| This week, fashion companies look for signs of promise in perilous times. Plus, why remote work isn’t a possibility for many across the globe, and the CEO of Tata Motors on what he’s learned from the COVID-19 crisis. |
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| A dark palette. Many of us have looked into our closets this year and thought, when will I wear that dress again? Those shoes? That tie? The fashion industry is living those questions from the other side, and the answers aren’t pretty. Our new report, The State of Fashion 2021: In search of promise in perilous times, written in partnership with The Business of Fashion, reveals that the industry’s profit is likely to plunge 93 percent in 2020, after rising just 4 percent in 2019. |
| Taking stock. At the same time, the sober mood among fashion executives surveyed in last year’s report has evolved into a strong determination to manage the industry through the COVID-19 pandemic. Many fashion companies have reshaped their business models during the crisis, streamlining their operations and sharpening their customer propositions. |
| A mixed global pattern. As the virus comes under more effective control over the next year, and people begin to feel more comfortable traveling and gathering, cautious optimism is warranted. Globally, prospects vary: as China’s consumer market continues to recover, there could be 5 to 10 percent sales growth there in 2021 compared with 2019. In Europe, where precrisis levels of consumer activity are not likely to return before the third quarter of 2022, sales in 2021 could decline 2 to 7 percent from 2019. In the United States, where only a modest recovery is likely before the first quarter of 2023, sales may fall 7 to 12 percent in 2021 compared with 2019. |
| Digital is king. Digital channels, already trending before the crisis, have been buoyed by the reluctance of shoppers to enter stores. Some 22 percent of executives told us that digital will be the key momentum driver in the coming year. Around the globe, we expect more than 20 percent annual digital growth in 2021 (with 30 percent in Europe and the United States) compared with 2020. |
| Innovation is queen. Given the disruptions of recent months, many companies are reconnecting with their supply chains and making tough decisions—for example, about return on investment at the store level—and then ramping up omnichannel services. At the same time, there’s a renewed appetite among both brands and consumers for local engagement and a personal touch. In a bright spot, the beauty segment has remained relatively insulated from the pandemic, offering consumers a comforting pick-me-up. |
| Fashion forward. Our new report drills down into the major themes affecting the fashion economy and assesses a range of possible responses. As decision makers continue to manage uncertainty, the most successful will be those that get a grip on the trends shaping the fashion landscape. That means focusing on digital and omnichannel but also emphasizing the importance of sustainability through the value chain. Consumers (and increasingly, investors) will reward companies that treat their workers and the environment with respect, and the deeper relationships that emerge will bring benefits in agility and accountability. |
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| INTERVIEW |
| Tata Motors keeps its foot on the gas |
| McKinsey recently spoke with Guenter Butschek, CEO of Tata Motors, about COVID-19-era challenges ranging from a devastating hit to the home economy and severe shocks to supply chains to worried dealers and anxious customers—not to mention more than 80,000 employees now confronting the crisis and looking for leadership. Butschek offered his perspective on how he and his organization are adapting, including by accelerating the adoption of digital technology and, on the people side, by relying on trust and transparency as “guiding principles.” |
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| MORE ON MCKINSEY.COM |
| How the EU can achieve net-zero emissions | The decarbonization pathways to a net-zero Europe are countless, but not all are cost-optimal. We look at one pathway that could reduce the European Union’s emissions by 55 percent while delivering broad economic benefits. |
| The future of payments is frictionless—now more than ever | Amrita Ahuja, the CFO of Square, explains how the company’s payment platform and services have helped small enterprises stay afloat during the COVID-19 crisis. |
| Will India get too hot to work? | Extreme heat and humidity could put millions of lives and billions of dollars at risk across India. What will it take to reduce the risk? |
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| THREE QUESTIONS FOR |
| Aamer Baig |
| Aamer Baig a senior partner in McKinsey’s Chicago office, leads McKinsey’s work in technology in North America, where he helps business and technology leaders transform their organizations.
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| How has the role of the CIO changed during the COVID-19 crisis? |
| In the first stages of the crisis, the CIO emerged as a star for enabling remote work and launching initiatives to ensure stability and connectivity with customers. But now management teams have moved on—they’re thinking about 2021 and 2022. So if CIOs thought the pressure was high before, it’s magnitudes higher now. |
| The pandemic has forced IT leaders to accelerate their digital timelines and build a new operating rhythm. CIOs who successfully navigated the culture-change aspects of working from home at a rapid, agile clip are building tremendous political capital among their C-suite peers. The challenge will be to sustain this productivity while partnering with the CEO to identify and build new digital business opportunities that help the company’s brand stand out. |
| But CIOs must drive the digital strategy; they can’t afford to fall into the trap of simply executing someone else’s agenda. When it comes to resource allocation, priorities, and strategic conversations, we are starting to see some distance between aspiration and reality. |
| As companies shift to digital platforms, how can they meet their customers? |
| The COVID-19 crisis has accelerated digital and customer interactions, even in the most staid industries and in B2B. We are entering a period when every customer is a digital customer, so companies that think about their customers as either digital or not will be passé soon. |
| For example, across industrial sectors, e-commerce and remote selling have become the preferred modes of doing business, with just 30 percent of B2B customers expressing an interest in engaging with sales representatives in person after the pandemic. Similarly, remote self-installations of certain technologies have more than doubled in recent months, and aftermarket services could remain largely contactless. |
| In enterprise tech, CIOs and their organizations have grown up serving and delivering internally, for the most part. Now they are being asked to deliver for the external customer, whose expectations are shaped by how we all use Amazon, Google, and Apple—that’s the kind of experience customers want. |
| Organizations should be more attuned to the customer experience in terms of products and services, putting them in the context of the customer’s workflow. For instance, many banks have offered customers an expanded range of online services to reduce the need for in-person banking. In response to the COVID-19 crisis, some banks in Asia offered contactless and smart services, allowing customers to complete a variety of financial services on an app, including basic banking transactions, wealth management, insurance, foreign exchange, and more. |
| How can IT facilitate the business’s interactions with customers? |
| In IT, you typically have a product person, sales, and then the customer. There’s at least three hops between IT and the customer, where at most there should be only one hop or direct contact. Successful CIOs work with the business to adopt agile principles and other structural changes to close the gap between tech and the customer. |
| IT should be collecting and analyzing data to fully understand customers, their environments, and their needs—something many organizations still lack the ability to do. You need a clear way of tracking interactions with customers across all transactions. It’s hard work, it’s heavy lifting, it takes time, but the benefits are tremendous. |
| Adopting an end-customer mindset is very important. Tech organizations are used to delivering according to requirements in a static way, but this is changing. Every tech organization should be thinking about itself as a B2C business, where the customer is not a static, amorphous, sterile entity but an actual person. The more intimacy and understanding, the better organizations will be at meeting—and not failing—the customer.
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| — Edited by Barbara Tierney |
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| BACKTALK |
| Have feedback or other ideas? We’d love to hear from you. |
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