A chambray men’s dress shirt stands out against a light blue background.
Fashion is fun, as anyone who’s seen a makeover scene in an ’80s movie knows all too well. Trying on, buying and keeping clothes for different moods fulfills complex human needs not just for consumption, but for comfort and personal expression.
Meet and engage directly with McKinsey’s senior experts on fast fashion
Anita Balchandani is a senior partner in McKinsey’s London office, Achim Berg is a senior partner in the Frankfurt office, Gemma D’Auria is a senior partner in the Milan office, Clarice Magnen-Marez is a senior partner in the Paris office, and Patrick Simon is a senior partner in the Berlin office.
Fashion is also a serious business. In 2023, it’s estimated that the global fashion industry will be worth $1.7 trillion. And more than 300 million people around the world are involved in making clothes somewhere along the value chain. Between 2000 and 2014, clothing production doubled and the amount of clothing purchased per person increased by about 60%, in part due to the rise of fast fashion.
Fast fashion retailers move faster than their traditional peers, meaning they have shorter production cycles and produce the latest designs, allowing shoppers to not only expand but refresh their wardrobes quickly and cheaply. And it turns out shoppers love new styles: According to the recently published “The State of Fashion 2024” report by Business of Fashion and McKinsey, 40% of U.S. consumers and 26% of U.K. consumers have shopped with fast fashion giants Shein or Temu in the past 12 months. If other fast fashion retailers are included, the numbers are likely much higher.
Despite its growth, the fast fashion industry also generates a significant amount of waste. Fast fashion consumers quickly throw away their clothes. It is estimated that consumers treat the cheapest clothing as almost disposable, throwing it away after only seven wears. Each year, the equivalent of three out of every five pieces of clothing produced is dumped into landfills or incinerated. And textile production contributes 1.2 billion tonnes of greenhouse gas emissions per year, more than all international flights and ships at sea combined. It has also been reported that some garment factory workers are low-paid and exposed to hazardous working conditions.
The true cost of fast fashion is starting to come into focus, especially for millennials and Gen Z. Young people are becoming more sustainability-conscious in their consumption habits. They are also keenly aware that the fashion industry is a major contributor to global warming. And they are walking the talk, too: A recent survey on sustainable consumption found that half of Gen Z shoppers in China said they aim to reduce their fast fashion purchases.
How can the fast fashion industry transform itself towards sustainability? Read on to find out.
Learn more about McKinsey’s Retail and Sustainability practice.
What is Ultra Fast Fashion?
If fast fashion retailers accelerate traditional product cycles, ultra-fast fashion accelerates them even further. In the 1990s, Spanish retailer Zara was the first unconventional fast fashion retailer to offer hundreds of new items every week. As of 2023, Chinese ultra-fast fashion retailer Shein is constantly producing up to 10,000 new designs per day. And Shein’s products are, on average, significantly cheaper than those of its more established fast fashion competitors: Shein’s average SKU price is $14 compared to $26 for fast fashion retailer H&M and $34 for Zara.
Shein has grown dramatically during the pandemic. Thanks in part to a surge in online sales and digital adoption, the company has more than doubled its U.S. market share during the pandemic and is now the second-most popular shopping site among Gen Z in the U.S. (after Amazon). A funding round in 2022 valued Shein at $100 billion (though that was reported to have fallen to $66 billion in 2023, possibly in anticipation of increased regulation).
How are fast fashion companies evolving their business models?
Ultra-low prices are essential to the success of the fast fashion business model, as are compressed delivery times. Emerging fast fashion retailers such as Shein and Temu are updating the model in the following ways:
An agile, scalable manufacturer-to-consumer supply chain. Some of the next generation of fast fashion companies are building large networks of suppliers that manufacture exclusively for them. Data-driven product design and testing. Shein, for example, uses demand-driven trend modeling to design and select products. This includes a variety of data inputs, from current trends to viral products to customer perceptions. A loyal and growing customer base. These are supported by affiliate marketing influencer programs and organic social community building, lowering customer acquisition costs. High app adoption and engagement strategies. Companies are gamifying the app experience, allowing customers to earn loyalty points by setting up accounts, posting reviews, watching live streams, and more.
How are fast fashion companies addressing sustainability concerns at the C-suite level?
