THE STATE OF FASHION 2021 - GLOBAL FASHION INDUSTRY SUFFERS A 90% ECONOMIC PROFIT DECLINE IN 2020

Key insights from The State of Fashion 2021 report by The Business of Fashion and McKinsey & Company.

The Business of Fashion (BoF) and McKinsey & Company released a new report, ‘The State of Fashion 2021’. Now in its fifth year, the report covers the future of the $2.5 trillion global fashion industry, based on exclusive interviews with top industry executives and a survey of more than 320 fashion professionals, providing a view on what lies ahead for the industry in 2021.

Amid a humanitarian crisis affecting the lives and livelihoods of billions of people, Covid-19 has also been the catalyst for a global economic downturn, with the fashion industry suffering its worst year on record. Against a backdrop of declining sales, rapid shifting consumer behaviour and disrupted supply chains fashion companies will suffer a staggering 90% decline in economic profit, following a 4% rise in 2019, according to McKinsey Global Fashion Index. [Economic profit is defined as a measure of value where capital costs are deducted from net profit earned].

The travel retail sector remains severely disrupted and destination shopping suffered throughout 2020. With international tourism expected to remain subdued next year and shoppers experiencing further interruptions to travel, companies will need to engage better with local consumers, make strategic investments in markets witnessing a stronger recovery and unlock new opportunities to keep customers shopping.

As the global health and economic crisis endures, 2021 will act as the bridge between the pre-pandemic reality and a potentially protracted recovery period for the global fashion industry. The pace of recovery will vary across fashion categories, value segments and geographical markets with some pockets of growth despite the continuing economic challenges. Fashion players focused on digital, Asia (China in particular) and luxury may have the competitive edge.