8 trends in the fashion and home furnishings sector in 2016
The fashion and home furnishings sector continues to be an exciting one to watch in 2016 due to the variety of issues tugging at its business core. Middle market manufacturers, designers, wholesalers and distributors in sectors such as apparel and home furnishings will face endless shifting consumer preferences, geo-political risks, a volatile global currency market, brand differentiation woes and more. And smart businesses will continue to focus on the millennial, the most important consumer right now.
2016 fashion and home furnishings outlook
Listen to our insiders as they assess the industry and provide 2016 insights.
Trends and issues
Note the following categories to monitor this year and the related trends and issues that will continue to shape the fashion and home furnishings sector.
Never before has a demographic group been so influential in the fashion industry than the millennial. They spend their hard earned money on experiences, such as travel, music, fitness and food, and not just on fashion. And when they do shop, they demand quality, value, fast fashion, speed to order and delivery, as well as close personal relationships with the brands they love.
While many fashion companies are extending their product reach by selling overseas, the grass is not always greener on the other side of the world. With uncertain economies in China, other parts of Asia and Europe, as well as concerns about currency stability and terrorism fallout, many companies may need to rethink their international expansion strategies.
M&A interest in the fashion sector continues to be healthy in 2016. Strong consumer brands with promising futures for brand extension, retail opportunities and international growth will be sought after by private equity and strategic buyers. Sell-side due diligence continues to help facilitate transactions for sellers to help prepare for a transaction as well as decrease the potential of broken deals.
Learn more by downloading our Q1 2016 Consumer Products Industry Spotlight.
The U.S. fashion sector saw a slight retail sales increase this past holiday season; however, in 2016, with the pull from a variety of volatile economic, political and consumer-demand shifts, the minor uptick could be a short-term win for fashion businesses this year and beyond. Consumer preferences for off-price and factory outlets have pushed many department stores to open their own outlets, helping to establish a level playing field with discounters such as T.J. Maxx.
Rapid and continuous change is the name of the game for fashion businesses. Improving inventory controls, shortening production cycles, seeking more cost- and time-efficient logistics, sourcing lower priced materials, as well as managing inventory markdowns, chargebacks and discounts, are essential for the successful company in 2016. Many businesses will be harnessing enterprise resource planning strategies to improve their infrastructure systems, digital platforms business intelligence and other operations this year. With the worries of security breaches, product recalls and strict regulatory compliance weighing heavily on businesses as well, continuous assessment and improvement at all levels of production and distribution will be essential.
Consumers are continuing to call for social and environmental ethics in fashion, and many companies are listening. Retailers and suppliers alike have made concerted efforts in recent years to implement anti-sweatshop codes of conduct for their supply chains; however, with the increased number of global avenues to leverage in the way of contractors and subcontractors, overseeing labor abuses will continue to be complex in 2016 and beyond. In addition, consumer demand for goods that are organic, do not harm the environment and are cruelty-free are becoming the mainstay for millennial shoppers. Smart companies are addressing these demands, but will need to understand the business implications on margin and profitability.
As companies become more reliant on technology, data security risks and privacy vulnerabilities will continue to grow. For the fashion sector, intellectual property and proprietary designs, employee information, customer data and more provide a valuable source of information for cybercriminals. Understanding the emerging threats and proactively planning for them will be an endless challenge for many companies presently and in years to come.
To learn more, read 5 cybersecurity predictions for 2016.
Brand differentiation is key to successful fashion companies, but it’s not the sole loyalty driver it once was. Millennials have made it clear via their distinct buying preferences that quality and affordability are more important to them than logos. Smart shoppers remain loyal to those brands which provide great designs, value and quality, but only if those brands are innovative and speak directly to the consumer and their personal wants and needs.
Listen to our industry insiders discuss what successful companies are focusing on in 2016 to find the balance of maintaining a respected brand, but staying nimble and innovative for their customers.