2023/03/15/</p><p>the-emergence-of-a-new-chinese-</p><p>traveler/</p><p>145 Evelyn Cheng, “China’s</p><p>domestic tourism is finally</p><p>back to pre-pandemic levels”,</p><p>CNBC, Oct 9, 2023, https://</p><p>www.cnbc.com/2023/10/09/</p><p>chinas-domestic-tourism-is-finally-</p><p>back-to-pre-pandemic-levels.html</p><p>146 McKinsey Consumer Sentiment</p><p>Q3 2023</p><p>147 Alison Ackroyd, “Top tourism</p><p>trends spotted during China’s</p><p>Golden Week”, Alizala, Oct 10,</p><p>2023, https://www.alizila.com/</p><p>top-tourism-trends-during-china-</p><p>golden-week-travel-festival-fliggy/</p><p>148 “Big-Spending Chinese Shoppers</p><p>Are Splurging on Luxury at Home, Not</p><p>Abroad Anymore”, Bloomberg News,</p><p>May 2, 2023, https://www.bloomberg.</p><p>com/news/articles/2023-05-02/</p><p>rich-chinese-shoppers-buy-luxury-at-</p><p>home-not-abroad-after-covid</p><p>149 Jennifer Weil, “DFS is to</p><p>open seven star luxury retail and</p><p>entertainment destination in Hainan”,</p><p>WWD, October 2023, https://</p><p>wwd.com/business-news/retail/</p><p>dfs-lvmh-open-seven-star-luxury-</p><p>retail-entertainment-destination-</p><p>hainan-1235853046/</p><p>150 Casey Hall, “As travel resumes,</p><p>China’s luxury shoppers ask Paris or</p><p>Hainan?”, Reuters, January 2023,</p><p>https://www.reuters.com/business/</p><p>retail-consumer/travel-resumes-</p><p>chinas-luxury-shoppers-ask-paris-or-</p><p>hainan-2023-01-05/</p><p>151 Martin Moodie, “DFS unveils</p><p>stellar boutique line-up as</p><p>Chongqing Jiangbei International</p><p>Airport inaugurates Starry</p><p>Galleria”, Moodie Davitt Report,</p><p>September 4 2023, https://</p><p>www.moodiedavittreport.com/</p><p>dfs-unveils-stellar-boutique-line-up-</p><p>as-chongqing-jiangbei-international-</p><p>airport-inaugurates-starry-galleria/</p><p>152 Casey Hall, “As travel resumes,</p><p>China’s luxury shoppers ask Paris or</p><p>Hainan?”, Reuters, January 2023,</p><p>https://www.reuters.com/business/</p><p>retail-consumer/travel-resumes-</p><p>chinas-luxury-shoppers-ask-paris-or-</p><p>hainan-2023-01-05/</p><p>153 McKinsey analysis of China</p><p>personal luxury market and expert</p><p>interviews, May 2023McKinsey</p><p>154 McKinsey analysis, August 2023</p><p>155 Alison Ackroyd, “Top tourism</p><p>trends spotted during China’s</p><p>Golden Week”, Alizala, Oct 10,</p><p>2023, https://www.alizila.com/</p><p>top-tourism-trends-during-china-</p><p>golden-week-travel-festival-fliggy/</p><p>156 McKinsey – BOF Consumer</p><p>Survey, September 2023</p><p>157 China aviation market”,</p><p>OAG, September 2023,</p><p>https://www.oag.com/</p><p>china-aviation-market-flight-data</p><p>120</p><p>The State of Fashion 2024</p><p>158 Casey Hall, Sophie Yu, Joyce</p><p>Lee, “China lifts bans on group tours</p><p>to US, Japan, and other markets”,</p><p>Reuters, August 2023, https://www.</p><p>reuters.com/world/asia-pacific/</p><p>china-adds-more-destination-</p><p>countries-outbound-group-</p><p>tourism-2023-08-10/</p><p>159 McKinsey – BOF Consumer</p><p>Survey, September 2023</p><p>160 Alison Ackroyd, “Top tourism</p><p>trends spotted during China’s</p><p>Golden Week”, Alizala, Oct 10,</p><p>2023, https://www.alizila.com/</p><p>top-tourism-trends-during-china-</p><p>golden-week-travel-festival-fliggy/</p><p>161 McKinsey – BOF Consumer</p><p>Survey, September 2023</p><p>25 percent plan</p><p>price increases of more than 5 percent.19 Companies</p><p>that succeed in driving growth through price rises will</p><p>likely take a precise, carefully tailored approach.</p><p>Simultaneously, decision makers will likely keep</p><p>a tight grip on costs and investments. However, the</p><p>industry has already seen widespread cost cutting,</p><p>suggesting the focus should be on stricter controls</p><p>rather than cuts.</p><p>The good news is that executives expect cost</p><p>pressure to abate, with just 18 percent of executives</p><p>predicting their companies’ cost of goods sold</p><p>(COGS) to grow more than 5 percent next year and 19</p><p>percent expecting selling, general and administrative</p><p>expense (SG&A) to rise more than 5 percent. This is</p><p>in contrast to last year, when 55 percent expected</p><p>COGS growth of more than 5 percent, and 40 percent</p><p>expected SG&A growth of more than 5 percent. One</p><p>reason is fading concern about inflation, with 12</p><p>percent and 18 percent of executives expecting COGS</p><p>and SG&A respectively to remain steady, compared to</p><p>1 percent and 3 percent last year.20 Additionally, the</p><p>successful implementation of cost measures over the</p><p>last couple of years have already absorbed many of the</p><p>potential cuts.</p><p>Strategic Priorities</p><p>As climate change continues to gather pace, fashion</p><p>executives remain focused on building more</p><p>sustainable businesses. When identifying the biggest</p><p>challenges and opportunities in the year ahead,</p><p>some 12 percent cite sustainability as a principal</p><p>opportunity for 2024, placing it at the top of the</p><p>C-suite agenda. However, reflecting the scale of the</p><p>task and rising regulatory pressure, 12 percent also</p><p>name it as a top challenge.21 Finding a balanced way</p><p>to implement sustainability improvements and risk-</p><p>reduction programmes with competitive advantages</p><p>is likely to be a key challenge for fashion executives</p><p>in 2024.</p><p>Another opportunity high on executives’ agendas</p><p>is an innovation that has been surrounded by buzz</p><p>in 2023: artificial intelligence, and particularly</p><p>generative AI.22 Given its application across the</p><p>fashion value chain and among functions, fashion</p><p>companies are already starting to experiment</p><p>cautiously. Those efforts are likely to continue in</p><p>2024, with a view to scaling use cases where there are</p><p>demonstrable performance upsides.</p><p>As for consumers across markets, discretionary</p><p>spend is likely to zero in on categories and brands</p><p>on which they feel they can rely. Hard luxury goods</p><p>— jewellery and watches — as well as leather goods</p><p>are emerging as key categories, as more players</p><p>enter the market and consumers seek to invest in</p><p>pieces that will maintain or increase in value over</p><p>time.23 Meanwhile, focused brand-building may help</p><p>companies stave off challenges across segments,</p><p>with consumers gravitating towards brands with the</p><p>greatest differentiation and brand storytelling.</p><p>In the face of an uncertain future marred by</p><p>continued macroeconomic challenges, fashion</p><p>executives may need to make bold decisions: leading</p><p>players cannot allow an ambiguous outlook to cloud</p><p>decision making when seeking to capture growth</p><p>opportunities ahead.</p><p>Fashion shoppers in Europe. Shutterstock.</p><p>17</p><p>Industry Outlook</p><p>03.</p><p>Vacation</p><p>Mode</p><p>Consumers are</p><p>gearing up for the</p><p>biggest year of</p><p>travel since before</p><p>the pandemic. But</p><p>a shift in values</p><p>means travellers</p><p>have a different set</p><p>of expectations,</p><p>even as shopping</p><p>remains high on</p><p>the agenda. Brands</p><p>and retailers should</p><p>consider refreshing</p><p>distribution and</p><p>category strategies</p><p>to meet travellers</p><p>wherever they are.</p><p>04.</p><p>The New Face</p><p>of Influence</p><p>It’s time for brand</p><p>marketers to update</p><p>their influencer</p><p>playbooks. A new</p><p>guard of creative</p><p>personalities is</p><p>gaining brands’</p><p>attention,</p><p>winning trust and</p><p>fandom among</p><p>key audiences.</p><p>Working with these</p><p>personalities in</p><p>2024 will require</p><p>a different type of</p><p>partnership, an</p><p>emphasis on video</p><p>and a willingness to</p><p>relinquish a degree</p><p>of creative control.</p><p>05.</p><p>Outdoors</p><p>Reinvented</p><p>Technical outdoor</p><p>wear has been</p><p>propelled by</p><p>consumers’ post-</p><p>pandemic embrace</p><p>of healthier</p><p>lifestyles as well as</p><p>“gorpcore,” and is</p><p>likely to accelerate</p><p>even further in</p><p>2024. More outdoor</p><p>brands will likely</p><p>launch lifestyle</p><p>collections while</p><p>lifestyle brands</p><p>embed technical</p><p>elements into</p><p>collections,</p><p>further blurring</p><p>the lines between</p><p>functionality and</p><p>style.</p><p>02.</p><p>Climate</p><p>Urgency</p><p>The frequency and</p><p>intensity of extreme</p><p>weather-related</p><p>events in 2023 mean</p><p>the climate crisis</p><p>has become even</p><p>more visible, leaving</p><p>the fashion value</p><p>chain especially</p><p>vulnerable. With</p><p>climate risks</p><p>worsening across</p><p>continents, the</p><p>fashion industry</p><p>can’t hold off any</p><p>longer on building</p><p>resilience into its</p><p>supply chains and</p><p>helping to abate</p><p>emissions.</p><p>01.</p><p>Fragmented</p><p>Future</p><p>In 2024, the global</p><p>economic outlook</p><p>will likely continue</p><p>to be unsettled.</p><p>As new and</p><p>ongoing financial,</p><p>geopolitical and</p><p>other challenges</p><p>weigh heavily</p><p>on consumer</p><p>confidence, fashion</p><p>markets in the</p><p>US, Europe and</p><p>China are facing</p><p>differing headwinds,</p><p>requiring suppliers,</p><p>brands and</p><p>retailers to bolster</p><p>contingency</p><p>planning, among</p><p>other measures.</p><p>Consumers’ net intent</p><p>to spend on apparel</p><p>is −16% across the US,</p><p>Europe and China in</p><p>Q4 2023</p><p>In 2024, global travel</p><p>volumes are projected</p><p>to reach 110% of 2019</p><p>levels, the first year to</p><p>exceed pre-pandemic</p><p>levels</p><p>More than $65 billion of</p><p>apparel exports are at</p><p>risk of being wiped out</p><p>by climate events such</p><p>as flooding and extreme</p><p>heat</p><p>Trade activity on resale</p><p>platform StockX for</p><p>Salomon, Arc’teryx and</p><p>The North Face grew on</p><p>average 800% in 2023</p><p>vs 2022</p><p>More than 40% of</p><p>consumers prefer</p><p>fashion influencers</p><p>who are relatable and</p><p>authentic</p><p>CONSUMER SHIFTSGLOBAL ECONOMY</p><p>The State of Fashion 2024</p><p>110% 40%</p><p>800%−16−16%%</p><p>$65$65bnbn</p><p>08.</p><p>All Eyes</p><p>on Brand</p><p>Brand marketing</p><p>will likely be back</p><p>in the limelight in</p><p>the year ahead as</p><p>the fashion industry</p><p>confronts a shifting</p><p>landscape in which</p><p>performance</p><p>marketing no longer</p><p>reigns. Consumers’</p><p>emotional</p><p>connections to</p><p>brands will likely</p><p>be critical as</p><p>fashion marketers</p><p>reorientate</p><p>their playbooks</p><p>to emphasise</p><p>long-term brand-</p><p>building strategies.</p><p>09.</p><p>Sustainability</p><p>Rules</p><p>The era of the</p><p>fashion industry</p><p>self-regulating</p><p>sustainability is</p><p>drawing to a close</p><p>around the world.</p><p>Across jurisdictions,</p><p>new rules could have</p><p>a widespread impact</p><p>on both consumers</p><p>and fashion</p><p>players. Brands and</p><p>manufacturers need</p><p>to revamp business</p><p>models to align with</p><p>the changes ahead.</p><p>10.</p><p>Bullwhip</p><p>Snaps Back</p><p>Changes in</p><p>consumer demand</p><p>have resulted in</p><p>the “bullwhip</p><p>effect,” where cuts</p><p>to orders increase</p><p>in magnitude at</p><p>different parts of</p><p>a supply chain,</p><p>putting pressure on</p><p>fashion’s suppliers.</p><p>Now, if supply</p><p>is to keep pace</p><p>with anticipated</p><p>renewed demand,</p><p>brands and retailers</p><p>should consider</p><p>focusing on</p><p>transparency and</p><p>bolstering strategic</p><p>partnerships.</p><p>07.</p><p>Fast Fashion’s</p><p>Power Plays</p><p>Fast-fashion</p><p>competition will</p><p>likely become even</p><p>fiercer in the year</p><p>ahead. Challengers,</p><p>led by Shein and</p><p>Temu, are changing</p><p>tactics around</p><p>price, customer</p><p>experience and</p><p>speed. Success for</p><p>disruptors and</p><p>incumbents will</p><p>likely hinge on their</p><p>ability to adapt to</p><p>evolving consumer</p><p>preferences,</p><p>while navigating</p><p>regulations that</p><p>may impact the</p><p>industry.</p><p>06.</p><p>Gen AI’s</p><p>Creative</p><p>Crossroad</p><p>After generative</p><p>AI’s breakout year</p><p>in 2023, use cases</p><p>are emerging across</p><p>creative industries,</p><p>including fashion.</p><p>Capturing the</p><p>value of this</p><p>transformative</p><p>technology in 2024</p><p>will require fashion</p><p>players to look</p><p>beyond automation</p><p>and explore</p><p>its potential to</p><p>augment the work</p><p>of human creatives.</p><p>73% of fashion</p><p>executives think gen</p><p>AI is a 2024 priority for</p><p>their companies, but</p><p>only 5% believe they</p><p>have the capabilities to</p><p>fully leverage it</p><p>71% of fashion</p><p>executives plan</p><p>to increase brand</p><p>marketing spend in</p><p>2024</p><p>40% of US consumers</p><p>have shopped at Shein</p><p>or Temu in the last 12</p><p>months</p><p>87%</p><p>162 “Global Blue releases the monthly</p><p>tax free shopping business update for</p><p>August 2023”, Global Blue, August</p><p>2023, https://www.globalblue.com/es/</p><p>about-us/media/global-blue-releases-</p><p>the-monthly-tax-free-shopping-</p><p>business-update-for-august-2023</p><p>163 “Global Blue releases the monthly</p><p>tax free shopping business update for</p><p>August 2023”, Global Blue, August</p><p>2023, https://www.globalblue.com/es/</p><p>about-us/media/global-blue-releases-</p><p>the-monthly-tax-free-shopping-</p><p>business-update-for-august-2023</p><p>164 Casey Hall, Mimosa Spencer,</p><p>“Fewer luxury shoppers but bigger</p><p>spenders as Chinese return to</p><p>Europe”, Reuters, May 2023,</p><p>https://www.reuters.com/business/</p><p>retail-consumer/fewer-luxury-</p><p>shoppers-bigger-spenders-chinese-</p><p>return-europe-2023-05-05/</p><p>165 McKinsey interview with</p><p>Jean-Marc Bellaiche, September 2023</p><p>166 McKinsey China Luxury</p><p>Consumer Survey, 2022</p><p>167 McKinsey China Luxury</p><p>Consumer Survey, 2022</p><p>168 McKinsey analysis, May 2023</p><p>169 McKinsey China Luxury</p><p>Consumer Survey, 2022</p><p>170 Blair Feehan, “2023 Social Media</p><p>Industry Benchmark Report”, Rival</p><p>IQ, Feb. 21, 2023, https://www.rivaliq.