the-state-of-fashion-2022

IN-DEPTH Five Imperatives to Protect Fashion Businesses from Cyber Risk In an increasingly digitised fashion economy, cyber risks are rising fast. To protect their customers, business operations and creative assets, fashion companies need to strengthen their defences, test regularly and embed cyber resilience into decision-making across the business. The benefits of getting this right will include both a reduction in risk and an uptick in performance. by Benjamin Klein Cyber attacks and data breaches are among re-invention of defences. There are two recent the top risks for fashion companies, their customers evolutions in fashion industry practices that have and the wider economy. The theft of corporate, increased cyber vulnerabilities. customer and employee data or funds can reverse years of hard work, undermine relationships The first is a movement toward more agile and have a significant impact on reputation and ways of working. New products and services are performance. increasingly developed and brought to market through fast-paced iterations using agile methods, The number of cyber incidents — including where rapid timelines often do not allow for rigorous attempts to gain illegal access to a system, network, risk checks. Security teams must be involved early infrastructure or device for the purpose of causing in the development process and embedded into the damage or harm — is rising fast. Publicly reported full digital lifecycles of new products and services. US data breaches were up 38 percent in the second The second is the ongoing evolution of technologies. quarter of 2021 compared with the first quarter, Increasing use of cloud computing, artificial and breaches in the first half of the year alone intelligence and machine learning is exposing reached 76 percent of the total reported in 2020.288 companies to more cyber risks by widening the scope for attack. Security teams must be innovative in Cyber security risks exist across a range of finding ways to apply common security patterns and fashion industry processes, from digital design and methods to new technologies. data analytics to online transactions and supply chain operations. Many back-office systems have Cyber risk is on a long-term upward trend only recently been digitised, meaning they present that accelerated during the Covid-19 pandemic, a potential point of weakness for fashion leaders partially as a result of widespread adoption of work- and security teams who had not previously been from-home patterns and technologies and soaring required to identify, assess and mitigate potential demand for e-commerce. Indeed, online retail risks in those areas. Indeed, shifting ways of has been one of the most attacked sectors over working create constant challenges, requiring the past year, accounting for 10.2 percent of all flexible decision-making muscle and continuous attacks across industries.289 Given the growing 101

FASHION SYSTEM The State of Fashion 2022 frequency and severity of incidents, regulators The rewards of doing so are clear for are requiring businesses to protect themselves, decision-makers: there is a direct relationship their partners and their customers, and punishing between cyber resilience and business those that fail to do so. Europe’s General Data performance. According to a recent McKinsey Protection Regulation (GDPR) imposes fines survey, higher cyber security maturity correlates for non-compliance of as much as 4 percent of a with better margins, so the payoff from strong risk company’s global annual revenues. management extends beyond security.292 A challenge for companies looking to invest A successful roll out of improved cyber in cyber defences is that the cost of initiating an capabilities should be predicated on action across attack is significantly lower than that of protection. five key areas: This creates an asymmetric battlefield in which hackers, companies, state-sponsored agencies and Identify the playing field and risk other perpetrators can enter systems with relative environment. ease. Moreover, for victims, the cost of being attacked continues to rise. The average cost of a Cyber security leaders should focus on data breach rose by nearly 10 percent year on year identifying relevant cyber risks (including potential in 2021 to $4.24 million, the largest single annual “black swan” events) across their value chains. That increase in seven years, according to IBM’s Annual starts with understanding legal and regulatory Cost of Data Breach Report 2021.290 In addition, the ground rules, and moving to a risk-based approach. longer that systems remain compromised the more This recognises that not all assets are created the costs mount. equal, and not all can be equally protected. It is vital for business leaders to take a global view of both A challenge for companies the company’s operations and its supply chains, and to communicate cyber security requirements looking to invest in cyber to suppliers and third parties. Insurance against cyber attacks is an option, but it is worth reading defences is that the cost of the small print; there are likely to be areas of risk that are not covered, and market conditions are initiating an attack is significantly changing rapidly. lower than that of protection. Across industries, corporate approaches Build capabilities to prevent cyber attacks. to cyber security are maturing, with companies acquiring new capabilities and bolstering their Rules and standards should be developed resilience. Banking and healthcare are among (such as acceptable use policies for email and the most mature industries when it comes to anti-phishing guidelines) and technical prevention cyber resilience, while fashion has a long way to measures should be deployed across systems, catch up. In response, fashion decision-makers including data encryption and next-generation need to adopt a dual mindset, reconciling firewalls. While some systems may need an short-term needs created by the pandemic with the extra level of protection, a general baseline is longer-term demands of the digital economy. To essential, such as keeping software up to date and increase resilience, security should be embedded regularly scanning systems for vulnerabilities. into products and processes, while customers, Where the cyber risk extends to production and partners, third parties and regulators should manufacturing systems or other connected devices, also be incorporated into enterprise-resilience measures should be expanded into those areas, too. management.291 102

IN-DEPTH Reinforce the ability to detect and respond to Simulate the worst case and build cyber attacks. muscle memory. The traditional focus of cyber security has Leading organisations test their plans been on prevention, but the spotlight is now moving and prepare for the worst by carrying out attack towards detection and response, acknowledging simulations. The aim is to assess decision-making, that attackers will inevitably succeed in breaching ensure clarity of roles and responsibilities, systems. Internally, that means closely monitoring including decision-making power, and identify systems and applications, as well as encouraging weaknesses. This enables companies to develop an employees to report suspicious activities. effective response mechanism and improve upon Customers, partners and third parties should be their reaction speed in the event of a real attack. fully incorporated into both detection and response measures. Externally, businesses should keep a Companies that lead in cyber security are close eye on cyber threat intelligence and be on defined by their outstanding performance in several constant alert, even if their own mechanisms have key areas, including maintaining a low “click rate” not yet triggered an alarm. in employee phishing programmes;293 regularly revisiting and updating cyber security priorities; The traditional focus of deploying solutions for managing applications; cyber security has been on scanning the IT environment for vulnerabilities; prevention, but the spotlight is and sourcing intelligence on threats. As an now moving towards detection overarching principle, senior managers should and response. incorporate cyber risk into all decision-making. In this way, they will get on the front foot and ensure Clarify responsibilities across the business. the organisation’s defences are as resilient as possible. Clear roles and responsibilities are vital to cyber resilience. Companies need to define The author of this article focuses on cyber security strategy and what “good” looks like, who owns which part of transformation at McKinsey. This article draws on a larger body of research cyber security and how relevant capabilities and on cyber security. The latest report in this series is Organizational Cyber skills should be developed. It is essential for the Maturity: A Survey of Industries.294 company’s front line personnel and anyone who is not an IT or security professional to understand their role in identifying and mitigating cyber risk, and to know what level of support they can rely on. Some companies have created the role of chief information security officer (CISO), an executive who defines and leads the overarching approach to cyber security, establishes central cyber security capabilities and helps to build capabilities across the business. While companies will need to build in-house capabilities in certain areas, they can also consider external support. 103

The State of Fashion 2022 FASHION SYSTEM 104

10. TALENT CRUNCH Companies that rely on brand appeal or the allure of fashion to attract and retain talent will need to raise their game as competition from both within and outside the industry intensifies, leading to more vacancies next year. As employees from upper management to the retail front line reconsider their priorities, companies must refresh their talent strategies for an increasingly flexible, diverse and digitised workplace. A fashion employee working from home. Unsplash. Fashion companies face a talent deficit in “There [may be] a perception among some the year ahead.295 Amid all-time-high vacancy rates, fashion companies that they are ‘too big to fail,’ … [or businesses are struggling to attract and retain talent a notion that employees should feel] ‘lucky enough — particularly in digital, creative and commercial to be here,’” said Caroline Pill, London-based roles. Employees now have more choice than ever partner at fashion and retail executive placement about where, when and how to work in a rapidly firm Kirk Palmer Associates. “[But] people are now evolving job market. To complicate matters further, attracted to [factors like] ‘what is my impact in the shifting employee priorities are changing the way bigger scheme of things?’ [so]… companies who are people think about job satisfaction. As a result of not going to adapt are going to struggle.”298 these and other challenges, there will continue to be a shortage of interested, qualified workers in 2022. One contributor to the talent crunch is the impact of the Covid-19 pandemic on business Fashion’s public image is only adding models. With e-commerce’s share of global fashion to the challenge. Employee concerns over the sales nearly doubling between 2018 and 2020 in industry’s environmental and social impact, in some regions,299 as even digital laggards got in on the addition to inadequate progress on diversity, equity act, the imperative to secure the best digital talent and inclusion (DE&I), are having a real effect on became more urgent.300 With online acceleration its desirability.296 Indeed, 49 percent of fashion came a plethora of new vacancies, as companies professionals believe the industry has lost some scrambled to hire for roles such as authenticators appeal as an employer in the past 18 months, a BoF for fashion resale platforms, analysts and data survey shows, with the industry’s reluctance to scientists, reflecting brands’ increasing emphasis change and poor sustainability credentials cited on big data.301 Other specialist roles, such as as common reasons. In the C-suite, the proportion those relating to sustainability, have also proved rises to 56 percent.297 Given these attitudes, fashion challenging to fill. companies need to adapt to stay competitive, improving employment conditions and reimagining At senior levels, brands saw a wave of workplace cultures to reflect changing talent needs. resignations in 2021, with some company leaders leaving fashion for other sectors like technology.302 105