One way fashion companies are preparing for future sustainability challenges is by reshaping their leadership teams. According to McKinsey’s State of Fashion 2024 report, the leadership teams of nearly all 25 European fashion companies include at least one executive with environmental, social or governance experience. These executives oversee a range of sustainability strategies, from reducing a company’s carbon footprint to cutting waste to improving labor relations.
Brands that execute sustainability strategies best incorporate sustainability elements into existing roles rather than creating entirely new roles. For example, UK-based fast-fashion retailer Primark appointed its first chief customer officer, Michelle McEttrick, to lead its sustainability strategy. And a successful sustainability officer can pave the way to a top job, as was the case with Helena Helmersson, who served as H&M’s sustainability officer before being appointed the company’s CEO in 2020.
How can the textile industry make its business model more sustainable?
In response to climate pressures and a rapidly changing regulatory environment, many fast fashion companies are considering how to make their business models more circular. In a circular model of value creation, resources are used repeatedly. In contrast, the traditional linear model starts with extraction and ends with disposal at end of life, where consumers are expected to throw the goods away and buy more.
Here are some ways fashion companies can work to comply with changing regulations.
Improved traceability. Achieving full visibility of the supply chain at every stage of production will be key to regulatory compliance. Advances in blockchain and other technologies could help companies enable more transparent and efficient oversight. Brands such as Brooks Sports and Renfro Brands have deployed TrusTrace’s digital traceability platform to achieve traceability at scale. Sourcing and production. In the apparel industry, upstream supply chain activities account for a large portion of carbon emissions, so in the future, there may be a focus on decarbonizing materials and garment production. Brands may increasingly shift to new suppliers or enter into strategic alliances. For example, luxury retail brand Hermes has partnered with startup MycoWorks to gain access to artificial mycelium (a network of mycelium that can be used to produce leather-like products). Design. A new emphasis on durability and longevity may require renewed attention to design details such as stitching and seams. Materials that cannot be separated for recycling may be avoided in the future, meaning designers may have to think more creatively about their design choices. End-of-life waste. New business models are emerging to minimize production and waste. Resale continues to grow through brand partnerships with second-hand marketplaces like The RealReal and Vestiaire Collective. There is also an opportunity to accelerate closed-loop recycling, the process of turning a product into a new product after multiple uses. Stockholm-based Renewcell is launching the world’s first large-scale fiber-to-fiber recycling plant and has already partnered with global brands such as H&M and Levi’s.
As global businesses respond to increasing climate pressures and a changing regulatory environment, fashion companies that create new patterns for sustainability are the ones most likely to succeed in the future.
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Reference articles:
“The state of fashion 2024: Finding signs of growth as uncertainty reigns”, November 29, 2023, Anita Balchandani, David Barrelet, Achim Berg, Gemma D’Auria, Felix Rohlkens, Ewa Studzinska “Good merchandising never goes out of style”, March 15, 2023, David Barrelet, Matthew Chapman, Eric Eklou, Julia Huang, Felix Rohlkens, Hannah Jankelevich “The state of fashion 2023: Sustaining growth amid global gloom”, November 29, 2022, Imran Amed, Sara Andre, Anita Balchandani, Achim Berg, Felix Rohlkens”Finding the fashion sustainability crowd”, June 28, 2022, Elisa Arbella, Anita Balchandani, Nick Kornbliet, Rively “The state of fashion in 2022: An uneven recovery and new ground”, May 2, 2022, Imran Amed, Achim Berg, Anita Balchandani, Pamela Brown, Hannah Crump, Amanda Dargan, Saskia Hedrich, Jacob Ekelöf Jensen, Leila Le Merle, Felix Rohrkens, Michael Straub, Rob YaNg, “Is Luxury Resale the Future of Fashion?”, December 14, 2020; Miriam Lobis, “The Environmental Impact of Clothing Remanufacturing”, July 25, 2019; Clarisse Magnhan-Marès and Saskia Hedrich, “Developing Products for a Circular Economy”, November 14, 2016; Eric Hannon, Marianne Kuhlmann, and Benjamin Tydigzman, “Sustainable Style: A New Approach to Fast Fashion”, October 20, 2016, Nathalie Remy, Evelyn Spillmann, and Stephen Schwartz
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