</p><p>com/blog/social-media-industry-</p><p>benchmark-report/#title-all-industry</p><p>171 Blair Feehan, “2023 Social Media</p><p>Insustry Benchmark Report”, Rival</p><p>IQ, Feb. 21, 2023, https://www.rivaliq.</p><p>com/blog/social-media-industry-</p><p>benchmark-report/#title-all-industry</p><p>172 Sara Lebow, “Gen Z has a 1-second</p><p>attention span. That can work to</p><p>marketers’ advantage”. eMarketer,</p><p>Dec. 15, 2022, https://www.</p><p>insiderintelligence.com/content/</p><p>gen-z-has-1-second-attention-span-</p><p>work-marketers-advantage</p><p>173 Werner Geyser, “The State</p><p>of Influencer Marketing 2023:</p><p>Benchmark Report”, Influencer</p><p>Marketing Hub, October 10, 2023,</p><p>https://influencermarketinghub.com/</p><p>influencer-marketing-benchmark-</p><p>report/</p><p>174 Amy He, Nicky Zink, Lindsey</p><p>Roeschke, Claire Tassin, Kevin</p><p>Tran and Emily Moquin, “How</p><p>Brands Can Succeed at Influencer</p><p>Marketing”, Morning Consult,</p><p>September 2023, https://pro.</p><p>morningconsult.com/analyst-reports/</p><p>influencer-marketing-trends-report</p><p>175 Kristen Barta, Nazanin</p><p>Andalibi, “Constructing Authenticity</p><p>on Tiktok: Social Norms and Social</p><p>Support on the “Fun” Platform”,</p><p>October 2021, https://dl.acm.org/doi/</p><p>pdf/10.1145/3479574</p><p>176 Arielle Feger, “TikTok screen time</p><p>will approach 60 minutes a day for</p><p>US adult users”, Insider Intelligence,</p><p>March 2, 2023, https://www.</p><p>insiderintelligence.com/content/</p><p>tiktok-screen-time-will-approach-60-</p><p>minutes-day-us-adult-users</p><p>177 Salvador Rodriguez, Meghan</p><p>Bobrowsky, Jeff Horwitz, “Instagram</p><p>Stumbles in Push to Mimic TikTok,</p><p>Internal Documents Show”, The</p><p>Wall Street Journal, September 12,</p><p>2022, https://www.wsj.com/articles/</p><p>instagram-reels-tiktok-meta-</p><p>facebook-documents-11662991777</p><p>178 Ben Smith, “How TikTok Reads</p><p>Your Mind”, The New York Times,</p><p>December 5, 2021, https://www.</p><p>nytimes.com/2021/12/05/business/</p><p>media/tiktok-algorithm.html</p><p>179 Callie Holtermann, “They’re Over</p><p>Being Real”, The New York Times,</p><p>April 12, 2023, https://www.nytimes.</p><p>com/2023/04/13/style/bereal-app.</p><p>html</p><p>180 Melissa de Witte, “Gen Z are</p><p>not ‘coddled.’ They are highly</p><p>collaborative, self-reliant and</p><p>pragmatic, according to new Stanford-</p><p>affiliated research”, Standford</p><p>News, January 3, 2022, https://</p><p>news.stanford.edu/2022/01/03/</p><p>know-gen-z/</p><p>181 Ellyn Briggs, “TikTok Is Officially</p><p>the Influencer Platform”, Morning</p><p>Consult, September 25, 2023, https://</p><p>pro.morningconsult.com/analysis/</p><p>tiktok-gen-z-influencers</p><p>182 Arielle Feger, “5 charts to help you</p><p>craft your 2024 TikTok marketing</p><p>and commerce strategies”, eMarketer</p><p>Insider Intelligence, Sept. 1, 2023,</p><p>https://www.insiderintelligence.</p><p>com/content/5-charts-help-you-</p><p>craft-your-2024-tiktok-marketing-</p><p>commerce-strategies</p><p>183 Tanya Chen, Geoff Weiss, “As most</p><p>influencers are struggling to maintain</p><p>fame, a new ‘it girl’ TikToker grew 1.7</p><p>million followers in a month. So who</p><p>is Alex Earle?”, Insider, December</p><p>28, 2022, https://www.insider.com/</p><p>who-is-alix-earle-tiktok-influencer-</p><p>tyler-wade-2022-12</p><p>184 Leila Register, ”‘Tube Girl’</p><p>inspires unapologetic self-expression</p><p>among women on TikTok”, NBC</p><p>News, October 7, 2023, https://</p><p>www.nbcnews.com/pop-culture/</p><p>tube-girl-inspires-unapologetic-self-</p><p>expression-women-tiktok-rcna118358</p><p>185 Alexandra Sternlicht, “The world’s</p><p>most followed TikToker gets paid as</p><p>much as $750K per post, but to reach</p><p>his greatest business goal Khaby Lame</p><p>is binge-watching American cartoons”,</p><p>Fortune, Sept. 14, 2022, https://</p><p>fortune.com/2022/09/14/how-khaby-</p><p>lame-plans-expand-business-that-</p><p>gets-750k-dollars-for-tiktok-post/</p><p>186 “What’s Next 2023 Trend Report”,</p><p>TikTok, December 15, 2022, https://</p><p>newsroom.tiktok.com/en-us/</p><p>whats-next-2023-trend-report</p><p>187 Tom Marshall, “People and</p><p>Nature Survey: How has COVID-19</p><p>changed the way we engage with</p><p>nature?”, Natural England, May 18,</p><p>2022, https://naturalengland.blog.gov.</p><p>uk/2022/05/18/people-and-nature-</p><p>survey-how-has-covid-19-changed-</p><p>the-way-we-engage-with-nature/;</p><p>188 Gary Gerard, “Winnebago Survey</p><p>Shows Growing Outdoor Activity”,</p><p>RVBusiness, May 30, 2023, https://</p><p>rvbusiness.com/winnebago-survey-</p><p>shows-growing-outdoor-activity/</p><p>189 “People and Nature Survey:</p><p>How has COVID-19 changed the</p><p>way we engage with nature?”</p><p>Natural England, May 18, 2022,</p><p>https://naturalengland.blog.gov.</p><p>uk/2022/05/18/people-and-nature-</p><p>survey-how-has-covid-19-changed-</p><p>the-way-we-engage-with-nature/</p><p>190 Jason Wang, “The Great Outdoors:</p><p>China’s Appetite for Adventure</p><p>Sports Booms”, Jing Daily, September</p><p>18, 2023, https://jingdaily.com/</p><p>china-adventure-sports-booms/</p><p>191 “China Outdoor Market Trends”,</p><p>MyMyPanda, July 17, 2023, https://</p><p>www.mymypanda.com/china-cbec-</p><p>meets-china-outdoor-market-trends/</p><p>192 Sabine Becker, Victor V. Duran,</p><p>“Sporting Goods 2023 – The need</p><p>for resilience in a world in disarray”,</p><p>Sporting Goods Industry Report,</p><p>January 2023, https://www.mckinsey.</p><p>com/~/media/mckinsey/industries/</p><p>retail/our%20insights/sporting%20</p><p>goods%202023%20the%20need%20</p><p>for%20resilience%20in%20a%20</p><p>world%20in%20disarray/sg-report-</p><p>2023_final.pdf</p><p>193 “Dicks Sporting Goods to Acquire</p><p>Moosejaw”, PR Newswire, Feb 22,</p><p>2023, https://www.prnewswire.com/</p><p>news-releases/dicks-sporting-goods-</p><p>to-acquire-moosejaw-301753328.html</p><p>194 Thomas Ryan, “2022 in Review:</p><p>M&A Activity Stays Busy Across</p><p>Lifestyle Market”, SBG Media, Dec</p><p>28, 2022, https://sgbonline.com/</p><p>the-2022-year-in-review-ma-activity-</p><p>stays-busy-across-active-lifestyle-</p><p>market/</p><p>195 “VF Corporation Reports</p><p>First Quarter Results”, VF Corp,</p><p>August 1, 2023, https://www.vfc.</p><p>com/news/press-release/1818/</p><p>vf-corporation-reports-first-quarter-</p><p>results-and-maintains</p><p>196 Pei Li, Manuel Baigorri and</p><p>Dong Cao, “Anta Sports Weighs IPO</p><p>of Wilson Racket Maker Amer”,</p><p>Bloomberg News, Dec. 7, 2022,</p><p>https://www.bloomberg.com/news/</p><p>articles/2022-12-07/anta-sports-is-</p><p>said-to-weigh-ipo- of-wilson-racket-</p><p>maker-amer?leadSource=uverify%20</p><p>wall</p><p>197 Pamela N. Danziger, “On, The $1</p><p>Billion Swiss Running-Shoe Company,</p><p>Declares Cyclon Its Sustainability</p><p>Incubator”, Forbes, Apr. 4, 2023,</p><p>https://www.forbes.com/sites/</p><p>pamdanziger/2023/04/04/on-the-1-</p><p>billion- swiss-running-shoe-company-</p><p>declares-cyclon-its-sustainability-</p><p>incubator/?sh=59960e0f645a</p><p>198 Dani James, “Hoka to Hit $2B</p><p>in Sales as DTC Channel Grows”,</p><p>Retail Dive, May 30, 2023, https://</p><p>www.retaildive.com/news/</p><p>hoka-earnings-two-billion-sales-dtc-</p><p>channel-grows/651515/</p><p>199 Hoka One One, “Moncler x</p><p>HOKA® Takes Mountain-Ready</p><p>Footwear To A Whole New Level”,</p><p>Cision PR Newswire, Nov. 1, 2021,</p><p>https://www.prnewswire.com/</p><p>news-releases/moncler-x-hoka-</p><p>takes-mountain-ready-footwear-to-a-</p><p>whole-new-level-301412702.html</p><p>200 Jil Sander, https://</p><p>www.jilsander.com/en-pl/</p><p>arc%E2%80%99teryx-x-jil-sander-</p><p>fall%2Fwinter-2021-collection/</p><p>project62b.html</p><p>201 “MONCLER X ADIDAS</p><p>ORIGINALS IS SO PUFFING</p><p>GOOD”, High Snobiety, October 2023,</p><p>https://www.highsnobiety.com/p/</p><p>moncler-adidas-collab-release/</p><p>202 Hiking Clothes for Women |</p><p>OYSHO United States,”</p><p>accessed Sept.</p><p>14, 2023, https://www.oysho.com/us/</p><p>hiking-clothes-women-n4967</p><p>203 Free People Movement. “Hiking</p><p>Gear & Camping Essentials”, accessed</p><p>Sept.14, 2023, https://www.freepeople.</p><p>com/fpmovement/hiking-gear/</p><p>204 “Introducing Merrell’s new SS23</p><p>lifestyle collection”, Merrell, February</p><p>16, 2023, https://www.merrell.</p><p>com/UK/en_GB/blog?url=%2F/</p><p>merrell_uk/2023/02/16/</p><p>introducing-merrells-new-ss23-</p><p>lifestyle-collection/</p><p>205 Daniel-Yaw Miller, “66ºNorth</p><p>Taps Kei Toyoshima in Fashion Push”,</p><p>The Business of Fashion, Nov. 20,</p><p>2022, https://www.businessoffashion.</p><p>com/articles/retail/66-north-iceland-</p><p>louis-vuitton-chanel-bottega/</p><p>206 “Prada Linea Rossa”, Prada,</p><p>https://www.prada.com/ww/en/</p><p>prada-linea-rossa.html</p><p>121</p><p>207 “FANCY A GORE-TEX COFFEE</p><p>AT THE ARC’TERYX CAFÉ?”,</p><p>High Snobiety, September 2023,</p><p>https://www.highsnobiety.com/p/</p><p>arcteryx-store-cafe/</p><p>208 Daniel-Yaw Miller, “The</p><p>Gorpcore Empire behind Salomon</p><p>and Arc’Teryx,” The Business of</p><p>Fashion, May 22, 2023, https://www.</p><p>businessoffashion.com/articles/retail/</p><p>salomon-arcteryx-wilson-anta-amer-</p><p>brand-growth/</p><p>209 Daniel-Yaw Miller, “Here</p><p>Comes the Gorpcore Backlash”, The</p><p>Business of Fashion, June 26, 2023,</p><p>https://www.businessoffashion.</p><p>com/articles/retail/</p><p>here-comes-the-gorpcore-backlash/</p><p>210 Sam Cole, “Unpacking</p><p>FW23 with Roa’s creative</p><p>director Patrick Stangbye”, High</p><p>Snobiety, February 2023, https://</p><p>www.highsnobiety.com/p/</p><p>roa-fw23-patrick-stangbye-interview/</p><p>211 Daniel-Yaw Miller, “‘Sportstyle’</p><p>Footwear Is Taking over the Sneaker</p><p>Resale Market”, The Business of</p><p>Fashion, Aug. 25, 2023, https://www.</p><p>businessoffashion.com/articles/retail/</p><p>sportstyle-footwear-is-taking-over-</p><p>the- sneaker-resale-market/</p><p>212 Peter Verry, “How Salomon</p><p>Sportstyle Emerged as a Favorite of</p><p>the Fashion Elite”, Footwear News,</p><p>March 6 2023, https://footwearnews.</p><p>com/shoes/outdoor-footwear/</p><p>salomon-sportstyle-sneakers-</p><p>outdoors-gorpcore-1203422146/</p><p>213 “SALOMON AND MM6 MAISON</p><p>MARGIELA REUNITE WITH</p><p>FUNCTIONAL FITS”, Hypebae,</p><p>September 18, 2023, https://hypebae.</p><p>com/2023/9/salomon-mm6-maison-</p><p>margiela-collaboration-sneaker-vest-</p><p>release-date</p><p>214 “Rihanna used the Super Bowl</p><p>to make a super brand of Salomon”,</p><p>GQ, 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https://</p><p>www.businessoffashion.com/</p><p>case-studies/technology/</p><p>generative-ai-playbook-machine-</p><p>learning-emerging-technology/</p><p>219 Holger Harreis et al., “Generative</p><p>AI: Unlocking the future of fashion”,</p><p>McKinsey & Company, March 8,</p><p>2023, https://www.mckinsey.com/</p><p>Industries/Retail/Our-Insights/</p><p>Generative-AI-Unlocking-the-future-</p><p>of-fashion</p><p>220 “The state of generative AI in</p><p>7 charts”, CBInsights, August 2,</p><p>2023, https://www.cbinsights.com/</p><p>research/generative-ai-funding-top-</p><p>startups-investors/</p><p>221 “Microsoft and OpenAI extend</p><p>partnership”, Microsoft, January 23,</p><p>2023, https://blogs.microsoft.com/</p><p>blog/2023/01/23/microsoftandop</p><p>enaiextendpartnership/</p><p>222 Adam Satariano and Cade Metz,</p><p>“Amazon Takes a Big Stake in the A.I.</p><p>Start-Up Anthropic”, The New York</p><p>Times, September 25, 2023, https://</p><p>www.nytimes.com/2023/09/25/</p><p>technology/amazon-anthropic-ai-</p><p>deal.html</p><p>223 Marc Bain, “Putting AI Shopping</p><p>Assistants to the Test”, The Business</p><p>of Fashion, 10 May, 2023, https://</p><p>www.businessoffashion.com/articles/</p><p>technology/putting-ai-shopping-</p><p>assistants-to-the-test/</p><p>224 “Zalando to launch a fashion</p><p>assistant powered by ChatGPT”,</p><p>Zalando, April 19, 2023, https://</p><p>corporate.zalando.com/en/</p><p>technology/zalando-launch-fashion-</p><p>assistant-powered-chatgpt</p><p>225 Marc Bain, “Putting AI Shopping</p><p>Assistants to the Test”, The Business</p><p>of Fashion, May 10, 2023, https://</p><p>www.businessoffashion.com/articles/</p><p>technology/putting-ai-shopping-</p><p>assistants-to-the-test/</p><p>226 Lauren Debter, “It’s Hard</p><p>To Rave About A Plain White</p><p>T-Shirt, So Retailers Are Making</p><p>AI Do It”, Forbes, May 27, 2023,</p><p>https://www.forbes.com/sites/</p><p>laurendebter/2023/05/27/</p><p>its-hard-to-rave-about-a-plain-white-</p><p>t-shirt-so-retailers-are-making-ai-do-</p><p>it/?sh=2b00b5724831</p><p>227 Marc Bain, “The Complete</p><p>Playbook for Generative AI</p><p>in Fashion,” The Business of</p><p>Fashion, June 2023, https://cdn.</p><p>businessoffashion.com/reports/</p><p>Case-Study-Complete-Playbook-</p><p>Generative-AI-Fashion.pdf</p><p>228 “Moncler Genius AI</p><p>Campaign”, Trendland, 21 February,</p><p>2023, https://trendland.com/</p><p>moncler-genius-first-ai-campaign/</p><p>229 Marc Bain, “What Really Went</p><p>Into Casablanca’s AI-Generated</p><p>Marketing Campaign”, The</p><p>Business of Fashion, 12 May, 2023,</p><p>https://www.businessoffashion.