FASHION SYSTEM The State of Fashion 2022 Indeed, a significant proportion of C-suite the BoF survey rate the industry’s competitiveness executives remain on alert for opportunities in in salary and benefits as “poor” or “very poor.”308 other industries, with 34 percent saying they have With many retail floor and entry-level jobs offering considered leaving the fashion industry in the past close to minimum wage at a time when inflation 18 months.303 This is a common sentiment across job is set to rise in major economies, attracting and levels, with nearly half of all fashion professionals in retaining staff has become a real challenge.309 the BoF survey reporting that they have considered Meanwhile, on the first rung of the career ladder, moving to another sector.304 Among this group unpaid internships are still commonplace in the of potential leavers, 60 percent cite a desire for a US and elsewhere, despite many other industries deeper sense of purpose as one of their top three largely ending the practice. While these challenges reasons, followed by 45 percent citing better salary are likely to continue throughout 2022, some and benefits.305 Tellingly, only 14 percent of this companies are taking steps to secure a pipeline group indicate that industry prestige is one of their of future talent, such as LVMH, which plans to top three reasons to leave or remain in fashion. recruit 25,000 people under the age of 30 across internships, apprenticeships and permanent Brands saw a wave of positions by the end of 2022.310 resignations in 2021, with In e-commerce, negative headlines about low wages and poor working conditions have hit multiple some company leaders leaving e-commerce companies around the world.311 At some digital giants in China, a new generation of fashion for other sectors like employees and consumers are campaigning against excessive “996” work culture, prompting both pay technology. increases and local labour regulator interventions. Pressures to increase minimum wage in the US These trends are reflected in the wider have resulted in some retailers increasing average economy. Across sectors, a significantly higher starting salaries in an attempt to fill vacancies.312 proportion of the global workforce is considering leaving their employer this year compared to In the coming year, fashion companies will previous years. Coupled with the specific challenges no longer be able to rely upon the appeal of their facing fashion, this suggests a refreshed approach to brands or the glamour of the industry to attract employer branding and retention strategies will be talent. Instead, to compete with other sectors, required in the year ahead.306 In particular, revised companies will need to reimagine their talent policies will be needed on the front line. strategies and move away from some unhealthy entrenched practices, such as hiring from inner Retailers have struggled to staff their stores circles. In addition, they should broaden their talent and distribution centres in 2021, while rising pools, embrace objective candidate assessments e-commerce order volumes have challenged in-store and leverage cutting-edge software, such as resume fulfilment.307 Additionally, there were waves of screening and job simulation tools, to safeguard redundancies in the same year amid widespread fairness.313 company restructuring and store and department closures. As a result, some workers re-evaluated Post-recruitment, leading companies their priorities and opted to move away from will foster a sense of belonging and equity of arduous, low-paid work. opportunity, engaging more closely with employees to develop comprehensive recruitment, retention One critical factor in the talent crunch is and inclusion policies. This will include clearly wage levels: 51 percent of fashion professionals in 106

10. TALENT CRUNCH articulating their corporate purpose, values and reluctant or slow-moving brands are likely to lose career development opportunities. out to their more adaptable peers.317 Where hybrid working is not possible, on-site employees will In 2022, authenticity, flexibility and demand other flexible conditions. employee wellbeing will prove to be stronger pulls than ever. Some companies have already made In 2022, authenticity, flexibility public moves to demonstrate these values: Nike and employee wellbeing will prove closed its offices for a week to give staff a “mental to be stronger pulls than ever. health break,”314 while Tapestry plans to extend remote working as long-term solutions for some Employees today want their employers employees.315 Hybrid home and office working to reflect their values, meaning that a company’s can also boost loyalty. Some 46 percent of fashion position on corporate social responsibility (CSR) respondents to the BoF survey say flexible working issues, including sustainability and DE&I, will is one of their top three most important factors play a big role in attracting and retaining talent. when choosing to remain with their employers.316 Indeed, one recent study revealed that 64 percent Hybrid working is set to become table stakes in some markets, alongside flexible working hours, and Exhibit 15: Employees cite learning and development, flexible working and sense of purpose as important retention factors after salaries MOST IMPORTANT 1 CONSIDERATIONS FOR EMPLOYEES IN 2022, % OF RESPONDENTS Salary and benefits 64 Learning and development opportunities 47 Flexible working arrangements (e.g. remote 46 45 working, flexible hours) Sense of purpose 18 15 Corporate social responsibility (CSR) policies 14 10 Industry prestige Mobility (e.g. international, cross-function, seniority) Employer’s resiliency/reliability of operations 1 Respondents selected top 3 most important factors when choosing to remain at their current employer or to seek employment elsewhere. SOURCE: BOF COMMUNITY SURVEY 2022 107

FASHION SYSTEM The State of Fashion 2022 of Millennials said they would not take a job if the change.324 Furthermore, some 50 percent of employer did not have a strong CSR policy.318 In employees of colour say that a career in fashion is addition, some 83 percent say they would be more not equally accessible to all qualified candidates.325 loyal to an employer that helps them contribute to social and environmental causes.319 That said, Still, some companies are taking steps to when putting their values into practice in different show employees, consumers and investors that markets and working cultures, companies need to improving DE&I is a priority. In 2021, Target and ensure they take local sensitivities and priorities Nordstrom were among the companies to publish into account. more detailed employee demographic information, taking responsibility for the lack of diverse “[Our values] are not different in any region representation at leadership level and committing [and] that’s very important to us… but there may to regular updates on progress. Prada, working with be nuances to the way that a goal is achieved… the Dorchester Industries Experimental Design [in markets as distinct as China and Brazil, for Lab, launched a three-year programme for artists example, so we have] a level of independence in of colour, aiming to recruit talent from outside the each geographical region, to do what’s right by company’s regular Italian fashion school recruiting that culture and that country. The end goal is still grounds.326 aligned,” said Sian Keane, chief people officer of luxury e-tailer Farfetch.320 Over the coming year, the fashion industry’s progress on DE&I and sustainability will continue “[We have] a level of to be put under the spotlight, with brands held accountable by their employees for putting their independence in each public values into practice.327 Listening and responding to these shifts will be crucial for geographical region, to do many brands that are aiming to attract a new, diverse generation of talent. Companies that lose what’s right by that culture momentum and fail to demonstrate progress, conversely, could end up closer to the bottom of and that country.” employer league tables. These measures are also key to ensuring the relevance of their brands There is plenty of evidence to show that with customers. gender-diverse and ethnically diverse companies financially outperform their peers.321 However, While many of the forces currently shaping there is still little diversity at the top of fashion the fashion industry employment landscape have companies, with senior roles regularly dominated evolved slowly over time, there is now an urgency by white men — one of the only exceptions being to implement changes. Companies that have long the chief diversity officer role.322 Some 42 percent relied on the inherent allure of the industry and the of fashion professionals rate the industry’s power of their brands to secure the best talent will performance as “poor” or “very poor” in prioritising need to accelerate their efforts to improve workplace DE&I as a core value, the BoF surveys shows.323 culture — ensuring that employees are sufficiently According to a separate survey by the Council of represented in key decision-making processes Fashion Designers of America (CFDA) and PVH, and that the company is “walking the talk” when industry professionals most frequently describe it comes to demonstrating their values. In the the state of DE&I in fashion as “evolving” and years ahead, these actions will draw a line between “improving,” while less than half of respondents employers that win the battle for talent and those believe actions taken in 2021 will lead to lasting left behind. 108

EXECUTIVE INTERVIEW Farfetch: Adapting to the New Talent War Sian Keane Chief People Officer, Farfetch Farfetch chief people officer Sian Keane E-commerce companies like is passionate about ‘not encouraging Farfetch have long prided microcultures within the business,’ especially themselves on an ability to attract between creative and tech specialists, as she a healthy mix of talent from both believes that weakens the luxury e-tailer’s the tech sector and the fashion common thread of values. But with the fashion industry, but the war for talent has industry facing a talent deficit in the year only intensified in recent years. It ahead and workers expecting more flexibility, could get even tougher next year, it will be hard for companies to strike the right as fashion companies battle to balance across recruitment and retention secure the specialists they need. strategies as different specialists expect A tighter labour market, where different things from workplace culture. workers scrutinise everything from a company’s sustainability — by Sheena Butler-Young record to its inclination to offer flexible working environments, means it will be just as important for people leaders to have an ironclad recruitment and retention strategy as it is for them to be ready to pivot on a dime. Sian Keane, the UK-based luxury e-tailer’s chief people officer, believes that the talent 109

FASHION SYSTEM The State of Fashion 2022 challenges that have arisen from people could learn remotely and more diverse talent, is how to the pandemic are not necessarily still be able to access that level of access talent in the first place. more difficult than those of the training. Thinking about how we So that may be thinking about past, but simply different in can make sure that people feel partnerships with external nature. Among her concerns they’re continuing to grow their businesses and organisations; it for the future are the number of own careers and thrive in a hybrid might be broadening where you women leaving the workforce and remote world is something look for talent to access a broader and the challenges associated that we’ve really leaned into. We set of demographics and people with building and replenishing just launched a very structured from socio-economic backgrounds. pipelines that feed diverse talent programme around personal We will be watching very closely into a business whose workers and development plans for everyone and monitoring the impact of consumers are increasingly global. and that started from some of some of those partnerships on the But despite the pressures that are the work that we were doing diversification of the way that we likely to mount across the industry under diversity and inclusion. recruit. Internally, we’re making in 2022, Keane sees opportunities Then, we accelerated that for all sure that we’re collecting the in the “borderless society” that our [employees], because I think data — and we’re still on a journey has emerged since remote and ensuring that everyone feels as with this — to be able to ensure hybrid working took hold. “Now though they’re connected to their that our promotions, progression, we’ve got access to people who future career is quite important. development and the decisions may not have considered leaving that we make are having a positive their job before,” she says. In what significant ways effect on the diverse pipelines that have recent social justice we already have. A lot has been said about movements and protests, the impact of the Covid-19 especially those in the summer Broadly speaking, is it harder pandemic on people’s values of 2020, changed how you for you to recruit now than it and their attitude towards think about recruitment and was a year ago? work. How has this played out employee retention? at Farfetch? I don’t think it’s harder for us The first thing we did is host to recruit now than it was a The two things we really think listening sessions with our year ago; we just have different about are around meaning. internal communities to find out challenges than we did a year ago. People need to be connected to what they’re really experiencing We’ve certainly increased and meaningful work. The second and feeling in their personal leaned into the hiring, training is making sure that we create a lives as well as their professional and development of our talent very strong sense of belonging. lives. Then we built a “positively acquisition team more than ever. That’s something that has always inclusive” strategy against We’re seeing that shine through been an important factor at that, so that we are responding in some of the numbers. However, Farfetch and is something that we to not just what we’re hearing some of the challenges that we know our people value, as we’ve externally, but what our people are facing are the compensation learned through our employment are really feeling and experiencing strategy and the challenges that engagement surveys. But creating internally. We created our we see around competitors from a sense of belonging in a hybrid Farfetch commitments, which are a remote working point of view. world is a new challenge. about creating a values-driven We want to have a very strong experience for all our [employees]. balance between home and office- How have you done that — One of those commitments is based work because we think created a sense of meaning and around increasing the pipeline socialisation and collaboration belonging — with remote work of diverse talent and increasing is critically important to our in play? senior representation internally. long-term culture, so we’re not The second thing is trying to a remote business. There’s also Learning is something we had [address] the skills gap. This is a number of new start-ups and always invested in, but as soon as really important because the businesses that have been born we went into working-from-home challenge that we have faced, with out of the pandemic that may be mode, we really fast-tracked a lot regards to hiring and recruiting attractive to people as they’re of our digital learning tools so that 110

