The start of 2019 puts us one year out from the global economic slowdown many expect by 2020. Retailers are feeling big changes in consumer habits and trade conditions, which are forcing them to adapt their strategy...and do it quickly. Here are the top three trends we see making a big impact on retail in the year ahead:
Asia gets fashion’s focus In 2018, the hype around China’s millennial buying power continued. We saw reinvestment in the region from luxury brands like Prada and LVMH. The focus on Asia amps up in 2019 as Greater China is expected to overtake the US as the largest fashion market in the world. India’s growing middle class consumer base is also attracting fashion companies. The India apparel market is projected to be worth $59.3 billion in 2022. By comparison, the UK represents $65 billion. India’s ecommerce space is expected to more than double from $18 billion in 2017 to $40-$45 billion in 2020. As productivity (as measured by GDP) grows, so does the country’s internet penetration and delivery systems.
Direct-to-consumer gains serious traction Is wholesale dead? Not yet, but 2019 will be pivotal in the DTC vs. wholesale debate. As many traditional big box retailers struggle to hang on to sales, more and more companies are seeing their DTC channels take off. The arguments in favor of DTC -- better business economics for the brand, cost savings passed through to the customer and shorter time to acquisition for customer purchase. Digital strategy makes it affordable and feasible. DTC brands are showing how shoestring marketing budgets can still support massive launches, à la Everlane’s Damn Good Denim. DTC also allows brands to speak to the emotional way consumers spend today. Aligning the shopping experience with sustainability, a certain authenticity or an image consumers want to subscribe to.
Social and environmental commerce matters By 2050, there will be more plastic in the ocean than fish. Facts like these are motivating consumers’ purchase decisions and challenging retailers to rethink their supply chain. For example, Adidas’s introduction of ocean plastic sneakers and pledge to be 100 percent recycle plastic by 2024, Tesco’s partnership with the WWF on a long-term sustainable food effort and Ikea’s goal to become climate positive by 2030. Nine in 10 Generation Z consumers believe companies have a responsibility to address social and environment issues -- an important sentiment retailers are taking into practice as this group will represent 40 percent of global purchasing power by 2020.
As 2019 unfolds, we will be exploring more forces affecting the industry and dive deep into how retailers are reacting. We look forward to sharing Q&As with London Business School’s faculty, alumni and other experts from the industry.
Written by Kathryn McConnell
Kathryn is a MBA 2020 candidate at London Business School and member of the Walpole Programme in Luxury Management. She came to LBS from the US after several years of developing strategic marketing campaigns for multi-national organizations. Her work has ranged from international consumer product launches to corporate earnings strategy and has led to features in the world’s top publications, including The Guardian and Wall Street Journal. Kathryn is an experienced dressmaker and active in preserving the craft in her hometown of Philadelphia. Kathryn has a B.A. degree from the University of North Carolina at Chapel Hill.