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The West stays stingy: Global fashion industry prepares for a challenging 2024

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With 2024 approaching, the fashion industry is readying itself for changes within its sector and for the behaviour of customers to continue shifting. The management consulting firm, McKinsey & Company, released a report on what to expect for the coming year

How did the fashion industry perform in 2023?

While the fashion industry made meteoric amounts of profit in 2021 and 2022, in both luxury and non-luxury goods, that all slowed down in 2023. The success of the post-pandemic boom couldn’t last. In Europe and North America, sales dwindled as the year went on. Even the Chinese population, known for splurging on luxury goods, eased their spending in the second half of 2023. Economically, 2023 was a weak year for fashion. 

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These dwindling numbers aren’t to the industry’s surprise. With socio-economic uncertainty, geopolitical unrest, and massive global inflation, people spend less and think twice before buying a new product. However, fashion has been shown to bounce back from weaker moments in the past (such as 2020, during the height of the pandemic). For 2024, fashion companies will need to implement smarter tactics to drive interest towards their brand and attract customers. 

How will the fashion industry perform in 2024?

According to the McKinsey study, the fashion industry will globally see a small incline in profit, though the numbers aren’t much different from 2023. Mass-market fashion and ready-to-wear will grow by 2 to 4% in North America and 1 to 3% in Europe. This will positively affect The States as they had seen negative growth in 2023, but will not shake the status quo for Europe. They made a little profit in 2023, so they were already on a positive trajectory.  

Luxury goods will bring in the most profit, though still less than the previously successful year of 2022. While 2023 brought in 5 to 7% of profit in the luxury goods market, that will be around 3 to 5% in 2024. Interestingly, that small surge in profit will not come from China, McKinsey suspects, but from North America. 

However, industry professionals are divided on the topic. The McKinsey study surveyed these professionals, citing that: “26% of respondents say they expect conditions to improve year on year, 37% see them remaining the same and 38% think they will worsen.” This is due to the aforementioned economic uncertainty and political unrest. 

The items bought from the luxury goods market will most likely be hard luxury goods, such as jewellery, watches, and leather, as these products are seen as investments rather than flighty purchases. 

Looking towards the Global South and Asia

Interestingly, not all countries are negatively affected by the fashion industry. India is performing exceptionally well. 85% of India-based executives are more optimistic about India’s consumption of non-luxury and luxury goods, and see financial growth.

Additionally, China feels optimistic about positive financial growth in 2024, despite their current slump in profit. According to the McKinsey survey, “Chinese consumers show a higher intent to shop for fashion in 2024, than consumers in both the United States and Europe.”

These percentages and statements might mean that the fashion industry ought to look at previously untapped markets, especially in the Global South, to make a profit.

Photo by Tim Douglas for Pexels

In summary

The fashion industry will continue to struggle due to climate change, geopolitical unrest and inflation. Fashion companies will have to balance the rising costs of creating and distributing garments, sustainability initiatives, and new marketing strategies to attract consumers. In regards to marketing, McKinsey expects that fashion brands will use fewer celebrities to endorse their products, as this idea of “authenticity” is currently in vogue with the consumer.

To surmise, only the brands that are smart and quick on their feet will reign victorious in one of the most challenging times for fashion yet.  

To read the full report of the State of Fashion in 2024, click here.

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