EXECUTIVE INTERVIEW considering job moves. Then we of the business. But one thing that engaging underrepresented see things like saturated talent we have done that we felt quite groups helping Farfetch avoid markets. There are geographies strongly about is not encouraging the talent shortage? where we need to keep shifting microcultures within the business. and moving to be able to access Farfetch values... are Farfetch Absolutely. Then there’s the other talent from different sources. Of values [across the entire business]. side of things; our consumers course [having] avenues for a They’re not different in any region are increasingly becoming more more diverse pipeline of talent and we believe it’s a common global. In order to engage with is something that is hard for thread between the broad range of your consumers, you need access businesses to do [but] they really specialists that we have within the to more native-language speakers have to make an effort. This business because we really have than you had before. We’re seeing kind of sentiment — the war for come together as both fashion and demand for stylists from Germany, talent — is something that has technology specialists. That’s very Romania, Bulgaria, Poland and been around my entire career, important to us. Another thing places that we hadn’t seen before. [but what’s different now is where is that we actually embrace our It’s about being able to access the] demand is, and where you’re difference. We don’t try to be Slack, talent from other regions that we seeing it pivot, and being fast Google, Facebook or anything else may not have been heavily leaning enough to make decisions and like that. into before the pandemic. adapt your processes and hiring policy practices to support that. Farfetch has more than a What are the most concerning dozen offices and locations issues surrounding talent As both an e-commerce across 10 countries, which recruitment and retention for company and a fashion employ more than 5,000 the fashion industry, as we player, Farfetch must recruit people. With such a global view, head into 2022? from both tech and fashion would you say that the talent circles. How do employees’ shortage is palpable right now, The movement of talent. We expectations tend to differ especially in terms of digital put a huge amount of effort into from these groups, and are and technical skills? hiring, nurturing and growing they evolving in different ways our Farfetchers internally, so now? When I joined Farfetch, there our talent pool is very precious were 100 people and now there’s to us. Being such a values- and Fashion businesses are starting more than 5,000. There are more culture-driven business, we want to look for people who come from vacancies than ever in the world to ensure that we have as much as a technology background, and right now, certainly in the UK. It’s possible in place so people don’t technology businesses are looking already quite easy for people to feel as though their heads need for people who come from a think about leaving a company. to be turned to other businesses. fashion background. Whereas for Then, when you add on the digital That’s why we have our internal Farfetch, that’s been front of mind expertise side of the equation, put engagement surveys and things since day one as we’ve always been Brexit on top of that, and the fact set up around access to our people a mixture of both. Our ultimate that it’s much harder to travel communities and our people aim is to create one community now, these are all the sorts of processes. Those things allow us at Farfetch, although we’re not things that are starting to erode to understand why people may get blind to the fact that there might access to talent. By the same itchy feet and be able to mitigate be differences in desires of how token, businesses can benefit that before they’re considering those things come to life from from movements of talent. We’ve leaving the business. The other an employee experience. For certainly seen increases in success concern is the rate of females example, some of the initiatives in hiring, because now we’ve got leaving the workforce and what or ways of working that we access to people who may not might therefore happen in the put in place for our technology have considered leaving their job long term to the successes that community and our engineers before. come from business investments would differ greatly from the in increasing gender balance experience that we might have for Is diversifying how you look within the workforce. the commercial or the fashion side for tech talent as well as This interview has been edited and condensed. 111

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MCKINSEY GLOBAL FASHION INDEX Sportswear and Luxury Emerge as Star Sectors Amid Broader Value Destruction As the industry comes to terms with record levels of value destruction, a subset of players tapping into shifting consumer behaviour and resilient geographies will consistently outperform the market. Key Insights • The impact of the pandemic in 2020 meant the industry posted negative economic profit for the first time in at least a decade, causing record levels of industry consolidation in 2020 and 2021. • A record 69 percent of fashion companies destroyed value in 2021, reaching new depths of negative economic profit and dragging down overall industry performance. • Fashion’s recovery looks set to be V-shaped, as performance in the first half of 2021 points to a possible return to positive economic profit by 2022. • The companies on this year’s ‘Super Winners’ list remained relatively stable in comparison to the list published in The State of Fashion 2020, with particularly strong performance from sportswear and luxury players. The McKinsey Global Fashion Index taking into account how much each company (MGFI) offers a bird’s-eye view of the fashion invests to generate its performance. First, we industry, tracking financial development and value unpack 2019-2020 economic profit composition creation across regions, value segments and product and development across the industry. We then categories. The index, comprised of a proprietary explore the devastating impact of Covid-19, which data set of over 350 public companies, was created has caused value destruction across the industry. to track the industry’s performance through the key Finally, we look at stock market valuations and financial metrics that provide decision-makers with their implications for what it will take to succeed in an informative and holistic benchmark. 2021 and 2022. This year, we revised our analysis of drivers of economic success (which we did not In this sixth edition of the MGFI, we assess in The State of Fashion 2021 due to the continue our exploration of economic profit — a pandemic) and determined which companies are measure of value creation defined as operating the industry’s “Super Winners.” The deep analysis profit less adjusted taxes and cost of capital. The of these leading companies extrapolates the driving metric measures absolute value created over time, 113

Exhibit 16: The industry was hit hard in 2020 causing negative economic profit TOTAL ECONOMIC PROFIT (EP), INDEX (2010 = 100) YoY economic +2 +4 -1 -18 -16 -29 +34 +25 -19 -190 profit change, % 100 102 107 106 87 86 69 70 73 52 2019 10.63 The State of Fashion 2022 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 336 2021 -63 2020 EBITA 11.6 11.6 11.6 11.6 11.0 10.6 10.2 10.6 10.7 10.2 6.9 margin, % 306 325 332 338 340 345 351 355 359 350 324 N= SOURCE: MCKINSEY GLOBAL FASHION INDEX (MGFI) Exhibit 17: Despite steep declines in 2020, investors are optimistic about the value of future earnings growth in fashion ENTERPRISE VALUE, % SHARE OF TOTAL 57 Value attributable to future 46 49 43 56 77 earnings growth Current earnings discounted to perpetuity2 54 51 57 43 44 23 2016 2017 2018 2019 2020 2021E1 1 Estimate based on forecasts for net operating profit after tax as per analyst consensus 2 Based on net operating profit after tax for the industry and the weighted average cost of capital weighted by enterprise value SOURCE: MCKINSEY GLOBAL FASHION INDEX (MGFI) 114

MCKINSEY GLOBAL FASHION INDEX forces behind their success and explains how these enterprise value to reported earnings projections forces have evolved over time. discounted to perpetuity in 2021,329 and 57 percent to future earnings growth. In most other consumer Looking Back at 2020 industries, this ratio is typically closer to 50:50, which suggests investors in the fashion industry are The fashion industry posted significant bullish on its value-creating potential in the long revenue declines in 2019-2020, and companies run. Still, to drive long-term value creation, fashion were unable to compensate through significant companies have their work cut out. The pressure adjustments to costs or capital intensity. Within our is on for decision-makers to focus on scaling sample of listed companies, revenues declined by 14 growth, as well as finding operational and capital percent, although losses in the rest of the industry efficiencies. are estimated to be even more severe, particularly as a few large players pulled up the sample average. Recent evidence suggests that the worst is As a result of these drops, average earnings before over in many markets, with positive signs that the interest, taxes and amortisation (EBITA) margins industry is delivering on investor expectations. declined by 3.4 percentage points to 6.9 percent, the In the first half of 2021, 280 listed companies that lowest levels in the 10-year period. Invested capital published results reported aggregate top-line fell by 6 percent, while capital intensity rose from growth of 5.3 percent, compared with the same 75 percent in 2019 to 83 percent in 2020. period in 2019. The luxury segment outperformed, posting growth of 16 percent, compared with the As a result of these economic challenges, rest of the market at around 4 percent.330 Digital the industry posted negative economic profit in pure play companies also outperformed, as did 2020, declining to minus 63 percent of 2010 levels; sportswear brands and some discounters. On the a momentous decline of 133 percentage points other hand, offline players such as large department compared to 2019.328 With this unprecedented stores and some mid-market fashion brands lagged. destruction of economic profit, around 7 percent of listed companies left the market from January Among the same cohort of companies, net 2020 to September 2021, either due to bankruptcy operating profit after tax was up 22.7 percent from or consolidation through acquisition. This rate is 2019 levels in the first half of 2021, resulting in roughly three to four times higher than the average a corresponding aggregate 1.4 percentage point exit rate observed prior to 2020. improvement in margins. Looking ahead to the remainder of 2021 and beyond, profits are expected In September 2020, for the previous edition to see a stronger recovery than revenues because of The State of Fashion report, we predicted a drop the cost base remains lower than 2019. This follows in economic profit of 93 percent for the full year of significant cost cutting in 2020, much of which 2020, but the outcome was much more devastating will persist for the next few years. However, cost than originally anticipated. High consumer and uncertainties will remain in the short to medium investor confidence in September were soon term, as input cost rises due to ongoing supply chain replaced by a winter of lockdowns, second and third congestion could temper margins.331 waves of Covid-19 infections and a significant hit to retail. Given the significant declines in invested capital in 2020, we could assume that stronger Signs of a V-Shaped Recovery revenues and operating profits have been achieved with less invested capital in 2021 than in 2019. Despite the losses experienced in 2020 and Total invested capital fell by 6 percent between 2021, investors are optimistic about the industry’s 2019 and 2020, partly because of bankruptcies earnings potential, ascribing some 43 percent of and restrained investments. The evolution of investment patterns over 2021 also remains 115

Exhibit 18: Unlike previous years, the destruction of economic profit caused by the bottom 20% of players could not be offset by the performance of the top 20% FASHION COMPANIES’ CONTRIBUTION TO INDUSTRY ECONOMIC PROFIT BY RANKED QUINTILE, % SHARE OF TOTAL -60pp Top 20% 202 178 163 195 135 21-80% -3 -2 0 -11 -42 Bottom 20% -100 -76 -63 -84 -193 -109pp 2016 2017 2018 2019 2020 The State of Fashion 2022 Note: Due to rounding, numbers presented may not add up precisely to 100. Total in 2020 is -100 due to negative economic profit. SOURCE: MCKINSEY GLOBAL FASHION INDEX (MGFI) Exhibit 19: The share of value destroyers reached record heights of 69% in 2020 VALUE CREATORS VS. VALUE DESTROYERS PER YEAR, % SHARE OF TOTAL 31 55 49 39 45 45 45 Value creators 68 72 64 60 69 32 28 36 40 45 51 55 55 55 61 Value destroyers 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 SOURCE: MCKINSEY GLOBAL FASHION INDEX (MGFI) 116

