How current global t …

Roberta Fusaro: Achim, the world has changed since we published The State of Fashion 2022 report. What are the changes that have had the greatest effect on fashion and the textile industry?

Achim Berg: The invasion into Ukraine is one of those topics not fully on our radar in November or December.

But that’s not the only change that has occurred since we published the report. We also didn’t know that Omicron would be the dominant variant in the first half of 2022.

We also did not expect that inflation would be a permanent challenge. We expected, like many governments, that this would be a temporary problem. We expected that the supply chain would normalize after two years of a pandemic. That also didn’t come true.

We did not expect an energy crisis.

We also didn’t expect that COVID-19 would be a big issue in China again, because China looked like the big winner of the whole pandemic at the end of last year. That’s the challenge of writing a report that tries to somehow predict or frame the future: things often turn out slightly different. But overall, our forecasts provided reliable insight and included topics we identified to drive the industry in 2022.

Supplier challenges

Roberta Fusaro: From the panoply of issues you’ve mentioned, what challenges do suppliers face right now?

Achim Berg: There are a lot of different challenges. It depends on which country we look at. Some are quite challenged.

The supplier side has a practical problem of delivering what is expected. But they’re also facing the issue of forecasting in a proper way because we don’t know exactly how the consumption patterns will develop.

The industry is always a couple of months ahead of the consumer, so they need to make some bets. In this environment, which is much more volatile than what we have seen in the last 20 years, it’s very difficult to make the right bets.

Supplier solutions

Roberta Fusaro: Given the increased risk, how should companies respond? And what are some things that companies can do to hopefully end up on the right side of these big bets?

Achim Berg: They should look for real partnerships and closer exchanges with brands because that would give companies access to data and would therefore make things more predictable.

On the other side, it’s worthwhile to think about how to flex the system to the maximum, because demand patterns are not as stable as they used to be. Brands and retailers will be forced to react more flexibly to these challenges. And the suppliers are, by definition, at the receiving end, so they will have to increase their flexibility even more.

Cost pressure will continue, so they will likely have to work also on the cost side, and also on their tier-two and tier-three suppliers in the whole system.

Different regions, different challenges

Roberta Fusaro: What were some of the more interesting data that came out from different geographies?

Achim Berg: On a global level, we’ve seen a faster recovery than what we expected 18 months ago. We had expected that the whole fashion industry would not get back to 2019 levels until the end of 2022. And on a global level, we already achieved that at the end of 2021.

You could argue that the fashion industry has shown more resilience and a faster ability to deal with challenges than what we had expected. Maybe we were too conservative in the eye of the storm. That might be another explanation.

The recovery was also quite different by region. Asia, with the very strong leadership of China, was the motor of the recovery right at the beginning. They had a very short dip and then they were doing quite well.

Europe had the toughest challenge to deal with, because they were lacking international travelers. Also, given the fragmentations of the markets, the recovery wasn’t that fast or that strong.

North America was remarkable. We’ve seen a V-shape recovery, which we had seen after some of the financial crises before. But we didn’t expect to see that here in the pandemic. If we look forward, it’s difficult to make predictions, as we discussed earlier.

China is currently quite challenged with its zero-COVID-19 policy, but we don’t know how long it will take to get recovery here. Let’s hope for the best, because that’s going to be very important in particular for the luxury part of the industry. Europe is currently doing better, because we see travel coming back. North America is still going strong.