Top 10 challenges facing fashion in 2020 (2024)

"Anxiety" and "worry". With those two words we couldvery well define the feelings with which the fashion world, and its topexecutives, face the year 2020. This situation is counterbalanced by theslight air of optimism with which some sectors, especially in the UnitedStates, were entering 2019.

This is at least what the latest annual report on the state of theindustry, "The State of Fashion 2020", by the consulting firm McKinsey andBoF, says, based on a survey of over 290 senior fashion executives, as wellas opinion leaders and opinion leaders. It forecasts a 2020 dominated byinstability and a slowdown that the main companies in the sector, and theirexecutives, are already preparing for. This situation is considered by manyto be premature, but according to the consultancy firm, it will lead to adrop of between 3 and 4 percent in the fashion industry's income. Thesefalls will be underpinned by growing macroeconomic uncertainty, trade wars,declining sales in emerging markets in Asia and the Pacific, and theeconomic pessimism that is beginning to reign in Europe.

More power to big companies in the sector

In the face of such a worrying situation for the fashion industry, itwill not all be bad news. Or rather, it will not be bad news for everyone.Since the growth of the emerging markets in Europe, Latin America, theMiddle East and Africa is expected to remain stable throughout 2020. At thesame time, we will see a greater concentration of a sector in which largecompanies and multinationals will be taking an increasing share of the pie.Because they will be the only ones able to satisfy the demands ininnovation and sustainability that today's consumers demand.

"It will become increasingly difficult for medium-sized companies tocompete with the all-powerful companies in the fashion industry," saysAchim Berg, McKinsey's director of fashion and luxury, and one of theauthors of the report. Because "to meet challenges such as digitalization,consumer demand and sustainability, brands need to focus their prioritiesand make the necessary capital investments to carry out their strategicplans. And it will be the companies that can do so that will find somelight throughout 2020.

It will not be an easy year," says Imran Amed, founder and editor-in-chiefof The Business of Fashion and co-author of the report. He underlines thefact that "the coming year will require fashion companies to makesignificant changes in their value chains, as on many other fronts, whilelearning to reduce their risks and manage in a climate of uncertainty.

In view of this situation of growing concern and competition, the reportconsiders these 10 key points as the main challenges and issues to beaddressed by companies in the fashion industry throughout this 2020. Thatis, if what they want is to survive in the face of turbulent times thathave already managed to defeat more than one giant that felt invincible.

1. On high alert

One of the main recommendations the report makes to companies is that by2020 they should act with extreme caution. They should pay particularattention to monitoring potential frictions between developed economies andemerging markets. Situations that, together with the increased risk of apossible recession, have already led many companies to develop resilienceguides and contingency plans with which to mitigate macroeconomic andgeopolitical instabilities and trade tensions.

2. Beyond China

China will continue to offer incredible and exciting growth opportunitiesfor the fashion industry in 2020, but the Chinese giant is proving to bemuch more complex than many multinationals ventured to estimate. So it isadvised that, as some companies are becoming too dependent on the Chinesemarket, and others are only aspiring to enter it; companies should considerdiversifying their risks by expanding into other growth areas.

3. New generation of consumers

As all companies struggle to capture and retain users' attention throughthe same platforms and social networks, it will become imperative forfashion companies to rethink their strategies and find ways to maximize thereturn on marketing spend. To achieve this, it will be key to achievecontent capable of attracting maximum attention. Content must be developedtaking into account the platform on which it will be published and themarket to which it is directed, using, whenever possible, direct links thatfacilitate the purchase.

4. Neighbourhood shops

The immediacy demanded by today's consumers is causing many companies todecide to complete their commercial network with smaller physical stores.With which they manage to bring the products closer to the consumer. Beingsuccessful, they point out from the report, in managing to combine theexperiences in stores with an offer located in neighborhoods and suburbsbeyond the main commercial routes.

5. More sustainability

The fashion industry is one of the most polluting industries, and one ofthe most energy and raw material intensive. For this reason, and in spiteof the tenuous advances that are already being introduced, 2020 will be theyear in which companies will have to leave their promotional andadvertising initiatives to three, replacing them with really significantactions that will even exceed what consumers are already demanding today.In this way, the definitive transformation of the industry towards a newsustainable model will be promoted.

6. New materials

There are more and more companies that are betting on exploring newalternatives to traditional materials, deciding to replace them in theircollections with new, more sustainable or technical fabrics. These advancesare expected to continue throughout 2020, a year in which great surprisesare expected to come from the R+D departments.

7. An inclusive culture

Consumers already demand that fashion companies be proactive guarantors andadvocates of diversity and inclusion. These two concepts will continue tobe at the heart of companies' agendas throughout 2020, being among theirhighest priorities and affecting their own internal organisation,advertising campaigns and collections. These measures will add to anincreasing demand in terms of transparency.

8. Increased foreign competition

Until now, companies, especially European and American multinationals, hadfound in Asia a "virgin" market in which to fatten their economic balancesheets. Something that, as we have already seen in 2019, has begun to provenot to be so easy to achieve, in a trend that does not seem to bediminishing throughout 2020, but quite the opposite. New challenges willappear as Asian companies and SMEs begin to abandon their traditional roleas manufacturers, and start selling their products directly to endconsumers. A large number of hitherto unknown players are expected toemerge in the coming year, especially from the supply chains ofmultinationals in Asia. From where they will begin to sell their productsat very competitive prices through online trading platforms andinternational marketplaces.

9. Revolution at the Fairs

Some of them have even disappeared, while the vast majority are committedto introducing new advances with which to adapt to the new times. Atransformation that we will continue to observe at the international fairsin 2020. In which, in an attempt to differentiate themselves, or even tosurvive, they will add B2C experiences or launch new services andimprovements in relation to their traditional B2B strategy.

10. Recalibrating the digital

With many of them making major acquisitions, others making the leap intothe physical environment and a few reaching the coveted "unicorn" status,there is no doubt about the great role that native digital companies havemanaged to play throughout 2019. A role that could start to have its dayscounted. "Investor sentiment is getting worse" in relation to almost alldigital companies, the report says. Therefore, it is possible that in 2020we will see, on the one hand, a lesser appearance of new companies, and onthe other hand, the disappearance of some of them. Both as a result of achange in the parameters of investor financing and in their profitabilitytargets.

This article was originally published on FashionUnited.ES, translated and edited by Kelly Press.

Photo Credits: Unsplash.