MCKINSEY GLOBAL FASHION INDEX uncertain however, partly because market percent of companies destroyed value in 2020, consolidation could contribute to a rise in invested compared with 61 percent in 2019 and just 28 capital through creation of goodwill. percent in 2011. Underlying this longer-term polarisation is a continuing shift in consumer Overall, strong revenues and operating behaviour, with the highly populated mid-market profits combined with potentially lower invested suffering at the expense of a relatively few dominant capital in 2021 means we anticipate positive luxury, value and sportswear players. economic profit overall in 2021, with some possibility that it will even exceed 2019 levels. Companies that transformed from value However, factors such as the impact of ongoing creators in 2019 to significant value destroyers supply chain disruptions mean that predictions in 2020 strongly represented the mid-market, are inherently uncertain, as some companies are alongside discount players and department stores, already noting. which all rely heavily on physical channels and therefore have been disproportionately impacted Growth observed among listed companies by lockdowns. As in-store retailing rebounds, some in the first half of 2021 is in line with the McKinsey of these players will return to value creation, as Fashion Scenarios predictions for the full year, already observed in the discount segment. which takes a more conservative view of H2 2021 in light of supply chain concerns, and accounts Last year, we warned that the increasing for lower top-line performance of non-listed share of value destroyers could imply that companies and revenues lost through bankruptcies. companies will struggle to re-finance, as they Overall, McKinsey Fashion Scenarios project the cannot earn their cost of capital. This has played total industry to reach 96 to 101 percent of 2019 out in the 7 percent of fashion companies in our levels in 2021, with luxury driving recovery and dataset that either filed for bankruptcy or were reaching 105 to 115 percent in the same period. sold in 2020 and 2021. Given the high proportion of value destroyers, financial distress and resulting Further Polarisation — New Depths in the consolidation is likely to continue. Industry’s Bottom Performers Drivers of Value Creation in 2020 Until this year, the evolution of economic profit within performance quintiles has reiterated Luxury and sportswear have consistently an established narrative: economic profit contributed a large share of positive economic profit gravitating towards the most successful companies. to the fashion industry, each contributing some 20 percent of economic profit among value creators While all quintiles saw declines in economic every year in the past five years. profit in 2020, the relative impact on the top versus the bottom contributed to further polarisation, Sportswear has been growing steadily for driven by dramatic declines in economic profit for some time, with total economic profit by the sector’s the bottom quintile, which fell by 109 percentage value creators growing every year from 2012, points from 2019 levels. This is relative to the 60- doubling in total over the eight-year period. Given percentage-point drop of the top quintile. Unlike the destruction of value in other sectors, 2020 was previous years, where the story was one of “winners a breakout year for sportswear, with 42 percent take all,” the story in 2020 shifted to one of severe of positive economic profit contributions in the value destruction. industry coming from sportswear companies and making it the largest contributor by far.332 Showing Similarly, 2020 revealed a steadily their resilience, 14 sportswear companies were value expanding group of value destroyers that delivered creators in 2020, and 15 were value creators in 2019. negative economic profit. Accelerating a trend By comparison, in many other sectors, the propensity that has been developing for a decade, a record 69 117

MCKINSEY GLOBAL FASHION INDEX to become value destroyers in 2020 was much higher. performance in China, as well as the fact that The geographic distribution of economic most luxury companies succeeded in accelerating digital sales through 2020. Another factor was cost profit contributions in sportswear is also shifting control, where the luxury segment successfully eastwards. China-based companies contributed maintained costs roughly in line with revenues, 16 percent of positive economic profit in 2020 with the aggregate ratio of selling, general and compared to 9 percent in 2017, driven largely by Anta administrative expenses (SG&A) to revenue only Sports and Li Ning. Outside China, the largest value increasing by 1.4 percentage points from 2019 creators were North American players, including to 2020. Nike, Lululemon and Dicks Sporting Goods. Margins in other segments were under Luxury also demonstrated resilience in pressure in 2020, trending below historic ranges. 2020. EBITA margins in luxury and affordable Within our sample of listed companies, value and luxury dipped from a 10-year average of around 19 discount revenues fell by around 17 percent from percent to 16 percent, but remained within their 2019, amid weak consumer sentiment and the historic range, contrary to other value segments. segments’ reliance on physical store networks. The cost of maintaining stores also prevented Luxury top lines fared relatively well, with companies from reducing costs in line with the smallest revenue declines in 2020 compared with other segments. Underlying this was strong The State of Fashion 2022 Exhibit 20: In 2020, luxury was the only value segment that, as a whole, managed to maintain margins within its 10-year historic range EBITA MARGINS BY VALUE SEGMENT IN 2020, AVERAGE FROM 2010-2019, AND RANGE FROM 2010-2019, % Margin during 2020 Average margin 2010-2019 Margin range 2010-2019 Total industry 6.8 11.1 Luxury & 16.0 18.6 affordable luxury 7.1 10.2 3.8 8.7 Premium/ bridge Mid-market1 Value1 & 4.1 12.0 discount 0 2 4 6 8 10 12 14 16 18 20 22 1 Adjusted for outliers that are structurally unprofitable due to business model. SOURCE: ANNUAL REPORTS, MCKINSEY GLOBAL FASHION INDEX (MGFI) 118

MCKINSEY GLOBAL FASHION INDEX revenues, and there was an increase in the share luxury jewellery and ready-to-wear from wealthy of SG&A to revenue of around 4 percentage points customers, whose earnings were less impacted from 2019 to 2020. The mid-market and premium by the pandemic and whose funds saved on travel segments, meanwhile, saw revenue declines of and entertainment were reallocated towards 17 percent and 13 percent respectively. However, luxury goods. A new entrant on the list from The these segments were able to manage costs more State of Fashion 2020 report, ranking at number effectively and saw increases in SG&A to revenue 19, was Moncler with strong growth in China and ratios of 1 to 2 percentage points in 2020. e-commerce channels.333 In addition, jewellery players contributed significant economic profit Internet retailers also outperformed in during the period, boosted by Pandora, which saw 2020 and 2021, reflecting the massive shift to excellent turnaround performance, doubling their e-commerce. In market capitalisation terms, online sales during the pandemic — a result of the internet retailers were trading 112 percent higher in previous years’ investments in digital capabilities September 2021 than in December 2019, compared and data, and increased brand desirability.334 with the rest of the industry which was trading 28 percent higher. Still, this was a much narrower The changes in category focus of some gap than during the height of lockdowns, when shoppers accelerated existing strengths in valuations of online players peaked and those sportswear, athleisure and outdoor brands as across the rest of the industry reached their nadir. people sought out comfortable work-from-home and home workout attire. Sportswear giants Nike, Super Winners — A Mostly Consistent Story Adidas, Anta Sports and Lululemon remain on the Super Winners list this year, with Anta Sports In previous versions of the MGFI, we moving up the ranking and posting more economic have highlighted a winner-takes-all trend in the profit than observed in the 2020 report, benefitting fashion industry that has created a group of “Super from Chinese breakout growth and domestic Winners.” In last year’s report, we were unable to spend on local brands. In addition, all new entrants publish the list, due to different reporting periods to the list this year, namely JD Sports, Deckers for financial year results, which distorted economic and Moncler, come from the sports and outdoors profit results due to varying levels of exposure category. Other players benefitted from a strong to the pandemic during the months captured in business in underwear, nightwear and casualwear full-year results. This year, we are taking a different during the period. approach, calculating the average economic profit contributed by each company over a two-year Some Super Winners saw declines in period, covering financial years 2019 and 2020. economic profit during the period, with market This approach helps to smooth distortions created valuations also growing slower than the industry by market disruption over the past 18 months. To average. Indeed, value and discount players supplement this view, we also ranked the top 20 saw earnings drop due to their physical stores based on market capitalisation to identify trends halting sales during the pandemic. Additionally, emerging beyond current performance indicators. mid-market fashion players saw economic profits decline in 2019 and 2020 compared to 2018, and Our latest group of Super Winners reflects saw their valuations grow in line with or slower the resilience of luxury and the spectacular growth than the industry average. These players saw of sportswear. The top five Super Winners, based revenue fall as spending in the category decreased on average economic profit over 2019 and 2020, overall. Particularly in Europe and the US, where were Nike, Inditex, Kering, LVMH (including lockdowns were extensive, shoppers also shifted Tiffany) and Hermès. The luxury players in this some of their spend on clothing to essential group continue to benefit from demand for bags, retailers such as grocers. 119

Exhibit 21: Several of the Super Winners from 2018 have maintained their leading status TOP 20 PLAYERS FROM THE 2018 LIST IN THE TOP 20 PLAYERS BASED ON FINANCIAL Change in MCAP STATE OF FASHION 2020 EDITION, ECONOMIC YEARS 2019 AND 2020, ECONOMIC PROFIT, Dec ’19 – Sep ’20 PROFIT, USD MN USD MN compared to industry average Nike 2,980 Nike 3,374 Inditex 2,910 Inditex 2,046 LVMH 2,316 Kering 1,591 TJX Companies 1,669 LVMH 1,489 Kering 1,513 Hermès 1,424 Hermès 1,311 Adidas 956 Fast Retailing 1,059 Fast Retailing 869 Adidas 1,008 Anta Sports 807 The State of Fashion 2022 Ross 897 L Brands 699 VF Corporation 861 TJX Companies 640 Pandora 641 Ross 622 Richemont 568 Lululemon 467 Anta Sports 532 Pandora 424 Next 515 Next 364 L Brands 483 Hanes Brands 315 HLA Corporation 413 Deckers 280 H&M 401 Burberry 254 Lululemon 400 HLA Corporation 249 Hanes Brands 371 Moncler 243 Burberry 315 JD Sports 226 2018 Super Winners New entrants Market Capitalisation (MCAP) grew above market average (>2x) MCAP grew above market average (1.4 to 2x) MCAP grew with market average (1.2 to 1.3x) MCAP grew below market average (<1.2x) SOURCE: MCKINSEY GLOBAL FASHION INDEX (MGFI) 120

