Product segments: winners and losers
The field in the global fashion industry is divided essentially into two groups: According to the report, sales of luxury fashion will grow between 5 and 10 percent worldwide in 2023, while revenue expectations for the remaining segments range between minus two percent and plus three percent. "2023 could be particularly challenging for the mid-market segment, which has been hit hard by economic downturns in the past," Dr. Achim Berg, senior partner in McKinsey & Company's Frankfurt office, tells us. Berg, also head of the Global Apparel, Fashion & Luxury Group there, continues, "Consumers with lower incomes will limit their spending in the face of macroeconomic challenges. More likely to reach for lower price points and discounted items." Higher-income consumer groups, which are less affected by the economic downturn, are likely to continue spending money on luxury goods, it is believed.
Ergo, a continuation of the development - merely at a lower level: Because even during the pandemic, two fashion sectors, in particular, shone: The luxury sector generated an average of 79 percent more profit from 2019 to 2021 than in the eight previous years. Active and sportswear even generated an average of 121 percent more profit in the period than in the years 2010 to 2018.
Interestingly, 39 percent of executives in the fashion industry as a whole expect the occasion wear segment to be among the top three growth categories in 2023. For mid-market brands, this could in turn be an advantage, as consumers allow themselves a higher budget for special events.
According to the consultants, segment-related shifts are increasingly being joined by shifts in sales and production. The report is rather cautious about a forecast of the time frame. McKinsey points to the high complexity of any kind of regional changes in manufacturing. "These cannot be changed from one day to the next. Rather, they are strategic steps that manufacturers take with their long-term goals and customer base in mind." As a result, due to the current economic situation, some plans are likely to be delayed as manufacturers and brands postpone major investments, the statement told the newsroom. However, the company said it expects these trends to resume after the economy slows.
Retail sales will not only develop in different directions by segment in 2023 but also regionally.
Forecasts for the U.S. market next year are slightly more optimistic than for Europe, for example, with luxury sales expected to increase between five to ten percent and the rest of the market between 1 to 6 percent. In China, expectations are somewhat higher still - at nine to 14 percent in the luxury sector and two to seven in the rest of the market.
Because of this forecast, it is not surprising that regions such as North America and the Middle East are rated by the fashion managers surveyed as the most promising for expansion, while Western Europe is becoming less attractive. Here, McKinsey expects growth of between three and eight percent for the luxury segment. By contrast, revenue expectations for the medium and aggressively priced fashion market are between minus four and one percent.