While the global fashion sector is still regaining its footing in the aftermath of the pandemic, firms may expect an uptick in growth in the coming year as changing category landscapes, new digital frontiers, and advancements in sustainability continue to bring opportunities.

The Business of Fashion (Bof) and McKinsey and Company's State of Fashion report this year examines the major themes influencing the fashion economy and assesses a range of responses based on interviews with leading industry executives and an extensive industry poll.

Despite severe operational interruptions, the pandemic, according to McKinsey, has done little to slow down the industry's megatrends. Instead, over the last year, they've accelerated, with industry leaders investing in digital, addressing environmental and social concerns, and putting a greater emphasis on diversity, equity, and inclusion.

With the fashion sector poised to continue its rapid development into the newly developed metaverse, McKinsey emphasizes the significance of digitally forward communication strategies, such as augmented reality (AR) experiments in shopping experiences, to engage young consumers. According to the BoF-McKinsey survey, 81 percent of Gen-Z spent an average of 7.3 hours per week playing video games in the previous six months. Brands could use non-fungible tokens (NFTs), game "skins," and virtual fashion to foster community building and trade, according to the research. Fashion executives also see "digital" and "consumer involvement" as prospects for 2022, with 32% and 11%, respectively, citing them.

As the world gets more digitized, the risks of cyber-attacks and incorrect data handling grow more apparent. According to the report, 53% of fashion executives believe their company will be targeted by a major cyber-attack in 2022. This figure highlights the urgent need to improve cyber defenses and invest in digital security.

One of the major megatrends highlighted in the research is circular textiles, with 60% of fashion executives surveyed saying they have already invested or plan to engage in closed-loop recycling by 2022. Companies will need to incorporate these technologies into the product development process for large-scale collecting and sorting procedures as these technologies evolve.

Transparency and authentication are important for both customers and businesses, and more firms are employing a variety of technologies to combat counterfeiting, disclose product information, and increase customer loyalty by boosting consumer trust. According to McKinsey, about two out of every five fashion executives aim to use product passports in 2022 or have already done so. Customers now have access to item life cycles and material providence thanks to the rise of product QR codes and blockchain transparency solutions.

As social life resumes in 2022, global fashion sales are expected to pick up steam, with consumers releasing pent-up purchasing power and renewing their wardrobes. As societal barriers loosen, McKinsey predicts that customers will gravitate away from sportswear and loungewear. Supply chain difficulties, the rise of domestic luxury spending amid muted overseas travel, and the further evolution of digital channels are expected to have the greatest influence on the company in 2022, according to executives. If a company operates globally, McKinsey recommends that it examine local conditions, emphasizing that countries with great healthcare and economic resilience are more likely to outperform others.

Nonetheless, with greater demand on global supply chains and higher prices standing in the way of consistent deliveries, logistics difficulties may worsen. According to the BoF-McKinsey poll, 87% of fashion executives believe supply chain interruptions will have a negative impact on profits in 2022. Companies will be forced to investigate ways to reinforce their supply chains and logistics networks, with a renewed focus on flexibility, sustainability, transparency, and cost management to assist them to deal with rising consumer demand as well as new regulatory and trade barriers.