OXFORDSHIRE, United Kingdom — Wednesday morning at The Business of Fashion’s VOICES 2023 gathering, editor-in-chief Imran Amed and McKinsey senior partner Achim Berg offered a first look at the “The State of Fashion 2024″ report, followed by a series of panels and presentations exploring the forces reshaping the global fashion system.

Speakers including Bottega Veneta creative director Mathieu Blazy, new Gap CEO Richard Dickson and Italian fashion entrepreneur Brunello Cuccinelli discussed craft, culture, brand building and more, while a panel of sustainability stakeholders examined the colonial dynamics embedded in fashion’s climate crisis.

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The State of Fashion 2024

Consumers plan to spend as much as 16 percent less on fashion next year, BoF and McKinsey’s “The State of Fashion 2024″ report found. Berg said this was the latest sign that a softening of the fashion market seen in the second half of 2023 will continue next year.

Opportunities for growth remain, however: notably rebounding travel, which will help brands reach new shoppers with tourist flows expected to hit 110 percent of 2019 levels next year, surpassing pre-pandemic volumes for the first time.

Brunello Cucinelli’s Hopeful AI Vision

In a conversation with BoF’s Imran Amed, Italian fashion entrepreneur Brunello Cucinelli discussed the value of human craftsmanship and his vision of  “humanistic, contemporary capitalism.” “There should be a balance between profit and giving back. Giving back elevates your soul,” Cucinelli said.

After placing ownership of his fast-growing company in a family trust and hiring a pair of co-CEOs to help support his business, Cucinelli has shifted to a creative director role at his namesake brand. He hopes the moves will protect the future of his brand — values intact. “I want my company to be there for another hundred years, and always owned by someone who believes in this sort of contemporary capitalism,” he said.

As wariness mounts regarding the potential for artificial intelligence to disrupt people’s lives and livelihoods, Cucinelli said the young generation should remain optimistic regarding the technology’s potential. “This will be a very helpful tool. It does not show emotion, it doesn’t cry — it will help us to rediscover the value of human beings,” he said. As more and more repetitive work is replaced by artificial intelligence, “we’ll be more on the lookout for thinking human beings, thinking souls.”

“You have to greet the future with a smile,” he concluded.

Facing Climate Colonialism

What is “climate colonialism”? In the run-up to the UN’s COP 28 conference, the phrase fast-entering the sustainability lexicon refers to the way the countries in the Global South often suffer the most from climate change, despite having historically done little to contribute to the problem, while, in a fashion context, being hosts to the network of manufacturers being tasked with retooling supply chains to help address the crisis.

“A lot of the regulation is coming from the EU and the US without sitting down and talking to the communities that have the solutions, talking to the manufacturers and the workers,” Ayesha Barenblat, CEO of supply chain advocacy organisation Remake, said in a panel discussion with BoF’s chief sustainability correspondent Sarah Kent.

Suppliers further down fashion’s value chain — from materials farmers to fabric mills to manufacturers — operate in a highly competitive market with thin margins compared to brands, but are the ones who will need to invest the most to make fashion more sustainable.

“The companies that make the least amount of money on the top line and bottom line have to spend the most money because of how we distribute the responsibility,” said Vidhura Ralapanawe, executive vice president for innovation and sustainability at Epic Designers.  “We have to collectively fund decarbonisation,” he said.

Some see colonial dynamics at play at the end of fashion’s lifecycle, too, as poorer countries are forced to deal with the waste the industry produces. In Ghana, a glut of unwanted clothing exported from the West has choked landfills and often ends up washing into sewers, leading heaps of garments to wash up on shore.

Or Foundation founder Sammy Oteng held up a bag containing thousands of tags from just a few hours of cleaning up garments on the beach near Accra.

“Brands are in denial about what’s happening in Ghana. There is a lack of responsibility, because even if we ceased making clothing now, what happens for the decades of damage that’s already been done?” Oteng said. In countries like France, which export massive amounts of used garments, “people are so isolated they don’t ever see what’s going on. Even if you show them a video of what’s going on, maybe they’re shocked but afterwards they go back to their lives.”

