profit blog

Among the four pillar in fashion business, profit is an ultimate goal chased by brands and entrepreneurs, for which all strategies and solutions to people, planet, and purpose are for. Brands need profit to maintain all departments running smoothly, especially in this era where various kinds of skilled people are required and cost are controlled and used for its best advantage because of uncertainty of finance and calamity.

According to the statistic provided by Profiletree, the global fashion industry is valued at nearly $1.7 trillion as of 2022. Above this, the fashion market, excluding the luxury sector, was estimated to struggle to deliver significant growth in 2023. According to a McKinsey examination of fashion forecasts, sales growth will be rather moderate, ranging from -2 to +3 percent. This is due in part to a contraction in the European market, which is predicted to fall by 1 to 4 percent (see exhibit) (The State of Fashion, 2023). These anticipated figures are projected globally, and are based on factors like inflation, the conflict in Ukraine, the energy crisis, and dwindling consumer confidence. Dividing into more specific sectors, according to the press release from LVMH, the top three best-sold items are fashion-leather goods, watches and jewelry, and persumes&cosmetics, which all witnessed stable growth in the first quarter of 2023. And the counterpart of Richemont are jewelry, watches, leather goods, which also increase by approximately 20%.

But in the three months that ended on September 30, 2023, LVMH’s revenue increased by just 1% year over year to 19.96 billion euros, with organic revenue growth of 9%—much less than the 21 billion euros that analysts had predicted—and 10% year over year to 62.2 billion euros in the first nine months, with a 14% increase in organic sales, a marked slowdown from the performance in the first half (Ladymax, Huining Zhou). This news release highlights the vulnerability and indetermination of the global fashion industry and raises more concerns about how businesses and brands can maintain stability and competitiveness in the face of volatile economic conditions.

The McKinsey senior partner, Achim Berg, responds to this question in his interviw that brands ought to be well-prepared for any possible situations that they might have to face. In this case, scenario planning may be a crucial tool for brands to foresee the upcoming hazards, such as financial woes and the energy crisis resulting from the war in Ukraine, and initiate solutions that can carry out to cope with risks. On the one hand, changing consumer needs and their consumption patterns need to be taken into serious account as a result of the decency of consumer confidence. On the other hand, maintain appropriate cost control while continuing to make investments in technology, sustainability and other strategies. The whole fashion industry should have a hyper-vigilant insight into the ever-changing world, including politics, finance, and culture, and grasp every fleeting opportunity.

Creative directors, who always play a vital role in constructing brands’ reputation and impression among consumers, have a direct impact on sales and online volume. In addition to designing, they also have to supervise fashion designers, multiple teams, be brand visionaries, and the ambassator of their brands.. When conducting all this work, they may face the conundrum of juggling creativity and commerce at the same time. In this situation, creative directors should consciously target their present and potential clients and launch products, campaigns, and even catwalks with uniqueness and creativity that align with brand positioning and customers’ anticipation. Try to establish a solid and ironic persona among consumers and find the balance between creativity and commerce, express values and an impressive figure in the annual financial report.

In summary, brands and entrepreneurs need to base themselves on the present but prepare in advance for future obstacles and issues.

Reference:

周惠宁 (no date) 财报速递 | 富人也撑不住？LVMH最新季报显示奢侈品需求急剧降温, Weixin Official Accounts Platform. Available at: http://mp.weixin.qq.com/s?__biz=MjM5OTAxMTE4MA==&mid=2652339318&idx=1&sn=a9a28f7f1d15a4d475dbcd295e629c8f&chksm=bd222a758a55a363bafec76611275d04285419db04950848f631a01662f5139ecf8a51706786#rd (Accessed: 20 October 2023).

Fashion industry challenges and global disruptions | McKinsey (no date). Available at: https://www.mckinsey.com/industries/retail/our-insights/how-current-global-trends-are-disrupting-the-fashion-industry (Accessed: 20 October 2023).

‘Global Fashion Industry Statistics: All You Need to Know | ProfileTree’ (2023), 2 April. Available at: https://profiletree.com/global-fashion-industry-statistics/ (Accessed: 20 October 2023).

Mitterfellner, O. (2023) Luxury Fashion Brand Management: Unifying Fashion with Sustainability. Milton, UNITED KINGDOM: Taylor & Francis Group. Available at: http://ebookcentral.proquest.com/lib/ual/detail.action?docID=7260416 (Accessed: 21 October 2023).

State of Fashion | McKinsey (no date). Available at: https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion (Accessed: 20 October 2023).

Overdiek, A. (2016) ‘Fashion designers and their business partners: Juggling creativity and commerce’, International Journal of Fashion Studies, 3(1), pp. 27–46. Available at: https://doi.org/10.1386/infs.3.1.27_1.