Top trends to watch in 2017 in the fashion and home furnishings sector
The outlook for the fashion and home furnishings sector is projected to be upbeat in 2017 as consumers will likely have more money in their pockets to spend. Higher wages, lower unemployment and expected lower corporate and individual tax rates will continue to boost consumer confidence. There are, however, a variety of issues and trends affecting the industry as well. Middle market manufacturers, designers, wholesalers and distributors in the apparel and home furnishings sectors will face shifting consumer preferences, the ever-evolving retail environment, a potential border-adjusted tax, international currency fluctuations, regulatory uncertainty, brand differentiation challenges and more.
Listen as Carol Lapidus, RSM consumer products practice leader, and fashion and home furnishings sector leader, shares her industry outlook about the various challenges—and opportunities—fashion and home furnishings companies will face this year.
In addition, check out the following trends and issues to monitor this year in the fashion and home furnishings sector.
The millennial consumer will continue to be the most important and largest customer segment for fashion brands. In 2017, smart companies should be mindful of important influencers, such as bloggers and social media celebrities; millennials are more inclined to be swayed by opinions from social channels as opposed to direct advertising. Likewise, millennials and other groups, such as Generation X consumers, use social media as a means to gain information and interact with the brands they choose to buy from. Fashion brands must be mindful of buying preferences and the needs of a variety of consumers.
Technology will have a significant interplay between brands and consumers as fashion companies leverage big data, shopping history data, social media profiles, visual search and other forms of artificial intelligence to better target customers and, ideally, to provide a curated mix of products, specifically for individual consumers.
Augmented reality technologies will also be part of brand strategies as a means to assist consumers in their buying decisions through better visualization of the products, as if looking in a mirror. Listen to what our industry insider says about millennial consumers, and other buyers, and how technology plays a critical role in engaging these customers.
Many U.S. fashion and home furnishings companies have expanded sales by selling overseas, either through distributors, opening their own stores or opening offices in key foreign locations. We continue to see growth by foreign-owned brands selling into the United States. And, a majority of fashion companies are importing their products manufactured by foreign contractors. All of these businesses could be significantly affected by foreign policy (such as the impacts of Brexit, NAFTA and the proposed border-adjusted tax) currency fluctuations, economic instability or foreign and U.S. tax uncertainties.
Mergers and acquisitions (M&A) interest in the fashion sector continues to be healthy in 2017. Strong consumer brands with promising futures for brand extension, retail opportunities and growth will be sought after by private equity and strategic buyers. Broken deals are continuing to decrease as sellers employ stronger strategies for preparing for deals, such as sell-side due diligence. Possible headwinds, however, for M&A this year could include global economic uncertainty, the proposed border-adjusted tax and higher deal multiples.
We are facing a time of uncertainty due to potential tax reform. Lower corporate and individual tax rates could put more money in the consumer’s pocket to spend on fashion. Conversely, the proposed border-adjusted tax could levy a major impact on those companies which import products into the United States. Companies will need to consider the potential impact of this proposed new legislation. Likewise, businesses that take a “Made in the U.S.A.” approach with their products could be straddled with higher labor and manufacturing costs. Many companies may need to rethink their international and domestic buying strategies, and evaluate their supply chain and overhead to cut costs and lessen the impact on consumer prices as well as their bottom line.
In 2017, we’ll continue to see the decline of the large department and chain stores. Rather, retailers are re-envisioning their traditional brick-and-mortar and online presence, and leveraging an omni-channel strategy to engage and serve customers. Smart brands will be engaging consumers directly, through a combination of online presence, distribution through channels like Amazon and opening their own stores so consumers can touch and feel the product before buying online.
As companies become more reliant on technology, data security risks and privacy vulnerabilities continue to grow. Intellectual property, such as 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.
Brand differentiation is key to successful fashion and home furnishings companies, but it’s not the sole loyalty driver it once was. Millennials have made it clear 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. Ethical sourcing (both social and environmental) continue to be important to consumers as well as retailers. Millennials continue to seek out brands that speak to values that are important to them, whether it’s protecting our water supply, animal-free testing, healthy work environments or organic products. The big question is whether they are willing to pay more for these attributes. Smart brands are addressing these demands and making important decisions to differentiate themselves in the marketplace.