Facts & Challenges
According to the German Textile+Fashion Association, the German textile and fashion industry is an important economic sector with an annual turnover of around 32 billion euros. It comprises around 1,400 SMEs with some 135,000 employees nationwide. According to the Federal Ministry for Economic Affairs and Climate Protection, Germany is the global market leader in the field of technical textiles. Around one third of the textile and fashion industry's total turnover is generated in the fashion and clothing sector. The industry is also characterised by a high export rate of more than 40 percent. The changes triggered by digitisation, climate change and other trends do not stop at the fashion industry. The coronavirus pandemic, the Russia-Ukraine war and rising inflation have had and continue to have a major impact on consumer behaviour, supply chains and sales in the industry.
The management consultants McKinsey & Company and the industry information service "Business of Fashion" are forecasting a global downturn in the fashion industry. Some fashion manufacturers are already cutting jobs in the country. According to experts, there are ten trends that will determine the textile and fashion industry in the coming years. Geopolitical divisions and destabilising factors will further weaken the fragile economy. At the same time, new regional focal points are emerging in the Middle East and the USA. High inflation and difficult economic conditions will also have a strong impact on consumer behaviour in Germany. Consumers with a lower income and less job security will invest less money in clothing and fashion and switch to cheaper products or second-hand clothing. Generation Z in particular is placing ever less value on gender-typical clothing. Companies in the fashion industry can therefore redesign and simplify their business processes and procedures. The most stable fashion segment will probably be formal wear for special occasions. Compared to the sharp rise in online sales during the pandemic, these are expected to level off again. Since the pandemic ended, more and more consumers have also enjoyed offline shopping again. Advertising costs in the online sector are therefore likely to rise. Data protection regulations and technological changes as well are driving up the costs of digital marketing.
Digitisation
Digitisation is also making its way into all areas of the fashion industry. Whether with suggestion algorithms for clothing items, digital dressing rooms with augmented technology and avatars, virtual photo studios or 3D printing technologies – digitisation and artificial intelligence (AI) are on the rise everywhere. Omnichannel shopping has become the new normal for customers and this is not just a trend. However, an overarching digitisation strategy still needs to be developed for the fashion industry. In the Fashion 4.0 production sector, digitisation and Industry 4.0 technologies still need to be implemented to a greater extent in the form of a smart factory. So far, there are only isolated examples of smart manufacturing in the fashion industry, such as the Adidas Speedfactory and the Knitido smart hosiery factory in Japan. AI-controlled, efficient and connected production processes will naturally also require a high degree of efficiency in logistics and intralogistics in the fashion industry.
Sustainability
According to the E-Commerce Magazine, more and more consumers – especially younger ones – are concerned about the sustainability of their lifestyle. According to a survey by the market research institute GFK, almost 70 percent of consumers say that environmental and social compatibility are important to them when purchasing clothing and shoes. The fashion industry must of course adapt to this, and there is still a lot to do. There are many black sheep in the fashion industry in particular. The German and European Supply Chain Act, greenhouse gas reporting according to Scope 1-3 and the new CSR Directive will make corporate sustainability reporting more transparent in the fashion sector, too. So-called brand greenwashing – i.e. misleading or false information about the environmental friendliness of their products or business practices – will also be targeted in this context. Fashion managers still complain about the lack of industry-wide sustainability standards to evaluate their efforts. At the same time, new fashion trends are emerging. The "green fashion" trend is all about sustainable manufacturing conditions, materials and recycling. Slow fashion aims to slow down and reduce the production and consumption of clothing. In addition, sustainable clothing is intended to be worn for as long as possible.
Nearshoring and supply chain diversification
Supply chains in the fashion industry need to become shorter (nearshoring), making them both more resilient and more sustainable. In addition, dependence on traditional supplier countries for fabrics and fashion such as China, Bangladesh, India and Cambodia must be reduced. Poland, Serbia, Croatia, Bulgaria, Turkey and Morocco are possible alternative suppliers. In principle, the resilience of supply chains can be greatly enhanced by a broader supplier base spread across many different countries (multisourcing and multishoring). At the same time, digital AI-controlled supplier platforms are being set up to improve market transparency. Fashion supply chains need better risk management. Risks must be identified, contingency plans drawn up and strategies continuously adapted. Many companies are also considering reducing their product range.
Trends in the fashion industry
Gender-neutral fashion:
Generation Z (born 1997 - 2012) in particular is increasingly buying gender-neutral fashion items.
Changing consumer behaviour:
Consumer behaviour is changing due to crises and inflation. The pandemic in particular, but also the sharp rise in inflation, is changing purchasing habits. Many customers must cut spending.
Global economic downturn in the fashion industry, declining online business, higher digital marketing costs. After the pandemic, customers are once again increasingly shopping in physical stores.
Brand sales focus on new regions:
Sales figures in the fashion sector in the Middle East and the USA are on the rise.
Digitisation is already underway throughout the fashion industry:
This trend can be observed along the entire supply chain, in production, marketing and sales. Examples include digital dressing rooms with augmented reality and virtual photo studios.
Efficient omnichannel logistics:
In the fashion industry, purchases are made seamlessly through online and offline channels. Of course, intra- and extra-logistics must be designed accordingly as efficient omnichannel logistics.
Sustainability:
The fashion industry must become much more sustainable. The German and European Supply Chain Act, scope 1-3 greenhouse gas reporting and the new CSR Directive make it much more difficult for black sheep to break the law or engage in greenwashing.
Supply chain diversification:
Diversification significantly increases the resilience of supply chains.
Shortage of skilled labour:
The fashion industry too is suffering from a shortage of skilled staff. There is already a shortage of qualified personnel, from fashion designers and cutting technicians to product developers and purchasers.
What are the requirements for logistics?
The fashion industry needs effective and efficient omnichannel logistics to ensure the fulfillment of all offline and online purchases. Particularly flexible and automated warehouse systems with an inventory management system (IMS) or warehouse management system (WMS) are usually used for this purpose. Suitable solutions are systems with storage and retrieval machines and shuttle vehicles that work according to the goods-to-man principle and shorten order throughput times as well as optimise the storage and retrieval process. Due to the omnichannel approach and the high rate of returns in the fashion industry, returns processing is highly complex and requires specialist reverse logistics, for example with automated (bag) sorter systems and overhead conveyors for garments. Stores must always have the required minimum quantity of products.
In addition, Click & Collect orders need to be managed. The challenge is to handle small order quantities, frequent orders and many SKUs as quickly as possible. Therefore, a warehouse system for omnichannel logistics has to meet particularly high demands and must be designed and configurated carefully. Omnichannel and e-commerce companies that have to cope with a highly volatile demand can benefit from flexible warehouses and flexible automation solutions, according to the Kembro study. The question is no longer whether or not to automate, but how to automate.
Full automation is often not suitable for small e-commerce orders. Partial automation using pick-and-place robots and automated guided vehicles (AGVs) is more suitable. Today, new flexible AI technologies offer unprecedented opportunities for the fashion industry. Picking in e-commerce distribution hubs is often carried out using multi-tier systems with high pick rates. The integration of live storage is an option for winner products. Manually serviced shelving and pallet racking systems are easy to expand and to adapt to seasonal fluctuations. They are also an inexpensive solution. However, space utilisation is often not very good compared to compact storage solutions and multi-tier installations. Shelving and pallet racking systems can be partially automated by using for example picking robots and AGVs for replenishment.