As 2021 comes to an end, the fashion industry begins to see the light at the end of the tunnel. With the focus on a medium and long-term future, McKinsey and Company and The Business of Fashion have once again compared the different points of view of great leaders in the textile sector to publish The State of Fashion 2022 report. From preparing for the recovery from the pandemic to the need to integrate large-scale circular materials within the textile sector, this report captures a vision of the most important trends that will shape the fashion industry during the next twelve months.
The last two years have been a challenge for fashion. Consumer behavior has abruptly changed, traditional supply chains have suffered disruptions, and three-quarters of textile companies have seen their revenues fall by nearly 90%. As the consequences of the pandemic continue their unpredictable progress, the main agreement that emerges from the study is to ensure the recovery of the textile sector during the next year.
According to The State of Fashion report, these will be the ten key trends that will set the agenda in 2022 for the fashion industry:
1. Uneven recovery
Despite the initial situation, the report states that the fashion industry is set to recover during 2022. Although, this recovery is expected to evolve unevenly depending on the territory. Countries with strong and resilient economic systems will tend to better recover from the stresses caused by Covid-19. While China has already reached pre-pandemic sales levels, the United States is close behind. However, Europe is progressing at a slower pace as a result of pressures from supply chains.
To balance this uneven recovery, international companies must be rigorous in their investment decisions, looking for alternatives that allow them to make their supply systems more flexible and reduce market risks.
“The post-Covid recovery must not leave anyone, or any country, behind”. Ngozi Okonjo-Iweala, World Trade Organization director-general
2. Logistics gridlock
The fashion industry depends on a complex network of supply chains that are in a critical situation. 87% of people surveyed expect that raw material shortages, transportation bottlenecks and rising logistics costs may lead to lower profit margins over the next year.
With logistics gridlock and insufficient resources, brands will have to balance the speed of trade with the need to relieve pressure on the supply chain. This can mean accelerating production and planning, as well as putting contingency plans in place. At the same time, brands must work with their suppliers to reinvent the supply chain through efficient supply management to strengthen production capacity and protect access to raw materials.
“There is a big opportunity to better match planning and buying to demand, and that’s something that we learned when Covid hit. The second-biggest learning is to build resilience into the supply chain now”. Stefan Larsson, Chief executive of PVH Corporation
3. Domestic luxuries
Luxury shopping has traditionally been linked to tourism. The decrease in international travel and its recovery forecast for the year 2023 mean that the luxury market must focus on the national consumer, balance its retail presence at a global level and invest in local channels that allow it to have a greater reach.
One of the consequences of this new paradigm has been the increase in the consumption of emerging national designers whose visibility has benefited from the limitations of the international market.
With the dynamic shift between travel and luxury shopping, high-end brands need to reformulate new strategies to engage both proximity shoppers and long-term inbound tourism, which will mean a reconsideration in product development, marketing and commercialization.
“With consumers having less access to international fashion than before, this isn’t surprising, but it also speaks to the rising national confidence that consumers are tapping into, and a newfound sense of solidarity to support local businesses that won’t go away anytime too soon”. Shaway Yeh, founder of fashion innovation and sustainability agency Yehyehyeh
4. Wardrobe reboot
The rise of social life weakens the athleisure trend after nearly two years as consumer favorite category. The customer’s investment will be splitted between items with a higher economic rank, as well as small impulse purchases that will continue to set the market trend for 2022.
For most brands, the demand for new products won’t necessarily mean having a greater supply, but knowing how to use their data to develop products and adjust their inventory to demand. Thanks to the rise of e-commerce, brands must seize the opportunity to collect information from consumers and track changes in dynamics to pay special attention to their behaviour.
To respond quickly to changing preferences, brands must also strengthen their relationship with supply chains and change the seasonal mindset of traditional fashion. This means reinventing their collections and production cycles in order to prepare for uneven supply and demand. Collaboration with suppliers to carefully manage orders and inventories will be essential.
“Virtual work and flexible hours aren’t going to go away. Brands that believe old patterns will revive will fall by the wayside”. Kathy Gersch, retail consultant
5. Metaverse mindset
Online uptime per average consumer has increased. It’s estimated that in 2020, Gen Z spent an average of eight hours a day in front of screens. This, together with the rise of digital environments such as the metaverse, make virtual goods into tools with great potential for the fashion industry.
Market leaders who want to take advantage of this trend will unlock new ways of interacting with the goal of capturing untapped value streams, such as new digital currencies, games and virtual fashion. Options that offer alternative routes to creativity, community building, and commerce.
Looking ahead, the popularity of NFTs will continue to grow as fashion brands seek new ways of differentiation and launch creative experiments. Crypto fashion will require significant investment in addition to experimentation, brands will need to implement strategies and develop partnerships with agents outside the fashion industry to deliver high-quality content that captures customer attention.
“There are more and more ‘second worlds’ where you can express yourself [but] there is probably an underestimation of the value being attached to individuals who want to express themselves in a virtual world with a virtual product, [through] a virtual persona”. Robert Triefus, Gucci’s executive vice president of brand and customer engagement
6. Social shopping
With the stores closed, the use of social media to discover and buy fashion gained momentum during the second quarter of 2020. 74% of consumers say that their purchases are more influenced by social networks than before the pandemic.
The exposure of brands in social media is something common in most markets, however, the next challenge for western social commerce is at the end of the conversion funnel, specifically, when paying for products within the same social network.