Product Passports

One tool that could help hold brands responsible for what happens to their clothes once sold — as well as helping them monetise the secondary market — is the product passport, according to Arianee CEO Pierre-Nicolas Hurstel. “Until a significant part of a brand’s revenue comes from second-hand there’s no possible way to achieve circularity,” he said.

Product passports — which are now being rolled out at scale at many European luxury firms — will generate data about a product’s full life cycle. The technology could create ways for brands to connect with their second-hand customers and develop schemes to charge royalties on secondary-market sales, allowing them to continue funding advertising spend and infrastructure without creating more and more new product.

“This could truly change the revenue model and the cost model. We can change the way we do fashion,” Hurstel said.

Mathieu Blazy’s Creative Alchemy

During two years at the helm of Italian leather goods powerhouse Bottega Veneta, creative director Mathieu Blazy has developed a knack for “alchemy,” BoF’s editor-at-large Tim Blanks pointed out in a talk with the designer.

Creating surprising garments from inspirations as banal as an oxford shirt or jeans — using ultra-realistic trompe-l’œil effects to render those casual sportswear staples in printed leather, for example — has become one of Blazy’s signatures.

“I became obsessed with this idea of boring, universal clothes — thinking, how could we push that? How could we make something for everyday where only the person who wears it knows they are wearing something very special?” Blazy said.

Blazy has captivated fashion fans in recent seasons with shows that featured globe-trotting explorations of texture and craft, juxtaposing a variety of techniques and patterns. In fashion, less can be more, but Blazy has taken another approach. “I wanted to explore more and more. When you add a lot of characters, you add layers and stories and also emotions,” he said.

Textile design is a passion for Blazy, who said he’s increasingly focused on working with teams to make sure design elements are integrated into materials rather than embellishing garments. “There is nothing I love more than when I ask something of the team and they say it’s not possible: then I know it’s going to be a great adventure. That’s when I push and push.”

Young Africa

Lagos Fashion Week founder Omoyemi Akerele spoke with designers Michelle Adepoju and Iretidayo Zaccheaus in a panel spotlighting surging fashion creativity in Africa, particularly in Nigeria where a vibrant scene blends design with influences across cultures and disciplines.

“It’s a melting pot — there are so many young and hungry people in Nigeria, who are really hustlers. There’s so much passion,” Zacchaeus said.

Zacchaeus has attracted as many as 150 brands from across Africa to take part in recent editions of Street Souk, a roving platform for pop-ups, trade fairs and performances that “bridge the gap between the African streetwear community and the global community.”

Gap’s New CEO

Can the man who saved “Barbie” — taking the doll back from the brink of cultural irrelevance to a global marketing phenomenon — now save Gap Inc, another faded icon?

Richard Dickson, who masterminded a turnaround for Mattel and its signature toy, joined the retail giant with a mission to relaunch its troubled apparel brands, which were once front and centre in American culture and dominated the high street.

Like Barbie, “Gap is a pop culture brand that sells apparel,” Dickson told BoF’s Imran Amed, explaining how he was drawing inspiration from the brand’s roots as a destination for blue jeans and records in San Francisco, as well as iconic ad campaigns from the 1990s.

“Brands need to have a strong identity, a point of view and creative perspective. We don’t need everyone to like us,” he said. What that means for Gap remains unclear, but Dickson is examining how the brand can clarify and differentiate its message versus competitors, as well as clarifying the identity of sister labels Old Navy and Banana Republic.

“Every part of a brand needs to be communicated with precision, in stores and online as well as in the company culture,” Dickson said. “It’s never about changing the idea of a brand but translating it into a cultural conversation.”

How Culture Drives Performance

Tim Brown, chief innovation officer at shoemaker Allbirds, interviewed Owen Eastwood, a consultant who has worked to boost the performance of major sports teams as well as private companies by rebooting their cultures. “We found players were often in a chronic stress state, “Eastwood said. “Their experience was: ‘If this goes bad it could ruin my life.’”

