Top 11 Fashion Industry Challenges In 2023 (2024)

Fashion is in for a difficult year, with forecasts for 2023 predicting a global slowdown as economic pressure grows.

With consumers tightening their budgets as the cost of living rises, sky-high inflation weighing heavily on brands, and intensified concern around issues such as sustainability, inclusivity, fair pay and working conditions, businesses cannot afford to let their guard down.

To maintain a positive trend in 2023, businesses must ensure that they are acting in the interest of all stakeholders — investors, employees, customers and society alike — and commit to overcoming issues such as environmental impact, lacking diversity, and distrust while navigating the short-term economic challenges.

3DLOOK’s team of experts answer ‘what are the current challenges facing the fashion retail industry?’, detail the biggest fashion industry challenges businesses face and provide tips on how to overcome them.

Fashion’s public image offers jobseekers little encouragement, with concern over environmental and social impact limiting appeal. Half of all professionals in the apparel industry feel as though fashion’s desirability has fallen since 2019, according to Business of Fashion, due to its poor sustainability credentials and reluctance to change.

To attract talent, the apparel industry must increase minimum wage, eliminate unpaid internships, and hire from wider circles. Last year, for instance, LVMH committed to training 25,000 young people from all backgrounds through internships, apprenticeships and permanent opportunities.

Businesses must also appease post-pandemic desires by continuing to offer flexibility. Fashion house Tapestry, for example, will allow employees to continue working from home.

This same respect must be shown throughout supply chains; with 64% of Millennials shunning employers that demonstrate poor social responsibility, according to Cone Communications, low wages and poor conditions in supplier factories must be addressed.

Fashion ranks among the world’s most polluting industries, contributing 8-10% of global carbon emissions, according to the UN.

With consumers demanding improvements and regulatory action such as New York’s ‘Fashion Sustainability and Social Accountability Act’ adding pressure, 15% of fashion executives cite sustainability as a top-three concern, according to McKinsey.

With 70%+ of emissions resulting from manufacturing, businesses must turn to sustainable materials that are recyclable, regenerative and responsibly sourced. Lululemon has committed to using 75% recycled polyester, which will cut emissions by 45%, for instance.

Adopting on-demand manufacturing models will also be crucial. Slow fashion marketplace MIVE, supported by 3DLOOK’s mobile body measuring tool, has created an emissions-free process where every garment is produced according to the customer’s precise measurements. This eliminates overproduction, minimizes returns, and drastically cuts emissions.

discover 3dlook solutions now

Despite the significant environmental cost of producing garments, much of it is deposited into a landfill within 12 months. Globally, fashion creates 40 million tons of textile waste annually, according to the Ellen MacArthur Foundation, and much of it is unnecessary — despite cotton’s recyclable nature, less than 1% of cotton materials were recycled in 2020.

If fashion is to reduce its volume of waste, it will require closed-loop systems that keep garments in constant circulation. To achieve this will require changes to the way garments are designed, with a focus not only on recyclability but also on the ease of collecting and sorting.

Fashion’s intricate supply chain is suffering from unprecedented disruption, from material scarcities to staffing shortages, logistical delays, and the energy crisis.

Combined, these issues push up the cost of manufacturing and distribution, impacting the profitability of many apparel brands. According to McKinsey, 15% of industry leaders fear margins & profitability will pose one of the greatest threats to the fashion industry in 2023.

To minimize disruption, companies must rethink their sourcing strategies and build greater flexibility into their supply chains. Brands should work with suppliers to scale up nearshoring, moving manufacturing operations closer to its customers to avoid material supply bottlenecks, minimize shipping costs, and continue providing near-instant delivery.

The pandemic caused a spike in e-commerce shopping rates. However, customers are also returning a larger portion of purchases, with 20.8% of goods now returned on average, according to the National Retail Federation — up 96% since 2020.

Fashion must take action to reverse this trend, with 30-40% of online fashion purchases typically returned, according to PwC.

To reduce fashion e-commerce return rates, brands must analyze their returns data to uncover patterns and learn customer behaviors and characteristics that are likely contributing to the issue. More often than not, retailers will find product clarity is the primary issue, with up to 70% of returns due to poor fit or style. Here, practices such as importing visuals, providing comprehensive sizing information, and implementing features such as live chat to assist customers in finding their right size can help.

request yourfit demo

As much as 60% of fashion’s eco-claims have been classed as ‘unsubstantiated or misleading’ by the Changing Markets Foundation. With fashion among the industries trusted least by consumers, according to Edelman, brands must find ways to back up their sustainability claims.