</p><p>com/articles/technology/</p><p>what-really-went-into-casablancas-ai-</p><p>generated-marketing-campaign/</p><p>230 “Heliot Emil, Spring/</p><p>Summer 2024”, Vogue Runway,</p><p>September 26, 2023, https://</p><p>www.vogue.com/fashion-shows/</p><p>spring-2024-ready-to-wear/</p><p>heliot-emil#gallery-collection</p><p>231 Marc Bain, “Fashion Execs Can’t</p><p>Stop Talking About AI”, The Business</p><p>of Fashion, 9 August, 2023, https://</p><p>www.businessoffashion.com/articles/</p><p>technology/fashion-execs-cant-stop-</p><p>talking-about-ai/</p><p>232 “Desigual Unveils On-Demand</p><p>Collection Crafted by Artificial</p><p>Intelligence”, Medium, July 15,</p><p>2023, https://medium.com/@</p><p>multiplatform.ai/desigual-unveils-</p><p>on-demand-collection-crafted-by-</p><p>artificial-intelligence-d33c0abcecd4</p><p>233 Joyce Zhou, Joseph Campbell,</p><p>“In Hong Kong, designers try out new</p><p>assistant: AI fashion maven AiDA”,</p><p>Reuters, December 28, 2022, https://</p><p>www.reuters.com/technology/</p><p>hong-kong-designers-try-out-</p><p>new-assistant-ai-fashion-maven-</p><p>aida-2022-12-27/</p><p>234 Rrik Brynjolfsson, “The Turing</p><p>Trap: The Promise & Peril of</p><p>Human-Like Artificial Intelligence”,</p><p>Stanford Digital Economy</p><p>Lab, January 12, 2022, https://</p><p>digitaleconomy.stanford.edu/news/</p><p>the-turing-trap-the-promise-peril-of-</p><p>human-like-artificial-intelligence/</p><p>235 Vaughn Schermerhorn, “How</p><p>Amazon continues to improve the</p><p>customer reviews experience with</p><p>generative AI”, August 2023, https://</p><p>www.aboutamazon.com/news/</p><p>amazon-ai/amazon-improves-</p><p>customer-reviews-with-generative-ai</p><p>236 Lilian Rincon, “Virtually try</p><p>on clothes with a new AI shopping</p><p>feature”, June 2023, https://</p><p>blog.google/products/shopping/</p><p>ai-virtual-try-on-google-shopping/</p><p>237 Holger Harreis, Theodora</p><p>Koullias, Roger Roberts, and Kimberly</p><p>Te, “ Generative AI: Unlocking the</p><p>future of fashion”, McKinsey &</p><p>Company, March 8th, 2023, https://</p><p>www.mckinsey.com/industries/retail/</p><p>our-insights/generative-ai-unlocking-</p><p>the-future-of-fashion</p><p>238 Jasper company website, https://</p><p>www.jasper.ai/</p><p>239 CALA company website, https://</p><p>ca.la/</p><p>240 Adobe Firefly company website,</p><p>https://www.adobe.com/sensei/</p><p>generative-ai/firefly.html</p><p>241 CLO 3D company website, https://</p><p>www.clo3d.com/en/</p><p>242 Interview with Norma Kamali,</p><p>fashion designer and brand owner, and</p><p>Nima Abbasi, Partner of Maison Meta</p><p>in September 2023</p><p>243 Koivisto, Mika and Grassini,</p><p>Simone, “Best humans still</p><p>outperform artificial intelligence in</p><p>a creative divergent thinking task”,</p><p>Nature, Scientific reports 13, May</p><p>2023, https://www.nature.com/</p><p>articles/s41598-023-40858-3</p><p>244 Poggi, Sofia, et. al, “How Retailers</p><p>and Brands are Taking Advantage of</p><p>Generative AI?”, IDC Europe Blog,</p><p>July 18, 2023, https://blog-idceurope.</p><p>com/how-retailers-and-brands-are-</p><p>taking-advantage-of-generative-ai/</p><p>245 Poggi, Sofia, et. al, “How Retailers</p><p>and Brands are Taking Advantage of</p><p>Generative</p><p>AI?”, IDC Europe Blog,</p><p>July 18, 2023, https://blog-idceurope.</p><p>com/how-retailers-and-brands-are-</p><p>taking-advantage-of-generative-ai/</p><p>246 Lousie Matsakis, Meaghan</p><p>Tobin and Wency Chen, “How</p><p>Shein beat Amazon at its own</p><p>game – and reinvented fast fashion”,</p><p>The Guardian, December 21,</p><p>2021, https://www.theguardian.</p><p>com/fashion/2021/dec/21/</p><p>how-shein-beat-amazon-at-its-own-</p><p>game-and-reinvented-fast-fashion</p><p>247 Vion, “Temu now tops</p><p>charts across Europe, North</p><p>America and ANZ”, Momentum</p><p>Works, June 9, 2023, https://</p><p>thelowdown.momentum.asia/</p><p>temu-now-tops-charts-across-europe-</p><p>north-america-and-anz/</p><p>248 McKinsey Consumer Survey,</p><p>September 2023 (n=1,947)</p><p>249 Web scrape of Zara, H&M, Shein,</p><p>Boohoo websites, accessed Aug. 22, 2023</p><p>250 Lousie Matsakis, Meaghan</p><p>Tobin and Wency Chen, “How</p><p>Shein beat Amazon at its own</p><p>game – and reinvented fast</p><p>fashion”, The Guardian, Dec. 21,</p><p>2021, https://www.theguardian.</p><p>com/fashion/2021/dec/21/</p><p>how-shein-beat-amazon-at-its-own-</p><p>game-and-reinvented-fast-fashion</p><p>251 CustomerGlu, “Fast Fashion</p><p>and Gamification: Winning</p><p>The Gen-Z Shoppers”, https://</p><p>www.customerglu.com/blogs/</p><p>fast-fashion-and-gamification-</p><p>winning-the-gen-z-shoppers</p><p>252 Xie Kangyu, “拼多多“低价爆款”</p><p>的全部秘密,都在这家年销量过亿</p><p>的工厂里”, TMT Post, April 2, 2018,</p><p>https://www.tmtpost.com/3163174.</p><p>html</p><p>253 Darrell Prescott, “Temu v. Shein</p><p>Tests US Antitrust Principles in</p><p>a Crowded Market”, Bloomberg</p><p>Law, August 9, 2023, https://news.</p><p>bloomberglaw.com/us-law-week/</p><p>temu-v-shein-tests-us-antitrust-</p><p>principles-in-a-crowded-market-1</p><p>254 “Who is Temu?”, Momentum</p><p>Works, February 2023, https://</p><p>momentum.asia/product/</p><p>who-is-temu/</p><p>255 John Deighton, “How SHEIN</p><p>122</p><p>The State of Fashion 2024</p><p>and Temu Conquered Fast Fashion –</p><p>and Forged a New Business Model”,</p><p>Harvard Business School, Apr. 25,</p><p>2023, https://hbswk.hbs.edu/item/</p><p>how-shein-and-temu-conquered-fast-</p><p>fashion-and-forged-a-new-business-</p><p>model</p><p>256 Maria Williams, “Temu and Shein:</p><p>A deep dive into their differences”,</p><p>Fashion Week Daily, June 9, 2023,</p><p>https://fashionweekdaily.com/</p><p>temu-and-shein-a-deep-dive-into-</p><p>their-differences/</p><p>257 Sadie Bargeron, “How China’s</p><p>Shein Conquered Global Social</p><p>Media”, Jing Daily, Apr. 9, 2021,</p><p>https://jingdaily.com/how-chinas-</p><p>shein-conquered-global-social-media/</p><p>258 Tracy Wen Liu, “Temu Is Losing</p><p>Millions of Dollars to Send You</p><p>Cheap Socks”, Wired, May 26, 2023,</p><p>https://www.wired.co.uk/article/</p><p>temu-is-losing-millions-of-dollars-to-</p><p>send-you-cheap-socks</p><p>259 Scott Peterson, “Temu, Shein</p><p>and Tiktok Shop are reaching deep</p><p>into their pockets to penetrate</p><p>Western markets”, OMR, October</p><p>10, 2023, https://omr.com/en/daily/</p><p>temu-tiktok-investing-billions</p><p>260 Chavie Lieber, “How Brands Get</p><p>Customers Addicted to Shopping”,</p><p>The Business of Fashion, June 23,</p><p>2021, https://www.businessoffashion.</p><p>com/articles/technology/</p><p>how-brands-get-customers-addicted-</p><p>to-shopping/</p><p>261 Chavie Lieber, “How Brands Get</p><p>Customers Addicted to Shopping”,</p><p>The Business of Fashion, June 23,</p><p>2021, https://www.businessoffashion.</p><p>com/articles/technology/</p><p>how-brands-get-customers-addicted-</p><p>to-shopping/</p><p>262 “Case Study: Quantifying Temu’s</p><p>Market Entrance with Credit Card</p><p>Transaction Data”, Earnest, March 8,</p><p>2023, https://www.earnestanalytics.</p><p>com/temu-clv-matches-walmart/</p><p>263 Jennifer Wills, “Saying farewell</p><p>to a throwaway fashion industry”,</p><p>European Commission, October</p><p>19, 2021, https://ec.europa.eu/</p><p>research-and-innovation/en/</p><p>horizon-magazine/saying-farewell-</p><p>throwaway-fashion-industry</p><p>264 Jenna Benchetrit, “How the</p><p>Shein influencer trip marked a</p><p>turning point in the brand-sponsored</p><p>vacation trend”, CBC, June 28, 2023,</p><p>https://www.cbc.ca/news/business/</p><p>shein-influencer-trip-marketing-</p><p>trend-1.6890922</p><p>265 Krystal Hu and Arriana</p><p>McLymore, “Fast-fashion giant Shein</p><p>plans Mexico factory”, Reuters,</p><p>May 24, 2023, https://www.reuters.</p><p>com/business/retail-consumer/</p><p>fast-fashion-giant-shein-plans-</p><p>mexico-factory-sources-2023-05-24/</p><p>266 “Cassidy, Baldwin Introduce Bill</p><p>to Stop China from Taking Advantage</p><p>of Lax U.S. Trade Laws”, June 14,</p><p>2023, https://www.cassidy.senate.</p><p>gov/newsroom/press-releases/</p><p>cassidy-baldwin-introduce-bill-to-</p><p>stop-china-from-taking-advantage-of-</p><p>lax-us-trade-laws</p><p>267 “PayPal: Temu to the rescue – or</p><p>maybe not”, The Financial Times,</p><p>October 2, 2023, https://www.ft.com/</p><p>content/e7877670-c7c0-46ed-9ab5-</p><p>7f1288f432c4</p><p>268 Jing Yang, “Fashion Giant Shein</p><p>Raises $2 Billion but Lowers Valuation</p><p>by a Third”, The Wall Street Journal,</p><p>May 18, 2023, https://www.wsj.com/</p><p>articles/fashion-giant-shein-raises-</p><p>2-billion-but-lowers-valuation-by-a-</p><p>third-1f8c316b</p><p>269 Mohamed Dabo, “Shein to open</p><p>30 stores across UK”, Retail Insight</p><p>Network, May 18, 2023, https://www.</p><p>retail-insight-network.com/news/</p><p>shein-30-stores-across-uk/</p><p>270 Stefan Van Rompaey, “Shein</p><p>and Forever 21 join forces”, Retail</p><p>Detail, August 25, 2023, https://</p><p>www.retaildetail.eu/news/fashion/</p><p>shein-and-forever-21-join-forces/</p><p>271 James Davey, “Shein buys</p><p>Missguided brand from Britain’s</p><p>Frasers”, Reuters, October 30, 2023,</p><p>https://www.reuters.com/markets/</p><p>deals/shein-buys-missguided-ip-</p><p>mike-ashleys-frasers-2023-10-30/</p><p>272 Vidhi Choudhary, “Shein bets on</p><p>third-party marketplace, pop-ups to</p><p>grow its following in the U.S.”, Modern</p><p>Retail, May 23, 2023, https://www.</p><p>modernretail.co/technology/shein-</p><p>bets-on-third-party-marketplace-pop-</p><p>ups-to-grow-its-following-in-the-u-s</p><p>273 Tiffany Ap, “Temu’s Ambitions</p><p>Are Bigger Than Beating Shein”, The</p><p>Business of Fashion, Mar. 20, 2023,</p><p>https://www.businessoffashion.com/</p><p>articles/retail/temus-ambitions-are-</p><p>bigger-than-beating-shein/</p><p>274 Tiffany Ap, “How Shein Wound Up</p><p>in the Luxury Fashion Business”, The</p><p>Business of Fashion, Sept. 28, 2023,</p><p>https://www.businessoffashion.com/</p><p>articles/retail/shein-marketplace-</p><p>designer-luxury-listings/</p><p>275 Amazon Ads and Twitch Ads.</p><p>“Anatomy of Hype”, July 25, 2023,</p><p>https://advertising.amazon.com/</p><p>en-gb/library/guides/global-research-</p><p>on-fans-and-fan-engagement</p><p>276 BoF-McKinsey State of Fashion</p><p>2024 Survey</p><p>277 Diana Pearl, “The Essential Brand</p><p>Marketing Guide”, The Business</p><p>of Fashion, September 20, 2023,</p><p>https://www.businessoffashion.</p><p>com/case-studies/marketing-pr/</p><p>brand-marketing-strategy-guide-</p><p>fashion-beauty-jacquemus-coach-hill-</p><p>house-home-dae-hair/</p><p>278 Hugo Boss, “Hugo Boss With</p><p>Record Year 2022”, Mar. 9, 2023,</p><p>https://group.hugoboss.com/en/</p><p>newsroom/news/news-detail/</p><p>hugo-boss-with-record-year-2022</p><p>279 Luke Leitch, “Ermenegildo Zegna</p><p>and Fear of God Are Trying to Rewrite</p><p>the ‘Rules’ of Menswear”, Vogue,</p><p>March 2, 2020, https://www.vogue.</p><p>com/slideshow/ermenegildo-zegna-</p><p>fear-of-god-collaboration</p><p>280 Robert Williams, “How</p><p>Zegna Is Adapting to Menswear’s</p><p>Transformation”, The Business of</p><p>Fashion, April 6, 2022, https://www.</p><p>businessoffashion.com/articles/</p><p>luxury/how-zegna-is-adapting-to-</p><p>menswears-transformation/</p><p>281 Tamison O’Connor, “Ermenegildo</p><p>Zegna Sidesteps Luxury’s US</p><p>Slowdown”, The Business of</p><p>Fashion, July 27, 2023, https://www.</p><p>businessoffashion.com/articles/</p><p>luxury/ermenegildo-zegna-sidesteps-</p><p>luxurys-us-slowdown/</p><p>282 Joyce Li, “New Balance Year</p><p>Over Year Sales Have Increased 115%</p><p>in 2022”, Hypebeast, February 16,</p><p>2023, https://hypebeast.com/2023/2/</p><p>new-balance-year-over-year-sales-</p><p>report</p><p>283 Mike DeStefano, “How New</p><p>Balance Reinvented Itself”, Complex,</p><p>https://stories.complex.com/</p><p>new-balance-reinvention/</p><p>284 Joyce Li, “New Balance Year</p><p>Over Year Sales Have Increased 115%</p><p>in 2022”, Hypebeast, February 16,</p><p>2023, https://hypebeast.com/2023/2/</p><p>new-balance-year-over-year-sales-</p><p>report</p><p>285 Jonathan White, “Why is</p><p>everyone buying New Balance</p><p>sneakers? The ‘dad shoe’ is right</p><p>on trend, has had high-profile</p><p>collaborations and was worn at</p><p>the Fifa World Cup”, South China</p><p>Morning Post, January 16, 2023,</p><p>https://www.scmp.com/lifestyle/</p><p>fashion-beauty/article/3206550/</p><p>why-everyone-buying-new-balance-</p><p>sneakers-dad-shoe-right-trend-has-</p><p>had-high-profile-collaborations</p><p>286 Lyst, “The Lyst Index: Fashion’s</p><p>Hottest Brands and Products”, Q2</p><p>2023, https://www.lyst.com/data/</p><p>the-lyst-index/q223/</p><p>287 Doug Stephens, “How to Win in</p><p>Retail: Less Science, More Art”, The</p><p>Business of Fashion, August 11, 2023,</p><p>https://www.businessoffashion.com/</p><p>opinions/retail/how-to-win-in-retail-</p><p>less-science-more-art/</p><p>288 Diana Pearl, “The Essential Brand</p><p>Marketing Guide”, The Business</p><p>of Fashion, September 20, 2023,</p><p>https://www.businessoffashion.</p><p>com/case-studies/marketing-pr/</p><p>brand-marketing-strategy-guide-</p><p>fashion-beauty-jacquemus-coach-hill-</p><p>house-home-dae-hair/</p><p>289 Emily Pang, “Tiffany & Co’s</p><p>Rebranding”, Mash Mag, https://</p><p>www.uscmashmag.com/tiffany-cos-</p><p>rebranding</p><p>290 Doug Stephens, “How to Win in</p><p>Retail: Less Science, More Art”, The</p><p>Business of Fashion, August 11, 2023,</p><p>https://www.businessoffashion.com/</p><p>opinions/retail/how-to-win-in-retail-</p><p>less-science-more-art/</p><p>291 Cappasity, “How to make your</p><p>store hyperphysical with immersive</p><p>technologies”, Medium, September 29,</p><p>2022, https://cappasity.com/how-to-</p><p>make-your-store-hyperphysical-with-</p><p>immersive-technologies/</p><p>292 James Parkes, “Jacquemus creates</p><p>surrealist interpretation of his own</p><p>bathroom for Selfridges pop-up”,</p><p>Dezeen, May 11, 2022, https://www.</p><p>dezeen.com/2022/05/11/jacquemus-</p><p>le-bleu-selfridges-retail-interiors/</p><p>293 Limei Hoang, “Hyperphysical</p><p>Stores Are The Next Big Thing.</p><p>But Are They Here To Stay?”,</p><p>Luxury Society, May 24, 2022,</p><p>https://www.luxurysociety.</p><p>com/en/articles/2022/05/</p><p>hyperphysical-stores-are-next-big-</p><p>thing-are-they-here-stay</p><p>294 H&M, “H&M Teams Up with</p><p>Disney and Artist Trevor Andrew to</p><p>Create a Limited-Edition Streetwear</p><p>Capsule Collection and Immersive Art</p><p>Installation at H&M Williamsburg”,</p><p>July 22, 2023, https://www.</p><p>prnewswire.com/news-releases/</p><p>hm-teams-up-with-disney-and-artist-</p><p>trevor-andrew-to-create-a-limited-</p><p>edition-streetwear-capsule-collection-</p><p>and-immersive-art-installation-at-</p><p>hm-williamsburg-301883118.html</p><p>295 Chloe Mills, “Store gallery: Inside</p><p>PrettyLittleThing’s new ‘pink haven’</p><p>showroom”, RetailWeek, April 13, 2023,</p><p>https://www.retail-week.com/fashion/</p><p>store-gallery-inside-prettylittlethings-</p><p>new-pink-haven-showroom/7043536.