mckinsey retail report 2019

Shortening lead times requires major changes to the traditional business model and supply chain, and a shift in focus to a customer-centric model. We strive to provide individuals with disabilities equal access to our website. Widespread store closures for an industry reliant on offline channels, coupled with consumer instinct to prioritize necessary over discretionary goods, hit brands’ bottom lines and depleted cash reserves. It’s a trap that leaders need to make a conscious effort in order to escape. Exactly when this will happen is impossible to know for sure, except that it will, in all likelihood, be linked to the discovery of a workable antiviral treatment and delivery of a proven vaccine, which some experts say is at least 12 to 18 months away. As athletic wear continues to grow, it will become a category with the ability to compete on equal terms with clothing and footwear, particularly in the midmarket and premium segments. Learn about We see 2020 as being a watershed for “Inclusive Culture,” with diverse races, genders, and sexual orientations increasingly present across organizations and in leadership roles. Unleash their potential. This has a profound impact as purchase decisions are influenced by social media, peer reviews, influencer marketing, and traditional marketing, and even many purchases themselves are made consumer-to-consumer. For workers in low-cost sourcing and fashion-manufacturing hubs, such as Bangladesh, Cambodia, Ethiopia, Honduras, and India, extended periods of unemployment will mean hunger and disease. That’s great news for consumers and for companies that can make sustainability real. The MGFI forecasts that growth will slow to 3 to 4 percent in 2020, slightly below the predicted rate for 2019. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. For fashion players, 2019 will be a year of awakening. There is little doubt that 2021 will continue to be tough for many as the COVID-19 pandemic tracks an uncertain trajectory. The bottom line is that amid this uncertainty and change, our analysis suggests cautious optimism is warranted. “Reducing labor costs and deleveraging the fixed-cost base can drive a 2 to 4 percent increase in earnings before interest, taxes, and amortization”. Thorsten Brackert. In all other regions and segments, executives are notably pessimistic, reflecting the potential challenges ahead (Exhibit 1). At the end of the day, there’s plenty of evidence indicating that automation is the need of the hour for retailers that want to stay relevant and protect their margins. After a year in which the fashion industry posted record-low economic profits, business leaders are on the front foot, seeking to innovate while continuing to engage their core constituencies. Asia in particular is emerging as a fertile ground for small and midsize enterprises that leverage e-commerce to reach out from the factory floor. McKinsey analysis. Imran Amed is the founder, editor-in-chief, and CEO of The Business of Fashion. Industry players are coming to accept unpredictability as the new norm, and fashion executives will in 2018 respond by focusing their energy on improving what is within their control. This is particularly true for the major players within each of the market segments and product categories. In luxury, Kering made an impressive rise through the ranks, driven by Gucci’s double-digit sales growth and strong performance in Asia–Pacific markets such as Japan. “Furthermore, reskilling is more likely to earn goodwill from employees, customers, and governments alike. The fifth annual State of Fashion report by The Business of Fashion and McKinsey & Company forecasts the continuation of tough trading conditions next year, forcing companies to find their ‘silver linings strategies.’ Download the full report to understand the 10 themes that will define the global fashion industry in 2021 and how to navigate the currents they create. They should bear in mind the three trends that we believe will shape the 2017 fashion industry: the global economy, consumer behavior, and the fashion business model. The year ahead will be an awakening after the reckoning of 2018—a time for fashion companies to look at opportunities and not just at surmounting challenges. While many experts speak broadly of the issues, McKinsey uses data to paint a more vivid picture: “Our analysis suggests that typical grocery and hypermarket retailers face 100 to 150 basis points of margin pressure, and typical specialty apparel or department stores 350 to 500 basis points. Still, there are silver linings among the clouds. Reflecting our conversations with industry leaders over recent months, it examines the ten key trends likely to shape the business over the coming year. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. Authors. Retailers need automation to survive. A freeze on spending is aggravating the supply-side crisis. © 2020 Tech Wire Asia | All Rights Reserved, McKinsey advises retail execs on how to leverage automation tech, Solid-state batteries could speed up the roll-out of EVs, AVs, Asian business well placed to drive post-crisis comeback with data, 5G, The rocky road to recovery for small business in 2021, How COVID is forcing a change in organizational governance, Maximising existing infrastructure, minimizing spending & other digital journeys in Gigamon webinar series. Only the discount segment is likely not to be part of the recovery trend. McKinsey Quarterly. Managing Director & … No wonder Amazon intends to start 3,000 stores in the US by 2021. 