Organisations looking to inspire and motivate through means other than fear and stress need participants to foster a sense of belonging.

“[Players] need to connect as individuals to something bigger than themselves,” he explained. “You create a story for them to connect to, and then you need to refresh and retell that story continuously.”

BoF VOICES 2023 is made possible in part by our partners Snapchat, McKinsey & Company, Porsche, Getty Images, Invisible Collection and Soho House.

Fast-fashion retailer Shein has a lot of work to do to convince sceptics that the runway is clear for it to launch an initial public offering next year.

The Singapore-headquartered company filed confidentially for a listing in New York, a person familiar with the matter has said, weeks after Bloomberg News reported that it could seek a valuation of as much as $90 billion in a first-time share sale. If it sold a 10 percent stake, raising about $9 billion at that valuation, it would be the fifth largest consumer company IPO of all time, just behind Porsche AG’s $9.1 billion 2021 listing, Bloomberg calculations show.

To achieve that milestone, Shein will have to do a historic job of persuading sceptical investors, politicians and regulators that the controversies surrounding it aren’t an obstacle to its growth.

The company faces issues including allegations that its products contain cotton from a Chinese region accused of making the material with forced labour, regulatory concern about Chinese firms listing in the US and a bruising legal battle with rival PDD Holdings Inc.’s Temu. Investors will likely have questions about how much of management’s time will be taken up with challenges that aren’t directly related to maintaining the app’s dominance, built on selling clothes for as little as $2.

“One of the biggest disadvantages of an IPO is disclosure and publicity,” David J. Kaufman, co-chair of Thompson Coburn LLP’s corporate and securities practice group, told Bloomberg News. “There’s probably going be a big lobbying effort about why they’re not using forced labour and where they source their cotton, and how all that is changing, with codes of conduct and inspection programmes,” Kaufman said.

Representative Jennifer Wexton, a Democrat from Virginia and one of the most Shein’s most vocal critics, issued a statement Tuesday urging greater scrutiny of Shein’s supply chain ahead of a listing.

“If the fast-fashion giant Shein wants to go public in the US, they should have to prove to American consumers that their products are not sourced from forced labour,” Wexton said in the statement.

Wexton co-sponsored the Uyghur Forced Labor Prevention Act (UFLPA), a law banning products from China’s Xinjiang region, after a Bloomberg investigation last year found scientific evidence that cotton produced in the region, alleged to be made using forced labour, was present in clothing sold by Shein.

The Congresswoman also co-authored a letter to US Securities and Exchange Commission Chair Gary Gensler asking the agency to require Shein to prove its supply chain is free of forced labour before approving any Shein IPO applications.

Shein has a zero-tolerance policy for forced labor and requires its contract manufacturers to only source cotton from approved regions, according to a statement from a company spokesperson responding to Wexton. Only 2.1 percent of Shein’s cotton tested positive for unapproved cotton, the statement showed. The company declined to comment earlier on the confidential filing.

In addition to fighting in the halls of Congress, Shein is also locked in a battle with Temu, an app it competes with for fast-fashion buyers. The duo have sued each other, with Shein accusing Temu of trademark and copyright infringement, while Temu said Shein violated antitrust laws. Shein has said the suit is without merit and the firm will vigorously defend itself.

There have been few Chinese IPOs in the US since a sweeping crackdown on overseas listings that wiped out an estimated $1 trillion of market value. Part of Shein’s long-running campaign to prepare for a US first-time share sale is to position itself as a global company, even though it traces its roots to China.

In 2022, Shein relocated its headquarters to Singapore. Last year, the e-commerce giant also begun to expand its manufacturing facilities in an effort to diversify outside of its Chinese manufacturing base. It has opened distribution centers in the US, Canada and Europe in a bid to accelerate shipping times in those regions. The company bought British online brand Missguided in October, and took a stake in the owner of fashion retailer Forever 21 in August.