</p><p>article</p><p>296 Imran Amed, “The BoF</p><p>Podcast | Why Fashion, Media and</p><p>Entertainment Are Converging”,</p><p>The Business of Fashion, August 25,</p><p>2023, https://www.businessoffashion.</p><p>com/podcasts/workplace-talent/</p><p>the-bof-podcast-why-fashion-media-</p><p>and-entertainment-are-converging/</p><p>297 Robert Williams, “LVMH Inks</p><p>Blockbuster Olympics Deal”, The</p><p>Business of Fashion, July 24, 2023,</p><p>https://www.businessoffashion.</p><p>com/articles/luxury/</p><p>lvmh-inks-blockbuster-olympics-deal/</p><p>298 “LVMH has become a Premium</p><p>Partner of the Paris 2024 Olympic and</p><p>Paralympic Games and will share its</p><p>creative excellence and craftsmanship</p><p>for key celebratory moments during</p><p>the Olympic and Paralympic Games”,</p><p>LVMH, July 24, 2023, https://</p><p>www.lvmh.com/news-documents/</p><p>press-releases/lvmh-has-become-</p><p>a-premium-partner-of-the-paris-</p><p>2024-olympic-and-paralympic-</p><p>games-and-will-share-its-creative-</p><p>excellence-and-craftsmanship-for-</p><p>key-celebratory-moments-during-</p><p>the-olympic-and-paralympic/</p><p>123</p><p>299 “Pinault Buys Majority Stake in</p><p>Talent Agency CAA”, The Business</p><p>of Fashion, September 7, 2023,</p><p>https://www.businessoffashion.</p><p>com/articles/luxury/</p><p>pinault-buys-majority-stake-in-caa/</p><p>300 Jacob Gronholt-pedersen, “EU</p><p>wants all textile waste rules in place</p><p>by 2028, commissioner says,” Reuters,</p><p>June 27, 2023, https://www.reuters.</p><p>com/sustainability/eu-wants-all-</p><p>textile-waste-rules-place-by-2028-</p><p>commissioner-2023-06-27/</p><p>301 European Commission,</p><p>“Communication from the</p><p>Commission to the European</p><p>Parliament: EU Strategy for</p><p>Sustainable and Circular Textiles”,</p><p>March 30, 2022, https://eur-lex.</p><p>europa.eu/legal-content/EN/TXT/</p><p>HTML/?uri=CELEX:52022DC0141</p><p>302 European Commission,</p><p>“How is the EU making fashion</p><p>more sustainable?”, https://</p><p>environment.ec.europa.eu/topics/</p><p>circular-economy/reset-trend/</p><p>how-eu-making-fashion-sustainable_en</p><p>303 Sandy Ong, “Asian garment</p><p>makers call for more help from</p><p>brands to adapt as Europe calls time</p><p>on fast fashion”, Reuters, August</p><p>23, 2023, https://www.reuters.</p><p>com/sustainability/society-equity/</p><p>asian-garment-makers-call-more-</p><p>help-brands-adapt-europe-calls-time-</p><p>fast-fashion-2023-08-23/</p><p>304 Sandy Ong, “Asian garment</p><p>makers call for more help from</p><p>brands to adapt as Europe calls time</p><p>on fast fashion”, Reuters, August</p><p>23, 2023, https://www.reuters.</p><p>com/sustainability/society-equity/</p><p>asian-garment-makers-call-more-</p><p>help-brands-adapt-europe-calls-time-</p><p>fast-fashion-2023-08-23/</p><p>305 Ellen MacArthur Foundation,</p><p>“An Introduction to Circular</p><p>Design”, June 6 2022, https://www.</p><p>ellenmacarthurfoundation.org/news/</p><p>an-introduction-to-circular-design</p><p>306 European Commission,</p><p>“Ecodesign for Sustainable</p><p>Products Regulation”, https://</p><p>commission.europa.eu/energy-</p><p>climate-change-environment/</p><p>standards-tools-and-labels/products-</p><p>labelling-rules-and-requirements/</p><p>sustainable-products/ecodesign-</p><p>sustainable-products-regulation_en</p><p>307 European Commission,</p><p>“Green Claims Directive”, https://</p><p>environment.ec.europa.eu/topics/</p><p>circular-economy/green-claims_en</p><p>308 Elena Pappas, “Latest Trend</p><p>Keeps Clothes Out of Landfill”,</p><p>European Commission, October</p><p>20, 2021, https://ec.europa.</p><p>eu/research-and-innovation/</p><p>en/horizon-magazine/</p><p>latest-trend-keeps-clothes-out-landfill</p><p>309 Saskia Hedrich, Jonatan Janmark,</p><p>Moa Strand, Nikolai Langguth and</p><p>Karl-Hendrick Magnus, ”Scaling</p><p>Textile Recycling in Europe — Turning</p><p>Waste Into Value”, McKinsey, July</p><p>14, 2022, https://www.mckinsey.</p><p>com/industries/retail/our-insights/</p><p>scaling-textile-recycling-in-europe-</p><p>turning-waste-into-value</p><p>310 Olivia Rockeman, “A slew</p><p>of countries are asking fashion</p><p>companies to pay for recycling</p><p>programs as clothing waste</p><p>becomes overwhelming”,</p><p>Fortune, March 30, 2023, https://</p><p>fortune.com/2023/05/30/</p><p>fashion-waste-recycling-programs-</p><p>epr-proposed-laws/</p><p>311 European Commission, “Circular</p><p>Economy for Textiles: Taking</p><p>Responsibility to Reduce, Reuse,</p><p>and Recycle Textile Waste and</p><p>Boosting Markets for Used Textiles”,</p><p>July 5, 2023, https://ec.europa.eu/</p><p>commission/presscorner/detail/en/</p><p>ip_23_3635</p><p>312 Lidia Luttin, “Full Overview of the</p><p>EU Textile Strategy and Regulations”,</p><p>Carbonfact, October 2, 2023, https://</p><p>www.carbonfact.com/blog/policy/</p><p>eu-regulations-for-textile-brands</p><p>313 Helen Reid, “New EU</p><p>sustainability reporting rules are</p><p>a challenge, says Puma,” Reuters,</p><p>September 6, 2023, https://www.</p><p>reuters.com/sustainability/</p><p>reuters-impact-new-eu-sustainability-</p><p>reporting-rules-are-challenge-says-</p><p>puma-2023-09-06/</p><p>314 Norton Rose, “Directive on</p><p>Green Claims”, May 2023, https://</p><p>www.nortonrosefulbright.com/en/</p><p>knowledge/publications/95a13d01/</p><p>green-claims</p><p>315 Trustrace, “About Us: Traceability</p><p>for Responsible Supply Chains”,</p><p>https://trustrace.com/about-us</p><p>316 McKinsey analysis, August 2023</p><p>317 Kering, https://www.kering.com/</p><p>en/news/mil-a-laboratory-for-more-</p><p>sustainable-materials/</p><p>318 Sarah Kent, “Would You Buy a</p><p>Mushroom Handbag?” The Business</p><p>of Fashion, May 23, 2022, https://</p><p>www.businessoffashion.com/articles/</p><p>sustainability/would-you-buy-a-</p><p>mushroom-handbag/</p><p>319 Renewcell Annual Report 2022,</p><p>https://www.renewcell.com/en/</p><p>financial-reports-and-presentations/</p><p>320 Sarah Kent, “Recycler Renewcell</p><p>Replaces CEO Amid Weak Sales”, The</p><p>Business of Fashion, October 16, 2023,</p><p>https://www.businessoffashion.com/</p><p>news/sustainability/renewcell-ceo-</p><p>replace-textile-recycling/</p><p>321 Sandy Ong, “Asian garment</p><p>makers call for more help from</p><p>brands to adapt as Europe calls time</p><p>on fast fashion”, Reuters, August</p><p>23, 2023, https://www.reuters.</p><p>com/sustainability/society-equity/</p><p>asian-garment-makers-call-more-</p><p>help-brands-adapt-europe-calls-time-</p><p>fast-fashion-2023-08-23/</p><p>322 The New York Fashion Act,</p><p>https://www.thefashionact.org/</p><p>323 UK Green Claims Code, https://</p><p>greenclaims.campaign.gov.uk/; “An</p><p>Energy Sector Roadmap to Carbon</p><p>Neutrality in China”, IEA, September</p><p>2021, https://www.iea.org/reports/</p><p>an-energy-sector-roadmap-to-carbon-</p><p>neutrality-in-china</p><p>324 Sarah Kent, “The United</p><p>Nations to Fashion: Stop Pushing</p><p>Overconsumption”, The Business</p><p>of Fashion, June 28, 2023,</p><p>https://www.businessoffashion.</p><p>com/articles/sustainability/</p><p>fashion-marketing-sustainability-</p><p>greenwashing-un-unep-charter/</p><p>325 United Nations Environment</p><p>Programme and UN Climate</p><p>Change’s Fashion Industry Charter</p><p>for Climate Action, “The Sustainable</p><p>Fashion Communication Playbook”,</p><p>June 2023, https://www.unep.org/</p><p>interactives/sustainable-fashion-</p><p>communication-playbook/</p><p>326 Hau L. Lee, V. Padmanabhan,</p><p>Seungjin Whang, “The Bullwhip</p><p>Effect in Supply Chains”, MIT Sloan</p><p>Management Review, April 15, 1997,</p><p>https://sloanreview.mit.edu/article/</p><p>the-bullwhip-effect-in-supply-chains/</p><p>327 Colleen Baum, Michael Hauer,</p><p>Aniket Joglekar, Alessandro Turco,</p><p>“Thinking beyond markdowns</p><p>to tackle retail’s inventory glut”,</p><p>McKinsey & Company, May 8,</p><p>2023, https://www.mckinsey.com/</p><p>industries/retail/our-insights/</p><p>thinking-beyond-markdowns-to-</p><p>tackle-retails-inventory-glut</p><p>328 UN Comtrade Export Analysis,</p><p>September 2023</p><p>329 McKinsey internal expert</p><p>interviews</p><p>330 “Swiss textile machinery firm</p><p>Rieter to cut at least 300 jobs”,</p><p>Swiss Info, July 20, 2023, https://</p><p>www.swissinfo.ch/eng/business/</p><p>swiss-textile-machinery-firm-rieter-</p><p>to-cut-at-least-300-jobs/48675726</p><p>331 “Pakistan’s economic woes leave</p><p>textile industry in tatters”, The</p><p>Economic Times, August 6, 2023,</p><p>https://economictimes.indiatimes.</p><p>com/news/international/world-news/</p><p>pakistans-economic-woes-leave-</p><p>textile-industry-in-tatters/</p><p>articleshow/102466381.cms</p><p>332 “Textile mills under crisis, yarn</p><p>production suspended”, The Times</p><p>of India, July 17, 2023, https://</p><p>timesofindia.indiatimes.com/</p><p>videos/news/tn-textile-mills-under-</p><p>crisis-yarn-production-suspended/</p><p>videoshow/101817453.cms</p><p>333 “Indian Textile Exports Shrink,</p><p>Mills Facing Cash Crunch”, Maritime</p><p>Getaway, July 17, 2023, https://</p><p>www.maritimegateway.com/</p><p>indian-textile-exports-shrink-mills-</p><p>facing-cash-crunch</p><p>334 Marrian Zhou, “Factory strikes</p><p>flare up in China as economic</p><p>woes deepen”, Nikkei Asia, August</p><p>28, 2023, https://asia.nikkei.</p><p>com/Business/Business-trends/</p><p>Factory-strikes-flare-up-in-China-as-</p><p>economic-woes-deepen</p><p>335 “Bangladesh: Over 300 factories</p><p>incl. garment factories close, leaving</p><p>over 44000 workers unemployed”,</p><p>Business and Human Rights Resource</p><p>Centre, https://www.business-</p><p>humanrights.org/en/latest-news/</p><p>bangladesh-over-300-factories-incl-</p><p>garment-factories-close-leaving-over-</p><p>44000-workers-unemployed/</p><p>336 McKinsey CPO Survey 2024,</p><p>October 2023</p><p>337 12 McKinsey internal expert</p><p>interviews</p><p>338 Mark Barnes, “Vietnamese</p><p>Garment Makets Hit Snag: Omen or</p><p>Opportunity?”, Vietnam Briefing,</p><p>November 11, 2022, https://www.</p><p>vietnam-briefing.com/news/</p><p>vietnamese-garment-makers-hit-</p><p>snag-omen-or-opportunity.html/</p><p>339 McKinsey CPO Survey 2024 of</p><p>34 global Chief Procurement Officers,</p><p>October 2023</p><p>340 Anna Granskog, Libbi Lee, “The</p><p>fashion industry can reduce emissions</p><p>across the entire value chain”,</p><p>McKinsey & Company, October 19,</p><p>2020, https://www.mckinsey.com/</p><p>capabilities/sustainability/our-insights/</p><p>sustainability-blog/the-fashion-</p><p>industry-can-reduce-emissions-</p><p>across-the-entire-value-chain</p><p>341 Jaee Nikam, “Gaps, challenges</p><p>and drivers for environmentally</p><p>sustainable textile and garment</p><p>manufacturing in India”, Stockholm</p><p>Environment Institute, May 25, 2023,</p><p>https://www.sei.org/publications/</p><p>environmentally-sustainable-textile-</p><p>garment-manufacturing-india/</p><p>342 Jared Paben, “Despite textiles</p><p>slump, Unifi ups domestic RPET</p><p>sales”, Plastics Recycling, August 29,</p><p>2023, https://resource-recycling.</p><p>com/plastics/2023/08/29/</p><p>despite-textiles-slump-unifi-ups-</p><p>domestic-rpet-sales/</p><p>343 Oliver Pike, “What Companies</p><p>Within and Outside the EU Can</p><p>Expect of New EU ESG Regulations,”</p><p>Thomson Reuters, May 4, 2023,</p><p>https://www.thomsonreuters.com/</p><p>en-us/posts/esg/csrd-esg-regulations/</p><p>344 McKinsey CPO Survey 2024 of</p><p>34 global Chief Procurement Officers,</p><p>October 2023</p><p>345 Adidas, https://www.adidas-</p><p>group.com/en/sustainability/</p><p>social-impacts/supply-chain/#/</p><p>training-and-empowering-suppliers/</p><p>346 PVH, “Advance Human Rights”,</p><p>https://www.pvh.com/responsibility/</p><p>124</p><p>The State of Fashion 2024</p><p>human-rights</p><p>347 Tanya Klich, “Louis Vuitton Raises</p><p>Prices Worldwide Due To Increased</p><p>Costs And Inflation”, Forbes, Feb</p><p>15, 2022, https://www.forbes.com/</p><p>sites/tanyaklich/2022/02/15/</p><p>louis-vuitton-raises--prices-</p><p>worldwide-due-to-increased-costs-</p><p>and-inflation/?sh=1fecb6946878</p><p>348 Corina Pons, “Inditex profit jumps</p><p>as Zara owner lifts prices”, Reuters,</p><p>Dec. 14, 2022, https://www.reuters.</p><p>com/business/retail-consumer/</p><p>inditex-9-month-profit-jumps-</p><p>increases-fashion-prices-2022-</p><p>12-14/#:~:text=MADRID%2C%20</p><p>Dec%2014%20</p><p>(Reuters),weakening%20global%20</p><p>demand%20for%20clothing.</p><p>349 Walter Loeb, “Uniqlo Will Raise</p><p>Prices As Japan Shifts Attitude On</p><p>Holding Prices”, Forbes, Jan. 13,</p><p>2022 https://www.forbes.com/sites/</p><p>walterloeb/2022/01/13/uniqlo-will-</p><p>raise-prices-as-japan-shifts-attitude-</p><p>on-holding-prices/?sh=5201c1757454</p><p>350 BoF-McKinsey, “The State of</p><p>Fashion 2023”, https://www.mckinsey.</p><p>com/~/media/mckinsey/industries/</p><p>retail/our%20insights/state%20</p><p>of%20fashion/2023/the-state-of-</p><p>fashion-2023-holding-onto-growth-</p><p>as-global-clouds-gathers-vf.pdf</p><p>351 LVMH, “New record year</p><p>for LVMH in 2022”, January 26,</p><p>2023, https://www.lvmh.com/</p><p>news-documents/press-releases/</p><p>new-record-year-for-lvmh-</p><p>in-2022/#:~:text=LVMH%20</p><p>Mo%C3%ABt%20Hennessy%20</p><p>Louis%20Vuitton,see%20table%20</p><p>on%20page%203).</p><p>352 Hermès, “Hermès International:</p><p>2022 Full Year Results”, Bloomberg</p><p>News, February 17, 2023,</p><p>https://www.bloomberg.com/</p><p>press-releases/2023-02-17/hermes-</p><p>international-2022-full-year-results</p><p>353 Gap Inc, “Fourth Quarter Fiscal</p><p>2022 - Financial Results”, March 9,</p><p>2023, https://www.gapinc.com/en-us/</p><p>articles/2023/03/gap-inc-reports-</p><p>fourth-quarter-and-fiscal-2022-res</p><p>354 Hermes, “Sales momentum and</p><p>particularly robust results in 2022”,</p><p>February 17th, 2023, https://assets-</p><p>finance.hermes.com/s3fs-public/</p><p>node/pdf_file/2023-02/1676575550/</p><p>hermes_20230217_pr_2022fullyear</p><p>results_va.pdf; Richemont, “Annual</p><p>report and accounts”, 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Announces Fourth Quarter</p><p>and Full Year Fiscal 2022 Results”</p><p>March 28, 2023, https://corporate.