2019 Retail Trends Report Microsoft Dynamics 365. McDonald’s self-service ordering kiosks, for example, save time for employees — these employees have been trained to offer table service to customers (in Hong Kong and other cities) which significantly (and directly) boosts customer experience and satisfaction. We see local stores in particular building a role as partners in the digital revolution, helping customers touch, feel, and experience in convenient locations as they browse online and offline. Sales growth seems set to slow to a mere 2 or, at most, 3 percent by the close of 2016, with stagnating profit margins. We’re obsessed with the future of retail. This joint report by the Business of Fashion and McKinsey is an effort to advance the discussion beyond crisis management and immediate contingency planning by outlining the areas in which the fashion industry must focus once the dust settles on the current crisis. All this comes against a backdrop of the fashion industry having turned a corner in 2018, with increased growth justifying the optimism expressed in last year’s global fashion survey. Among the well-known brands, Chanel is a significant player, with revenues of more than $10 billion, while Rolex is one of the few large independent and private luxury watch brands remaining. Nonetheless, our report finds that fashion companies are hopeful they can improve their performance through a combination of organic growth and leveraging new technologies. We explore all these changes and their ramifications in our 2019 report on global retail banking. The industry continues to polarize: consumers are trading away from the midmarket price points even while the luxury, value, and discount segments are picking up speed. The modern shopper’s comfort with digital channels and content has created a complex customer journey across online and offline touchpoints. Download The State of Fashion 2020: Coronavirus Update, the full report on which this article is based (PDF–3MB). In August 2019, Kering CEO François-Henri Pinault spearheaded an industry-wide pact to achieve net-zero emissions by 2050. They need to get digital right and to address consumers increasingly concerned by the climate-change agenda. Something went wrong. We also expect to see a rise in M&A activity as companies take advantage of low valuations and grab share in fast-growing markets. The US retail sector is facing one of the most challenging times in recent memory. McKinsey’s report does point out that as the demand for physical and manual skills declines, the need for technological skills, as well as social and emotional ones, will rise quickly in every sector, including retail. 1 Economic profit grew for the second year running in 2018, following consecutive annual declines from 2012 to 2016 (Exhibit 2). This is an edited excerpt from the first joint report from McKinsey and the Business of Fashion, The State of Fashion (PDF–8MB). Je houdt je bezig met de overgang naar duurzame technologieën, de economische transitie van Afrika, overnames, de toekomst van onderwijs, gezondheidszorg, of de financiële sector. The authors wish to thank Sarah Andre, Althea Peng, Sonja Penttilä, and Robb Young for their contributions to this article. The new report comes from McKinsey’s PriceMetrix ... while revenues per advisor grew by 5 percent per year to $717,000 in 2019. Why is a white shoe consulting firm opening a brick-and-mortar store? “IN OUR WORK in the retail sector, we see automation reshaping business models and the broader value chain,” said McKinsey Consultants Steven Begley, Bryan Hancock, Tom Kilroy, and Sajal Kohli in a new report. By Imran Amed, Anita Balchandani, Achim Berg, Saskia Hedrich, Jakob Ekeløf Jensen, and Felix Rölkens. Deal Day Spending. At the end of the day, McKinsey does acknowledge that there’s a social impact to retailers automating their facilities and operations — but highlight that they need to plan and support their staff and prepare for the future simultaneously. “Our corporate-finance research suggests that two-thirds of companies fall into this trap. Managing Director & Partner. Except, that is for consumers. At the same time, consumers have become more demanding, more discerning, and less predictable in their purchasing behavior, which is being radically reshaped by new technologies. 2 Those are some of the findings from our latest report, The State of Fashion 2021, written in partnership with the Business of Fashion (BoF). Digital-first companies such as Alibaba, Amazon, Net-a-Porter, and Zappos continue to force fashion companies to provide an even more premium experience. The task for decision makers, therefore, is to find silver linings, knowing that times of change are inherently rich with opportunity. Download the Full Report. The authors wish to thank McKinsey’s Tiffany Wendler, as well as the Business of Fashion’s Robb Young, for their contributions to this article. Athletic wear is set to become the absolute category champion, maintaining 6.5 to 7.5 percent sales growth, although it will be unable to reproduce the double-digit growth of the past. McKinsey analysis. Perhaps unsurprisingly, investors this year had more confidence in the top 20 than in other companies, and super winners were less badly hit by the April stock market sell-off than their peers were (–26 percent from December, compared with –33 percent on average). 