Chinese regulators may still decide to scrutinise Shein’s listing and require it to seek approval. The country’s securities watchdog requires Chinese companies to register to sell shares abroad, and screens them for state security and other concerns. That could delay the IPO process further.

Only a trickle of Chinese companies have been allowed to list in the US in recent years, and the offerings have been small. The biggest in the past two years, Hesai Group, raised $192 million on Nasdaq in February.

“Is this a opening of the log jam? Are the glory days back? No. This is a unicorn, it’s a unique example, giant and very valuable,” said Kaufman.

By Olivia Rockeman

Learn more:

Shein Files for US IPO in Major Test for Investor Appetite

Goldman Sachs, JPMorgan Chase and Morgan Stanley have been hired as lead underwriters on the initial public offering (IPO), and Singapore-based Shein could launch its new share sale some time in 2024, the sources said.

The luxury e-tailer saw modest growth as aspirational luxury consumers cut back on nonessential spending. In its first quarter of the year that ended in September, Mytheresa’s gross merchandise volume — a measure of goods sold on the platform — rose 3 percent year over year to €204 million ($224 million), against a 13 percent increase in the previous quarter.

The company’s profit margins also fell as price-conscious consumers flocked to competitors offering steeper discounts. Mytheresa’s gross profit margins slipped 7 percentage points in the first quarter, and its profits on the basis of adjusted earnings before interest, taxes, depreciation and amortisation dropped more than 100 percent.

Mytheresa said it expects sales and profits for the full fiscal year ending in June to come in at the lower end of its previous guidance, with 8 percent year-over-year sales growth and 3 percent EBITDA profit margins. Investors appeared spooked about Mytheresa’s growth prospects. The company’s stock dropped more than 5 percent following its earnings release.

Still, as aspirational consumers’ spending power remains challenged, Mytheresa made inroads with its focus on growing its cohort of high-spending clients. Its top customers grew 19 percent in the first quarter, and that segment accounted for nearly 40 percent of sales in the same period. That was due in part to the company partnering with brands like Erdem and Rabanne to offer exclusive in-person experiences for top clients. This concentration on high spenders helped Mytheresa’s average order value increase 5 percent to €660.

Learn more:

US Sales and Top Spending Customers Drive Sales at Mytheresa

The Munich-based e-tailer is benefitting from its focus on courting luxury’s wealthiest shoppers, CEO Michael Kliger told BoF.

Earlier this year Adrian Simonetti’s team was in Milan opening a swish new flagship store for La Martina, the polo-infused fashion brand he leads from Argentina. At the same time, the so-called ‘perpetual crisis’ that has plagued the chief executive’s home country for decades went into overdrive as annual inflation exceeded 100 percent. The contrast between the successful expansion of one Argentine company and the failure of the country’s economic policies couldn’t have been starker.

“The great recognition we’ve received in Europe [over the years] has boosted the business [overall and had] a positive impact in Argentina and [elsewhere] in Latin America. However, Argentina’s macroeconomic context presents major challenges like instability, changes in the country’s foreign trade policies, inflation and restrictive measures,” said Simonetti.

Shortly after his father Lando Simonetti founded La Martina in 1985, the family embarked on a mission to transform it into a global business. Today, the company has 700 distribution points across 25 countries including flagships in upmarket districts of Paris and Dubai as well as cities in Latin American countries like Mexico, Chile, Colombia, Brazil and Peru. It has also rolled out retail networks in key Asian markets like China and India.

Simonetti may be used to the orderly glamour of European fashion capitals, but he operates from a very different environment back in Argentina where his team of 100 employees run both the international and domestic business units. He can’t afford to be complacent about the latter since Argentina still accounts for a substantial 30 percent of company revenues through sales in 20 mono-brand stores across the country, from Buenos Aires in the east to Mendoza in the west.

The International Monetary Fund has provided more than 20 huge financial bailouts to the country over the years including an instalment of $6 billion last December. The cumulative effect of Argentina’s chronic instability has been soaring poverty and unemployment rates, a serious decline in living standards for the country’s lower- and middle-income consumers and a precarious operating environment for businesses across the board.

