Analysis of the market situation and consumer trends for 2022-2023

Analysis of the market situation and consumer trends for 2022-2023

REVENGE BUYING

After two years of struggling due to the Covid 19 pandemic, the fashion industry is slowly recovering. According to a recent McKinsey&Company report, global fashion sales in 2021 reached 96-101% of sales compared to 2019, and should reach 103-108% in 2022 This is, however, a geographically diversified process.

At the top of the list is China, where the sales of luxury goods have increased by 70-90% compared to 2019. Chinese jewellery companies have increased their profits up to 4 times as a result of spending repatriation by Chinese customers related to the ban on flights during the pandemic. The United States ranked second with 5% growth compared to 2019. Europe continues to see 10-15% drop in sales compared to 2019. For the luxury goods sector, a full return to pre-pandemic volumes should be achieved in 2023.

In the mid-2021s, consumer needs that had been suppressed for months, and the return to work and social life after a period of lockdown, caused the so-called “revenge buying”, the trend of making purchases to compensate for times when it was not possible.

This phenomenon is common after crises, epidemics, and wars, when the desire to compensate for times of misery and restriction escalates. It also influences the fashion, that becomes more colorful and distinctive during this period.

WHERE WE ARE?

The global economy

One of the effects of the pandemic is the growing differences between large companies, whose turnover now exceeds the pre-pandemic values, while a lot of smaller companies are facing crisis, bankruptcy and acquisitions..

The forecast for 2022 is generally growth, but the rate of growth will vary – countries with solid health systems and robust economy will recover fastest, while those with worse access to the vaccine will recover much slower. The mutation of the virus and how it spreads are also major factors.E.g., in 2021 in India, the spread of the Delta mutation caused factories to be shut down again and supplies chains to be disrupted.

Supply chain issues

Material shortages, transport bottlenecks, delivery delays, constantly changed regulations and high transport costs will be serious challenges for importers (the cost of transporting of a container from China to Europe has increased six times!). 49% of companies surveyed claimed that this will be the biggest problem they will have to deal with this year.

In the supply eco-system, you are only as strong as your weakest partners.

Changes in consumer behavior

travel – as international tourism continues to remain stagnant, the direction and form of consumption continues to evolve and focuses on local markets.

When global traveling will return to its pre-pandemic stage, the first beneficiary will be the luxury goods industry, but that won’t happen before 2023.

there is a growing awareness of the benefits of supporting local businesses, quality and availability is appreciated. The turn toward local manufacturers is predicted to be the new standard, even when travel is completely re-established
consumer sentiment has a huge impact on the speed at which life returns to pre-pandemic conditions. The effect of months of restrictions is the savings made by customers during that time – so it is forecast that purchases will increase in 2022, especially among young and wealthy customers (revenge buying)
new customer needs – we got rid of comfortable sweats, which we were wearing for 2 years, and we returned to work and social life. Now the Fashion Industry needs to focus on watching closely the changes in customer needs.

Online sales

The pandemic has forced online shopping. In effect, people who previously did not use this form of shopping became accustomed to it and began to trust the online stores.74% of customers claim that they buy more online than they did before the pandemic.

Young people are the main force behind online sales – Generation Z and Millenials – this group is particularly fond of shopping through social media.

In fact, statistics show that jewellery is one of the most frequently purchased products on social media, after cosmetics, shoes and purses.

As online sales grow, so does the threat of cybercrime. With the digitization of fashion companies reaching new levels, companies are facing more threats of cyber-attacks and increasing risks from data mishandling and fraud. The investment in digital security is becoming a must.

Sustainability and business ethics

Companies that have implemented sustainability within their company are experiencing the business benefits associated with environmental and social improvements of their operations. As consumer awareness of the fashion industry’s impact on the environment rises, makes this factor to be the decision maker when choosing a brand. That is especially important if we want to earn the trust of people from the younger generation.43% of Generation Z say they look for companies with a solid reputation for sustainability.

Supply chain integrity and transparency

The proof of authenticity and origin of a product is become very important criteria for purchase, especially in the case of jewellery and other luxury goods.The consumer wants to be aware of the history and origin of the product, its authenticity and whether it was ethically produced.

With the growing trend of aftermarket sales of products, “product passports” will become more and more in demand for consumers. They can also help companies to fight against counterfeiting, to stand out and to build customer loyalty.

LOOKING AHEAD

Jewellery companies are noticing a growing demand for jewellery made of precious metals, especially gold.Historically, times of anxiety result in growing demand for precious metals, treated as a stable investment. Reliance on precious metals is in line with the current trend to purchase original and high quality products. It is expected that the segment of jewellery made of precious metals will record growth rates of 8% to 12% during 2019-2025.

While the tide is turning and 2021 and 2022 looking significantly more positive for the global fashion industry than the previous two years, the shakeup is far from over, as weaknesses exposed during the Covid-19 pandemic will continue to plague the industry. However, for those who are able to quickly adjust to the changing consumer expectations while properly managing inventory and supply chain expenses, they will enjoy a sense of recovery and refreshment.