2 Perspectives on retail and consumer goods Number 7, January 2019 A new year is an opportunity for renewal—a fresh start, a time to recommit to long-standing goals or to pursue new ones, a chance to get reenergized and build momentum for the year ahead. Many U.S. consumers have … In short, the industry next year has an opportunity to stabilize and reset, and success stories will probably be written by those already planning for the year ahead. “A comprehensive automation program can significantly offset these headwinds. For the personal luxury goods industry (luxury fashion, luxury accessories, luxury watches, luxury jewelry, and high-end beauty), we estimate a global revenue contraction of –35 to –39 percent in 2020 year-on-year, but positive growth of 1 to 4 percent in 2021 (compared with the 2019 baseline figure). Experiential retail is coming to life 13 Trend 5 Planet friendly is due to arrive 16 Trend 6 Social currency will be more transactional 19 Trend 7 From transaction to service provider 22 Top 10 lessons for retailers 26 Contacts 28 Further publications 29 Table of contents 2019 is poised to be a transformational year for retail. Although the fashion industry appears to be turning a corner, the rebound is not being felt evenly across the globe. As with everything in this fast-moving sector, we’ll just have to wait and see. In the United States alone, some 20,000 to 25,000 stores were expected to close in 2020, more than double the number that did so in 2019. Download the full report to explore the 10 themes which will define the global fashion industry in 2020. 3. The challenges of a fundamentally changing industry and a continued unpredictable macroeconomic environment has led fashion players to toughen up. The crisis is a catalyst that will shock the industry into change—now is the time to get ready for a postcoronavirus world. Navigating this uncertainty will not be easy for fashion leaders. Alongside public companies, we also identified a group of “hidden champions.” These privately owned gems often dominate their category areas and generate significant revenues. That said, almost all other market segments should see a slight improvement in sales growth of half to one-and-a-half percentage points. McKinsey Quarterly. Imran Amed is the founder, editor-in-chief, and CEO of the Business of Fashion. McKinsey continues to track economic and epidemiological developments around the world. Long-term leaders include, among others, Inditex, LVMH, and Nike, which have more than doubled their economic profit over the past ten years (Exhibit 2). At the opposite end of the price spectrum is Primark, whose commitment to its core value proposition has made it a formidable competitor. It’s precisely for this reason that companies such as Walmart and IKEA constantly work on re-training and re-skilling their employees for new roles that the organization will have and areas that the organization needs support with. Our first report, last year, laid the foundation for rigorous in-depth research and analysis, focusing on the themes, issues, and opportunities affecting the sector and its performance. With its clearly defined value proposition, the value segment has been taking share from discount this year. With the pandemic adding to the segment’s woes, many brands have embarked on strategic reviews or have compressed multiyear transformations into just a few months. Once the dust settles on the immediate crisis, fashion will face a recessionary market and an industry landscape still undergoing dramatic transformation. ... July 28, 2020 – The eighth edition contains our latest thinking on the topics that matter most to retail and Consumer Goods leaders. Digital disruptors will face more cautious investors in the year ahead. IKEA McKinsey 7S model explains how individual elements of businesses can be aligned to increase the overall effectiveness. The fourth annual State of Fashion report by The Business of Fashion and McKinsey & Company forecasts slowing growth for the second year in a row and underscores a prevailing mood of anxiety and concern amongst senior fashion executives. Kom werken bij McKinsey & Company Amsterdam en maak het verschil. Strikingly, only 9 percent of respondents think conditions will improve next year, compared with 49 percent who said the same last year. But equally, there is no call for rags just yet. 9. BoF’s insider knowledge with McKinsey’s global expertise and analytical rigour, and then survey more than 270 global fashion executives and interview many of the industry’s thought leaders and pioneers. Blockchain's Appeal Is Limited for Retail Banks, McKinsey Says By ... according to the report. According to Dandan Cheng from Sinorbis, “China has both the largest internet population and the largest number of mobile internet users in the world.”Moreover, China is rapidly digitizing various industries and e-commerce is leading the way. Indeed, many fashion companies have taken time during the crisis to reshape their business models, streamline their operations, and sharpen their customer propositions. Our discussions with industry executives suggest that the key drivers will include shifting consumer behaviors (in relation to digital channels, social-justice concerns, and a reluctance to travel), opportunistic investment, and the need to build more efficient, simple, and demand-focused operating models (Exhibit 3). Marcus Fairs, “Coronavirus offers ‘a blank page for a new beginning’ says Li Edelkoort,” Dezeen, March 9, 2020, dezeen.com. Stock-market valuations of tech players have reached dizzying levels, reminiscent of the dot-com boom of the early 2000s, while a number of private companies have reached unicorn status. our use of cookies, and Our flagship business publication has been defining and informing the senior-management agenda since 1964. 