“Argentina’s growth performance over the past decade has been dismal,” said Martin Uribe, an Argentine professor of economics at Columbia University in the US, adding that the unfavourable economic environment goes back much further. “Noteworthy crises… since the 1980s involve the debt default of 1982, the hyperinflation of 1989-1991, the default crisis of 2001 and the balance-of-payments crisis of 2018. With no doubt whatsoever, all four crises have led to a large contraction in economic activity and high inflation.”

The key to survival through such turmoil, Simonetti suggests, is an agile management style. “We compete as an Argentine company, with limited resources and against the best brands in the world [so] we’ve acquired flexibility to move in different scenarios, thinking long-term as well as short-term,” he said.

“Nowadays we’ve reached a limit in the Argentina market. We’re benefitting from the growth of tourism coming to the country, but not so much from the local market,” Simonetti said, explaining that continuous international expansion has been key to growth.

Simonetti declined to disclose company earnings but said that EBITDA (earnings before interest, taxes, depreciation and amortisation) has been improving significantly in recent years, reaching 30 percent of turnover in 2022.

Yet company leaders like Simonetti now face a new wave of uncertainty. Argentina’s political transition is predicted to be turbulent next year as Javier Milei, a radical libertarian and self-described “anarcho-capitalist” who admires Donald Trump’s so-called “battle against socialism” was recently elected the country’s new president.

Some local business leaders were alarmed by both main candidates in the election, but others felt optimistic that Milei’s policies could tame hyperinflation. Argentine stocks and bonds did rise in trading outside the country immediately after his November win. However, supporters of his rival during the election fear Milei’s promises to make “drastic” changes to the economy could go too far or be counterproductive.

Only time will tell how the new government will impact the economy but businesses in Argentina are nothing if not resilient to change.

Operating in a Hostile Environment

Dusting off some memories from one of the most serious economic crises in Argentina’s history, Simonetti recalls how his father managed to battle for survival back in 2001 during the ‘corralito’ period.

“The corralito was dramatic. Supply chains halted, the banks closed, and people came into work with so much uncertainty. We reached a point where our cash [reserves] would last for just two more weeks,” said Adrian Simonetti.

“There were tears” from employees and suppliers when his father announced that they would have to wait to get paid until he found a way through the crisis, Simonetti recalled, but most of the company’s 50 staff members at the time kept working as the family steered La Martina through the chaos. Some of the youngest workers who remained are now company leaders, such as chief financial officer Juan Sebastian Labanca and Latin America regional chief executive Pablo Villalba.

“Whenever it comes to crises in Argentina, the human factor always sustains the business,” said Simonetti.

In recent years, companies operating in Argentina have been challenged not only by domestic instability but the local impact of international black swan events like the pandemic and global disruptions including the Ukraine war.

Domestically, however, “the first and most important [factor] is economic instability [due to] high inflation, currency devaluation and constant changes in government policies,” said Abelardo Marcondes, chief executive and founder of Mexico City-based LuxuryLab Global, a consultancy specialising in Latin American markets.

“The knock-on effect of such instability has been that local companies have “had to deal with infrastructure, logistics, sourcing of materials and transportation challenges [because Argentina] lacks modern frameworks. Costs have therefore increased for fashion companies,” Marcondes added.

On top of hyperinflation, labour costs are also relatively high due to government regulation, impediments to international trade and a shortage of credit.

“Argentina is suffocating because there is a lack of dollars. The country has a bad strategy for wanting to keep business ‘easy’ in a closed economy [meaning it’s] losing the opportunities of an open economy. Even so, a few fashion [and textile] companies manage to ride out [the turbulence],” said Ramiro Castiñeira, an Argentine economist and director of the economic and finance consultancy Econometrica.

According to Constanza Sierra, director of Buenos Aires-based Essentia Consulting, a firm serving premium and luxury brands, the challenges have led some Argentine companies to “move to other regions with clearer rules.”

