Worldwide Covid-related restrictions undeniably had a huge negative impact on the global economy in 2020, especially for non-essential industries like luxury and fashion. The good news is that the most of the industry started to recover in 2021, though unevenly.
According to the latest State of Fashion report published by McKinsey this fall, global fashion sales should “reach 96% to 101% of 2019 levels in 2021 and 103% to 108% in 2022” but “performance will vary across geographieswith growth likely driven by the US and China, as Europe lags”. The report also states that “consumer sentiment is on a positive trajectory, especially in markets where vaccination and saving rates are high.”
To round off this good news, experts are today confident that the global fashion industry won’t experience a setback in sales comparable to the one recorded in 2019 if a new wave of tight restrictions should occur. “Brand owners, retailers, consumers, I think, even suppliers, are starting to adapt to this so-called new normal” said Joseph Phi, Group Chief Executive of the Hong Kong-based supply chain management company Li & Fung in an interview published within the State of Fashion report. “The pandemic has shaken the very core and the very foundation of how the fashion supply chain has been built. It was built on efficiency by squeezing every ounce to make it cost effective. There is a need for a new equilibrium, and this will include diversification of the sourcing base, instead of putting all of your eggs in one basket,” said Phi.
Buyers from Russia
While it does not necessarily focus on the MENA region, the report does give some data showing that the fashion and luxury industry is also back on track in this part of the world, especially in the GCC and, more importantly, this is despite the remaining travel restrictions or those that might be imposed if the pandemic again becomes out of control. According to experts quoted in the report, the upward trend was mainly driven by domestic shoppers, which almost offset the decreases in tourism.
Fashion and luxury brand representatives contacted by Pulse all stated it was too early to comment on their performance for 2021, as the year has not yet ended. Off the record, many agree with the report’s observation. “It’s at least true for the luxury sector in the GCC,” says luxury expert and founder of Moksyz luxury retail consultancy, Fidaa Baddour. “The industry was broadly able to recover thanks to the domestic market and despite the decrease in the number of tourists coming from China. There were also some positive surprises, like the increasing number of buyers coming from Russia”, he also stated.
It’s not surprising to learn that the rise in domestic demand and the diversification of foreign clientele benefitted new local designers and familiar local names. “While we do expect customers to return to previous [international] buying habits, we’re certain that [increased] ‘repatriated spending’ will become the norm. As consumers search for quality products they don’t have to travel for, local designers and artisans are exceeding expectations and matching — sometimes surpassing — the quality demanded,” analyzed Avinash Wadhwani, co-founder of Lagos multibrand store Temple Muse, who was also quoted in the report. Khalid Al Tayer, chief executive of Ounass and managing director of Al Tayer Insignia, which operates joint ventures with brands including Gucci and Yves Saint Laurent, goes as far as saying that the trend “has really accelerated the brands in their adaptation of local tastes and local cultures and local celebrations by coming up with communication, [events] and merchandising that appeals to them.”
NFTs and Metaverse
Another prominent factor that contributed to this upturn is the development –hastened by necessity – of online sales channels, another lever pinpointed by the report: “Online business models were a standout success story of the pandemic. We expect that companies will continue to invest in digital innovation and experiment with fresh approaches to creativity and commerce in 2022. Digital assets such as non-fungible tokens (NFTs), gaming “skins” and virtual fashion will edge closer to the mainstream, with some brands expanding into the digital “Metaverse”, the recent major attempt by Facebook to succeed where the Second Life marketplace failed almost two decades ago. If it’s too early to comment on the outcome of this ambitious project, it’s however more than safe to assess the benefit of an enhanced online presence for traditional distributors. According to the report, “UAE-based luxury players with an online presence, such as Al Tayer Insignia’s Ounass and Chalhoub Group’s Tryano and Level Shoes, are (…) expanding fast across the region.”
Lastly, it is of course a given that this positive trend didn’t benefit all MENA region markets, at least to same extent, as countries like Lebanon, Syria, and Libya are facing major turmoil. The digital trend has also not been fully embraced by retail or wholesalers. On the other hand, textile producing countries like Egypt and Tunisia have enjoyed a dynamic of their own, with a double digit increase in textile exports, according to the latest official statistics (over 25% and almost USD 800 million for the former at the end of October, and more than 11 % for the latter at the end of August at EUR 1.1 billion).