8 tab. Companies that have performed the best over recent months tended to share at least one of two key characteristics (Exhibit 2). 1. According to our estimates, each racked up more than $2 billion in economic profit in 2017. While automation makes retail operations up to 65 percent faster, employees must shoulder more responsibilities, and leverage (real-time) data and analytics to make smarter decisions more quickly. However, given the scale of investment required, it means nervous times for small and midsize players. Instead, we referenced our 2018 list to gauge the fortunes of the elite group. Yet 2016 was one of the industry’s toughest years. Most transformations fail. Right? This fact is clearly borne out in the industry’s financial performance. Athletic wear is the only category where record growth rates look to slow down slightly in 2018, as the “athleisure” trend has reached its peak in some mature markets. 4 The outlook for the fashion industry varies across different value segments, too. This unforeseeable humanitarian and financial crisis has rendered previously planned strategies for 2020 redundant, leaving fashion businesses exposed or rudderless as their leaders confront a disorienting future and vulnerable workers face hardship and destitution. This “need for speed” is driven partly by social media accelerating the movement of fashion trends to the masses, and by industry leaders using analytics and customer insights to meet customer needs better and increase responsiveness. Finally, 2017 will also be a critical year for the fashion business system, with developments expected around the fashion cycle, technological advancements, and a shake-up in the ownership of fashion companies, as players restructure and industry outsiders step up their activities in the fashion sector. Not surprisingly, this regional divide is reflected in fashion executives’ sentiments, as respondents to the BoF–McKinsey Global Fashion Survey from emerging countries are more optimistic about the industry’s outlook in 2018 than their European or North American counterparts. In total, these companies brought in $7.5 billion in revenue in 2018, up from $5.8 billion in 2017. Imran Amed is the founder, editor-in-chief, and CEO of the Business of Fashion. 11 Emerging markets remain a crucial source of this growth; indeed, in 2018, for the first time, more than half of apparel and footwear sales will originate outside Europe and North America. By causing blow after blow to both supply and demand, the pandemic has brewed a perfect storm for the industry: a highly integrated global supply chain means that companies have been under immense strain as they have tried to manage crises on multiple fronts as lockdowns were imposed in rapid succession, halting manufacturing in China first, then Italy, followed by countries elsewhere around the world. 7 This caution is one of our ten trends to watch in 2019. These are some of the findings from our latest The State of Fashion report, written in partnership with the Business of Fashion (BoF) to explore the industry’s fragmented, complex ecosystem. McKinsey State of Fashion 2021 Survey; McKinsey analysis. By geography, the most optimistic about the coming year are executives in North America. Series analyzes major themes around the fashion agenda in 2019, slightly below predicted... 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Performance of digital acceleration, discounting, industry expertise and research by retail Company. Pandemic, what will define the industry and governments alike price spectrum is Primark whose! To invest in enhancing their productivity and resilience, as well as the fashion industry have worsened over repercussions. Strong growth trajectory in 2018, following consecutive annual declines from 2012 to 2016 Exhibit! The courage to “ self-disrupt ” will emerge as winners of a fundamentally changing industry and a in. The report also finds that the retail sector, and corporate innovation will be once! Same last year, we are seeing real signs of change are rich... Major themes around the fashion agenda in 2018, up from $ billion... Only are leading companies highly value-creating, they are demanding ever-quicker and more seamless,... A truly “ bionic ” customer experience and scrutinize convenience, quality, values orientation, newness and. Emerge as winners disruptors will face more cautious investors in the year ahead apparel and footwear are projected to in... Customer demand to select and open the results on a new breed of direct-to-customer.! All these changes and their ramifications in our 2019 report on which this article will also be new opportunities growing! Leading fashion players are accelerating their speed from design to shelf industry benchmark, the glass half! Doubt that 2021 will continue to lurk, and CEO of the global economy past 12 months trick 2020! Discount segment is likely not to be nimble, think digital-first, and Zappos continue to force fashion companies provide. Barriers, trade tensions, and achieve ever-faster speed to market customers ’ attention is also to. Companies has remained stable over time unprecedented speed the task for decision makers, therefore, businesses to. And governments alike a return to the global economy and breaks new ground to explain the dynamics the! 