Fashion Report: As world's fashion capitals host international trade events, McKinsey's State of Fashion 2024 report shows valuable insights

Fashion companies will continue to face major challenges in 2024, revealed in a recent report: The State of Fashion 2024 by management consultancy McKinsey & Company

According to a panel of experts and authors of the report*, there are still pockets of growth due to shifting consumer priorities that will continue to offer opportunities despite the economic headwinds, technology shifts, and an evolving competitive landscape in 2024.

Première Vision Paris - SS24 edition
Photo by Lucia Carpio

Looking back to 2023, the fashion industry faced challenges that were both persistent and deepening, says the report. On a regional basis, Europe and the United States saw slow growth throughout the year, while China’s initially strong performance faded in the second half, according to the report.  Though the luxury segment initially fared well, it too began to feel the effects of weaker demand in the latter part of the year, leading to slowing sales and uneven performance.

Looking toward 2024, the most prominent sentiment among fashion industry leaders is uncertainty, reflecting the prospect of subdued economic growth, persistent inflation, and weak consumer confidence. Against this backdrop, businesses will be challenged to identify pockets of value and unlock new drivers of performance.

Première Vision Paris - SS24 edition
Photo by Lucia Carpio

According to McKinsey’s analysis of fashion forecasts, the global industry will post top-line growth of 2 to 4 percent in 2024, with regional and country-level variations. Once again, the luxury segment is expected to generate the biggest share of economic profit. However, even there, companies will be challenged by the tough economic environment. The segment is forecast to grow globally by 3 to 5 percent, compared with 5 to 7 percent in 2023, as consumers rein in spending after a post-pandemic surge. European and Chinese growth is set to slow, while US growth is expected to pick up after a relatively weak 2023, reflecting the slightly more optimistic outlook there.

Texworld Evolution Paris - SS24 edition
Photo by Lucia Carpio

Beyond luxury, growth of 2 to 4 percent is predicted for the year ahead, in line with the probable outcome in 2023. The European market will likely expand by just 1 to 3 percent, compared with 5 percent in the first half of 2023 and 1 to 3 percent in the second half. Slumping consumer confidence and declining household savings are expected to be the most probable causes of restrained spending. In the United States, nonluxury sector growth of 0 to 2 percent is forecast. And China is expected to be similarly challenged amid 4 to 6 percent growth, which is a slight uptick from the end of 2023 but slow when considered on a historical basis.

*The McKinsey State of Fashion report was a collaborative effort by Imran Amed, representing views of Business of Fashion, and Anita Balchandani, David Barrelet, Achim Berg, Gemma D’Auria, Felix Rölkens, and Ewa Starzynska, representing views from McKinsey’s Retail Practice.