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Fashion and Logistics: a New Challenge

The analysts’ forecasts for the Fashion Industry in 2019 have been largely confirmed by the events that unfolded during the year. According to “The State of Fashion 2019” report by McKinsey & Company, even if Greater China is expected to overtake the U.S. as the largest fashion market before the end of the year (McKinsey FashionScope), the overall industry growth has been hampered by volatility and negative trends in the global economy, such as the China and U.S. trade war, the increase in the U.S. interest rates, and the pessimistic sentiment coming both from institutions and industry players. The Fashion industry is still extremely polarized: the first 20% of the operating firms generates alone the 97% of the overall profitability. A general call to action for Logistics operators: according to the latest available data, there has been a gradual but dramatic shortening of the time span between the discovery and the purchase of a product by the consumer. This will force an improvement in the existing supply chains for fashion players who wish to survive the following years. The aforementioned major players are actively searching for challenges instead of passively preparing for them: innovation along the supply chain – not just “cutting costs” – seems to be the only way to pass through the storms ahead. This can be made by, for example, outsourcing the firm’s logistics to an external operator. Now, speaking for my country: the Italian Fashion Industry has one of the lowest level of logistic outsourcing. Will these new factors manage to change this long-established trend of the industry? Nothing is certain, but analysts tell us that this low orientation to outsourcing is mainly driven by: Low incidence of logistics costs on the product’s final price; Managers and Owners’ perception of high reliability for internal logistics operations compared to outsourced ones. The extreme variability and uncertainty of the actual economic conditions, margins exploitation, and a new approach to omnichannel may reverse this national trend – which will make an impact on the Fashion Industry as a whole. What do you think?

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