Three operations trends reshaping the global fashion market in 2019

My LinkedIn profile is clear: fashion is hardly my area of focus. But a newly released (and engagingly written) report, The State of Fashion 2019—co-led by my colleague Achim Berg and by Imran Amed, founder and CEO of the Business of Fashion—caught my eye because it reinforces several of today’s key trends in global manufacturing, regardless of sector. Let me share just a few messages:

Trend 1: From maker to buyer in India and China

As the report notes, between 2018 and 2022, India’s rapid economic growth is projected to expand its middle class by 19.4 percent a year. By the end of that period, its apparel market alone should be roughly $65 billion, worth about as much as Germany’s or the U.K.’s. Meanwhile, China already accounts for some 18 percent of all final goods consumed. Whereas in 2005, China exported 71 percent of the finished apparel it produced, by 2017 that figure fell to 47 percent.

I’m seeing similar movement across virtually every sector. Rather than devoted more for exports, manufacturing capacity in China—and increasingly in India—is now emphasizing domestic consumption. That’s a new opportunity for manufacturers who can sell to these markets—and a possible challenge for those looking to source products for other markets, one that’s partly alleviated by the second trend.

Trend 2: Automation reaches the toughest tasks

As the report explains in more detail, apparel has been one of the last industries to automate extensively. Many fundamental tasks, such as sewing, proved technically difficult to automate. The world’s ready supply of lower-skilled labor reduced the incentive to invest heavily in overcoming the barriers.

But, as in sector after sector before it, apparel is seeing the rise of new technologies that are cracking even the most difficult automation challenges. As a result, 82 percent of fashion-industry executives surveyed said they believe that simple garments will be fully automated by 2025—and 70 percent think that more complex garments, such as dresses and jackets, will be significantly automated as well.

At the same time, labor costs among traditional exporters are rising, further increasing incentives for innovation—not least among China’s manufacturers, which are investing in advanced manufacturing processes and upskilled workforces. That’s leading business around the world to rethink their footprints, as noted in the third trend.

Trend 3: Manufacturing’s new geography

The fashion industry has already illustrated the potential for nearshoring, with fast-fashion giants locating more of their manufacturing either in mid-cost markets such as Mexico and Turkey, or even in higher-cost locations in Western Europe. Advanced automation opens even more possibilities. The promise is enormous: shorter time-to-market reduces overstocks and discounting.

But the peril is substantial as well. As the report notes, the greatest benefit comes from co-locating an entire value chain, from raw materials to finished product. When nearshoring is only partial, longer lead times simply shift higher in the value chain. That means thinking through a highly complex process of moving every aspect of production.

These sorts of challenges are arising every day, across industries.

How are you seeing them play out in your sector? Where do you see some of the major opportunities and risks?