PROFITS ROLE WITHIN THE FASHION INDUSTRY
Of course, profit is essential for any business to survive economically. in most cases profit is a main drive for businesses. Most businesses strive for high profit margins as a key goal within the business. The higher your profit margin, the more profit you’re making on each £/$ of sales. Higher margins indicate your company is running a profitable business model and your sales performance is good (magestore, 2022). Profit allows business’s to grow and expand, by bringing out more clothes, expanding their stores and upgrading their e-commerce sites. However profit can be hard to maintain, especially with fast fashion brands. mainstream fashion is a highly competitive market, with low barriers to entry, therefore the lowest prices will make the most sales. But in turn this results in a lower profit margins for these companies due to competitive pricing.
THE SIZE OF THE FASHION INDUSTRY
“Fashion is one of the world’s most important industries, driving a significant part of the global economy. It is one of the key value-creating industries for the world economy. If it were ranked alongside individual countries’ GDP the global fashion industry would represent the seventh-largest economy in the world,’’ stated McKinsey in its State of Fashion 2017 report. The fashion industry will always be huge, but the size of the fashion industry depends on multiple factors. The main factor being the level of consumers disposable income. if disposable income is high, consumers are more likely to spend their money on normal goods (a good that experiences an increase in demand due to an increase in a consumer’s income). However is disposable income is low, less money will go towards the fashion industry. Interest rates are also important when considering the size of the fashion industry. If interest rates are high, customers are more inclined to save their money rather than splurge on the latest fashion trends. For example, pre – pandemic when income was high, the fashion industry global revenue was estimated between $1.7 trillion and $2.5 trillion according to two different research reports by Euromonitor and McKinsey.
HOW DIFFERENT SECTORS ARE PERFORMING
in McKinsey’s analysis of fashion forecasts, the luxury sector is set too outperform the rest of the industry, as wealthy shoppers continue to travel and spend, and thus remain more insulated from the effects of hyperinflation. This is because lower income households will be effected more by hyperinflation due to already lacking disposable income, meaning their spending on normal goods will further decrease. Meaning the luxury sector will thrive in comparison. mkinsey. (2023).
HOW CAN A BRAND REMAIN COMPETITIVE IN UNCERTAIN ECONOMIC TIMES?
in uncertain economic times such as the Covid-19 pandemic, when consumer confidence is low. Brands need a strong brand image to remain competitive along with a strong business and marketing plan, to cope with lower sales due to lowered disposable income. A strong brand allows a business to become timeless within the fashion industry and therefor survive the times of low growth.
Bibliography
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mkinsey BOF. (2017). The State of Fashion 2017. [Online]. mkinsey.com. Last Updated: 2017. Available at: https://www.mckinsey.com/~/media/McKinsey/Industries/Retail/Our%20Insights/The%20state%20of%20fashio [Accessed 21 October 2023].
mkinsey. (2023). The State of Fashion 2023: Holding onto growth as global clouds gather. [Online]. mkinsey.com. Last Updated: 2023. Available at: https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion#:~:text=For%20the%20persona [Accessed 21 October 2023].