Coming Up in Fashion: Challenges & Opportunities


The fashion landscape is evolving and the COVID-19 pandemic has only further accelerated trends and challenges that the industry faced prior to the crisis. As sales decline, store closures continue, and consumer behavior changes, the fashion industry is struggling to keep up. A report by McKinsey found that economic profit in the industry declined by 93% in the previous year.

Even in times of uncertainty, executives need to reinvent processes, invest in digital solutions that enable flexibility and increase efficiency, and realign their strategy to address pressing matters such as sustainability in the industry.

The Digital Revolution

The digital revolution was taking place prior to the pandemic, however, the apparel industry had fallen behind. Due to the crisis and the consequences that followed, the industry was forced to adopt digital at a quicker pace.

In the new normal, McKinsey discovered that 40% of all sales are going to be made through online channels even as stores resume operations. The pandemic serves as an opportunity for many brands to increase innovation from top to bottom and invest in digital. A study by McKinsey found that 30% of fashion executives surveyed viewed going digital as the biggest opportunity for the industry this year followed by sustainability.   

As store closures continue, 70% of executives believed that their online business would grow by 20% in 2021. One of the largest retailers in the world, Inditex, announced that they will be closing 1,200 additional stores and focus more on digital initiatives. Fashion brand Zara plans to invest $3.2 billion to digitally transform their business.  

Leaders will use digital tools, data, and artificial intelligence to improve their processes and make more insightful decisions based on consumer demand. 40% of executives surveyed by McKinsey planned to integrate data analytics into their processes. Companies that emerge successful will be those that gather and leverage data for planning and decision making.

Digital will serve as an opportunity for executives to transform their businesses to be more agile, flexible, and resilient. As executives gain more visibility into their supply-chains, they can take steps to improve processes and address key issues such as sustainability.

3 in 5 consumers consider sustainability as an important factor when making a purchase


Sustainability in Fashion

Recently, the climate crisis has been a major topic of discussion around the world. The fashion industry is recognized as one of the biggest contributors to this issue and is responsible for emitting 10% of global greenhouse gases. The pandemic has made consumers more aware as they push for sustainability and transparency from brands. Post-pandemic, consumers will prefer brands that have a clear purpose and emphasize sustainability in their practices. Sustainability was viewed as the second biggest opportunity by fashion executives and 60% believed that sustainable materials would become the norm.

A study by McKinsey found that 3 in 5 consumers consider sustainability as an important factor when making a purchase. This is particularly true amongst the younger generation as a study by Neilsen highlighted that 73% of millennials are willing to pay more for sustainable products. Brands are taking notice and starting to include this in their practices. An example would be footwear/apparel company AllBirds that allows customers to see the carbon footprint of each product before making the purchase.

The industry is notorious for their overproduction issue which leads to an inventory pileup and contributes to waste. In 2020, the industry was left with between €35 to 45 billion in overstock. 65% of consumers are now placing importance on factors such as durability when making a purchase instead of focusing on things such as ‘newness’ of an item.

Big fashion brands, such as H&M, are planning to use only sustainable materials by 2030. Additionally, with the help of artificial intelligence, the brand is shifting towards a more circular supply-chain. The aim is to produce clothes that can be worn for a long period of time and then recycled or transformed into new ones. AI will help them better understand customer needs and produce the right products accordingly without leading to overproduction. The brand has also introduced the loop machine which allows customers to see firsthand their old clothes being tuned into new ones.

Future Outlook

The fashion industry needs to embrace digital and work towards sustainability as they head into the new normal. The industry will be slow to recover from the pandemic and to be successful companies will need to engage and interact with consumers in new ways and use data and analytics to gain insights and make decisions.

There will be long-lasting changes in consumer behavior due to the pandemic as they value sustainability, longevity, and durability of a product.

Coming Up in Fashion: Challenges & Opportunities
Deniz Thiede (CMO, Triple Tree Solutions)
Published 31 May 2021

Further Reading