</p><p>lululemon.com/media/press-</p><p>releases/2023/03-28-2023-210523147</p><p>356 Lauren Thomas, “Macy’s</p><p>to close 125 stores, cut 2,000</p><p>corporate jobs, in hunt for growth”,</p><p>CNBC, February 4, 2020, https://</p><p>www.cnbc.com/2020/02/04/</p><p>macys-to-close-125-stores-sees-480-</p><p>million-in-restructuring-costs-to-</p><p>2000-corporate-jobs.html</p><p>357 Walter Loeb, “Dillard’s</p><p>Reports Year End 2022 Results”,</p><p>Forbes, February 21, 2023,</p><p>https://www.forbes.com/</p><p>sites/walterloeb/2023/02/21/</p><p>dillards-reports-year-end-2022-</p><p>results/?sh=23504555115c</p><p>358 Tapestry, “TAPESTRY, INC.</p><p>REPORTS FISCAL 2022 FOURTH</p><p>QUARTER AND FULL YEAR</p><p>RESULTS”, August 18, 2022, https://</p><p>tapestry.gcs-web.com/news-releases/</p><p>news-release-details/tapestry-</p><p>inc-reports-fiscal-2022-fourth-</p><p>quarter-and-full-year#:~:text=In%20</p><p>Fiscal%202022%2C%20</p><p>Tapestry%20returned,cost%20of%20</p><p>%2438.08%20per%20share.</p><p>359 Maliha Shoaib, “Tapestry raises</p><p>outlook as sales climb 27 per cent”,</p><p>Vogue Business, Feb.10, 2022, https://</p><p>www.voguebusiness.com/companies/</p><p>tapestry-raises-outlook-as-sales-</p><p>climb-27-per-cent#:~:text=In%20</p><p>2021%20Tapestry%20introduced%20</p><p>its,compared%20to%20</p><p>pre%2Dpandemic%20levels.</p><p>360 Crocs, “Crocs, Inc. Reports</p><p>Record Annual Revenues of $3.6</p><p>Billion, Growing 54% Over 2021”,</p><p>February 16, 2023, https://investors.</p><p>crocs.com/news-and-events/press-</p><p>releases/press-release-details/2023/</p><p>Crocs-Inc.-Reports-Record-</p><p>Annual-Revenues-of-3.6-Billion-</p><p>Growing-54-Over-2021/default.</p><p>aspx#:~:text=2022%20Brand%20</p><p>Summary,on%20a%20constant%20</p><p>currency%20basis.</p><p>361 Signet Jewelers, “Signet</p><p>Jewelers Reports Strong Fiscal</p><p>2022 Results and Market Share</p><p>Gains”, March 17, 2022, https://</p><p>www.signetjewelers.com/</p><p>investors/financial-news-releases/</p><p>financial-news-release/2022/</p><p>SIGNET-JEWELERS-REPORTS-</p><p>STRONG-FISCAL-2022-RESULTS-</p><p>AND-MARKET-SHARE-</p><p>GAINS/#:~:text=income%20this%20</p><p>quarter.-,Full%20Year%20Fiscal%20</p><p>2022%20Results%3A,and%20up%20</p><p>101.4%25%20to%20FY20.</p><p>362 Cathaleen Chen, “The New Rules</p><p>of Off-Price Retail”, The Business of</p><p>Fashion, August 2, 2022, https://www.</p><p>businessoffashion.com/articles/retail/</p><p>off-price-retail-inflation-tjmaxx/</p><p>363 Pamela N. Danziger, “Luxury</p><p>Brands See Drop In U.S., Where</p><p>Aspirational Consumers Put New</p><p>Purchases On Hold”, Forbes, July</p><p>29, 2023, https://www.forbes.com/</p><p>sites/pamdanziger/2023/07/29/</p><p>luxury-leaders-sales-drop-in-us-as-</p><p>-aspirational-consumers-put-new-</p><p>purchases-on-hold/?sh=47607a07415c</p><p>364 LVMH, “Excellent first half</p><p>for LVMH”, Jul.25, 2023, https://</p><p>www.lvmh.com/news-documents/</p><p>press-releases/excellent-first-half-for-</p><p>lvmh-july-2023/#:~:text=Profit%20</p><p>from%20recurring%20</p><p>operations%20for,at%20</p><p>%E2%82%AC8%20481%20million;</p><p>Hermès, “Excellente performance</p><p>des ventes et des résultats au 1er</p><p>semestre”, Jul.28, 2023, https://assets-</p><p>finance.hermes.com/s3fs-public/</p><p>node/pdf_file/2023-07/1690487668/</p><p>hermes_20230728_cp_</p><p>resultatspremiersemestre_vf.pdf</p><p>365 Prada Group, “PRADA</p><p>S.P.A. APPROVES RESULTS</p><p>AS OF 30 JUNE 2023”, 27</p><p>July, 2023, https://www.</p><p>pradagroup.com/en/news-media/</p><p>news-section/23-07-27-prada-</p><p>group-financial-results-h1-2023.</p><p>html; Hugo Boss, “First Half Year</p><p>Report 2023”, Jul.19, 2023, https://</p><p>group.hugoboss.com/en/investors/</p><p>publications/results; Moncler Group,</p><p>“GROUP H1 2023 REVENUES</p><p>REACH OVER 1.1 BILLION EUROS</p><p>(+24% cFX) MONCLER BRAND</p><p>ACCELERATES TO +32% IN THE</p><p>SECOND QUARTER”, Jul.26, 2023,</p><p>https://d2jb2t40p81ydg.cloudfront.</p><p>net/wp-content/uploads/2016/07/</p><p>Moncler-Group-Press-</p><p>Release-H1-2023.pdf</p><p>366 Adrienne Klasa, Andrew</p><p>Edgecliffe-Johnson ans Silin Chen,</p><p>“Luxury sector slows after ‘bonkers’</p><p>post-pandemic spending spree”,</p><p>Financial Times, July 30, 2023,</p><p>https://www.ft.com/content/</p><p>ace8104d-ae80-4969-949b-</p><p>62d301239d29</p><p>367 Adrienne Klasa, “LVMH shares hit</p><p>as slowdown prompts fears of end to</p><p>‘roaring 20s’ luxury boom”, Financial</p><p>Times, October 11, 2023, https://www.</p><p>ft.com/content/ce43b24e-89ab-44de-</p><p>b380-2b21fa14a8ad</p><p>368 On, “On Reports Results for the</p><p>Second Quarter and Six-Month Period</p><p>Ended June 30, 2023”, August 15,</p><p>2023, https://investors.on-running.</p><p>com/financials-and-filings/financial-</p><p>releases/news-details/2023/</p><p>On-Reports-Results-for-the-Second-</p><p>Quarter-and-Six-Month-Period-</p><p>Ended-June-30-2023/default.aspx;</p><p>Asics, “Summary of Consolidated</p><p>Financial Statements For the</p><p>Second Quarter Ended June 30,</p><p>2023”, Bloomberg, August 8, 2023,</p><p>https://assets.asics.com/system/</p><p>libraries/1678/Summary%20of%20</p><p>Consolidated%20Financial%20</p><p>Statements%20For%20the%20</p><p>Second%20Quarter%20Ended%20</p><p>June%2030,%202023%20%28Japan</p><p>%20GAAP%29.pdf?_ga=2.168582819</p><p>.389462457.1697710474-1421286703.</p><p>1697710474 Lululemon, “Q2 Fiscal</p><p>2023 Earnings Commentary”, August</p><p>21, 2023, https://corporate.lululemon.</p><p>com/~/media/Files/L/Lululemon/</p><p>investors/results-center/2q23-</p><p>financial-supplement.pdf</p><p>369 Kim Bhasin, “Nike Jumps as</p><p>Profit, Inventory Results Ease</p><p>Demand Fears”, Bloomberg,</p><p>September 11, 2023, https://</p><p>www.bloomberg.com/news/</p><p>articles/2023-09-28/nike-rises-</p><p>after-reporting-its-inventory-glut-is-</p><p>easing?utm_source=website&utm_</p><p>medium=share&utm_campaign=email</p><p>370 Samsonite, “Samsonite</p><p>International S.A. Announces Results</p><p>for the Six Months Ended June 30,</p><p>2023”, August 16, 2023, https://</p><p>corporate.samsonite.com/en/press-</p><p>releases.html</p><p>371 Pamela N. Danziger, “Luxury</p><p>Brands See Drop In U.S., Where</p><p>Aspirational Consumers Put New</p><p>Purchases On Hold”, Forbes, July</p><p>29, 2023, https://www.forbes.com/</p><p>sites/pamdanziger/2023/07/29/</p><p>luxury-leaders-sales-drop-in-us-as-</p><p>-aspirational-consumers-put-new-</p><p>purchases-on-hold/?sh=47607a07415c</p><p>372 Anta Sports “ANTA SPORTS</p><p>PRODUCTS LIMITED ANNUAL</p><p>REPORT 2022”, 2022, https://</p><p>manager.wisdomir.com/files/394/2</p><p>023/0330/20230330183001_755951</p><p>62_en.pdf</p><p>373 Boohoo Group Plc, Annual</p><p>Report 2022, page 22, https://</p><p>www.boohooplc.com/sites/</p><p>boohoo-corp/files/2022-05/boohoo-</p><p>com-plc-annual-report-2022.</p><p>pdf; Cathrin Schaer, “After 2022</p><p>Sales Slowdown, Zalando Plans to</p><p>Combat Post-pandemic Hangover”,</p><p>WWD, Mar. 7, 2023, https://wwd.</p><p>com/business-news/financial/</p><p>zalando-negative-sales-growth-</p><p>for-1235571398/; Asos plc, “Final</p><p>results for the year to 31 August 2022”,</p><p>https://www.asosplc.com/news/</p><p>final-results-year-31-august-2022/;</p><p>About You Holding, “About You</p><p>Reports Solid Performance and</p><p>Reiterates Break-even Target for FY</p><p>2023/2024 despite a Challenging</p><p>Market Environment”, May 11,</p><p>2023, https://ir.aboutyou.de/</p><p>download/companies/58027/</p><p>Pressreleases/23-5-11_PressRelease_</p><p>AY_EN.PDF</p><p>—</p><p>Editor’s Note: This report was</p><p>corrected on Nov. 29, 2023, to clarify</p><p>the dates of Musinsa store openings.</p><p>125</p><p>The Business of Fashion is a next-generation media company recognised around the world for its</p><p>authoritative, analytical point of view on the global fashion industry. Serving members in more</p><p>than 125 countries, BoF combines independent, agenda-setting journalism with practical business</p><p>advice, online learning, career-building tools and immersive events and experiences designed to</p><p>open, inform and connect the global fashion community.</p><p>FOR EDITORIAL ENQUIRIES PLEASE CONTACT:</p><p>Imran Amed</p><p>Founder, CEO & Editor-in-Chief</p><p>ceo.office@businessoffashion.com</p><p>Vikram Alexei Kansara</p><p>Editorial Director</p><p>vikram.kansara@businessoffashion.com</p><p>Brian Baskin</p><p>Deputy Editor</p><p>brian.baskin@businessoffashion.com</p><p>Janet Kersnar</p><p>Executive Editor</p><p>janet.kersnar@businessoffashion.com</p><p>Hannah Crump</p><p>Associate Director of Strategy</p><p>hannah.crump@businessoffashion.com</p><p>FOR COMMERCIAL ENQUIRIES PLEASE CONTACT:</p><p>Nick Blunden</p><p>President</p><p>nick.blunden@businessoffashion.com</p><p>Rahul Malik</p><p>Managing Director, North America and</p><p>Head of New Business</p><p>rahul.malik@businessoffashion.com</p><p>Johanna Stout</p><p>Head of Brand and Community Partnerships</p><p>johanna.stout@businessoffashion.com</p><p>Matthew Cullen</p><p>Head of Business Development and BoF Careers</p><p>matthew.cullen@businessoffashion.com</p><p>FOR PRESS ENQUIRIES PLEASE CONTACT:</p><p>Jael Fowakes</p><p>Associate Director, Brand and Community</p><p>jael.fowakes@businessoffashion.com</p><p>Liam Johnson</p><p>Senior Account Director</p><p>liam.johnson@camronglobal.com</p><p>126</p><p>For questions on the report or further discussions, please contact</p><p>a member of McKinsey’s global consumer leadership team:</p><p>FOR REPORT ENQUIRIES:</p><p>Achim Berg</p><p>Senior Partner, Global</p><p>achim_berg@mckinsey.com</p><p>Gemma D’Auria</p><p>Senior Partner, Global</p><p>gemma_dauria@mckinsey.com</p><p>Anita Balchandani</p><p>Senior Partner, EMEA/United</p><p>Kingdom</p><p>anita_balchandani@mckinsey.com</p><p>Felix Rölkens</p><p>Partner, Germany</p><p>felix_roelkens@mckinsey.com</p><p>FOR PRESS ENQUIRIES PLEASE CONTACT:</p><p>Linda Dommes</p><p>Senior Communication Specialist</p><p>linda_dommes@mckinsey.com</p><p>Corinne Teschner</p><p>Communication Specialist</p><p>corinne_teschner@mckinsey.com</p><p>FOR REGIONALLY FOCUSED ENQUIRIES:</p><p>Americas</p><p>Sandrine Devillard</p><p>Senior Partner, North America</p><p>sandrine_devillard@mckinsey.com</p><p>Jennifer Schmidt</p><p>Senior Partner, North America</p><p>jennifer_schmidt@mckinsey.com</p><p>Sajal Kohli</p><p>Senior Partner, North America</p><p>sajal_kohli@mckinsey.com</p><p>Joëlle Grunberg</p><p>Partner, North America</p><p>joelle_grunberg@mckinsey.com</p><p>Colleen Baum</p><p>Partner, North America</p><p>colleen_baum@mckinsey.com</p><p>Pamela Brown</p><p>Partner, North America</p><p>pamela_brown@mckinsey.com</p><p>Fernanda Hoefel</p><p>Partner, Latin America</p><p>fernanda_hoefel@mckinsey.com</p><p>EMEA</p><p>Holger Harreis</p><p>Senior Partner, Germany</p><p>holger_harreis@mckinsey.com</p><p>Karl-Hendrik Magnus</p><p>Senior Partner, Germany</p><p>karl-hendrik_magnus@mckinsey.com</p><p>Franck Laizet</p><p>Senior Partner, France</p><p>franck_laizet@mckinsey.com</p><p>Clarisse Magnin</p><p>Senior Partner, France</p><p>clarisse_magnin@mckinsey.com</p><p>Antonio Gonzalo</p><p>Partner, Iberia</p><p>antonio_gonzalo@mckinsey.com</p><p>Carlos Sánchez Altable</p><p>Partner, Iberia</p><p>carlos_sanchez_altable@mckinsey.com</p><p>Patrick</p><p>Klinkoff</p><p>Partner, Austria</p><p>patrick_klinkoff@mckinsey.com</p><p>Alexander Thiel</p><p>Partner, Switzerland</p><p>alexander_thiel@mckinsey.com</p><p>Jonatan Janmark</p><p>Partner, Nordics</p><p>jonatan_janmark@mckinsey.com</p><p>Nitasha Walia</p><p>Partner, Middle East</p><p>nitasha_walia@mckinsey.com</p><p>Asia-Pacific</p><p>Daniel Zipser</p><p>Senior Partner, Greater China</p><p>daniel_zipser@mckinsey.com</p><p>Asina de Branche</p><p>Partner, Greater China</p><p>asina_de_branche@mckinsey.com</p><p>Younghoon Kang</p><p>Partner, Korea</p><p>younghoon_kang@mckinsey.com</p><p>Naoyuki Iwatani</p><p>Senior Partner, Japan</p><p>naoyuki_iwatani@mckinsey.com</p><p>Alex Sawaya</p><p>Senior Partner, Hong Kong</p><p>alex_sawaya@mckinsey.com</p><p>127</p><p>128</p><p>The State of Fashion 2024</p><p>of fashion</p><p>executives think</p><p>sustainability</p><p>regulations will impact</p><p>their businesses in 2024</p><p>73% of chief</p><p>procurement officers</p><p>cited demand volatility</p><p>as a dynamic that</p><p>may impact supplier</p><p>relationships in the next</p><p>five years</p><p>FASHION SYSTEM</p><p>The State of Fashion 2024</p><p>7171%%</p><p>8787%%</p><p>4040%% 7373%%7373%</p><p>Global</p><p>Economy</p><p>01. Fragmented Future</p><p>02. Climate Urgency</p><p>01.</p><p>Fragmented</p><p>Future</p><p>In 2024, the global economic outlook will likely</p><p>continue to be unsettled. As new and ongoing</p><p>financial, geopolitical and other challenges weigh</p><p>heavily on consumer confidence, fashion markets</p><p>in the US, Europe and China are facing differing</p><p>headwinds, requiring suppliers, brands and</p><p>retailers to bolster contingency planning, among</p><p>other measures.</p><p>KEY INSIGHTS</p><p>• Global GDP growth is set to slow to 2.9 percent in 2024, down</p><p>from 3 percent in 2023 and 3.5 percent in 2022.</p><p>• Consumer spending may be tempered in the year ahead. In the</p><p>third quarter of 2023, net intent to purchase apparel was 7 percent</p><p>in China, but negative 25 in the US and negative 29 in Europe.</p><p>• Emerging Asia provides potential growth spots, with</p><p>India’sinvestment activity, domestic demand and developing</p><p>infrastructure making it a promising market for fashion.</p><p>21</p><p>Global Economy</p><p>Consumers around the world might be mistaken if</p><p>they believe 2024 will offer a chance to catch their</p><p>collective breath after enduring a post-pandemic</p><p>period of turbulence. Universally, slowing growth,</p><p>new and continued geopolitical conflict, and</p><p>consumer spending pressures are likely to define</p><p>economic prospects. And as in previous times, the</p><p>impacts will likely not be felt uniformly as market</p><p>responses diverge.</p><p>As 2023 rolls towards its end, forecasters have</p><p>readjusted their outlooks as the strains of high</p><p>inflation and subsequent interest rate hikes showed</p><p>few signs of falling closer to target levels. By October,</p><p>the International Monetary Fund’s forecast put</p><p>global GDP growth at 2.9 percent in 2024, down</p><p>from 3 percent in 2023 and 3.5 percent in 2022.24 The</p><p>IMF cites slowdowns in advanced economies as the</p><p>primary culprit.