Just last year McKinsey Global Fashion Index indicated that the sector of luxury has faced persistent and deepening challenges. On a regional basis, Europe and the United States experienced slow growth throughout the year, while China's initially strong performance faded in the second half. While the luxury segment initially performed well, it too began to feel the effects of weaker demand in the latter part of the year, leading to slower sales and mixed performance. The eighth report in the annual series discusses the major themes shaping the fashion economy and assesses potential industry responses. Reflecting in-depth research and numerous conversations with industry leaders, it reveals key trends that could shape the fashion landscape in the year ahead.
A year of uncertainty that will lead us to look to technology to solve the impasse
Now looking ahead to 2024, the most obvious sentiment among fashion industry leaders is uncertainty, reflecting the prospect of subdued economic growth, persistent inflation and weak consumer confidence. In this environment, companies will be challenged to identify pockets of value and unlock new performance drivers. Uncertainty within the industry mirrors the broader economic situation, albeit with regional divergences. Moving into 2024, pressure on household incomes is expected to dampen apparel demand and drive trade across categories. However, there are geographic outliers that may offer comfort, such as India. Additionally, after the breakthrough year ofGenerative AI in 2023, more use cases are emerging across the industry. To capture value, fashion players will need to look beyond automation and explore the potential of artificial intelligence to enhance the work of human creatives.
The Power Game of Fast Fashion
Competition in the fast fashion is set to be fiercer than ever. Challengers, led by Shein and Temu, are introducing new tactics around price, customer experience and speed. Their success may depend on adapting to changing consumer preferences while navigating the regulatory agenda.
Luxury Sector Needs to Increase Online Sales by 2025
I luxury brands are increasingly prioritizing digital transformation to the point that some fashion houses are adopting cutting-edge technologies to improve their online presence. For example, Louis Vuitton introduced an AI-powered chatbot service at the VivaTech event in 2021. They claim that this technology allows them to handle over 60% of customer inquiries 24/24. While Gucci is offering customers the opportunity to connect with sales consultants online. And Chanel has developed a virtual fitting room service. Other well-known brands are actively exploring the potential of Web3 technologies and some luxury brands have even started accepting cryptocurrencies as a means of payment. Looking ahead to 2024, it is expected that the Web3 Marketing will gain popularity among luxury brands due to its ability to retain customers with extraordinary and unforgettable experiences.
Immersive technology to excite and personalize the purchase
It is expected that the immersive technology will have a significant impact on luxury retail in 2024. Luxury brands are leveraging these technologies to offer customers unique and interactive shopping experiences. Customers will have the opportunity to virtually try on products, visualize how they would look or fit in real life, and even explore virtual showrooms or events. This technology not only improves the convenience and accessibility of luxury shopping, but also allows brands to showcase their products in a more engaging and personalized way.