MCKINSEY GLOBAL FASHION INDEX Looking Ahead — Big Bets for 2022 Majority private-equity owned Burlington also crept into the top 20 on a market capitalisation This year, we also assessed the top 20 basis, as investors rewarded its big bets on the companies by their market capitalisation, to value segment, taking advantage of the reshuffle of identify where valuations have grown above market market share, consumer loyalties and retail space levels and understand future trends based on that is likely to continue to play out among players investor expectations. In addition to the continued in the industry in 2022 and beyond. Burlington strength of sportswear and luxury, three additional opened 100 discount stores in 2021 alone.339 focus areas for investors were jewellery, Chinese companies and disruptive business models. In terms of outright stock market performance, the top 20 by market capitalisation Jewellery companies (particularly fine outperformed the rest in 2020, reflecting jewellery) saw gains in market capitalisation comparatively lower revenue declines (minus that reflected overall luxury resilience and rising 4 percent, compared with minus 20 percent consumer demand for investment pieces.335 The across the industry). Several of the top 20, and branded fine jewellery segment is expected to grow particularly sportswear and jewellery players, by between 8 and 12 percent from 2019 to 2025.336 even saw revenues rise. The EBITA margins of Richemont saw its valuation increase by 40 percent the top 20 were around 12 percent on average in from December 2019 to September 2020, and Chow 2020, compared with 3 percent across the industry. Tai Fook doubled its market capitalisation in the Meanwhile, profit margins of both groups saw same period. Titan, a leading Indian jewellery similar 3 to 4 percentage point declines. player, realised the fruits of its pre-pandemic investment in omnichannel and continued While the tide is turning with 2021 and 2022 formalisation of the Indian jewellery market and looking significantly more positive for the global saw an increase in market capitalisation of 80 fashion industry than the previous two years, percent.337 the shakeout is not over as weaknesses exposed during the Covid-19 pandemic will continue to Overall, three Chinese companies, Anta plague the industry. However, those that are able Sports, Li Ning and Chow Tai Fook, were among to pivot quickly to meet the changing expectations the top 20 and showed the highest market of consumers, while appropriately managing capitalisation growth across all players. For inventory and supply chain costs, will leapfrog example, Li Ning increased its market capitalisation ahead into a new dawn of recovery. by a multiple of 3.9 during the period. These players benefited from the repatriation of Chinese spend as consumers embraced local brands, particularly as global travel was restricted.338 As travel disruptions are likely to continue through to the beginning of 2023, meaning consumers increasingly shop local via domestic travel and duty-free shopping, China’s local fashion sales growth will continue to benefit through 2022 and beyond. Finally, companies with business models that aligned with accelerated shifts in consumer behaviour during the pandemic are being rewarded. For example, online clothing marketplace Zalando saw its market capitalisation rise by a factor of 1.9 amid surging consumer demand for e-commerce. 121

The State of Fashion 2022 THE STATE OF BEAUTY 2022 122

IN-DEPTH Beauty’s Cautious Recovery After being hit significantly by the pandemic, all categories within the beauty sector are performing strongly, driven partly by burgeoning social commerce channels for which beauty products are perfectly suited. Amid the growth, the sector’s competitive intensity shows no signs of abating, as luxury fashion houses continue to expand their beauty ranges at pace in a bid to boost revenues and attract new customers without eroding their brand values. by Vanessa Goddevrind, Dale Kim, Sakina Mehenni, Michael Straub, Samantha Phillips and Kristi Weaver Consumers cut spending on discretionary online discovery and purchase. Skin care will see items amid Covid-19 stay-at-home restrictions, and the strongest performance, growing 22 percent in sales of beauty products plunged. In 2020, global 2021 and a further 10 percent in 2022. By 2024, we sales fell 15 percent from $538 billion in 2019 to estimate skin care will account for 34 percent of the $458 billion. In 2021, as lockdowns ease, the sector global beauty market. is close to reversing that fall. A 13 percent increase in sales to $518 billion is projected for 2021 and, in One overarching category that both brands 2022, sales should top 2019 levels. and retailers are betting big on is “clean beauty.” The category has grown fast as independent Asia Pacific and North America should be brands claiming to use safe, natural and cruelty- the first regions to completely recover 2019 sales free formulas flourished. Traditional players have performance, followed by Europe, while Latin started expanding their ranges to meet the demand, America, the Middle East and Africa will take with some even reformulating hero products. When longer. China, where the beauty market continued Dior launched Capture Totale C.E.L.L. Energy as to grow during the pandemic, will pick up speed, an update to its established anti-ageing product fuelled by skin care and colour cosmetics. line, it claimed both eco-friendly packaging and to be made from 85 percent natural ingredients.340 In terms of product categories, sales of Retailers have also visibly invested in clean beauty fragrance and colour cosmetics predictably fell in their choice of brands, products and store abruptly in 2020. Although both categories are layouts. Sephora’s flagship Champs Élysées store growing again, we expect consumers to continue in Paris, for example, has a large space dedicated to indulge in the “self-care” categories of skin to the category. However, some leading skin care care and hair care, which remained in demand influencers, such as Dieux Skin founder Charlotte during the pandemic. These categories do not rely Palermino, have expressed scepticism around on in-store trialling and lend themselves well to 123

THE STATE OF BEAUTY 2022 The State of Fashion 2022 the clean beauty trend, claiming specifically that Physical stores have seen a bounce-back non-natural ingredients are not intrinsically as lockdown restrictions lifted, and some beauty harmful. Both her social media posts and her own brands have even reinforced their physical line of “non-clean” beauty products have proved presence. In the US, for example, Sephora has highly successful.341 opened dedicated spaces in some Kohl’s department stores, while Ulta Beauty now sells a curated One overarching category product range at Target.343 The nature of beauty products — especially colour cosmetics — means that both brands and that, while customers will browse online, in-person testing is still hard to beat. As Margaret Mitchell, retailers are betting big on chief merchandising officer at UK beauty chain Space NK, explains, a customer “may want to try is “clean beauty.” something from a VR perspective on a website, but… that’s not replacing coming into a store for a The pandemic had a varied impact across complexion match.”344 value segments. The premium segment was hit more in the short-term as its traditional physical The desire to see and try a product, and channels were closed. The mass segment, however, the enjoyment of trialling and shopping for beauty was not only more readily available online but it products in person, should help to boost physical also skews more towards the hair and personal sales. However, in the long run, all non-digital care products that better withstood the crisis. channels, except travel retail, are expected to Premium products, including those from luxury maintain market share at best, while most will lose. fashion houses, are nevertheless expected to gain market share in the long run, exceeding their One digital channel attracting a lot of 2019 share by 2023, and growing at 13 percent per attention and investment is social commerce, annum between 2021 and 2024 (see “Competition whereby brands and retailers use social media Intensifies in Luxury Beauty” on page 128). platforms throughout the sales and marketing funnel to drive discovery, conversion and purchase. In terms of channels, digital continues to Social commerce has been a popular sales channel grow fast and is taking share from bricks-and- in China for some years, already accounting for mortar retail. Online sales will account for 23 more than 13 percent of total e-commerce sales percent of the beauty market by 2022 and will (see “Social Shopping” on page 65). Meanwhile, in become the most important channel by 2024. In the West, many customers are comfortable with China, where digital channels are more embedded social media for discovery, but sales are yet to take in the consumer consciousness and integrated off due to a lack of platform functionality and some into heavily used social apps, we expect more hesitance among shoppers. However, times are than half of all sales to take place online by 2023. changing: both customer attitudes and technology Globally, digital sales constitute a diverse group of are evolving quickly, and brands are starting to channels encompassing social selling on platforms capture this opportunity. such as Instagram, TikTok, WeChat, Xiaohongshu and others; marketplaces such as Amazon and The beauty sector is particularly well-placed Lookfantastic; and traditional retail and brand to maximise the potential of social commerce. It is e-commerce sites. Company announcements show a highly engaging category: consumers are already the extent to which the beauty industry anticipates familiar with online beauty tutorials, and the a digital future: L’Oréal, for example, has said very majority of Gen-Z and Millennials in the US prefer publicly that it is aiming for half of its sales to be to discover beauty products through social media generated via digital channels.342 ahead of any other channel.345 Beauty companies 124

IN-DEPTH Makeup artist applies eyeshadow during a social media livestream. Getty Images. must prioritise these new channels and ensure growth: half of US TikTok users have purchased they have the right capabilities in place to ride the a product or service from a brand after seeing next wave of growth by converting social users into it advertised, promoted or reviewed on the social shoppers. platform.347 Overall, social commerce sales in the US are expected to double from 2020 to 2023, The popularity of social commerce in reaching $53 billion.348 China is enabled by seamless payment methods within apps such as WeChat. Brands that get To succeed with social commerce, brands social commerce right in this market have seen and retailers will need platforms to deliver the astonishing growth rates. Revenues at Chinese experiences that both they and their customers beauty company Yatsen Holdings Limited want. The underlying technology needs to evolve multiplied by more than 50 from 2017 to 2020, fast to keep pace with trends, and beauty companies reaching over RMB 500 million ($78 million),346 must innovate both their marketing and customer with its local “C-beauty” brand Perfect Diary, which engagement techniques as they move customers focuses on sales via its social direct-to-consumer seamlessly from discovery to purchase. model on WeChat, making up the majority of revenues. The popularity of social commerce in China is enabled Social commerce sales in the West are by seamless payment methods expected to grow, though the pace of adoption and within apps such as WeChat. direction of travel may differ from China, owing to the plethora of platforms in the West and the Platforms that recognise the potential of the lower levels of seamless payment integration beauty sector are partnering with beauty brands compared with China. The lack of an established to pilot their latest social commerce offerings. livestreaming culture in the West also means For example, TikTok now offers tools that enable brands will need to devise new strategies to attract customers. Nevertheless, there is potential for 125

