With the threat of recession looming, the new year brings its own set of challenges for retailers recovering from supply chain bottlenecks and inventory build-ups. But 2023 is not all doom and gloom.
The expansion of the Metaverse is likely to continue its growth trend as more retailers find new opportunities to connect virtual worlds with real-life experiences.
With the recovery of foot traffic after the epidemic and the additional emphasis on the consumer experience in physical stores, the resilience of shopping malls remains.
Sustainable fashion, which started as a consumer awareness movement to help protect the environment, is now becoming big business.
Newton Business-China Europe Fashion Institute will work with you to study these 6 major trends that will affect the fashion retail industry in 2023.
The Metaverse continues to grow
In 2023, the impact of the Metaverse on fashion retail is unlikely to subside. Last year, the fashion industry could see various luxury brands entering the metaverse to promote their brands and connect with younger audiences. For example, Gucci, H&M, Puma and Gap, etc.
As real-world income becomes possible in virtual spaces like Roblox, this trend is likely to only grow. Although one survey showed that 48% of teenagers said they were unsure or not interested in the Metaverse, some analysts are positive about the concept. McKinsey & Company predicts that the Metaverse will be worth US$5 trillion by 2030, with the impact of e-commerce expected to reach US$2 trillion to US$2.6 trillion.
Whether this prediction will come true remains to be seen, but major fashion and luxury brands are still investing in this area. The virtual world Roblox has about 58.8 million daily active users, so for fashion brands, the risk may be worth it.
Uncertain Economic Situation
Inflation appears to be stabilizing, but macroeconomic forces remain a threat to discretionary spending. Some economists believe the recession is inevitable, the result of efforts to slow demand and lower prices.
As retailers know all too well, however, it doesn’t take a full-blown recession to scare consumers whose household budgets have been squeezed for more than a year, though consumer confidence fell in December, according to analysis The index rebounded “significantly” from last month. According to the report, feelings about the present and near future have improved, but expectations “still hover around 80%, a level associated with a recession.”
Increased consumer confidence is good news for fashion brands, although consumers in 2023 are likely to remain cautious and picky when it comes to spending money. And experiences will continue to compete and win consumers’ discretionary dollars.
DTC brands continue to strive for profitability
The wave of IPOs of DTC companies in 2021 has given the public a clearer understanding of their financial performance. Several DTC darlings with a reputation for disrupting their respective categories have one thing in common as they enter the public markets: They struggle to meet profitability goals.
Warby Parker, Allbirds and Bark, which have gone public in recent years, have reported growing losses despite growing sales. Even DTC brands that have been publicly traded for longer continue to struggle to achieve and maintain profitability.
DTC brands are often forced to deal with high marketing costs associated with acquiring and retaining customers. As investors become more stringent about the financial performance of DTC brands, companies will need to find ways to reduce these costs, which often come at the expense of profitability.
While more investors no longer condone the once-accepted “growth at all costs” mentality, e-commerce startups continue to attract venture capital funds. According to the report, e-commerce startups raised $20 billion through 450 deals as of September 30, 2022. While this is down 42% from 2021, when transaction activity was at an all-time high, it is also up 44.5% from 2020.
Environmentally conscious fashion retail is accelerating
In 2022, many brands are launching more recyclable materials initiatives. This includes recycling old items into capsule collections made from existing recycled materials. Some well-known fashion groups have invested in recycled materials startups, including Zara parent company Inditex and Goldman Sachs Asset Management.
As consumer interest grows, these fashion brands may take more sustainable fashion development initiatives in 2023. While the higher prices for greener retail products may deter some consumers from purchasing, 60% of consumers in one study said sustainable fashion is an important purchase factor.
Second-hand resale platforms like The Real Real and Rent the Runway have even joined organizations working to minimize industry impact, such as some sustainable fashion groups.
Marketing becomes more complex
Marketing has never been a simple matter, but the intersection of multiple factors will make the task even more challenging in 2023. The threat of a recession means marketing budgets are also at risk, as some fashion brands look for ways to cut costs. Traditionally, marketing is often one of the first departments to be axed, and fashion companies have already experienced a series of corporate layoffs in the second half of this year, which may continue until 2023.
Even without budget cuts, fashion marketers will face a host of obstacles in the year ahead. As more consumers turn to online shopping, privacy protections make consumer data collection more difficult. Some studies predict that mostConsumers will withhold critical data from marketers in the future.
The collapse of major brand ambassador partnerships such as Nike and Kyrie Irving, Adidas and Kanye West (also known as Ye) has highlighted the need for increased scrutiny of celebrities and KOLs. The situation also leaves brands facing difficult choices about what to do with the designs and remaining products from failed relationships.
Resale brings revenue, but also risks overexposure
Over the past few years, resale has grown from a venture backed by sustainable fashion consumers to A strategy for fashion brands to generate additional revenue.
A recent report stated that 92% of respondents said they buy, sell or trade used items at least once a year. Walmart, IKEA, Amazon, etc. all have second-hand businesses. The RealReal, ThredUp and NuulyThrift are also players. But the past year has seen some surprising entries into the market in different sectors: fast-fashion retailer Shein launched Shein Exchange in October, while Rolex launched its first-ever pre-owned program in December.
Retailers of all types are considering reselling as an option for the same reason: revenue. By 2026, the second-hand clothing market is expected to reach $82 billion. But what happens to this corner of the market when there are so many platforms? Will consumers continue to buy? Will the retailer provide a steady stream of good enough product to make it work?
For now, the audience exists. James Reinhart, CEO and co-founder of second-hand resale platform ThredUp, said in a statement earlier this year: “Resale over the past decade has been dominated by the market, but brands and retailers are driving the next wave of second-hand merchandise. .” “We are still in the early days of this trend, but the acceleration in resales is a positive sign and has huge benefits for the planet.”
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