It is only the beginning of the 20s decade, and we have already witnessed a pandemic, war in Europe and major climate events that disrupted economies across the world.

With Covid making a comeback in China, the shutting down of the city, port and manufacturing units has led to disruptions in the supply chain yet again. The country is not just considered a major supplier but also a significant market for apparel brands – accounting for 22% of global apparel spending currently, according to Hinton. As a result, she adds, “many retailers have been shifting their production away from China to places such as Vietnam and India to reduce their risk and dependence on it.”

Subsequently, we have had the invasion of Ukraine by Russia which has hit energy, commodity and food prices globally, particularly in Europe, all of which indicates a tough future for consumers. Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC), and other major oil producers are restricting oil supply again which will push transport costs back up. In the backdrop of everything else, there have been catastrophic climate crises – floods in Pakistan and Bangladesh, abnormally high temperatures across the world, including Europe, and widespread drought and forest fires. All of which is exacerbating the problems.

With a strengthened US dollar against other currencies and the dollar being the major currency used in apparel sourcing, it is inevitable that costs and prices will rise in 2023. It all looks pretty grim, with consumer confidence being recorded at an all-time low, and inflation at a 40-year high, demand is falling, and a global recession is on the horizon. In comparison to 2019, share of consumer spending on retail in 2023 is expected to hit the hardest due to inflation – certainly not a great start to the new year.

Major themes for apparel in 2023 to 2026

The head of apparel at GlobaData, Chloe Collins, shared the themes that will have an impact on the sector over the next two-three years, including inflation and ESG.

Inflation

Consumers across the world are extremely concerned about their personal finances amid surging inflation, particularly with respect to how it is impacting their household budgets, with 89.7% of consumers stating they are either extremely or quite concerned about this in GlobalData’s Q3 2022 global survey. This will inevitably cause shoppers to cut back on purchasing non-essential items such as fashion to prioritise necessities like food and energy instead.

Both Europe and North America are the two regions that have been worst hit by rising inflation. Of the major European economies, the consumer price inflation (or CPI) in 2022 for the UK was expected to be the highest at 9.2%.

As retailers overcome the peak period and consumers grapple with higher energy bills, early 2023 is also paving way for high inflation. While, a brief look at North America showed an average inflation at 7.5% in 2022 driven by the US, where higher energy prices due to the Russia-Ukraine conflict and supply chain issues led to increased costs.

However, this inflation is forecast to fall in 2023 with it still being notably higher than it was pre-pandemic at 3.5%. Price growth will remain higher than pre-pandemic in 2023, at 3.4% and 2.4% in Europe and North America respectively, as energy prices continue to rise due to the ongoing conflict, and then in the years following this, growth is expected to gradually return to normal.

Consumers have changed their lifestyle in response to inflation. For example, more than half of consumers adjusted their shopping habits, primarily by cutting back on non-essential fashion purchases, while the remaining consumers that took part in the survey were only minimally impacted by increased costs. This was either due to having a discretionary income or because the consumers used money saved during the pandemic to support their spending.

Image sources: Business of Fashion, johnlewis.com, Drapers, Retail Gazette, the times

As a result, one prominent issue that retailers and brands will most likely experience due to this decline in demand amid inflation is surplus inventory.

Childrenswear is expected to be one of the main outperformers as well as essential categories like underwear and sportswear, which are expected to remain resistant to inflation.

In comparison to this, mass market players are expected to experience a greater impact than premium or luxury brands; especially those with weak brand identities.

Fast fashion players are also somewhat falling out of favour, and this is further exacerbated by consumers’ growing concerns about sustainability, points out GlobalData’s apparel analyst Pippa Stephens.

ESG

ESG mentions reached a peak in 2021, with a large number of brands pledging to achieving carbon neutrality or complete supply chain mapping in 2025 or 2030. However, the number of mentions dipped in 2022, though this is more likely due to companies mentioning other concerns such as inflation, rising production costs, shortages and profit warnings.

A key focus area in ESG has been the environment which led to the growth of the resale market partly due to its affordability, but also because it allows consumers to participate in a more circular type of consumption, thus reducing their impact on the environment.

As per GlobalData’s calculations the global apparel resale market is currently worth US$182bn, up 174% from 2016. This growth is forecasted to accelerate even more, with the market expected to reach US$338bn by 2026.