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The considerable stresses and strains of the last few years – geopolitical, social, and economic – have certainly created circumstances in which many shoppers yearn for the escapism promised by retail therapy.
Intriguingly, however, companies across the apparel, fashion, and luxury (AF&L) sector have often fared quite differently to each other in recent times, with the specific segment of the market in which a given brand operates frequently having a profound effect on its performance.
Such a conclusion arose from research recently carried out by McKinsey. But what lessons can be learned from this for firms in the luxury or fashion sectors that are presently working alongside a UK creative agency to help power their growth?
Evidence of luxury, premium, and sportswear brands continuing to excel
When, in 2020, McKinsey looked at the total shareholder return (TSR) in the AF&L industry, it was clear that within this sector, the premium and luxury segments were significant outperformers. This was a trend that continued for the entirety of the pandemic.
Although the global management consulting firm said the luxury segment had been “the longest-standing winner within the industry, a recent surge in sportswear has gained momentum as a preferred choice among premium customers.”
McKinsey observed that the past decade had been one of “strong performance” for the AF&L industry, with 70% of the biggest AF&L companies in the world delivering returns upward of 10% since 2016. McKinsey added that, at the time of its analysis at the end of 2021, the global apparel market’s fortunes compared well to most other sectors, including the likes of technology and retail.
The organisation noted that sportswear brands and retailers had seen upward of 20.3% returns from 2019 to 2021, compared to the 4.5% that traditional apparel players achieved during the same timeframe. Such growth has been linked to significant numbers of customers having embraced a “work from home” wardrobe back when the coronavirus crisis took hold, amid a heightened emphasis on personal health and wellness.
As for luxury and premium brands, McKinsey said they had been dramatically surpassing the performance of much of the rest of the global apparel market since prior to the COVID-19 crisis. The company added that this trend had accelerated with the onset of the pandemic itself, the luxury and premium segments providing shareholder returns of 33.2% and 18%, respectively. This compared to the 8.9% seen in value segments, and 6.2% for mass segments.
The value segment has been battered and bruised, as the luxury sector has thrived
The above is in contrast to the situation before the coronavirus outbreak, when the value segment was the highlight of the industry, shareholder returns then hitting 21.1%.
During the early stages of the pandemic, however, customers were largely forced to switch to online shopping, and many of the best-known value brands still lacked robust ecommerce platforms that would enable them to cater to such fast-changing demands.
Meanwhile, McKinsey attributed the luxury sector’s strong showing at this time to a variety of factors, including – but not restricted to – the widespread lockdowns leading many customers to spend less on travel, and more on high-end goods.
According to McKinsey, “in the post-pandemic world, it will be increasingly important for AF&L players to continue to focus on what is working for both customers and the global apparel market, but players should also look ahead and consider how things will evolve over time.”
The article continued: “For businesses already heavily indexed in the luxury category, the priority will be listening to nuanced changes in consumer demand and allocating investments to burgeoning growth opportunities and product innovation. For those seeking new growth strategies, category exploration and cost control might be great options.”
Would you like to position your own brand strongly to take advantage of the opportunities for growth that will define the months and years ahead?
If so, you may wish to think seriously about making Skywire London your choice of leading UK creative agency. Please enquire today to learn more about how our British-based, but globally oriented service could help improve your high-end or lifestyle brand’s outlook.
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