GREENEXT Talks: 10 Fashion Trends Shaping 2023
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Just as the fashion industry was beginning to find its feet after Covid-19′s turmoil, the later months of 2022 seem determined to throw brands and retailers off course again. Deteriorating macroeconomic and geopolitical conditions have weighed heavily on the industry in the second half of the year and continue to leave fashion executives on edge as they look toward 2023.
The Business of Fashion and McKinsey & Company released their annual State of Fashion report, revealing the industry is heading for a global slowdown in 2023 as macroeconomic tensions and slumping consumer confidence chip away at 2022′s gains.
Let's go deep into the 10 trends that will define the industry and the opportunities for growth in 2023!
🔎 Global Fragility
Amid the highest inflation in a generation, rising geopolitical tensions, climate crises, and sinking consumer confidence in anticipation of an economic downturn, the global economy is in a volatile state.
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According to the Business of Fashion, 56% of fashion executives expect conditions in the fashion industry to worsen in the year ahead. Fashion brands will need careful planning to navigate the many uncertainties and recessionary risks that lie ahead in 2023. However, despite the economic challenges ahead, some fashion executives said they remain focused on sustainability projects, which was cited as the most important opportunity for 2023 by 16 percent.
Key findings:
A range of destabilizing factors, such as inflation and heightened geopolitical tensions, continue to weaken an already fragile world economy, with global GDP growth expected to fall to approximately 2.5 percent in 2023 as the threat of recession looms over many countries.
Consumers are becoming more cautious about their discretionary spending in most regions. Europeans intend to make the biggest spending cuts on apparel, footwear, accessories, and jewelry.
To protect their companies’ bottom lines, 72 percent of fashion executives plan to increase prices and 37 percent expect to focus on cost improvements in 2023, a higher proportion than in 2020.
🔎 Regional Realities
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Understanding where to invest globally has never been easy, but rising geopolitical uncertainty and uneven post-pandemic economic recoveries, among other factors, will likely make it even more challenging in 2023. Brands can re-evaluate regional growth priorities and hone their strategies so they are more tailored to the geographies in which they operate.
Key findings:
Growing geopolitical uncertainty and slower-than-expected recoveries from the pandemic have shifted the world map of growth opportunities for fashion brands, and executives are intending to take action.
Markets that fashion brands have prioritized in their growth strategies, such as China, are signaling a slowdown ahead.
Regions like the Middle East and the US have emerged as priorities for the year ahead: 88 percent and 78 percent of fashion executives believe the respective regions will have the same or higher growth prospects in 2023 compared to the previous year.
🔎 Two-Track Spending
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Consumers may be impacted differently by the potential economic turbulence in 2023. Depending on factors including disposable income levels, some will postpone or curtail discretionary purchases; others will seek out bargains, increasing demand for resale, rental, and off-price. Fashion executives should adapt their business models to protect customer loyalty and avoid diluting their brands. For instance, 74% of US fashion consumers traded down to less expensive brands or products between April and July 2022.
Key findings:
Shopping behavior will diverge across income groups. While high-income shoppers with savings, access to credit and greater job security may continue spending on fashion, lower-income consumers will tighten or cut discretionary spending.
Customers may seek out lower-priced retailers and discounts, particularly in younger cohorts. Over 75 percent of US Gen-Z and Millennials said they are taking steps to manage finances, compared with Gen-X’s 64 percent and Baby Boomers’ 53 percent.
Off-price channels will grow — forecast to account for 12 percent of fashion industry revenues by 2025 — as will resale, which is expected to grow 11 times faster than apparel retail by 2025.
🔎 Fluid Fashion
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Gender-fluid fashion is gaining greater traction amid changing consumer attitudes toward gender identity and expression. For many brands and retailers, the blurring of the lines between menswear and womenswear will require rethinking their product design, marketing, and in-store and digital shopping experiences.
1 in 2 Gen-Z consumers on average have purchased fashion outside of their gender identity.
Key findings:
Interest in gender-fluid fashion is driven by younger generations, particularly Gen-Z consumers, who see their gender identities as less static than their elders. Around half of Gen-Z globally have purchased fashion outside of their gender identity.
The shift is visible not only on high-fashion runways but also in everyday shopping, with online searches for “genderless” and “gender-neutral” fashion increasing year on year.
Younger consumers are more likely to shop across gender lines, and consumers in North America, Europe, Japan, and South Korea, among other locations, are expected to be the most receptive to gender-fluid strategies from fashion brands.
🔎 Formalwear Reinvented
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Formal attire is taking on new definitions as shoppers rethink how they dress for work, weddings, and other special occasions. While offices and events will likely become more casual, special occasions may be dominated by statement-making outfits that consumers rent or buy to stand out when they do decide to dress up.
39% of fashion executives expect occasion wear to be among the categories to grow the most in 2023.
Key findings:
After two years of decline, the formalwear category rebounded in 2021 and 2022. That momentum will continue into 2023 but could slow amid a tough economic climate.