THE STATE OF BEAUTY 2022 The State of Fashion 2022 brands to manage marketing campaigns via their Meanwhile, brands are trialling a wide existing Shopify dashboards, and is piloting the range of innovative approaches. Luxury cosmetics concept with Kylie Cosmetics.349 Pinterest is company L’Occitane, for example, had success in enabling influencers to add shopping links via its South Korea using KakaoTalk Gift, an offshoot of Shopify partnership and is specifically targeting a popular messaging app that lets users give and the beauty market by deploying augmented reality receive gifts. In China, Yves Saint Laurent (YSL) try-on technology that allows users to test different Beauté opened a flagship store on Alibaba-owned shades of makeup.350 Meanwhile, Amazon Live Tmall. YSL broke records on the platform when it is attempting to re-energise the home-shopping launched in 2018 and continues to make it a priority format with livestreaming shows that give in China.355 influencers the ability to tag promotions, chat with users and earn commission on sales.351 Newer entrants to social commerce are also testing fresh ideas. For example, after experiencing Emerging alongside these large and high conversion rates with one-on-one virtual established players are smaller, niche platforms. consultations offered on its website in 2020, US beauty shopping start-up Flip, for example, Charlotte Tilbury director of digital Harminder has invested heavily in the short video experience. Matharu said, “it is encouraging us to explore social Launched in 2019, Flip’s content is focused commerce further.”356 Meanwhile, specialist US exclusively on beauty and includes built-in clean beauty retailer Beautycounter has partnered shopping links for featured products. Flip currently with payments company Klarna to host a series of sells more than 200 brands and aims to feature livestream shopping events from Beautycounter’s more than 500 by the end of the year.352 Los Angeles flagship store. Platforms that recognise the The rise of social commerce in the West is no longer a question of “if” but rather “how fast.” potential of the beauty sector are Brands will need to invest now to remain relevant as customer comfort with shopping on social partnering with beauty brands to channels accelerates. Consumers will increasingly seek entertainment and engagement in their pilot their latest social commerce shopping experience, and brands will have to prepare for a shortened consumer decision funnel. offerings. Content will continue to grow in importance, and brands will need to deliver relevant and Ulta Beauty, meanwhile, has invested in entertaining shoppable content paired with livestream shopping by partnering with beauty seamless e-commerce logistics. Winners will invest app Supergreat.353 Supergreat has a large and early and dive in with both feet to ensure they enthusiastic beauty audience that skews heavily capture the attention of the Gen-Z consumer. towards young women. Users spend an average of 20 minutes a day on the app, and it has received After a challenging couple of years, beauty investment from celebrities such as Hailey Bieber, players should be more optimistic about the Kate Hudson and Karlie Kloss. The potential for future. But even though revenue is expected to social commerce has also attracted third-party grow across all categories, the companies that will capital. For example, private-equity firm Permira secure long-term growth will have clear strategies recently invested in CommentSold, a US-based on which product categories to target and which software company that lets influencers sell directly channels to prioritise. These strategies must via livestreams. Permira said that “live selling will sit alongside ambitious and tangible targets on be the next wave of e-commerce.”354 environmental and social sustainability as well as a 126

IN-DEPTH sharper focus on diversity, equity and inclusion. companies with very niche or limited ranges, those Although the picture for the global beauty who lack a clear purpose-driven story, and those who are over-reliant on offline distribution. At the market in 2022 is relatively bright, players will heart of the mission for the most successful players of course be wary of supply chain issues, and the will likely be a commitment to listen to customers, macroeconomic and geopolitical uncertainty and to engage with them in a variety of authentic within the broader global economy. These stresses ways across a wide range of platforms. point to a need for prudence, especially for Exhibit 22: Global beauty sales are expected to exceed 2019 levels in 2022, with share shifting to skin care CATEGORY DEVELOPMENT, RETAIL SALES USD BN, % SHARE OF TOTAL YoY growth ‘19-’20 ‘20-’21E ‘21E-’22E ‘22E-’24E CAGR 6% p.a. -15% 13% 8% 5% -2% p.a. $560bn $595bn $622bn -33% 22% 18% 7% 14 14 15 Colour $538bn $518bn 9 9 9 -26% 13% 6% 5% cosmetics 15 13 15 14 14 Fragrances $458bn 10 11 12 15 34 -5% 6% 4% 3% Hair care 10 15 32 32 33 Skin care 16 30 29 -16% 22% 10% 8% Personal 29 33 31 30 29 28 care -4% 5% 4% 3% 2019 2020 2021E 2022E 2023E 2024E Note: Due to rounding, numbers presented may not add up precisely to 100. SOURCE: MCKINSEY ANALYSIS BASED ON MCKINSEY GLOBAL INSTITUTE MACROECONOMIC SCENARIOS, EUROMONITOR, NPD, NIELSEN, IRI, AMAZON STACKLINE AND PUBLICLY REPORTED COMPANY FINANCIALS 127

Exhibit 23: E-commerce is the fastest-growing channel for beauty sales CHANNEL DEVELOPMENT, RETAIL SALES USD BN, % SHARE OF TOTAL YoY growth ‘19-’20 ‘20-’21E ‘21E-’22E ‘22E-’24E CAGR 6% p.a. -15% 13% 8% 5% $622bn -2% p.a. $595bn $560bn 50% 25% 20% 16% 25 28 E-commerce1 $538bn $518bn 23 -45% 10% 4% 0% Department 21 5 54 stores 11 5 16 15 14 -10% 8% 2% -2% Drugstores/ 8 $458bn 17 pharmacies 26 -6% 5% 1% -2% 19 Grocery 17 4 25 23 -5% 10% 4% 2% retailers 8 5 12 Mass & club 5 Other 18 2022E 28 Speciality 4 28 4 -24% 14% 3% -1% Travel retail 10 31 7 -35% 15% 5% 5% The State of Fashion 2022 16 4 4 4 12 -70% 55% 65% 27% 7 9 9 8 2019 8 12 13 12 2024E 2 3 2020 2021E 7 2023E 1 Includes all e-commerce sales (brand.com, retailer.com, marketplace, and buy-online-pick-up-in-store sales) Note: Due to rounding, numbers presented may not add up precisely to 100. SOURCE: MCKINSEY ANALYSIS BASED ON MCKINSEY GLOBAL INSTITUTE MACROECONOMIC SCENARIOS, EUROMONITOR, NPD, NIELSEN, IRI, AMAZON STACKLINE AND PUBLICLY REPORTED COMPANY FINANCIALS Competition Intensifies in Luxury Beauty a range of beauty products that extends beyond fragrance. In Chanel’s case, beauty products are The prestige beauty and personal care believed to account for a third of its revenues.357 market is worth $115 billion — approximately a quarter of the total beauty market. It is a lucrative However, given the number of players but crowded space, and the growing presence of competing in this market, luxury houses will need luxury fashion houses in the market is intensifying to target the right sub-categories and listen to their the competition. Some have a long-established customers, while staying true to their brand. presence in beauty (Chanel No.5 launched in 1924, after all), but other luxury fashion entries are far Skin care is likely to be the next category more recent, like Valentino Beauty which launched move for many players. It is a challenging market in 2021. Now, as they seek to grow revenues and as consumers tend to be more cautious about skin build brand loyalty among younger customers, care products than colour cosmetics. Therefore, almost all the leading luxury fashion brands have according to Mario Ortelli, managing partner of luxury advisors Ortelli & Co., most brands are likely to focus initially on skin care products such 128

IN-DEPTH as cleansers and primers, rather than the more gender fluidity and inclusivity. For example, if a “science-oriented” skin care categories such as brand’s fashion shows feature models with a variety anti-ageing. of body shapes, or of varying ages, then a beauty campaign that features exclusively young models To appeal to a sufficiently wide customer with flawless skin could muddle the brand’s core base, luxury houses will need to move away from values for consumers. Similarly, if a brand uses trading solely on a sense of unattainable exclusivity. organic cotton in garments and recycled paper for Today’s beauty consumers expect to engage in a packaging, but then uses parabens for its beauty two-way conversation with brands. Community- products, the brands’ values can be seen as a based direct-to-consumer brands such as Glossier mismatch. and Drunk Elephant have established significant momentum by tapping into customers’ desire to The risk of brand dilution should also be a be included in the product co-creation process. consideration when deciding whether to produce Luxury houses will therefore need to rethink beauty products and categories in-house or customer engagement by building or strengthening outsource expertise by licensing the brand name communities, hosting live events (virtually or to a third party. Chanel, for example, produces otherwise) and seeking out (and being receptive to) all its beauty products in-house, while Valentino, feedback.358 Prada and Giorgio Armani license their brands to L’Oréal.361 Luxury players need to consider the scale Working with influencers who can more of distribution networks, expertise in developing readily reach their customers is one route, but formulations and production capabilities when brands may also consider tapping into the views of making such decisions. However, it is not an either/ younger employees in their workforce — and hiring or decision: different stages of the value chain more young talent like LVMH is doing — to better from product development to sales may be better understand how to target their next generation of suited to a certain approach. Hermès, for example, customers.359 develops its skin care and cosmetics products in-house but outsources production to third A significant concern for any brand entering parties.362 new markets and targeting new customer segments is not diluting their brand or confusing their The authors would like to thank Annabel Morgan, Natalia Lepasch and Simona brand values. But expanding into new categories Kulakauskaite for their contribution to this article. inevitably carries some risk of brand dilution, so it is essential that the essence of the brand remains anchored. The connection of a luxury fashion brand’s DNA to its beauty products may be price-based, with a premium price tag to match its fashion offering, but it can also be more intrinsic. For example, the matte lines of Hermès’ Rouge Hermès lipsticks feature shades inspired by its classic Birkin bag, where the texture alludes to the soft leather, while the satin shades pay homage to its classic silk scarves.360 The connection should also be apparent and consistent in brand messaging, especially in relation to consumer values around sustainability, 129

