McKinsey named the main trends in the global fashion industry for 2024

In 2024, international tourism will exceed pre-Covid levels, which will have a positive impact on purchases in the fashion industry. But growth in luxury goods sales will slow due to savings from consumers purchasing in the immediate aftermath of the pandemic.

The recovery of international tourism in 2024 will be one of the main growth drivers for the fashion industry. This follows from an annual study of the state of the global fashion market, which was prepared by analysts from the consulting company McKinsey & Company together with the specialized publication The Business of Fashion. Experts used the findings of the McKinsey Global Fashion Index report, which analyzes the financial data of almost 400 public companies, and also conducted a survey of consumers and executives of the largest companies in the fashion industry.

The fashion industry faces challenges in 2023, with growth slowing in Europe and the US , the report says. CHINA performed well in the first half of 2023, but also saw a slowdown in the second half of the year . Luxury sales fared better than the rest of the fashion market, but in the second half of the year consumer demand for fashion purchases declined across all segments, slowing sales and impacting production.

In 2024, the fashion industry will be affected by general trends of slowing economic growth, geopolitical conflicts and pressure on consumer spending. At the same time, McKinsey notes that cost-saving tactics have largely been exhausted, and consumers are returning to travel. Travel is forecast to return to pre-Covid levels next year - meaning fashion companies will have to revamp the way they interact with consumers who shop abroad.

Read about what consumer demand trends analysts identify for 2024, and what fashion companies should prepare for in this article from RBC.

What will happen to the fashion market in 2024

According to McKinsey, global retail sales of luxury goods will slow down in 2024: growth compared to the previous year will be 3-5% (analysts do not provide absolute values ​​in monetary terms). For comparison, in 2023, sales of goods in the luxury segment showed an increase of 5-7%. The slowdown in sales is due to the fact that consumers are cutting back on spending after a surge in purchases after the end of the pandemic, analysts explain.

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At the same time, sales of non-luxury goods will grow steadily, McKinsey predicts: in 2024, growth relative to the previous year will be 2–4%. In Europe, sales growth rates in this segment will remain at the level of 2023 (1–3%). In the US, sales of non-luxury goods will increase to 2% after declining this year (minus 2%). In China, growth rates will accelerate to 4–6% year on year (versus 1–3% in 2023).

In conditions of uncertainty, consumers will give preference to product categories and brands that they trust, analysts indicate. For example, luxury goods such as jewelry, watches and leather goods will be in demand. This reflects their potential investment value in difficult economic times.

Travel stimulates shopping interest

The main driver of growth for the fashion industry will be the recovery of international tourism: after the covid-19 pandemic , buyers around the world are ready for new spending on travel. According to analysts, despite general economic uncertainty, global tourist flows in 2024 will not only recover to 2019 levels, but will also exceed pre-pandemic levels by 5–10%. The increase in the number of trips is facilitated by a change in lifestyle: after the pandemic, people got used to remote or hybrid work and became less tied to the office.

The largest market players - such as the LVMH concern (unites the fashion houses Christian Dior, Louis Vuitton, Givenchy, Kenzo, Fendi) and the Kering group (Gucci, Saint Laurent, Bottega Veneta, Balenciaga, Brioni and Boucheron) - consider tourists in Europe, especially American, a key factor in increasing its sales in the first half of 2023, the report indicated. During this period, sales at LVMH increased by 47%, and at Kering by 53%.

Moreover, a consumer survey conducted by analysts showed that 80% of respondents worldwide plan to buy clothes, shoes and accessories while traveling in the coming year. At the same time, 28% expect to spend more on a trip than in the previous year.

Nearly 40% of consumers buy new clothes to wear while on vacation, a McKinsey report found. In the wake of the pandemic, travelers are looking to expand their itineraries beyond traditional destinations, with consumers looking to travel to places they haven't been before in the coming year, according to a survey. This has already influenced the strategy of fashion brands in terms of contact with consumers: to attract buyers, they began to expand into smaller European cities and open stores in fashionable places from pop culture.

Fashion brands' partnerships with related industries - such as travel agencies, hotels, spas and restaurants - give them the opportunity to create compelling offers no matter where customers are located and adapt to where and how they want to shop, it adds. McKinsey. For example, Louis Vuitton opened a branded cafe and boutique in Taormina, Sicily, where the second season of the popular series “The White Lotus”, released in 2022, was filmed. Brands are increasingly opening pop-up spaces (a store or branded area that opens for a short time): for example, Prada opened a pop-up cafe in the London department store Harrods, and the Loro Piana brand celebrated its 2023 summer collection with a collaboration with La Réserve à la Plage on the Côte d'Azur in Saint-Tropez, opening a boutique in a beach club.