To connect brands with consumers, social media giants are stepping up the development of in-app shopping experiences. Instagram launched its shop functionality in 2020 and since then it allows the purchase of products from the application or through a redirect to the brand’s website. Meanwhile, Snapchat is using its augmented reality experience to allow users to virtually try on clothing and accessories. TikTok has expanded its business partnerships by testing live shopping with selected brands. And some platforms, such as Twitch, allow brands to target very specific demographic segments.
As consumers place increasing importance on social media, brands with the ability to unlock the potential of social commerce through quick and agile shopping will be well positioned to create a new revenue stream.
Over the next few months, many companies in the textile sector will put to the test the possibilities offered by social networks to create seamless shopping experiences from product discovery to payment.
“You don’t have to be like the audience, you don’t have to pretend [to be] one of them if you’re not, they’ll see straight through it. All you have to do is show you understand them”. Adam Harris, global head of Twitch’s brand partnerships studio
7. Circular textiles
One of the most important levers of change in the fashion industry to reduce its environmental impact is closed-loop recycling. A system that is beginning to be implemented at scale and that also promises to limit the extraction of virgin raw materials and reduce fashion waste. Fact that takes on special relevance with the imminent entry into force of the waste law in Spain.
As the popularity of circular materials increases in the fashion industry, companies will need to integrate them into the product design phase while adopting large-scale collection and sorting systems. The deployment of industrial processes will reduce prices over the next few years and boost demand for garments made from circular materials.
To maintain a competitive advantage, brands may require a direct investment in recycling facilities. Considering that increasing scale will mean higher capital spending, brands will need to look beyond the comparatively cheaper costs of virgin materials.
While there is an optimistic view that many closed-loop technologies will reach industrial scale in 2022, fashion leaders will need to address the challenge globally, incorporating circular textile solutions in a wider dimension. If the industry wants to significantly reduce its levels of environmental damage, fashion will also need to eliminate toxic chemicals, decarbonize the supply chain and reduce emissions.
“Recycled always has lower impact [than linear]. There’s no questioning it,”, “It’s probably a perfect solution for an imperfect situation”. Claire Bergkamp, chief operating officer at Textile Exchange
8. Product passports
In order to promote authenticity, transparency and sustainability, fashion brands are investing in technologies that allow adding information of interest to products. These product passports consist of a combination of blockchain technologies, which are supported by radio frequency identifiers (RFID), QR codes or near field communication (NFC). While these new systems are helping companies address the fashion industry’s weakest points such as forgery and the need for more transparent business practices, product passports may become a failed practice to showcase sustainable brand development in case of not being able to guarantee that the data offered by the providers is accurate. Settling standards that support full supply chain traceability is imperative to protect industry transparency.
Accessibility and affordability will be success factors for product passports. To encourage scaling and allow both large and small brands to access this tool, standardization and compatibility must be top priorities. As these dynamics unfold, the key for brands will be to keep up with technological innovation.
“It’s really important that there’s been a democratic process so we could create a governance structure and a standard that works for both smaller brands and big brands”. Timothy Iwata-Durie, Cartier’s global innovation director
9. Cyber resilience
As the digitization of businesses reaches new dimensions, brands face increased threats from cyberattacks and potential risks related to inappropriate data handling. Information is becoming both a strategic asset and a source of financial, reputational and operational risk. To meet customer expectations and comply with regulation, brands must establish clear standards for data collection, use, and storage.
On the other hand, companies need to test their cyber resilience, prepare employees for a potential offense, and organize cyber attack simulations to test their response protocols in real time.
With the increasing sophistication of cybercrime and increasing pressure from regulation and consumers, brands must act urgently to strengthen their defenses and invest more to make digital security a strategic imperative.
“Whatever cyber protection you had last year, last quarter, last month, yesterday, it’s not going to be enough for tomorrow”, “To me, it starts with an awareness that the risk is increasing, and getting really close to it, [and then] getting humility across the organisation that this is a continuous ongoing work of improvement”. Stefan Larsson, chief executive of PVH Corporation
10. Talent crunch
Over the next year, the fashion industry’s progress on diversity, equity and inclusion, as well as sustainability, will continue to be the focus.
Listening and responding to these changes will be crucial for brands seeking to attract a new generation of talent, as well as ensuring their relevance within the market.
Companies that have relied for decades on the attraction linked to the industry and the power of their brands to have the best professionals in the textile sector should accelerate their efforts to enrich the work culture. Ensuring that their employees are represented in the processes of decision-making and that the company leads by example when it comes to demonstrating its values.
In the coming years, these actions will make the difference between the brands that manage to have the best fashion talent among their ranks and those that fall behind. Companies must update their talent recruitment and retention strategies to build an increasingly flexible, diverse and digitized workplace that represents the priorities of all of their employees, from top management to front-line retail workers.
“There [may be] a perception among some fashion companies that they are ‘too big to fail,’ [or a notion that employees should feel] ‘lucky enough to be here’”. “[But] people are now attracted to [factors like] ‘what is my impact in the bigger scheme of things?’. Caroline Pill, partner at Kirk Palmer Associates.
The main conclusion that we draw from The State of Fashion 2022 report is that the textile sector faces a complex combination of challenges and opportunities in the coming year. Experience in 2020 and 2021 has shown that fashion is an industry with the potential to adapt to changing circumstances. The predictions show the importance of meeting these challenges through digital and sustainable transformation. This sector must unlock growth and align with the new needs of consumers. At BCOME we look to the future and work to increase the flexibility of those brands that want to make sustainability an essential tool to project their development in the fashion industry. Let’s build a long-term model of responsible production together.