Demonstrating progress will be particularly important to young consumers, according to Cotton Incorporated, with 43% actively seeking companies with solid sustainability reputations.

To rebuild trust, brands must improve traceability and transparency. Blockchain-enabled product passports can share information with consumers, such as materials used, manufacturing processes, and supplier working conditions. Retailers such as Pangaia are already demonstrating this potential, while political organizations such as the European Union are considering the deployment of the technology at scale in 2023.

Standardization can also help — the Higg Index, for instance, provides a standardized way for brands to measure environmental and social impact across a product’s life cycle.

Some 42% of fashion professionals say the industry is ‘poor’ at prioritizing diversity and inclusion, according to BoF.

Fashion’s lack of diversity shows in the products it sells — plus-size makes up just 21% of the US fashion market, according to Coresight Research, despite serving 70% of women. Likewise, 31% of non-binary people feel unable to wear work attire that acurrately represents their gender expression.

Building diverse teams and involving employees in key decision-making processes will be vital. Diversity from within the company will help brands to understand the needs of the complex fashion market, and ensure products and marketing truly serves the consumer base.

Brands such as Nordstrom have begun to publish detailed employee demographic information, highlighting underrepresented groups and challenging itself to improve.

Sizing continues to pose a significant problem for fashion consumers, with 62% struggling to find clothing that fits.

A lack of standardization causes confusion among consumers, and vanity sizing — assigning smaller sizes to make consumers feel good — complicates the issue. As shoppers move online, with a lack of dressing room to try on garments, the problem is complicated further.

To overcome the issue, womenswear brand Denim 1822 has created over 100 different jean styles and offers sizes ranging from 00 to 24W. Using 3DLOOK’s YourFit, 1822 Denim scans customers’ bodies to intricately match them to their perfect size and fit. 92% of customers have expressed satisfaction with the recommendations they received, with conversions up and returns down.

As big data in fashion retail reaches new heights, so too does the risk of brand-damaging cyber attacks. Retail is the fourth most targeted industry, with the average breach costing retailers $3.28m according to IBM.

The loss of trust can add millions more to the cost. Likewise, regulatory acts such as California’s Consumer Privacy Act can result in huge fines for targeted businesses.

Never has it been more important to build cyber resilience in fashion retail. Brands must allocate a greater proportion of their budgets to cybersecurity and, as well as seek support from specialist firms, build in-house cyber competency.

With the threat landscape constantly evolving, brands must actively monitor cyber risk throughout the value chain and consider how data is handled — from collection to use and disposal.

Faced by record-high inflation, inflated energy costs, constant talk of a cost of living crisis and worrying geopolitical tensions, consumer confidence is rapidly falling. Feeling the effects of the economic downturn and fearing further impact, two-thirds of consumers plan to cut back on non-essential purchases in 2023 according to KPMG. In Europe, fashion is where consumers plan to make the biggest spending cuts.

To protect bottom lines, 72% of fashion executives plan to increase prices in 2023 according to McKinsey. However, with consumer purchasing power falling, this risks pricing out shoppers and damage loyalty by forcing them to seek more affordable options elsewhere.

Rather, to protect themselves as the global economy recovers, enterprise retailers must focus on reducing avoidable costs throughout the business. Return loss is one area where brands could make significant savings, as is overproduction ⁠— Using YourFit, retailers can improve their production, planning and distribution processes to ensure belt-tightening consumers have access to products they will love, buy and keep.

With industry experts anticipating a tough year for fashion, challenges will be abundant, from long-term struggles such as sustainability and sizing struggles to growing issues such as diversity and distrust.

However, having survived one of the most difficult periods the fashion industry has ever faced during the pandemic, businesses have proven themselves capable of persevering. By adapting to changing consumer behavior, listening to the concerns of customers and colleagues, and investing in the right solutions and software, apparel industry businesses can overcome the challenges 2023 throws at them.

Get in touch to discover how 3DLOOK’s fit personalization platform can help your brand overcome 2023’s biggest fashion challenges.

Request a DEMO