The ING Economic Bureau arrived at two scenarios for the future. The first prediction is somewhat dire. The economic situation in the West remains precarious with relatively little growth. Emerging markets are the driving force behind international trade. Fast fashion companies are expanding outside Europe, but will simultaneously face strong players from Asia who are entering their local markets. This will cause margins to tumble. Traditional business models with slow production chains and intermediaries will not survive this development. Many local entrepreneurs will have to give up the fight. Only those with clear added value in a niche will apparently survive.
New business models may also be established as a result of increased political, economic and ecological problems that create unrest. Decreased consumption and corporate social responsibility will occupy a more prominent place. Material property will become less important, while sustainability becomes more important. Technology will also play a greater role in the fashion industry. Self-cleaning materials will, for example, become more popular. Accessories such as 'smart' watches and glasses will become commonplace.
Fast fashion versus sustainability
According to Dirk Mulder, sector manager food and retail, entrepreneurs should decide for themselves which path they want to take. "The implemented changes will change the market for good. The question is whether people will choose an evolutionary or revolutionary path. Players in fashion are faced with an important decision; following trends or defining them."
What becomes obvious in both scenarios is that brands in the mid-segment have become as good as obsolete. According to the bank, the mid-segment is currently suffering greatly from thrifty consumers who prefer to shop at budget chains. The higher end has, however, managed to maintain its position. This is, in part, thanks to emerging markets like China, where demand for luxury goods has grown explosively. There also appears to be little room for independent retailers in 2025. Fashion is changing at an increasingly faster rate and apparel costs as much now as it did in 2002. Independent retailers cannot adapt as quickly as large chains. Shopkeepers are more dependent on intermediaries en must buy collections based on their gut. In the past few years, the number of store closures has grown considerably, 2530 in 2012 compared with 1336 in 2007.
Few prospects for brands in the mid-segment
ING believes that web shops will continue to grow in the coming years. The bank does think, however, that online stores should consider their return policy. Clothing and shoes that do not fit can lead to a very high rate of returns and major costs. Better product information, but also new technologies like virtual changing rooms, should limit the number of returns.