</p><p>Inflation, still remaining high, will likely</p><p>continue to be in the limelight. According to the IMF,</p><p>the global headline inflation rate is set to fall to 5.8</p><p>percent in 2024, from 6.9 percent in 2023 and 8.7</p><p>percent in 2022.25 Against this backdrop, officials</p><p>at the US Federal Reserve Bank are among those at</p><p>central banks who expect interest rates to remain</p><p>“higher for longer.”26 27</p><p>What will likely differentiate 2024 from the</p><p>past few years is that consumers in key economies</p><p>may be confronting different challenges from each</p><p>other, thus creating additional complexity for</p><p>fashion executives steering their companies through</p><p>headwinds from region to region.</p><p>In Europe, the economic picture is gloomy, as it</p><p>continues to struggle under the shadow of the war</p><p>in Ukraine. By the second quarter of 2023, Europe’s</p><p>biggest economy, Germany, saw growth stagnate,</p><p>and the risk of a second recession within a year is still</p><p>hovering.28 29 Meanwhile, in the UK, Europe’s second-</p><p>largest economy, growth was slow as the economy</p><p>attempted to shrug off 2022’s surge in inflation and</p><p>adjust to 14 consecutive interest rate hikes.30 31</p><p>GDP growth in the euro zone is set to remain</p><p>low, seeing only a tentative rise in 2024 — from 0.7</p><p>percent in 2023 to 1.2 percent in 2024, according</p><p>to the IMF.32 A monthly euro-zone survey by the</p><p>European Commission found that consumer</p><p>A pedestrian on The Bund in Shanghai, C</p><p>hina. G</p><p>etty Im</p><p>ages.</p><p>1 Europe includes respondents from France, Germany, Italy, Spain and the UK</p><p>Source: McKinsey ConsumerWise Global Sentiment Data</p><p>Exhibit 4</p><p>Consumers in Europe and the US plan to reduce</p><p>apparel spend, while China’s is expected to rise</p><p>Net intent to spend on apparel over 3 months to end-December 2023,</p><p>%</p><p>−29Europe1</p><p>−25US</p><p>7China</p><p>22</p><p>The State of Fashion 2024</p><p>confidence hit a six-month low in September.33 The</p><p>euro zone’s ongoing cost-of-living crisis is straining</p><p>many households, alongside continued higher core</p><p>inflation rates compared to the US.34 35</p><p>In the US, where Federal Reserve policies appear</p><p>to have averted outright recession and achieved lower</p><p>levels of inflation, growth prospects seem slightly</p><p>brighter than those in Europe. However, GDP growth</p><p>is expected to slow next year, from 2.1 percent down</p><p>to 1.5 percent.36</p><p>Various events in the second half of 2023</p><p>underscored the fragility of consumer confidence</p><p>in the country. For example, in October US policy</p><p>makers lifted the three-year freeze on student-loan</p><p>repayments,37 leaving 37 percent of respondents to a</p><p>Morgan Stanley survey anticipating that they would</p><p>have to cut spending in order to make payments,</p><p>while 34 percent said they would not be able to make</p><p>payments at all.38 Earlier in the year, credit card debt</p><p>reached an all-time high of $1.03 trillion, according</p><p>to central bank research, with high interest rates and</p><p>financing charges also contributing to headwinds.39</p><p>In China, 2023 held different economic</p><p>pressures. The economy moved into deflation, and an</p><p>ongoing crisis in the property market — which drives</p><p>25 percent of China’s economy — left apartment</p><p>sales in August 47 percent below 2019 levels.40 41</p><p>Major property companies are buckling under the</p><p>weight of unsustainable debts and losses.42 Youth</p><p>unemployment has been high, hitting 20.8 percent in</p><p>May (the latest date that China’s National Bureau of</p><p>Statistics published new figures).43</p><p>Chinese consumers have continued building up</p><p>savings, while a return to spending has been slow.44</p><p>At around 35 percent to 45 percent of GDP, China’s</p><p>gross savings rate has been historically high and,</p><p>according to the World Bank, the country has the</p><p>highest savings-to-GDP rate among large economies.</p><p>Indicators suggest that in 2023, China’s savings levels</p><p>increased further, perhaps as households expanded</p><p>their safety nets out of precaution.45</p><p>In contrast, savings pots have dwindled in both</p><p>the US and Europe. An unusual amount of excess</p><p>in savings was built up in these regions during</p><p>the Covid-19 pandemic, but analysis now suggests</p><p>that these are likely to run out by the end of 2023,</p><p>A pedestrian on The Bund in Shanghai, C</p><p>hina. G</p><p>etty Im</p><p>ages.</p><p>23</p><p>Global Economy</p><p>after consumers returned to shopping more freely</p><p>following the lifting of pandemic lockdowns. The</p><p>subsequent toughening of the economic climate</p><p>in 2023 has also meant that it is difficult for</p><p>consumers to replenish their savings, and even as</p><p>savings remain reasonably high in absolute terms,</p><p>inflation is causing them to devalue. This bodes ill for</p><p>discretionary spending in 2024, after recent years</p><p>of relatively buoyant consumption.46 47 Pressure on</p><p>household budgets is likely to prompt a decline in</p><p>discretionary spend. In the third quarter of 2023, net</p><p>intent to purchase apparel was negative 25 in the US</p><p>and negative 29 in Europe, according to a McKinsey</p><p>survey.48</p><p>Rays of Light</p><p>Still, there are certain country-level reasons for some</p><p>degree of optimism. This is the case with China,</p><p>even if the base case is for muted demand and slow</p><p>GDP growth, from 5 percent in 2023 to 4.2 percent</p><p>in 2023, according to IMF forecasts. The volume of</p><p>imports expanded 1 percent year on year in the first</p><p>half of 2023 (compared with a decline of 6.4 percent</p><p>in the same period in 2022), indicating a tentative</p><p>rise in domestic demand.49 50</p><p>Consumer spending plans in China appear to be</p><p>marginally more positive than in the US and Europe,</p><p>with a 7 percent net intent to purchase apparel</p><p>as well as jewellery, and 8 percent for footwear,</p><p>McKinsey research shows. Meanwhile, 69 percent</p><p>of consumers are planning to splurge on shopping.51</p><p>However, even if cautious, optimism for the country</p><p>should be tempered, as the overall outlook may be</p><p>disappointing — forecasts for shopping and travel</p><p>have remained dampened in recent months,52 and</p><p>growth is still well below</p><p>historical levels.</p><p>Emerging Asia provides potential, too. For</p><p>example, in India, consumer confidence reached a</p><p>four-year high in September 2023, while India-based</p><p>executives are more optimistic than western peers,</p><p>with 85 percent of respondents to a McKinsey</p><p>global survey saying that conditions have improved</p><p>in the six months to August.53 India’s bellwether</p><p>manufacturing Purchasing Managers Index (PMI)</p><p>hit a 31-month high in May and the services PMI</p><p>reached a 13-year high in July. GDP growth stood</p><p>at 6.9 percent in fiscal 2023.54 Strong investment</p><p>activity, consistent domestic demand and a policy-</p><p>maker push to invest in infrastructure buoyed the</p><p>rapid growth. This rate will likely moderate in 2024</p><p>but remains strong with forecasted GDP growth of</p><p>6.3 percent.55</p><p>The impact of 2024’s mixed outlook will be felt</p><p>by fashion businesses across the value chain. Brands</p><p>and retailers will likely need to confront a further</p><p>wave of low consumer demand in some key markets,</p><p>while suppliers may feel the amplified effects of</p><p>this dampened demand even more as it echoes</p><p>along the supply chain, leading to underutilised</p><p>capacity. Revenue growth in this environment is</p><p>likely to be driven by price rather than volume, and</p><p>businesses will need to plan price increases with</p><p>care and precision to avoid alienating cash-strapped</p><p>consumers.</p><p>To build greater resilience across value chains</p><p>in 2024, fashion decision makers can focus on</p><p>contingency planning, ensuring that scenarios take</p><p>into account high levels of uncertainty and the range</p><p>of regionalised consumer demand shifts. Scenarios</p><p>for each region will need to factor in increasingly</p><p>divergent underlying factors. Meanwhile, strong</p><p>inventory management is likely to remain a priority,</p><p>continuing successful cost management programmes</p><p>implemented in post-pandemic times.</p><p>Meanwhile, suppliers can expect an increasingly</p><p>competitive landscape. Manufacturing sector price</p><p>wars are a possibility as weak consumer demand</p><p>puts pressure on orders and leads to excess capacity</p><p>in some supply chains. Suppliers may want to work</p><p>to build deeper, collaborative relationships with</p><p>brands to reduce exposure to price competitiveness,</p><p>while ensuring they retain tight control of costs in</p><p>the year ahead.</p><p>Universally, slowing growth, new and continued</p><p>geopolitical conflict, and consumer spending pressures</p><p>are likely to define economic prospects.</p><p>24</p><p>The State of Fashion 2024</p><p>The Tumultuous</p><p>Path to an Exit</p><p>By Sara Hudson, Pamela Brown, Leila Le Merle and Simona Kulakauskaitė</p><p>IN-DEPTH</p><p>Global Economy</p><p>Private equity (PE) firms looking to exit their fashion</p><p>industry assets in 2024 may find they have some</p><p>difficult choices to make. Against a backdrop of</p><p>public market volatility, finding an attractive route</p><p>to exit has been challenging, to such an extent that</p><p>future deal-making may provide less-than-ideal</p><p>returns and raise questions about the long-term</p><p>value creation opportunities across parts of the</p><p>fashion industry.</p><p>The significant shift in fashion’s financial market</p><p>performance had, in fact, already started in 2018.</p><p>Apparel, fashion and luxury (AF&L) companies</p><p>generally tracked benchmark indexes closely up</p><p>until then, after which industry performance began</p><p>to diverge. While luxury companies outperformed</p><p>the MSCI World Index by 14 percentage points</p><p>in the five years to October 2023, non-luxury has</p><p>underperformed the same index by 3 percentage</p><p>points.56</p><p>A similar scenario has been playing out in</p><p>the private realm, with PE investors becoming</p><p>increasingly cautious about non-luxury fashion</p><p>categories, with deal volume stagnating over the</p><p>last decade (except for 2021 which was a record</p><p>PE deal year) even when “dry powder” — that is,</p><p>capital available for investment — grew in the PE</p><p>industry overall.57 In early 2023 amid an overall</p><p>downward trajectory in the broader PE space, PE</p><p>activity in AF&L ground to a halt due to pressure on</p><p>discretionary consumer categories, high valuations</p><p>and difficulties obtaining debt financing.58</p><p>PE firms are likely to continue to see more</p><p>limited exit options.59 On one side, strategic buyers</p><p>have not made many investments in the past few</p><p>years, given their caution around adding further</p><p>complexity to their portfolios, and have focused</p><p>instead on optimising their existing operations.60</p><p>PVH Corp and VF Corp, for example, last acquired</p><p>targets in 2018 and 2020, respectively. On the other</p><p>side, few PE-backed brands can reach the scale that</p><p>an initial public offering requires. This then means</p><p>attracting another PE investor, but they will likely be</p><p>confronting the same concerns about the industry’s</p><p>long-term value creation as the public market.</p><p>An increasingly important priority for investors</p><p>is to minimise exposure to the “fashion risk”</p><p>inherent in brands that rely on actively shaping</p><p>or getting fashion trends right.61 Naturally, these</p><p>brands see swings in popularity over time, which</p><p>makes it difficult to assess their value at any point</p><p>in time, encouraging investors towards brands with</p><p>iconic, timeless designs and a credible, compelling</p><p>brand story. Even if investors are able to identify the</p><p>brands with staying power, the added challenge of</p><p>how to underwrite the intangible value — that is the</p><p>value of the brand — adds complexity and risk to the</p><p>deal-making process.</p><p>PE players have long homed in on luxury targets, Th</p><p>e</p><p>N</p><p>ew</p><p>Y</p><p>or</p><p>k</p><p>St</p><p>oc</p><p>k</p><p>Ex</p><p>ch</p><p>an</p><p>ge</p><p>. S</p><p>hu</p><p>tte</p><p>rs</p><p>to</p><p>ck</p><p>.</p><p>The fashion industry has struggled to attract</p><p>investment over recent years, amid inconsistent</p><p>performance and increasing polarisation. In this</p><p>challenging environment, fashion businesses</p><p>seeking funding should have solid performance</p><p>fundamentals demonstrating sustainable</p><p>profitability, clear brand equity and a path to value</p><p>creation. Finally, market timing will be critical.</p><p>26</p><p>The State of Fashion 2024</p><p>for example the sale in August 2023 of luxury</p><p>womenswear brand Zimmermann to PE firm Advent</p><p>International. However, large luxury houses and</p><p>other strategic suitors are equally attracted to these</p><p>assets and are typically also active bidders when</p><p>brands come onto the market.</p><p>PE firms are also not singularly focused on</p><p>luxury — sportswear, footwear, wellness, outdoor,</p><p>modern jewellery and intimates are on their radars</p><p>too.62 Also in demand are B2B players further down</p><p>the value chain that allow PE investors to gain</p><p>exposure to the fashion industry indirectly (without</p><p>assuming fashion risk). Transactions in this space</p><p>include Permira’s acquisition of luxury contract</p><p>manufacturer Gruppo Florence in late 2022 and</p><p>San Quirico’s 75 percent purchase of Minerva Hub, a</p><p>metallic components and leather producer for luxury</p><p>companies, in 2023.63</p><p>Looking to Divest</p><p>Across the PE industry, there is a growing backlog</p><p>of deals that have exceeded their typical holding</p><p>periods and need a sale to realise returns for</p><p>investors. However, about half of the assets that</p><p>are at or near the end of their holding periods are in</p><p>segments which investors are increasingly wary of.