GLOSSARY The State of Fashion 2022 1.5-degree pathway Capital intensity Cyber attack Duty-free A scientific estimate that indicates A measure of profitability used to An attempt to gain illegal access to a The ability to purchase items without limiting global warming to 1.5 degrees assess how much invested capital a system, network, infrastructure or paying import, sales, value-added tax Celsius above pre-industrial levels company turns into revenue. devices for the purpose of causing (VAT) or other taxes. would reduce the odds of initiating damage or harm. the most dangerous and irreversible Carbon neutrality EBITA effects of climate change. Balancing the level of carbon Cyber threat An income statement item that emissions produced with an equal The possibility of a malicious attempt deducts amortisation from earnings Artificial intelligence (AI) level of carbon removal through to damage or disrupt a computer before interest and taxes (EBIT). An Computer systems performing tasks the shift to new energy sources, network or system, to damage or steal alternative measure of income a firm by mimicking the problem-solving changes in industry processes, data, or to disrupt digital operations. makes from its core operations. and decision-making capabilities circular business models and carbon of the human mind, often used to offsetting. Daigou EBITA margin process large amounts of data for Grey-market surrogate shoppers A measurement of a company’s predictive purposes. Circularity who buy goods overseas to sell on the EBITA as a percentage of its total An economic system aimed at Chinese mainland. revenue. Augmented reality (AR) eliminating waste and promoting The use of technology to create an the continual use of resources, Data breach EBITDA enhanced version of the physical minimising resource inputs and An incident that results in An income statement item world, through the use of digital items the creation of waste, pollution information being taken from a that deducts depreciation and such as visuals and audio. and carbon emissions. In apparel, system without authorisation. amortisation from earnings before we refer to the six Rs: reducing the interest and taxes (EBIT). An Athleisure materials needed and waste created Deadstock alternative measure of income A hybrid clothing category that when making products; recycling Old, leftover and over-ordered fabric a business makes from its core combines athletic with casual, the materials used to produce new often purchased from other designers operations. everyday styles, for example jogging products; refurbishing deadstock or warehouses, which is diverted into bottoms in athletic fabrics. and used products into new products new garments rather than landfill. Economic profit — without re-processing the raw A measure of value-add created by Avatar materials; reselling second-hand or Deleveraging businesses, whereby opportunity A digital image or graphic used products with no refurbishment; The process of reducing a company’s costs are deducted from revenues representation of a user, often renting products through one-off debt by paying existing debt and earned. A company creates value deployed in online games, chats, etc. rental or subscription models; and obligations on its balance sheet. when its operating profit exceeds the repairing products, by professional or Deleveraging allows companies to dollar cost of capital. Defined as Net Baby boomers amateur means during the product’s reduce the riskiness of their business. Operating Profit, Less Adjusted Taxes Demographic cohort born circa use-phase — without changing (NOPLAT) minus Capital Charge 1946-1964, following the “Silent ownership. Digital material libraries (Weighted Average Cost of Capital, Generation.” A central repository for all available WACC, multiplied by Invested Closed-loop recycling raw materials and components of a Capital). Belonging A recycling process where textile product, enabling designers to have The feeling of acceptance and of being product waste (both post-consumer full visibility over the options they can Endemic virus valued experienced by employees and and post-production) is recycled use to complete a design. An outbreak of a virus that is limited fostered by a company’s culture and into new textile products so that to a particular region or country. work environment. the materials remain in constant Digital twin circulation (garment-to-garment). A virtual asset associated with Equity Biodegradable a physical object or process. A Equality of opportunities and Material capable of being Consumer sentiment digital twin can include an object resources relative to the unique needs decomposed naturally by bacteria An indicator that measures how or garment’s full history from of individuals and groups. when discarded as waste. optimistic consumers feel about their manufacturing to transportation finances, the state of the economy and (e.g. a level of detail that extends to European Union (EU) “Black Swan” events purchasing behaviour. dyeing, production and distribution A political and economic union of A metaphor for a rare event that is facilities), as well as information 27 member states that are located unpredictable and has far-reaching Conversion about the purchase aftercare, repairs primarily in Europe. consequences. The process of completing a desired or resale. action, such as a consumer purchasing EV/sales Blockchain a product or signing up for a service Direct-to-consumer (DTC) A measure that compares a company’s A digital database containing (often related to sales generation). Selling products directly to the enterprise value to its annual sales. encrypted information that can be end consumer instead of through It is typically used as a metric that simultaneously used and shared COP26 retailers, wholesalers etc. quantifies the purchasing cost of a within a large, decentralised, publicly The UN’s 26th Climate Change company’s sales. Enterprise value accessible network. Conference, which took place Distributed denial of services accounts for market capitalisation, in Glasgow, UK in October and (DDoS) debt and cash. BoF-McKinsey State of Fashion November 2021. A type of cyber attack in which online 2022 Survey services are made unavailable by Extended producer responsibility Proprietary joint survey by The Cost of goods sold (COGS) overwhelming the page with internet Extended producer responsibility Business of Fashion and McKinsey. An income statement item stating the traffic. (EPR) is a policy approach under The survey asks international fashion total costs used to create a product or which producers are given a executives and experts to rate their service, which has been sold. Diversity significant responsibility — financial business sentiment, investment plans Involving individuals with a range and/or physical — for the treatment and industry trends. 222 respondents Covid-19 of human differences including, or disposal of post-consumer participated in the State of Fashion Coronavirus disease 2019 (Covid-19) but not limited to: gender, race, products. Survey for the State of Fashion 2022 is an infectious disease caused by ethnicity, sexual orientation, age, report in September 2021. severe acute respiratory syndrome origin, nationality, social background, Fiscal response coronavirus 2 and was classified physical ability, religion and political The use of government spending and a pandemic by the World Health beliefs. taxation (e.g. taxes or tax cuts) to Organization on March 11, 2020. influence the economy. 130

Freight inventory during a given period. A over hundreds if not thousands Reach Goods transported from place to decreasing turnover implicates lower of years. The estimated number of potential place, by land, sea or air. sales and potentially a build-up of customers a brand can reach with excess inventory. Millennials (Generation-Y/Gen-Y) a specific marketing campaign or G20 Demographic cohort born circa initiative to generate awareness. International forum bringing Key opinion leader (KOL) 1982–1995, also commonly referred to together the world’s major economies A term often used in China and other as Generation-Y (this name is based Regenerated fibre accounting for more than 80 percent markets to describe influencers or on Generation-X, the generation that Fibre created from pre-existing fibres of world GPD. G20 members are brand ambassadors. preceded them). whose cellulose areas are dissolved in Argentina, Australia, Brazil, Canada, chemicals and rebuilt into new fibres China, France, Germany, Japan, India, Last-mile logistics Near-field communication (NFC) by viscose method. Indonesia, Italy, Mexico, Russia, Also known as last-mile delivery, this Wireless short-range communication South Africa, Saudi Arabia, South is the final step of the delivery process technology allowing rapid Repatriation Korea, Turkey, the United Kingdom, or supply chain which involves the information transfer between two Sending money back to one’s own the United States, and the European shipment of goods from the (often devices containing NFC chips. country; in relation to shopping, Union. Spain is also invited as a local) distribution centre to the end this is spending money domestically permanent guest. consumer. Non-fungible token (NFT) rather than abroad. A unique digital asset, e.g. a photo, Generation-Z (Gen-Z) M&A activity video, audio or other digital item that Resale Demographic cohort born circa The consolidation of companies can represent art, music, in-game Buying or selling clothing second- 1996–2012, following the Millennial through various types of financial items etc. Blockchain technology is hand, often via online platforms or generation. transactions, including mergers, used to establish a verified and public vintage / consignment stores. acquisitions, consolidations, tender proof of ownership. General Data Protection offers or the purchase of assets. Retention Regulation (GDPR) Open-loop recycling Keeping employees at a business The European Union’s law on data Machine learning A recycling process in which one through a number of satisfaction protection and privacy. A form of artificial intelligence that product is recycled into a different measures, to reduce turnover. automates analytical model building, product, thereby delaying the Government support scheme / enabling systems to “learn” with material from going into waste once it Revenge buying subsidy minimal human intervention. cannot be recycled again. A phenomenon where customers Actions by governments to support indulge in buying goods after being small and large businesses during the McKinsey Fashion Scenarios Open-source deprived of shopping and social Covid-19 crisis. Relevant government Covid-19 recovery scenarios in the A software for which the original code events during a crisis such as a aid to brands and retailers includes fashion industry across regions and is made freely available and may be pandemic. rental support, salary support for segments based on holistic fact-bases redistributed and modified. furloughed staff and loans on good and key sources of intelligence; Return on investment (ROI) terms. includes fashion, accessories and Phishing Assesses the benefit of an shoes; last updated on October 20, A method of deceiving individuals investment by comparing the cost Greenhouse gas emissions 2021 as per Edition XIII. into revealing personal information of an investment to its return. For Greenhouse gases vented to the e.g. passwords and credit card stores, this relates to comparing Earth’s atmosphere as a result of McKinsey Global Fashion Index numbers by sending fraudulent store investments and costs in store human activity; includes carbon (MGFI) emails purporting to be from operations to the store’s profitability. dioxide and equivalents that can Proprietary and copyrighted reputable parties. cause climate change. McKinsey tool that provides a global S&P 500 and holistic industry benchmark Price segments A stock market index that tracks the Gross Domestic Profit (GDP) for the entire fashion industry. The As definitions of market segments stocks of 500 large-cap US companies. The total monetary or market value MGFI was first created for The State often vary across sources, all of all the finished goods and services of Fashion 2017 to track industry companies in the MGFI are Seasonality produced within a country’s borders performance through three key categorised based on a Sales Price Increased demand for certain in a specific time period and thus variables: sales, operating profit and Index, providing a range of prices for products due to the season or serving as a measure of economic economic profit. MGFI comprises a standard basket of products within weather, e.g. warmer jackets due to health. an extensive list of public companies each segment and home market — colder temperatures. spanning market segments, product thereby relying only on a quantitative Hybrid working categories and geographies. The measure, whereby companies in each Selling, general & administrative Flexible work structure in which analysis of public companies is built segment price their items similarly. expenses (SG&A) employees can split their working with data from McKinsey Corporate An income statement item stating hours between working from a central Performance Analytics (McKinsey QR codes all costs not directly tied to making a office and working remotely from CPAT). Matrix barcodes that contain product or service. their homes. information about an item or the Metaverse location it is attached to, which can be Skins Inclusion The envisioned future iteration of the read by smartphones. An item that an online game player can The exercised decision by an internet that is made up of 3D virtual acquire to change the appearance of an organisation to involve diverse people spaces linked within a perceived Radio-frequency identification avatar, e.g. a digital piece of clothing. and perspectives. virtual universe. In a broader sense, it (RFID) often refers not just to virtual worlds, A wireless system of tags that uses SKU productivity Intellectual property (IP) but rather the full spectrum of virtual radio waves to identify and track an A measure of the effectiveness and Property that includes intangible worlds, augmented reality and the object, e.g. when tracking items along profitability of an assortment by creations of the human intellect. For internet. a supply chain. measuring stock keeping units against fashion companies, this can include strategic and financial targets. designs, trademarks, copyrights, Microplastics Ransomware attack prototypes, manufacturing Very small pieces of plastic, typically A type of malware that blocks access Social commerce instructions, etc. less than 5mm in length, that shed to a system, files, databases and The use of social networking apps from items such as garments and demands a ransom payment in order and platforms such as Facebook, Inventory turnover pollute the environment. Their to provide access. Instagram, TikTok and Twitter A ratio showing the number of times environmental harm is caused by to promote and sell products and a company has sold and replaced their slow degradation, which occurs services. 131

GLOSSARY Super Winners Virtual goods The top 20 fashion players by Intangible objects traded in online economic profit (average economic communities or marketplaces. profit 2019-2020 for the 2020 Super Objects are purchased for use in Winners, and economic profit in online communities or online games. 2018 for the 2018 Super Winners) according to The State of Fashion Zero-based approach Report. An approach that seeks to link organisational designs to strategic Sustainability priorities (e.g. areas for investment Within a business context, compared to efficiency optimisation) sustainability refers to businesses instead of a “one-size-fits-all” making decisions in terms of solution across the business. environmental, social, human The State of Fashion 2022 and corporate governance impact for the long term and relates to how a company’s products and services contribute to sustainable development. Tariff A tax or duty to be paid on particular classes of imports or exports. Travel retail sector Retail located in travel hubs and key tourist destinations, such as airports, airlines, cruises, train stations, downtown locations and border shops. Value creator A company generating positive economic profit. Value destroyer A company generating negative economic profit. Value segment The company segmentation based on a Sales Price Index, which provides a range of prices for a standard basket of products within each segment and company’s home market. The companies in the McKinsey Global Fashion Index and the BoF- McKinsey State of Fashion Survey are categorised into six segments, which are based on a price index across a wide basket of goods and geographies. The segments range from lowest to highest price segment: discount, value, mid-market, premium/bridge, affordable luxury, luxury. VAT Value-add tax, referring to the tax added on all purchases in many countries. VAT reductions or breaks for tourists may be added as a savings incentive to shop abroad. Virgin material Textile fibres used in their virgin state and not based on recycled material (e.g. virgin cotton versus recycled cotton; virgin polyester versus recycled polyester). Virtual fashion Visual representation of fashion items built using technology and 3D software e.g. to be worn by avatars in online games. 132