Brands await the return of Chinese tourists

For more than two decades, tourists from China have been a major catalyst for the growth of global tourism. In 2019, China accounted for a fifth of international tourism spending, with Chinese tourists spending $255 billion and taking 166 million outbound trips.

Further growth in international tourism was hampered by isolation during the COVID-19 pandemic, McKinsey points out. Now, despite economic uncertainty, residents of mainland China are willing to travel, both domestically and internationally. In 2023, the number of Chinese trips abroad, according to analysts’ forecasts, may reach 50% of the pre-pandemic level, and a full restoration of the tourist flow may occur by the end of 2024 or the beginning of 2025, experts do not rule out.

However, the priorities of Chinese travelers have changed compared to pre-pandemic times. Thus, according to McKinsey surveys, visiting shopping centers ranks lower on the list of tourists’ priorities than other types of leisure activities. Tourists from China primarily seek new experiences - trying local cuisine, attending tourism events, spending time in nature and sightseeing. But spending on purchases is recovering: according to one of the world’s largest tax free operators, Swiss Global Blue, which is cited in the report, in 2023 in the Asia-Pacific region, spending on purchases from tourists from mainland China was 9% higher than in 2019. In Europe, Chinese traveler spending has been slower to recover, currently at 41% of pre-pandemic levels, but as travel recovers, European retailers can expect shopping spending to return to near pre-pandemic levels.

Consumers are tired of advertising on social networks

Attracting consumer attention through advertising is becoming increasingly difficult for fashion businesses, analysts point out: 68% of consumers are dissatisfied with the large amount of sponsored content on social media platforms (this includes, for example, native advertising), and 65% turn to fashion bloggers less than a few years ago.

Consumers are tired of traditional marketing after years of being bombarded with promotions and brand announcements. Young people prefer to avoid information noise: according to the report, Generation Z (people born between 1996 and 2016) lose active attention to advertising after just 1.3 seconds. But bloggers and celebrities continue to be the link between the brand and the consumer. Analysts predict the influencer marketing industry will reach $21.1 billion in 2023, up from $16.4 billion in 2022.

The main platform where users spend time has also changed. Thus, in 2022, engagement rates on Instagram (owned by the Meta corporation, whose activities are recognized as extremist in RUSSIA and are prohibited) fell by about 30% over the year, and the reach of posts also decreased. At the same time, TIKTOK has become the favorite platform among Generation Z, ahead of YouTube and Instagram.

Brands have begun to create long-term partnerships with famous bloggers, moving away from one-off videos or invitations to fashion shows. As an example, the McKinsey report cites Gucci's collaboration with TikTok blogger Francis Bourgeois, famous for his stories about trains, who became the face of the North Face x Gucci collaboration.

Combining luxury and active leisure

One of the long-term consequences of the pandemic, McKinsey analysts called the continued interest of consumers in a healthy lifestyle and active outdoor recreation - camping, hiking and water tourism. For example, this year 82% of US residents said they engage in outdoor activities, up from 60% in 2020. In the UK , almost half of those surveyed spend more time outdoors than before the pandemic.

Against this background, the gorpcore style, or camping chic, is becoming increasingly popular: its adherents wear in everyday life things originally intended for camping, hiking and rock climbing. In 2022, sales of activewear were 24% higher than before the pandemic. Amid the growing popularity of this trend, luxury and outdoor brands have begun to release joint collections—one of the first was the North Face and Gucci collaboration in 2021. Analysts expect brands to further blur the lines between style and practicality in 2024.

What worries fashion industry executives?

CEOs of major fashion companies surveyed by McKinsey expect the coming year 2024 to be “uncertain.” Amid international tensions, geopolitics emerged as the top issue for fashion executives for the second year in a row, with some 62% of respondents citing geopolitical instability as the top risk to business growth. Another 55% of respondents are concerned about economic instability, and 51% are concerned about inflation (up from 78% last year). According to the IMF , in 2024 the overall global inflation rate will decline to 5.8% from 6.9% in 2023.

Due to the challenging economic backdrop, respondents are more divided on the industry's prospects than in any other year since the survey was conducted: 26% of respondents expect conditions to improve year on year, 37% expect conditions to remain the same, and 38% expect conditions to improve. will get worse.