Formalwear for special occasions is expected to be the most promising part of the category: 39 percent of fashion executives expect sales of occasion wear to be among the top three growth categories in 2023.
Rental will present a unique opportunity: consumers are more likely to rent men’s and women’s formalwear than any other apparel or accessories category.
🔎 DTC Reckoning
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Though brands across price segments and categories have embraced digital direct-to-consumer channels, mounting digital marketing costs and e-commerce readjustments have put the viability of the DTC model into question. To grow, brands will likely need to diversify their channel mix, including wholesale and third-party marketplaces, alongside DTC. 1/3 of fashion executives cited challenges to direct-to-consumer channels as one of the top themes that will impact their business in 2023.
Key findings:
Unprecedented e-commerce growth rates are normalizing. E-commerce sales are expected to grow at a CAGR of 10 percent in the US and 11 percent in Europe between 2022 and 2025, far slower than the 30 percent growth seen from 2019 to 2020, and more in line with the pre-pandemic rates of 15 percent and 14 percent from 2016 to 2019.
Profitability in the online DTC channel is suffering, as digital marketing costs grow alongside online return rates — costing brands between $21 and $46 per returned product on average.
Brands are doubling down on physical touchpoints, from mono-brand stores to concessions at multi-brand retailers. In 2022, physical store openings in the US outpaced closures for the first time in over three years.
🔎 Tackling Greenwashing
As the industry continues to grapple with its damaging environmental and social impact, consumers, regulators, and other stakeholders may increasingly scrutinize how brands communicate about their sustainability credentials.
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If brands are to avoid “greenwashing,” they must show that they are making meaningful and credible changes while abiding by emerging regulatory requirements.
79% of fashion executives consider the lack of standards to assess sustainability performance as the greatest hurdle to improving how consumers perceive their sustainability efforts.
Key findings:
Policymakers are highlighting thorny questions looming over the industry: what is sustainable fashion and which brands — if any — can claim to sell it?
A quarter of consumers in the UK said their purchase decisions were driven by sustainability, reflecting a broader pattern across geographies, and elevating the importance of sustainability marketing for brands.
Caution is needed to avoid misleading or confusing consumers if communication is not clear, consistent and accurate. Missteps for brands can lead to not only reputational damage but also regulatory or legal action and fines.
🔎 Future- Proofing Manufacturing
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Continued disruptions in supply chains are a catalyst for a reconfiguration of global production. Textile manufacturers can create new supply chain models based around vertical integration, nearshoring and small-batch production, enabled by enhanced digitization.
More than 2/3 of apparel chief purchasing officers expect digitization to be the most important capability for suppliers to grow in the year ahead.
Key findings:
Macroeconomic pressures continue to weigh on fashion’s global supply chains. More than half of fashion executives believe supply chain disruptions will be one of the top factors impacting growth of the global economy in 2023.
In an attempt to avoid transport bottlenecks and political or social instability, 65 percent of fashion executives are considering nearshoring, creating new manufacturing hubs dedicated to serving US and European demand.
Navigating supply chain disruptions will require brands to work closely with their manufacturers: about 60 percent of fashion executives are considering forming strategic partnerships with their suppliers.
🔎 Digital Marketing Reloaded
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Recent data rules are spurring a new chapter for digital marketing as customer targeting becomes less effective and more costly. Brands will embrace creative campaigns and new channels such as retail media networks and the metaverse to achieve greater ROI on marketing spending and gather valuable first-party data that can be leveraged to deepen customer relationships.
79% of US apparel and footwear executives rate the performance of retail media networks as better than other marketing channels.
Key findings:
Privacy regulations and technological changes have reduced the effectiveness and driven up the cost of paid digital marketing, meaning brands spent more than three times the amount to acquire each customer in 2022 than in 2013.
Brands are bolstering creative capabilities and adapting channel strategies. Marketing budgets are shifting to alternative channels, such as retail media networks. Spending on RMNs is expected to reach $100 billion by 2026.
Valuable customer data is still up for grabs. Over half of customers said they are more likely to share data if they receive something in exchange, like personalized recommendations; brands that innovate the customer experience will have a significant advantage.
🔎 Organization Overhaul
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Successful execution of strategies in 2023 will in part hinge on a company’s alignment around key functions. Fashion executives need a new vision for what the organization of the future will require, focusing on attracting and retaining top talent, as well as elevating teams and critical C-suite roles to execute on priorities like sustainability and digital acceleration.
90% of fashion executives have projected a skills shortage in their organizations.
Key findings:
Though 97 percent of executives expect salaries and other SG&A costs to rise in the year ahead, they should resist the temptation to put talent and organizational projects on ice.
The Great Resignation continues to weigh heavily on the industry. 55 percent of executives cited the talent crunch as one of the top factors impacting their business in 2022.
Education and training typically generate a return on investment that is between two-and-a-half and three times higher than recruiting, boosting the business case for investing in skills gaps found in key areas like sustainability, IT, and supply chain.