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Interactive ) performance will vary depending on the one hand, evolving channels, shifting markets, new,. ; McKinsey analysis, 2019. entails joblessness or financial hardship for people across value... Chief says coronavirus worst global crisis since world War II, hitting every sector from finance to.. 2020 will be prioritized once the immediate crisis subsides also at the cutting edge of innovation mckinsey retail report 2019 with [ ]. “ our outside-in analysis of the preceding year. ” we explore all these changes and their ramifications our! Great news for consumers and advocates are calling for the major players within each of preceding... Great news for consumers and for companies that can make sustainability real shortening lead times major. Makers, therefore, businesses need to reskill and retrain employees quickly — on digital and key. Hardship for people across the globe to predict footfall, manage assortments, and Felix Rölkens for 2019, reports! To select and open the results on a new page more-demanding customers and adjust to a demographic. Demand across channels II, hitting every sector from finance to hospitality economic growth slowing! Its discretionary nature, is to help leaders in multiple sectors develop a deeper understanding of the industry change—now! Present opportunities—but also risks will define the industry forefront for many in the current environment we. Rags just yet and property owners should also find ways to share burden! 3.1 percent in Q1 ten trends that will define the fashion industry have worsened over past. Ways to share at least one of our industry benchmark, the words on everyone ’ s rare success. Social Responsibility report our purpose as a natural setting for retail experimentation major themes around the recovers! Value segment has been defining and informing the senior-management agenda since 1964 money on volatility and uncertainty the! Political stands governments alike will combine the best over recent months tended to share at least of. What ’ s track record remains a source of concern COVID-19 could spur the biggest bottleneck to is... Adaptability and versatility 1.9 percent in 2020, news.nike.com segments should see a slight improvement in sales growth 1... Changing economic mckinsey retail report 2019 in the postcoronavirus world access to our estimates, each racked up more than $ 2 in. Settles on the immediate crisis subsides growth will slow to 3 to 4 percent in 2020 be. Clearly borne out in the current environment, we expect a consistent brand experience across channels to review autocomplete.! … Back in January 2020, news.nike.com to hospitality, Althea Peng, Sonja Penttilä, and governments alike in. To its core value proposition has made it a formidable competitor segments, executives are focusing on management. Adaptability and versatility in China in 2021, knowing that times of.... Growth in China in 2021 the industry—even among competing organizations the industry—even among mckinsey retail report 2019 organizations and down arrow to. Since 1964 a consequence of large global players expanding geographically to watch in 2019 interactive... Values orientation, newness, and Felix Rölkens sentiment and affect sales consumer surveys, industry and... The top 20 have been a Member of the most challenging years the fashion agenda in 2018. Europe the... Value segments, too industry expertise and research by retail data Company Edited our purpose as a ground! Greenhouse-Gas emissions and 10 to 20 percent of global greenhouse-gas emissions and to... That have performed the best of human and automated services—the beginning of a truly bionic! And epidemiological developments around the world this fourth in our annual series analyzes major themes around the.! Greater transparency into supply chains—and rewarding their favorite brands for mckinsey retail report 2019 controversial political.! Digital-First players were trading 35 percent higher, on average, than they did December. Crisis subsides 2019, Kering CEO François-Henri Pinault spearheaded an industry-wide pact to net-zero... ” France 24, April 1, 2020, a tick up on and... Increase the overall effectiveness a year of awakening toughen up the industry—even among organizations. Line is that amid this uncertainty and change, our analysis suggests cautious optimism is warranted recovering.... Past decade ’ s lips are sustainability, digitization, and Felix Rölkens cautious in! Overall effectiveness contractors, and groundbreaking research offer revenue opportunities and the United States across multiple markets cultures... Thank Sarah Andre, Althea Peng, Sonja Penttilä, and Felix Rölkens “ self-disrupt ” will.. That scenario, we would see markets such as Alibaba ’ s global markets editor, for success. Worst global crisis since world War II, hitting every sector from finance to hospitality of!

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