Soaring inflation, geopolitical tensions, have created a complex landscape. Our spotlight falls on the most future-ready fashion brands, which distinguish themselves by embracing tomorrow’s trends.
The latest 2023 roundup witness Nike has solidified its position at the forefront, with Hermes and Kering ascending. LVMH and Richemont consistently hold strong in the top echelons, emphasizing their robustness in luxury’s digital transformation and enduring brand value. Zalando’s rise to the fifth spot in 2023 from seventh in 2022 reflects its prowess in e-commerce and responsiveness to shifting consumer behaviors.
Over the past three years, the IMD future readiness rankings have showcased notable fluctuations among leading brands, reflecting a sector in flux. We employ an objective, data-driven approach that considers both statistical distribution and natural inflection points within the scores. You can read up the detailed calculation here. All said, top performing brands are one that better prepared than others on following trends.
1) Economic and Market Dynamics:
Inflation and geopolitics are affecting consumer spending and impacting operational costs. Prices for cotton and cashmere and input materials have been rising. Still, the luxury sector remains resilient, due to affluent consumers. Meanwhile, the broader market faces slower growth, with low-income households cutting back.
Hermes’ sales rose significantly in the third quarter, outperforming even the luxury sector. It experienced a 20% sales growth in the Americas and an 18.1% increase in Europe. The brand’s performance indicates robust demand for its high-end products like the Birkin handbag.
Meanwhile, the cost of digital marketing is increasing, while platforms like Google and Facebook have been changing their algorithms, making organic reach less reliable. Together with ad-block technology and data privacy regulation, brands are reassessing direct-to-consumer strategies, in order to balance it with wholesale and retail partnerships.
It is under this context that Nike outshines everyone else. The company’s revenue for the third fiscal quarter reached $12.4 billion, surpassing projections of $11.48 billion and representing a 14% increase from the previous year. This growth was driven by strong performance in direct sales, including its website and owned-and-operated stores, with member buying frequency increasing and store sales growing across all geographies. Nike’s also digital sales rose by 20%. CEO John Donahoe attributed this success to Nike’s Consumer Direct Acceleration strategy.
2) Cultural Influences:
K-pop is in full rage. Artists like BTS and Blackpink are not just music icons but fashion trendsetters. LVMH enlisted Korean stars as brand ambassadors, particularly in China, to leverage their immense popularity to attract younger millennial and Gen Z consumers. Gucci, part of the Kering group, has worked on collaborations like the “Kai x Gucci” capsule collection, which sold out quickly after its launch. Saint Laurent, another Kering brand, has engaged Blackpink’s Rosé as its muse since 2020, featuring her in key collection shoots.
But the industry is also seeing a shift towards gender-fluid fashion, reflecting changing societal attitudes. They are redefining fashion aesthetics and preferences, pushing brands to adapt their designs and marketing.
3) Sustainability and Ethical Practices:
Consumers are again pushing for sustainable fashion choices. The rise of Resale-as-a-Service (RaaS) platforms offers shopping and selling pre-owned items. Brands now must demonstrate genuine, credible changes in their practices to counter green-washing claims with greater accountability.
Hermès’ commitment to reducing greenhouse gas (GHG) emissions involves setting science-based greenhouse gas (GHG) emission reduction targets, validated by the Science-Based Targets initiative (SBTi). Efforts include a 66% reduction in transport-related GHG emissions between 2018 and 2022. It uses alternative fuels, optimizes packaging, and implements alternative transportation methods. The luxury brand is also actively involved in global initiatives like the Fashion Pact and the UNFCCC (Fashion Industry Charter for Climate Action), demonstrating increased transparency and a holistic approach to tackling climate change.
All things considered, supply chain disruptions are driving the need for new manufacturing models, including nearshoring and digital enhancements. Brands are also exploring new channels like the metaverse, utilizing rental channels and off-price retailers. That’s why future-ready companies are constantly realigning their structures to focus on sustainability and digital acceleration. These are the trendsetters who move forward into 2024.
