Purchases, less margins and mature markets: Global Fashion Drivers 2018

What drives fashion business today? In an environment characterized by constant change and uncertainty, the sector’s titans shake their strategies to adapt against the clock. Falls of the margin, purchases to gain size and retreat to mature markets are some of the trends transforming the sector, according to the last edition of the Global Fashion Drivers’ report elaborated by Modaes.es and which counts with Desigual’s support.

The document analyses for the third year in a row the carriers of the transformation of fashion business around the world thanks to the changes adopted by the hundred greatest companies of the sector on a global scale.

Read the full Global Fashion Drivers 2018 report

One of the trends appointed by the report presented yesterday in Barcelona, is the need to gain size in order to continue to be competitive. Three out of ten analysed companies took a stake in another company last year, and 3% of them changed hands.

Corporative operations were also a tool for the sector’s titans at the time of strengthening their innovation. In that sense, 7% of the corporations took a stake in a start-up, and one out of ten launched its own incubator.

Three out of ten of the biggest companies in the business reduced their profit last year

Innovation is, in fact, one of the keys to face fashion industry’s new background. Pressured by changes in consumption habits and by the apparition of numerous disruptive corporations, the sector’s titans are transforming from their structure to their executive team in order to be innovative. As a matter of fact, 18% of companies released innovation hubs last year and 12% created new executive positions linked to that area.

Another of the roles added to many organisation charts from the sector’s main companies was the client chief officer. A 14% of the groups already had this role, responsible of leading omnichannel integration and piloting client strategies.

On the other hand, the report analyses one more time the international expansion of the main players of the sector. After years of intense expansion, uncertainty and the scalation of trade war have motivated players to shelter in familiar grounds.

Because of that, eight out of ten great groups committed to mature markets like Europe, Japan or the United States, where most of them concentrated still the majority of their sales. Furthermore, the ratio of players who landed in a new market went from 30% in 2015, to 27% in 2016 and to a 26% last year.

The number of companies who entered a new market has decreased in recent years: from 30% in 2015 to 26% last year. 

A smaller cake

Beyond the strategies and tools adapted by fashion companies, the report also brings to light another great trend for the sector: the fall of sales and profitability. In fact, three out of ten of the sector’s biggest corporations saw their profit decrease last year, two in ten reduced their gross margin and 19% contracted narrowed revenue last fiscal year. In order to face this environment, about 17% of the companies started restructuration plans last year and another 17% reduced their workforce.

A huge part of the fashion business companies agree on the fact that uncertainty has been established as fashion’s new normal. Moreover, half of them reference that word in their 2017 annual reports. Among the indicators that complete these Global Fashion Drivers are also the new commercial mix of companies, with changes in their distribution network, the research of new materials and a coy first commitment to blockchain and Industry 4.0.