Decoding "The State of Fashion" and brand building Shifts.
Digest #13 Unveiling "The State of Fashion", Luxury Loyalty, Rising Sustainability Focus, and the lack of in-house GenAi capabilities.
The "State of Fashion 2024" report by BOF and McKinsey forecasts a retail sales growth of 2% to 4% for the fashion industry in the upcoming year. The luxury market is expected to see a slowdown to 3-5% in 2024, down from 2023's 5-7%.
This mirrors trends identified in the Bain & Co and Altagamma report, which also forecasts comparable slowdown, as summarized in our last digest.
China's luxury market, shows resilience with a projected 4-6% growth in 2024, buoyed by a quick economic recovery, strong consumer confidence, and supportive domestic policies. In contrast, the US luxury market anticipates a modest 2-4% growth, constrained by a mature market and cautious consumer spending.
Jewelry and watches are set to grow in luxury market share, surpassing handbags as the top category by 2023. This growth is driven by their perceived ability to retain value in uncertain times. As these luxury goods emerge as key categories, more brands are entering the market.
Luxury was the main segment driving economic profit, with luxury's EBIT margin reaching 25%, 5 p.p above pre-pandemic levels, thanks to an 18% revenue increase largely from effective pricing strategies.
However, mid-market (Excluding Inditex) and value segments experienced margin drops due to intense competition and cost increases.
Facing cost pressures and aiming to maintain profitability, companies are looking at price increases, with 25% of executives considering hikes above 5%.
Relying on price increases as a quick fix might boost short-term profits, but it risks damaging long-term growth and value creation, particularly for brands that haven't invested in their brand equity.
The report also highlights a renewed focus on brand marketing, moving away from performance marketing and building emotional connections with consumers, emphasizing long-term brand building and loyalty.
According to Julie Hoffman from Adobe, luxury consumers highly value seamless brand experiences that expertly integrate digital and physical experiences.
For them, loyalty programs transcend mere points or discounts. It's about exclusivity, like early product access, invite-only events, and customized experiences. These programs are designed to make customers feel valued and important, emphasizing a deep, personal connection with the brand.
Sustainability chapter: 87% of fashion executives anticipate significant impacts from sustainability regulations.
By 2024, self-regulation may become obsolete as new global rules affecting production, waste management, and the entire value chain are implemented.
When it comes to luxury and jewelry brands, WWF releases a rating for 21 brands.
Larger groups like Kering, Richemont, and LVMH perform better, yet no brand achieves top rankings, indicating a need for substantial improvement across the sector.
The report shows advancements in climate strategies and reporting, but points out gaps in supply chain transparency and stakeholder involvement.
From Loewe To Swarovski, hand-painted murals get a luxury upgrade.
Loewe 2022 sales up 37% to 626m€, gross profit rises 92%.
Shein confidentially files IPO for US expansion.
Golden Goose turnover grows 19% to €421M, eyeing €3B Milan IPO.
Farfetch considers going private; Richemont reviews the YNAP deal.
Missoni explores potential sale with Rothschild as advisor.
South-America Luxury Market Perspectives (Spanish Article)
Net-A-Porter debuts rental in partnership with By Rotation and HURR.
Online Jewelry & Watches UK: Top Stores & Market Share
From Miu Miu to Uniqlo: 2023 is the year of contradictions.
Fashion Tech
Gen AI’s Creative Crossroad: 73% of fashion executives said generative AI will be a priority for their businesses in 2024, but just 28% have tried using it in creative processes for design and product development and only 5% believe they have the capabilities to fully leverage it, according to the SoF 2024.
One last bite:
Zara: The billion dollar missed opportunity. An in-depth UX review.
Zara Launches on TikTok Shop.
Bershka taps 3DLook for Fit Tech Experience.
60% of luxury shoppers use Pinterest to research luxury brands.
Louis Vuitton is selling the Via Tile Mini Trunk NFT bag for US$6,500.
Brand Engagement in the Metaverse: November 2023.
The dos and don’ts of styling for the metaverse.
Until next time.Thanks for reading.