</p><p>Fashion-focused women’s apparel currently makes</p><p>up 12 percent of this cohort in EMEA and poses a</p><p>significant amount of trend-related risk.64 A number</p><p>of potential deals in this category have stalled in</p><p>2023, including Giuseppe Zanotti (L Catterton),</p><p>Sezane (General Atlantic), Isabel Marant (Montefiore</p><p>Investment) and Ganni (L Catterton).65</p><p>In the current economic climate, PE investors</p><p>are also likely to be cautious about department</p><p>stores and other “third-party” retailer assets (e.g.</p><p>online and offline retailers that primarily sell goods</p><p>from other brands), amid increasing macroeconomic</p><p>headwinds and narrow profit margins. Third-party</p><p>retail accounts for 36 percent of assets held (offline</p><p>24 percent and online 12 percent).66</p><p>All told, PE firms’ choice may come down to</p><p>Th</p><p>e</p><p>N</p><p>ew</p><p>Y</p><p>or</p><p>k</p><p>St</p><p>oc</p><p>k</p><p>Ex</p><p>ch</p><p>an</p><p>ge</p><p>. S</p><p>hu</p><p>tte</p><p>rs</p><p>to</p><p>ck</p><p>.</p><p>Exhibit 5</p><p>Market values are higher for companies</p><p>with strong revenue and profit growth</p><p>Enterprise value (EV) growth and underlying drivers,</p><p>Sector aggregate growth (5.5%)</p><p>Source: McKinsey Global Fashion Index</p><p>EV CAGR (2010–2022) total industry</p><p>EV CAGR (2010–2022) total industry excl. luxury</p><p>EB</p><p>IT</p><p>D</p><p>A</p><p>m</p><p>ar</p><p>gi</p><p>n</p><p>ch</p><p>an</p><p>ge</p><p>(2</p><p>0</p><p>10</p><p>–2</p><p>0</p><p>22</p><p>)</p><p>Margin accretive,</p><p>growth laggards</p><p>N=68</p><p>N=63</p><p>N=115</p><p>N=102</p><p>N=44</p><p>N=37</p><p>N=46</p><p>N=38</p><p>Margin dilutive,</p><p>growth laggards</p><p>Margin accretive,</p><p>growers</p><p>Margin dilutive,</p><p>growers</p><p>Revenue growth (CAGR 2010–2022)</p><p>5% 2%</p><p>−2% −4%</p><p>16% 14%</p><p>11% 10%</p><p>27</p><p>Global Economy</p><p>delaying exit or compromising on price. But PE firms</p><p>could also decide to sell to brand management groups,</p><p>some of which have started making acquisitions.</p><p>Authentic Brands Group, which bought Reebok in</p><p>2022, as well as WHP and Blue Star Alliance, are</p><p>among such acquirers specialising in turning around</p><p>distressed assets. However, the prices on offer are not</p><p>always going to be attractive.</p><p>The Public Market View</p><p>If investors cannot sell into private markets, they</p><p>may look to the public markets for their exit. Since</p><p>the 1980s, there were on average two to four AF&L</p><p>IPOs in Europe and North America every year. The</p><p>number of AF&L IPOs spiked in 2019 as well as 2021,</p><p>with 25 IPOs over those two years, and have included</p><p>brands such as Zegna, Allbirds, Dr Martens as well as</p><p>luxury marketplace The RealReal.67</p><p>But the performance of newly listed AF&L</p><p>stocks has generally been challenging. Since 2018,</p><p>the stock price of newly floated AF&L companies</p><p>has dropped an average of 40 percent one year after</p><p>listing, according to data from McKinsey Corporate</p><p>Performance Analytics.68 Exceptions include USWE</p><p>(IPO in 2021), Revolve (2019) and Levi Strauss (2018).</p><p>As of the third quarter of 2023, the stock prices</p><p>of nearly all AF&L companies that had IPOs in 2021</p><p>were below their listing prices. An outlier is On,</p><p>whose share price has turned a corner and is now</p><p>trading close to its listing value. Another exception</p><p>from 2021’s IPO group is Zegna, whose shares at the</p><p>end of September 2023 were up 13 percent.69</p><p>Several factors have contributed to the</p><p>outperformance of Zegna and On. One is the strength</p><p>of the brand story. The heritage of craftmanship of</p><p>Zegna, born in wool mills in Italy and deeply rooted</p><p>in its local environment, aligned with consumers’</p><p>desire for high-quality fabrics. Furthermore, Zegna</p><p>moved away from a reliance on formalwear towards</p><p>classic but “quiet” collections in time for the quiet</p><p>luxury boom in recent years.</p><p>Investors also reward consistent and strong</p><p>top-line growth.70 On grew revenue more than 60</p><p>percent in both 2021 and 2022, driven by its highly</p><p>innovative solutions and design that appeal to a broad</p><p>group of customers looking for comfort. Zegna’s</p><p>revenue grew 27 percent and 16 percent in those two</p><p>years.71 Another factor is that strong performers</p><p>sit within in-demand categories like luxury and</p><p>sportswear. Luxury now makes up close to half of the</p><p>industry’s total economic profit, having increased</p><p>its economic profit 3.5 times from 2018 to 2022.</p><p>Sportswear’s (including sports footwear) economic</p><p>profit grew 1.7 times from 2018 to 2022, despite a 17</p><p>B2B upstream companies</p><p>Exhibit 6</p><p>Around half of fashion assets that private equity investors may want</p><p>to offload soon are brands, which can pose trend-related risks</p><p>Distribution of assets acquired by private equity investors in EMEA in 2020 or earlier,</p><p>%, total = 111 assets</p><p>1 Includes specialist players in lingerie, suiting and other clothing</p><p>Source: McKinsey Analysis, PE fund websites</p><p>BrandsRetailers</p><p>Offline retail</p><p>24</p><p>Online retail</p><p>12</p><p>Specialists1</p><p>19</p><p>Womenswear</p><p>12</p><p>Footwear and</p><p>accessories</p><p>12</p><p>B2B</p><p>companies</p><p>10</p><p>Jewellery</p><p>6</p><p>Sports</p><p>5</p><p>54%</p><p>28</p><p>The State of Fashion 2024</p><p>percent drop in 2022.72</p><p>A McKinsey Global Fashion Index analysis</p><p>in 2023 of publicly listed AF&L enterprise value</p><p>between 2013 and 2023 suggests that while profitable</p><p>growth is most attractive to investors, revenue</p><p>growth is generally more heavily rewarded than</p><p>margin accretion. Margin accretive companies that</p><p>grew revenue above the industry average saw a 11</p><p>percentage points uplift in enterprise value growth,</p><p>compared to margin accretive companies that grew</p><p>below the industry average. In contrast, companies</p><p>that grew revenue above the industry average only</p><p>saw a 5 percentage points uplift if they were margin</p><p>accretive compared to those that grew revenue but</p><p>were margin dilutive.</p><p>Signs of Revival</p><p>Towards the end of 2023, there were many rumours</p><p>of large IPOs for AF&L players, including Shein73</p><p>and Skims,74 raising expectations for a return of deal</p><p>activity. One of the highest profile IPOs of 2023 was</p><p>Birkenstock, whose target valuation set multiples</p><p>at 18 times EBITDA. Despite very healthy margins</p><p>of 35 percent EBITDA, this valuation would put</p><p>Birkenstock at a similar or even higher multiple</p><p>to LVMH (15 times EBITDA for the current year),</p><p>and the same multiple as Nike, which has lower</p><p>margins.75 Other shoe brands, such as Crocs and Dr</p><p>Martens, are trading at six to seven times EBITDA.</p><p>Despite the wave of brand hype generated by the</p><p>“Barbie” movie (in which the shoe had a cameo) and</p><p>strong performance fundamentals, Birkenstock</p><p>stock declined in value in the first week of trading.</p><p>This was due to investor concerns over how long</p><p>Birkenstock can sustain its growth trajectory76 — to</p><p>date driven by demand for comfort “home shoes”</p><p>during the pandemic and made cool by high-end</p><p>designer collaborations with Dior, Manolo Blahnik,</p><p>Jil Sander and Proenza Schouler.</p><p>For successful flotations, firms are expected to</p><p>meet several requirements, including a compelling</p><p>equity story, sustained revenue and margin growth,</p><p>ability to scale, and resilience amid category</p><p>tailwinds. Of course, even these may not guarantee</p><p>success. Consistent performance in meeting (and</p><p>exceeding) investor expectations is critical to share</p><p>price performance.</p><p>When deciding when to IPO, owners should</p><p>closely monitor consumer trends and public</p><p>perceptions, as well as the performance of recently</p><p>listed companies. In addition, PE owners listing their</p><p>portfolio companies will need to consider the impact</p><p>of retaining a meaningful stake post IPO.77 By doing</p><p>so, they expose themselves to share price volatility</p><p>due to company performance, as well as broader</p><p>market moves.</p><p>A public market revival is typically a precursor</p><p>of PE deal-making and the funds with fashion</p><p>specialisms are likely to move first. Non-fashion</p><p>specialists are likely to remain on the sidelines for</p><p>longer. Still, there are nascent signs of a more general</p><p>shift in sentiment, with $1.2 billion of PE “dry</p><p>powder” putting pressure on funds to begin investing</p><p>again.78 Meanwhile, investment committees will</p><p>look to the green shoots of M&A recovery, reflecting</p><p>slightly better macroeconomic fundamentals in</p><p>some markets and valuations starting to decline to</p><p>more transactable levels.79</p><p>One thing is certain: given the volume of assets</p><p>held by PE players, there is likely to be a queue</p><p>for the exit when markets pick up, potentially</p><p>creating a bottleneck. Within PE, aversion to</p><p>fashion risk and concerns about discretionary</p><p>categories are likely to remain significant barriers.</p><p>Alongside market timing, value creation will</p><p>likely remain a key priority for 2024. Owners</p><p>should consider focusing on brand health, topline</p><p>growth and commercial excellence (including</p><p>getting pricing and promotions right), while also</p><p>optimising sourcing, rethinking categories, and</p><p>considering new occasions and channels. For those</p><p>approaching exit, continuing to invest and not</p><p>starving the assets is likely to be key, while at the</p><p>same time hoping for consumer sentiment and</p><p>discretionary spending to turn around.</p><p>For successful flotations, firms are expected to have a</p><p>compelling equity story, sustained revenue and margin</p><p>growth, ability to scale, and resilience amid category tailwinds.</p><p>29</p><p>Global Economy</p><p>02.</p><p>Climate</p><p>Urgency</p><p>The frequency and intensity of extreme weather-</p><p>related events in 2023 mean the climate crisis has</p><p>become even more visible, leaving the fashion value</p><p>chain especially vulnerable. With climate risks</p><p>worsening across continents, the fashion industry</p><p>can’t hold off any longer on building resilience into</p><p>its supply chains and helping to abate emissions.</p><p>KEY INSIGHTS</p><p>• Fashion is responsible for between 3 percent and 8 percent of</p><p>total greenhouse gas emissions.</p><p>• By 2030, extreme weather events could jeopardise $65 billion</p><p>worth of apparel exports and eliminate nearly one million jobs</p><p>in four economies that are among the most central to the global</p><p>fashion industry.</p><p>• Fashion executives said other challenges such as economic</p><p>uncertainty, geopolitical tensions and inflation will vie for their</p><p>attention ahead of climate risk in 2024.</p><p>30</p><p>The State of Fashion 2024</p><p>For many fashion businesses, addressing climate-</p><p>related risks is often a priority that is eclipsed</p><p>by other challenges they deem more urgent</p><p>or imminent. However, due to the geographic</p><p>footprint and structure of fashion’s supply chains,</p><p>it is especially vulnerable to extreme and increasing</p><p>climate volatility. In 2024, a mindset shift is needed</p><p>across the industry to acknowledge that maintaining</p><p>the status quo is no longer an option and climate</p><p>risk cannot be viewed as a long-term project to be</p><p>tackled further down the line. The past year has</p><p>provided ample examples of why climate de-risking</p><p>needs immediate action given fashion value chains’</p><p>exposure to extreme weather conditions around the</p><p>world.80 De-risking will not be the sole responsibility</p><p>of manufacturers — brands will also need to revisit</p><p>their supplier standards and invest to ensure they</p><p>are sufficiently addressing new climate-related</p><p>dimensions.</p><p>Globally, 2023 will likely be remembered as a</p><p>year of climate-related disasters, and the frequency</p><p>of these disasters is only expected to increase due to</p><p>climate change.81 Soaring temperatures around the</p><p>world will make 2023 one of — if not the — hottest</p><p>years on record, which scientists say is the result of</p><p>both El Niño weather patterns and global warming.82</p><p>83 Sweltering temperatures, wildfires, torrential rain</p><p>and flash floods have devasted communities around</p><p>the world, leaving behind death and destruction. Few</p><p>regions seemed to be spared.84 85 86 87 88</p><p>Monsoon rains in Hue, Vietnam. Sergi Reboredo/Getty Images.</p><p>31</p><p>Though the human and environmental tragedy</p><p>looms large, it is also hard to ignore the economic</p><p>toll. The US, for example, had suffered an annual</p><p>record, at $23 billion, of climate-related disasters</p><p>even before 2023 comes to an end, surpassing 2020’s</p><p>record high.89 And drought in Argentina in 2023</p><p>could cause the country’s economy to shrink by 2.5</p><p>percent, according to the International Monetary</p><p>Fund.90 Beyond the Americas, China lost more than</p><p>$7.6 billion due to severe drought in 2022.91 Globally,</p><p>the cost of each climate-related disaster is estimated</p><p>to have increased 77 percent over the past 50 years,</p><p>reports the World Economic Forum.92</p><p>As global warming exceeds its current level of</p><p>1.1°C above pre-industrial levels, productivity growth</p><p>is set to fall. With global warming levels potentially</p><p>reaching 2.2°C by 2050, global GDP levels could be</p><p>reduced by up to 20 percent, while warming of up to</p><p>5°C by 2100 could lead to “economic annihilation,”</p><p>according to Oxford Economics.93</p><p>The BoF-McKinsey State of Fashion 2024</p><p>Executive Survey found that executives expect</p><p>other challenges — notably economic uncertainty,</p><p>geopolitical tensions and inflation — to be vying for</p><p>their attention ahead of climate risk.94 Yet, the past</p><p>year should be a wakeup call for fashion. With fashion</p><p>still responsible for between 3 percent and 8 percent</p><p>of total greenhouse gas emissions,95 a mix of short-</p><p>and long-term strategies can help companies address</p><p>the climate challenge. Companies, for example, may</p><p>look to de-risking the value chain and revamping</p><p>structural and operational legacies, or doubling</p><p>down on sustainability.