New strategy choices for 2022 (part 2) : The 10 major features which really happened

In part 1 of the New Strategy Choices for 2022, I reviewed the 10 forecasts from Covid impact.

Those  “fashion recession” scenari did not happen. Luxury fashion showed how it was recession proof : not only industry coped with the pandemic, but above all, it returned quickly to profits and even more heavily restoring the mindset of 2019…Top Brands accelerated on many topics faster than the market average, making them absolute winners. Let’s see what happened in 2021 real life and what is here to stay for 2022.

3 words to describe the conditions we can expect for the fashion industry in 2021: “uncertain,” “challenging” and “disruptive.” McKinsey State of Fashion 2021

The 10 major features which really happened

1.    Global business reached a highest ever

o  Business recovered in China very fast (per memory, boutiques closed for 2 months), and thanks to China unique no risk policy , they were able to handle business as usual, yet with much more traffic. The Chinese customers have been buying locally in China since. That ensured China mainland market to double from 2019 to 2021…. That trend continued up to when Shanghai and major cities went to partial or full lock down in April 2022.

o  More surprisingly, not only US business recovered , but also expanded above 2019 levels as of mid 2021. Brands suddenly discovered that US market could expand beyond NYC, LA, Vegas , Miami. Following the steps of Chanel or Hermès which had a better footprint in the US for decades, LVMH and Kering decided to invest in new cities like Charlotte, Nashville or Atlanta.

o  Profitability highest ever : profitability became a key focus when pandemic hit. Some players are now finding themselves in a healthier position. They discovered that selling less, in better locations, but also with less resources and better sell throughs, they could deliver better profitability. That was rewarded by investors (eg. Victoria’s Secret, LVMH)

o  Big brands will probably continue to steal market share away from smaller, medium sized brands

Luxury’s resurrection has been phenomenal, but uncertainties remain., THE LUXURY SOCIETY NEWSLETTER, May 3, 2022 

2.    Back to the pre pandemic glory for fashion weeks

After two years of digital shows, short films, video games and social media creations, the rebellion against fashion week appears to be over. Brands having experimented with alternative forms than the conventional fashion shows (Gucci), came back to the regular Fashion Week schedule, both in Paris and in Milan. Even men/women brands like Armani or Versace, who were happy with combined shows pre covid, are returning to 2 shows : Milan for men , while maintaining their woman show…. all packed.

On paper, the schedule is back to its former glory. The pandemic accelerated the transition of fashion week from an industry event to a consumer-facing one. Brands are now caring more about how a show pops up on social media than they did before. The winning shows are the ones producing a viral moment behind models acting as movie stars (seems it is impossible not to have the Hadid sisters) and/or behind an inventive set. Who really cares of the quality of the clothes themselves ?

3.    The communication has been taken over by the Gen Z generation

Euphoria or Emily in Paris generated a buzz much stronger than the millennials targeted “Gossip Girl” reboot. These 2 shows took it all when talking about fashion-oriented impact, front row seats, or key campaigns signed with major Brands. I would add Netflix success with Anya Tayor-Joy from The Queen’s Gambit and Honeyon from Squid Game, signing at LV and Calvin Klein. The pandemic helped definitely to give influence power to the Gen Z and Gen Alpha.

4.    The new winner is the same old product recipe with some adjustments

o  A new value proposition for products is the old one ! the logo products intensify nearly everywhere with new Brands joining the monogram family (Versace, Balmain, Givenchy, Burberry)

o  During the crisis, customers did not have to dress up, hence, boosting sportswear categories such as sweaters, track suits and sneakers. That trend was already pre existing to Covid as they were the favorite of GenZ customers, especially in China, where formal or semi formal is less common than in US or Europe. Back to the above point on profitability, sportswear items usually require less savoir faire (think printing on jersey, t-shirt shape versus embroidery or tailoring), hence higher margins. Post crisis, we would expect Brands to continue providing heavy sportswear assortments as they have been drugged to high margins (even Hermes had a full rack of men track suits, not in cachemire, but regular cotton…)

o  Brands have been forced to increase full-price sell throughs to reduce inventories. To achieve that, assortments decreased in complexity and more customer demand-focused, whereas supply chain was boosting reactivity with replenishment/ reorders new agile tools.

5.    The new retail

Traditional retail came out reinforced as customers wanted to experiment the brand and there is no better place to experience a Brand than a boutique (in Paris, the new Montaigne Dior universe, the new Burberry, the new Versace, all new concepts).

Experience over possession : after pandemic and the shift to online shopping, with the metaverse looming, Brands are now considering retail experience to transport customers into dimensions previously associated with gaming or movies.

These new retail palaces are now competing with Fortnite, Roblox or Netflix.

Especially Gen Z customers have extremely high expectations in immersive environments

 The new retail comes with the implementation of a unique customer database, long time avoided by Brands, because the customer is now shopping where she/he wants. Customer took back the power of buying decision, expecting to be served where she/he wants, with the selected product she/he wants (assortment selection by buyers is no more an excuse). Omnicanal is a must have, yet a challenge for many.