Profit within the fashion industry
The four pillars that dominate the fashion industry are Planet, People, Profit, and Purpose. The profit pillar focuses on providing economic benefits for a fashion business (Redress, 2023). Ultimately art and commerce go hand in hand, one doesn’t exist without the other. Businesses must find a happy medium between increasing revenue and creating products that are creative. Although the fashion industry strives to promote creativity and present fashion as an art form, the main purpose of a business is to simply make money.
The fashion industry is one of the biggest industries on the market. The revenue of the global apparel market was calculated to amount to 1.53 trillion U.S. dollars in 2022, a slight decrease on the previous year. However, revenue was forecast to increase in 2023, to more than 1.7 trillion dollars (Statista, 2023).
Within the entirety of the fashion industry, there are various sectors that differ from one another. Some of these include luxury fashion, high street fashion, sportswear, kids wear, etc. Based on McKinsey’s analysis of fashion forecasts, the luxury sector is expected to grow however, the rest of the fashion market will struggle to deliver significant growth in 2023. This analysis of fashion forecasts projects relatively slow sales growth of between -2 and +3 percent, weighed down by a contraction in the European market (expected to shrink between 1 and 4 percent). China and United states are expected to fare better, growing between 2 and 7 percent and between 1 and 6 percent respectively.
(McKinsey and Company, 2022)
However, during uncertain economic times, brands must find ways to remain competitive and still generate income whilst also promoting creativity and expressing their brand values. Inflation is at the top of executives’ minds for the coming year, according to results from the annual Business of Fashion and McKinsey State of Fashion Survey. They expect that inflation will undercut consumer demand, pushing shoppers to curtail fashion spending or trade down for less expensive products as their energy and grocery bills spike (McKinsey and Company Report, 2022). In order for fashion businesses to continue to strive during these difficult financial times, they need to understand and utilise social media. Social media allows businesses to market their products and promote themselves digitally and therefore, reaching customers from behind a screen. A good example of this is the significance of social media throughout the Covid-19 pandemic. As the Covid-19 pandemic worsened, people were forced to take social distancing measures and fashion retailers had to close stores and discontinue production (Fashion and Textiles, 2021). Fashion businesses saw a decline in profits and therefore, the majority turned to digital marketing and social media as a way to remain in business.
Moreover, there are numerous stories of brand decline that a significant number of luxury brands have experienced (Miterfelner, 2023). According to Kapferer (2012) and Thomas and Kohli (2009), reasons for brand decline and deletion, which lead to loss of brand equity, include quality that is forgotten or non-significant differences, the missing of new trends, offering mono products, distribution issues, weak communications, the inability to stay with the target market, mismanagement by big groups which weaken brands they purchased, environmental factors and, finally, the departure of the creative director. (Mitterfelner, 2023). As such, in order for brands to remain afloat, they need to ensure they are on top of such factors.
Contributing to this, creative directors must find ways to bridge the gap between creativity (art) and commerce. Executive MBA (Fashion) at London College of Fashion continued their series of events with a fashion business panel discussion on the divide between creative vision and commercial reality, bringing together a panel of industry experts who try and manage the relationship between money and unique vision on a daily basis. (Crook, 2017). The group collectively agreed that fashion businesses must collaborate with their consumers who will have their own interpretation of the relationship between creativity and value for money from the product ranges that they choose to buy (Crook, 2017).
References:
Redress Design Award, (2023) Circularity in Fashion, Available at:
https://www.redressdesignaward.com/academy/resources/guide/circularity-in-fashion (Last accessed: 20 October 2023)
Statista, (2023) Global apparel market- statistics and facts, Available at:
https://www.statista.com/topics/5091/apparel-market-worldwide/#topicOverview (Last accessed: 20 October 2023)
McKinsey and Company Report, (2022) The State of Fashion 2023: Holding onto growth as global clouds gather, Available at: https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion#:~:text=Dire%20consequences%20for%20fashion%2C%20one,annual%20revenues%20before%20the%20pandemic%2C&text=entails%20joblessness%20or%20financial%20hardship%20for%20people%20across%20the%20value%20chain. (Last accessed: 20 October 2023)
Fashion and Textiles, (2021), Global fashion retailers’ responses to external and internal crises during the COVID-19 pandemic, Available at: https://fashionandtextiles.springeropen.com/articles/10.1186/s40691-021-00260-x#:~:text=Specifically%2C%20as%20the%20COVID%2D19,and%20cancel%20orders%20from%20suppliers. (Last accessed: 21 October 2023)
Crook, J, (2017), London College of Fashion, Compelling Fashion Business: Bridging The Divide Between Creative Vision and Commercial Reality, Available at: https://www.arts.ac.uk/colleges/london-college-of-fashion/stories/compelling-fashion-business-bridging-the-divide-between-creative-vision-and-commercial-reality (Last accessed: 21 October 2023)
Mitterfelner, O, (2023), Decline and resuscitation of Luxury Fashion Brands, Luxury Fashion Brand Management, Chapter 6 page 135, (online) https://ebookcentral.proquest.com/lib/ual/reader.action?docID=7260416 (Last accessed: 21 October 2023)