The fashion market is heating up and undergoing rapid change. New consumer behaviours, technologies and trends are making fashion one of the most dynamic industries to follow.
The global fashion market is expected to jump from 1.5 trillion U.S. dollars in 2020 to 2.25 trillion dollars by 2025. This leap in value comes from evolved understandings of fashion and the new values being embraced by the industry.
Historically, Europe has been the fashion mecca, with Italy and France home to the most acclaimed brands. Throughout recent years, however, fashion has gone global, and today the United States is the largest market for apparel and fashion, although emerging markets, especially in the Asia-Pacific region, are quickly catching up.
The era of fast fashion is approaching an end after much criticism has been directed at its practice of short garment lifespans, which amounts to huge quantities of clothing waste annually. Data showed that, globally, customers lose US$460 billion worth of clothes every year by throwing them away.
The push for more sustainable and ethical fashion emphasises the quality of products and invokes the idea that clothes can be re-used, recycled and upcycled. As such, the secondary market has witnessed explosive growth in the last few years, prompted especially by younger generations, who are increasingly engaged in sustainable and ethical apparel.
Research from McKinsey says that nine out of ten Generation Z consumers believe that companies have a responsibility to address environmental and social issues. This trend is seen in the growth prospects of the resale market, currently worth $24bn and predicted to reach $64bn within five years.
Other concepts entering the fashion scene are the coupling of technology and innovation. Several gadgets and tools are being used to enhance and expand the industry, the most innovative uses — according to CB Insights — including the use of robots to cut fabric, AI algorithms that predict style trends, and VR mirrors in dressing rooms.
Below, we share some insights into some of the most interesting names to watch in this space.
The RealReal (REAL): The RealReal is a leading US-based platform for authenticated luxury consignment where consumers can buy and sell high-end items, allowing for resale of various products from apparel to jewellery and art. The platform currently only operates in the US, but the company plans to go international in 2022.
Despite the challenges of 2020, the company reported a growth in the number of people entering luxury consignment, especially the younger generations as Gen Z and Millennials represented 35% of new consignors. This is thanks to the company’s strategy of diversifying their physical high-street stores to move into neighbourhoods beyond their flagship stores, increasing accessibility.
Overall, the resale market continues to grow, with forecasts to jump from the current $28 billion to $51 billion by 2023.
New consumer behaviours also promise to make The RealReal a key fashion platform in the coming years, as sustainability becomes a key pillar of the industry. The growing popularity of the circular fashion economy will benefit resale platforms, a concept based on the principles of regeneration and elimination of waste and pollution from supply chains. In 2020, The RealReal partnered with Gucci to promote ‘circularity’ through the launch of a platform to sell pre-owned Gucci products.
Stitch Fix (SFIX): Moving into the tech aspect of fashion, Stitch Fix offers data-driven personalisation services. With more and more people shopping online, the company has had a very successful run in the last few months, with a market cap of more than US$6 billion.
Upon announcement of 2021 outlook, the SFIX share price fell dramatically — but we advise investors to keep an eye on this stock because the use of AI in online shopping is certainly a factor to increase value.
Poshmark (POSH): Poshmark is an social media-based marketplace where uses can sell fashion items. Poshmark was designed upon the concept of ‘social shopping’ or peer-to-peer transactions. Unlike TheRealReal, Poshmark does not own inventory; it acts as a facilitating platform for buying and selling pre-owned items.
Because of its strong social media presence, Poshmark has a faithful community, with users spending on average almost half an hour per day on the platform. The number of active users rose 46 percent from 2018 to 2020.
To optimise and better target products to consumers, Poshmark uses a data-driven algorithm approach to its content.
After its very successful IPO in January 2021, Poshmark started to internationalise operations and Australia was chosen as the first destination outside the US to host operations. According to CEO Manish Chandra, Australia has “a well-established thrift-shop culture, high rates of e-commerce adoption and environmentally conscious consumers.”
Our director Stefania Barbaglio has been on Investors’ Hub sharing some insights into investment in fashion. Watch the interview below:
Stefania will also be speaking about technology in fashion at the Evolution Fashion Week hosted by Adam & Alice on April 5th. Register for Technology in the Fashion Space — Impact of Technology on Fashion here
Be sure to follow us on social media @cassiopeia_ltd to keep up with more news and updates in this exciting sector, and don’t forget to subscribe to our channel to hear about further upcoming interviews on FinancialFox.