Marcondes agrees: “Argentine fashion companies have mitigated the impact of economic instability mainly through diversification, exploring opportunities in international markets as well as expanding their customer base… [and pursuing] partnerships, collaborations...and digitalisation.”

Indeed, La Martina is not the only company to have found a way through Argentina’s many economic crises.

Spreading Risk Across the Region

Blue Star Group (BSG) has largely prospered since 1995 when it was launched by Carlos Castelli, an Argentine entrepreneur who eventually transformed the small family business into a network of 800 physical stores across Latin America.

The group, which owns high-street brands Todomoda and Isadora produced from factories in Buenos Aires and Chaco, has scaled thanks to well-timed overseas expansion plans. Such was the case when Argentina’s 2001 crisis reached its peak. Castelli spread the company’s risk to Mexico, where now more than a quarter of its stores are located, approximately the same number of stores as in Argentina, ranging from Jujuy in the far north to Chubut in the deep south.

“In 2011 we started operating in Chile and Peru. Then operations in Brazil happened in 2019 and Paraguay was our most recent launch in 2022,” said Martin Castelli, president of BSG, and son of Carlos, the founder. The company also sells on e-commerce giant Mercado Libre.

Though Castelli declined to disclose sales figures, he told BoF that the company has been “growing in an organic way with earnings and revenues increasing year on year, except for the pandemic [period].”

Another example of an Argentine label becoming a regional hit is Rapsodia, a company founded by Francisco de Narváez, Josefina Helguera and Sol Acuña in 1999. The contemporary fashion brand has grown from a small showroom in Las Cañitas to a footprint of 73 stores in five other Latin American countries: Mexico, Colombia, Chile, Uruguay and Paraguay.

“From day one we decided that the company had to be regional. The strategy had a lot to do with the fact that we couldn’t have 100 percent Argentinian risk. But through [our] retail, design, production and development arm, plus finances and processes from the back office, we were able to be sustainable during the crises,” says Juan Pazo, president of Rapsodia. “The strength of the company is its stability.”

In 2017, it secured investment from L Catterton, the private equity firm backed by LVMH and the Arnault Group.

Some of Argentina’s designer brands have also scaled up significantly despite the country’s seemingly endless economic and political instability. Jazmin Chebar, an eponymous womenswear brand famous for its printed textiles, expanded from a single Buenos Aires shop in 1997 to a company operating 31 stores across the region (11 of which are overseas in Uruguay, Chile, Paraguay, Peru and Mexico), employing 540 people.

Over the years, Argentina’s unpredictability may have slowed down some of the brand’s business plans, but it didn’t stifle growth completely. Though it declined to disclose earnings, Jazmin Chebar indicated that the number of garments produced annually went from 6,000 units in 2001 to 600,000 units in 2022. “The target is to reach a million garments in the next five years [albeit] in an uncertain world,” said company president Claudio Drescher.

While many fashion businesses in Argentina have failed over the years, or struggled to the point of being on the brink of bankruptcy, a small group of companies including La Martina, Blue Star Group, Rapsodia and Jazmin Chebar have found a way to do more than just survive the country’s ‘perpetual crisis.’

Their successes are not just a factor of market-ready designs and careful overseas expansion plans. According to Sierra, the firms also tend to offer clever branding strategies and customer service innovations.

Most of all, “Argentine companies have a characteristic that we should not be proud of [if it is the only feature of their success], but it is an [important] characteristic [nonetheless]. And that is adaptability,” said Jonatan Loidi, chief executive and founder of Buenos Aires-based consultancy GrupoSet.

Being forced by the country’s turbulent market to become adaptable at a high-level has made some companies very good at being “adaptable to [specific] changes [like] consumption [patterns], trends and [fluctuating] resources,” Loidi added.

“[It’s not just about] adapting to survive [here] but being able to create incredible things at the same time that end up being used by the whole Latin American region. I believe this is a distinguished feature of the Argentinian fashion market.”