</p><p>Outsized Risks for Fashion’s Value Chain</p><p>Every part of the fashion value chain is affected by</p><p>the climate crisis, not least because so much of the</p><p>industry is reliant on the countries and regions most</p><p>directly impacted by climate upheavals, signifying an</p><p>outsized risk for fashion in comparison to many other</p><p>industries. By 2030, extreme weather events could</p><p>jeopardise $65 billion worth of apparel exports and</p><p>eliminate nearly one million jobs in four economies</p><p>that are among the most central to the global fashion</p><p>Source: United Nations Office for Disaster Risk Reduction, World Trade Organisation</p><p>Exhibit 7</p><p>A significant share of apparel exports is from countries</p><p>most directly impacted by climate-related disasters</p><p>Top 10 countries most impacted by climate-related disasters,</p><p>Measured by number of people affected, 2000–2023</p><p>1. China 20 30</p><p>3. Philippines</p><p>7. Thailand</p><p>0 0</p><p>1 1</p><p>5. US</p><p>9. Brazil</p><p>12 1</p><p>6 0</p><p>2. India 16 3</p><p>4. Bangladesh</p><p>8. Ethiopia</p><p>0 9</p><p>0 0</p><p>6. Pakistan</p><p>10. Vietnam</p><p>6 2</p><p>6 6</p><p>Share of global apparel exports</p><p>%, 2021</p><p>Share of global cotton exports</p><p>%, 2021</p><p>67%</p><p>of cotton exports</p><p>are highly affected</p><p>by climate disasters</p><p>52%</p><p>of apparel exports</p><p>are highly affected</p><p>by climate disasters</p><p>32</p><p>The State of Fashion 2024</p><p>industry — in Bangladesh, Cambodia, Pakistan</p><p>and Vietnam.96</p><p>One part of the fashion value chain that is</p><p>particularly exposed is the production of raw</p><p>materials supplying manufacturers.97 Consider</p><p>cotton, which is sensitive to both droughts and</p><p>flooding. In India, the world’s second-largest cotton</p><p>exporter, extensive rainfall and pest invasions have</p><p>reduced its supply to the extent that the country</p><p>began importing it.98 Pakistan, too, has been hit by</p><p>extreme monsoons, while in contrast, drought has</p><p>hit Texas’ cotton producers, leading to abandoned</p><p>crops and steep production declines.99 100 101</p><p>For manufacturers, flooding is also a growing risk,</p><p>forcing temporary or permanent factory closures. In</p><p>Ho Chi Minh City, Vietnam, 55 percent of apparel</p><p>and footwear manufacturing sites could be exposed</p><p>to rising sea levels and flooding by 2030.102 Not only</p><p>are the livelihoods of factory workers impacted,</p><p>but their health and safety as well. Factory workers</p><p>in Dhaka, Bangladesh, report suffering headaches,</p><p>exhaustion from dehydration and lack of sleep due</p><p>to high temperatures, while 53 percent of surveyed</p><p>Cambodian workers reported becoming unwell</p><p>due to heat stress. Meanwhile, as temperatures</p><p>climb, productivity is expected to fall significantly,</p><p>estimated to decrease at about 1.5 percent for every</p><p>degree that temperatures rise above 25°C.103</p><p>Climate is also impacting fashion’s logistic</p><p>strategies. Across all industries, 90 percent of</p><p>exported goods are reliant on shipping to reach their</p><p>final destinations, but an estimated $122 billion of</p><p>economic activity at ports is at risk from disruptions</p><p>caused by extreme climate events.104 105 The summer</p><p>of 2023 saw Europe’s worst dry spell in 500 years,</p><p>with ships navigating the Rhine River forced to</p><p>reduce the weight of cargo in order to continue</p><p>their journeys. A similar narrative played out on the</p><p>Panama Canal. In China, drought slowed traffic on</p><p>the Yangtze River, forcing companies to move goods</p><p>through alternative, often more expensive routes.106</p><p>Weather-Proofing Strategies in 2024 and Beyond</p><p>Fashion executives in 2024 and beyond should embed</p><p>climate strategies across their businesses. They may</p><p>do so by first identifying direct value at risk from</p><p>potential climate impacts as well as material second-</p><p>and third-order impacts — such as supply chain</p><p>disruptions, damage to infrastructure, or financial</p><p>and job losses — and implementing thorough scenario</p><p>planning for these possibilities.</p><p>Boosting resilience up and down the value</p><p>chain, particularly in climate risk “hotspots,” is</p><p>critical.</p><p>Nimble processes are needed to swiftly</p><p>offset weather-related pressures on suppliers and</p><p>inventories as well as consumers. Alongside these</p><p>operational changes, other adjustments must be</p><p>considered, including sourcing strategies and</p><p>locations to ensure they also enable flexibility and</p><p>speed in times of extreme weather events. This may</p><p>require trade-offs between risk mitigation and cost,</p><p>speed, capacity and availability of materials.</p><p>Action by manufacturers must take the form of</p><p>prioritising worker health and safety. This can be</p><p>actioned through operational shifts such as offering</p><p>more frequent breaks, rehydration amenities and</p><p>proactive temperature monitoring of the factory</p><p>floor, alongside capital investments in fan systems.</p><p>Longer term, and most importantly, companies</p><p>should invest in innovation across the value chain</p><p>aimed at helping to reduce fashion’s impact on the</p><p>planet. This will touch on all areas of the value chain,</p><p>from new material innovations such as lab-grown</p><p>fibres, more efficient and ethical product reuse and</p><p>recycling, and a shift from encouraging make-take-</p><p>waste consumption culture.</p><p>Industry-wide initiatives will be crucial to</p><p>facilitate progress at scale. Joining pacts such</p><p>as the Fashion Pact, the Sustainable Apparel</p><p>Coalition and the Fashion Charter is a strong first</p><p>step, but action must follow alignment. Individual</p><p>company adaptation should be supported by urgent</p><p>collaborative change.</p><p>Every part of the fashion value chain is affected by the climate crisis</p><p>not least because so much of the industry is reliant on the countries</p><p>and regions most directly impacted by climate upheavals.</p><p>33</p><p>Global Economy</p><p>Consumer</p><p>Shifts</p><p>03. Vacation Mode</p><p>04. The New Face of Influence</p><p>05. Outdoors Reinvented</p><p>03.</p><p>Vacation</p><p>Mode</p><p>Consumers are gearing up for the biggest year</p><p>of travel since before the pandemic. But a shift</p><p>in values means travellers have a different set of</p><p>expectations, even as shopping remains high on</p><p>the agenda. Brands and retailers should consider</p><p>refreshing distribution and category strategies to</p><p>meet travellers wherever they are.</p><p>KEY INSIGHTS</p><p>• Global travel is projected to exceed pre-pandemic flows for the</p><p>first time in 2024, reaching up to 110 percent of 2019 levels.</p><p>• 80 percent of consumers surveyed in the US, UK and China</p><p>expect to shop for fashion while travelling in 2024, with 28 percent</p><p>planning to spend more than the previous year, according to the</p><p>BoF-McKinsey State of Fashion 2024 Consumer Survey.</p><p>• More than half of respondents are seeking destinations they</p><p>haven’t visited before, including second-tier cities.</p><p>35</p><p>Consumer Shifts</p><p>In the aftermath of the Covid-19 pandemic,</p><p>consumers around the world have embraced travel</p><p>with a new fervour. Despite cost-of-living pressures</p><p>and economic uncertainties, global travel flows</p><p>(calculated as the total number of kilometres</p><p>travelled by paying airline passengers) are projected</p><p>to return to 100 percent of pre-pandemic levels in</p><p>2023 and reach between 105 percent and 110 percent</p><p>in 2024, according to McKinsey analysis.107</p><p>A fundamental change of lifestyles adopted in</p><p>recent years is helping to fuel this rise. For example,</p><p>remote and hybrid work are more entrenched than</p><p>they were pre-pandemic. A growing number of</p><p>workers are no longer tethered to offices. In the</p><p>US, only 39 percent of companies now require staff</p><p>to work from their offices full time, down from 49</p><p>percent at the start of 2023, according to workplace</p><p>provider Scoop’s Flex Index, which predicts the</p><p>number to fall to 15 percent in the coming years.108</p><p>Meanwhile, business travellers are extending</p><p>their work trips into “workation” trips, a global</p><p>phenomenon that combines business with leisure.</p><p>Business travellers in the US, Europe and Asia take</p><p>on average six “workation” trips annually, with 29</p><p>percent of these trips to international destinations,</p><p>according to travel-agency specialist Travel Edge.109</p><p>110</p><p>For many consumers, travelling and shopping</p><p>go hand in hand. Leading players like LVMH and</p><p>Kering have cited tourists, specifically Americans</p><p>in Europe, as a key driver of increased sales in the</p><p>first half of 2023, which grew 47 percent and 53</p><p>percent respectively.111 Moreover, the BoF-McKinsey</p><p>State of Fashion 2024 Consumer Survey found that</p><p>80 percent of global respondents expect to shop for</p><p>clothes, footwear and accessories while travelling in</p><p>the year ahead, with 28 percent expecting to spend</p><p>more than the previous year while travelling.112 For</p><p>brands and retailers, these travelling consumers will</p><p>provide new growth opportunities.</p><p>Net</p><p>Intent1</p><p>1 Net intent calculated as the difference between the percentage of respondents who ‘will do more’ and the</p><p>percentage of respondents who ‘will do less’</p><p>Note: numbers are rounded and may not add to 100</p><p>Source: BoF-McKinsey State of Fashion 2024 Consumer Survey</p><p>Will do less Will do the same Will do more</p><p>Exhibit 8</p><p>Consumers will prioritise experiences whilst travelling</p><p>Future intent whilst travelling,</p><p>% of respondents</p><p>Being in nature 28%</p><p>Sightseeing 16%</p><p>Dining out/eating local</p><p>food 15%</p><p>Cultural experiences/</p><p>entertainment 13%</p><p>Relaxing by beach/pool 12%</p><p>Active sports/outdoor</p><p>activities 11%</p><p>Shopping for apparel,</p><p>footwear and accessories 8%</p><p>Shopping for home décor,</p><p>gifts and souvenirs 0%</p><p>4713 41</p><p>4918 34</p><p>4520 35</p><p>5118 31</p><p>5118 30</p><p>5119 30</p><p>5220 28</p><p>23 54 23</p><p>19%</p><p>avg. net intent</p><p>for experiences</p><p>4%</p><p>avg. net intent</p><p>for shopping</p><p>36</p><p>The State of Fashion 2024</p><p>Pushing the Boundaries</p><p>The world’s capital cities will remain popular for</p><p>world-class shopping. Paris, for example, has seen</p><p>a notable spike in tourism in 2023 with numbers</p><p>approaching those in 2019. Nearly 12 million tourists</p><p>visited the city between January and April 2023,</p><p>representing a 27 percent year-on-year increase and</p><p>only 2.5 percent down on 2019 levels.113 London has</p><p>also seen a surge — two million more international</p><p>visitors are forecast to arrive in the city in 2023,</p><p>compared with the year prior.114</p><p>But now, many travellers are also looking to</p><p>expand their itineraries beyond these traditional</p><p>destinations. Over half of the respondents to the</p><p>BoF-McKinsey consumer survey said they are</p><p>seeking destinations they haven’t visited before in</p><p>the year ahead, perhaps as a nod to a post-pandemic</p><p>desire for freedom and escapism.115 Smaller cities like</p><p>Edinburgh, Scotland; Lisbon, Portugal; or Osaka,</p><p>Japan, have witnessed surging popularity this year,</p><p>offering different experiences in terms of historical</p><p>sightseeing, culture, local dining and nightlife as</p><p>well as local shopping.116 117 “Set-jetting” destinations</p><p>inspired by television and film are also resonating</p><p>with travellers — consider what the series “The Game</p><p>of Thrones” has done for tourism in Dubrovnik on</p><p>the Adriatic coast of Croatia.118</p><p>While travel itineraries are being redrawn,</p><p>some brands are already adjusting where and how</p><p>they connect with shoppers. In some cases, this has</p><p>meant expanding store networks into second-tier</p><p>cities. Uniqlo has been focusing on accelerating new</p><p>openings, including plans for a store in Scotland, on</p><p>Edinburgh’s Princes Street, in 2024.119 Edinburgh,</p><p>too, has been in Chanel’s line of sight as it opened its</p><p>first Scottish pop-up in the city this past summer.120</p><p>In other cases, it has meant capitalising on trending</p><p>locations from popular culture. This is what Louis</p><p>Vuitton did in Taormina, Sicily, where it opened a</p><p>branded café and boutique in 2023 after the hilltop</p><p>town served as the backdrop of the hit series,</p><p>“The White Lotus.”121 122</p><p>Revival of Experiences</p><p>Providing differentiating experiences is also</p><p>important. According to marketing agency</p><p>Razorfish, 40 percent of travellers are willing to</p><p>spend half or more of their travel budget on a highly</p><p>curated moment or experience.123 While pop-ups</p><p>have been part of fashion’s playbook for some time,</p><p>brands are increasingly expanding these experiences</p><p>into</p>
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