INFOGRAPHICS AND EXHIBITS The State of Fashion 2022 infographics: Exhibits: 1. Uneven Recovery Exhibit 1: Industry Outlook Source: “WHO extends call for a moratorium Source: BoF-McKinsey State of Fashion 2022 on Covid booster doses until the end of Survey, N=222 the year”, CNBC, September 8, 2021, ht t ps://w w w.cnbc.com/2021/09/08/ Exhibit 2: Industry Outlook who-extends-call-for-a-moratorium-on-covid- Source: BoF-McKinsey State of Fashion 2022 booster-doses-until-the-end-of-the-year.html Survey, N=222 2. Logistics Gridlock Exhibit 3: Industry Outlook Source: BoF-McKinsey State of Fashion 2022 Source: McKinsey Fashion Scenarios, McKinsey Survey, N=222 analysis, expert interviews 3. Domestic Luxuries Exhibit 4: Industry Outlook Source: “Update: COVID-19 global air traffic Source: McKinsey Fashion Scenarios, McKinsey demand scenarios” – McKinsey Travel, Logistics analysis, expert interviews & Infrastructure analysis; PAX-IS, July 2021 Exhibit 5: Uneven Recovery 4. Wardrobe Reboot Source: McKinsey Recovery Scenarios, in Source: BoF-McKinsey State of Fashion 2022 partnership with Oxford Economics, June 2021 Survey, N=222 Exhibit 6: Logistics Gridlock 5. Metaverse Mindset Source: BoF-McKinsey State of Fashion 2022 Source: Newzoo, Key Numbers 2021 Survey, N=222 6. Social Shopping Exhibit 7: Domestic Luxuries Source: BoF-McKinsey State of Fashion 2022 Source: “Update: Covid-19 Global Air Traffic Survey, N=222 Demand Scenarios” – McKinsey Travel, Logistics & Infrastructure Analysis; PAX-IS, July 2021 7. Circular Textiles Source: BoF-McKinsey State of Fashion 2022 Exhibit 8: Wardrobe Reboot Survey, N=222 Source: Lyst, August 2021 8. Product Passports Exhibit 9: Metaverse Mindset Source: BoF-McKinsey State of Fashion 2022 Source: Newzoo, Key Numbers 2021 Survey, N=222 Exhibit 10: Social Shopping 9. Cyber Resilience Source: eMarketer, January 2021 Source: BoF-McKinsey State of Fashion 2022 Survey, N=222 Exhibit 11: Circular Textiles Source: BoF-McKinsey State of Fashion 2022 10. Talent Crunch Survey, N=222 Source: BoF Community Survey 2022, N=630 Exhibit 12: Circular Textiles Source: Simplified form of A New Textiles Economy: Redesigning Fashion’s Future, Ellen MaCarthur Foundation with Analysis by McKinsey, November 2017 Exhibit 13: Product Passports Source: BoF-McKinsey State of Fashion 2022 Survey, N=222 Exhibit 14: Cyber Resilience Source: BoF-McKinsey State of Fashion 2022 Survey, N=222 Exhibit 15: Talent Crunch Source: BoF Community Survey 2022, N=630 Exhibit 16-19: McKinsey Global Fashion Index Source: McKinsey Global Fashion Index (MGFI) Exhibit 20: McKinsey Global Fashion Index Source: Annual reports, McKinsey Global Fashion Index (MGFI) Exhibit 21: McKinsey Global Fashion Index Source: McKinsey Global Fashion Index (MGFI) Exhibit 22-23: The State of Beauty 2022 Source: McKinsey analysis based on McKinsey Global Institute Macroeconomic Scenarios, Euromonitor, NPD, Nielsen, IRI, Amazon Stackline and publicly reported company financials 133

END NOTES The State of Fashion 2022 1 McKinsey Fashion Scenarios, October 2021, https://www.businessoffashion. Fashion, March 15, 2021, https://www. 41 “OECD Economic Surveys: Brazil”, 2021 com/articles/global-markets/ businessoffashion.com/articles/retail/ The Organisation for Economic what-vietnams-factory-closures-mean- the-revenge-shopping-opportunity Co-operation and Development, 2 BEA; Eurostat; Oxford Economics; for-fashion December 2020, https://www.oecd. McKinsey Global Institute analysis 31 McKinsey Fashion Scenarios, org/economy/surveys/Brazil-2020- 21 Genevieve LeBaron, Penelope November 2021 OECD-economic-survey-overview.pdf 3 McKinsey & Company Covid-19 US Kyritis, Perla Polanco Leal, Michael Consumer Pulse Survey Feb 8–22, Marshall, “The Unequal Impacts 32 Ibid. 42 BoF Interview with Carlos Jereissati 2021, N=2,076 of Covid-19 on Global Garment Filho, October 2021 Supply Chains”, June 2021, 33 Sarun Charumilind, Matt Craven, 4 McKinsey & Company Covid-19 https://www.workersrights.org/ Jessica Lamb, Adam Sabow, Shubham 43 Laura Turquet, “Gender equality, Consumer Pulse Survey, 2022 Global wp-content/uploads/2021/06/ Singhal, Matt Wilson, “When will the sustainability and social justice: Sentiment Survey The-Unequal-Impacts-of-Covid-19-on- Covid-19 pandemic end?”, McKinsey, A roadmap for recovery”, May 31, Global-Garment-Supply-Chains.pdf; August 23, 2021, https://www. 2021, https://www.weforum.org/ 5 BoF-McKinsey State of Fashion 2022 Queennie Yang, “China’s Shoemaking mckinsey.com/industries/healthcare- agenda/2021/05/sustainability- Survey Hub Locks Down Following Covid-19 systems-and-services/our-insights/ social-justice-women-recovery/; Outbreak”, The Business of Fashion, when-will-the-covid-19-pandemic-end “Intersectional inequities in 6 BEA; Eurostat; Oxford Economics; September 14, 2021, https://www. COVID-19 mortality by race/ McKinsey Global Institute analysis businessoffashion.com/news/china/ 34 Leticia Miranda, “India’s Covid ethnicity and education in the United chinas-shoemaking-hub-locked-down- crisis has ripple effects for garment States, January 1, 2020–January 7 “Meet your future Asian consumer”, following-rise-in-covid-19-infections industry worldwide”, NBC News, June 31, 2021”, The Harvard Center McKinsey, July 28, 2021, https://www. 2, 2021, https://www.nbcnews.com/ for Population and Development mckinsey.com/featured-insights/ 22 Julian Gething, Sam Hodgkinson, business/business-news/india-s-covid- Studies, February 23, 2021, https:// future-of-asia/meet-your-future- Richard Hudson, Matt Johnston, crisis-has-ripple-effects-garment- www.hsph.harvard.edu/population- asian-consumer David O’Neill, Marta Wlodar, “Road industry-worldwide-n1269306; development-dev/wp-content/ to recovery: The state of corporate Anirban Nag, “India Consumer uploads/sites/2623/2021/02/21_Chen_ 8 National Bureau of Statistics restructuring in Europe”, McKinsey, Confidence Drops to Record Low, covidMortality_Race_Education_ March 16, 2021, https://www. RBI Survey shows”, Bloomberg, June HCPDS_WorkingPaper_Vol-21_No-3_ 9 McKinsey Fashion Scenarios, mckinsey.com/business-functions/ 4, 2021, https://www.bloomberg. Final_footer.pdf October 2021 transformation/our-insights/ com/news/articles/2021-06-04/ road-to-recovery-the-state-of- india-consumer-confidence-drops-to- 44 Bruce D. Meyer, James X. Sullivan, 10 McKinsey Fashion Scenarios, corporate-restructuring-in-europe record-low-rbi-survey-shows Jeehoon Han, “Real-time Poverty October 2021 Estimates During the COVID-19 23 Annie Nova, “Pandemic-era relief 35 Macroeconomic scenarios, including Pandemic through November 11 BoF-McKinsey State of Fashion is drying up. But families still have GDP projections, in this article 2020*”, December 15, 2020, 2022 Survey options”, CNBC, August 6, 2021, are based on McKinsey Recovery https://harris.uchicago.edu/files/ https://www.cnbc.com/2021/08/06/ Scenarios, developed in partnership monthly_poverty_rates_updated_thru_ 12 BoF-McKinsey State of Fashion unemployment-benefits-stimulus- with Oxford Economics and published november_2020_final.pdf 2022 Survey checks-pandemic-era-aid-is-ending-. in July 2021 html; Faisal Islam, “Furlough scheme 45 “Government panel warns of 13 BoF-McKinsey State of Fashion ends with almost 1 million left in 36 Maria Eloisa Capurro, “Brazil’s widening gender gap in Japan 2022 Survey limbo”, BBC, October 1, 2021, https:// Economy Seen Growing Less due to pandemic”, Japan Times, www.bbc.com/news/business- After Disappointing Quarter”, May 16, 2021, https://www. 14 BoF-McKinsey State of Fashion 58735299 Bloomberg, September 1, 2021, japantimes.co.jp/news/2021/05/16/ 2022 Survey https://www.bloomberg.com/ national/social-issues/ 24 Macroeconomic scenarios, news/articles/2021-09-01/ gender-gap-growing-pandemic/ 15 BoF-McKinsey State of Fashion including GDP projections, in this brazil-s-economy-shrinks-in-second- 2022 Survey article are based on McKinsey quarter-as-investment-drops 46 Anna Andrianova, “Wealth Recovery Scenarios, developed in Gap Widens as Pandemic Hits 16 BoF-McKinsey State of Fashion partnership with Oxford Economics 37 “Nigeria Economic Update: Russia’s Poorest Regions Hard”, 2022 Survey and published in July 2021 Resilience through Reforms”, The Bloomberg, November 30, 2020, World Bank, June 2021, https://www. https://www.bloomberg.com/ 17 Rich Mendez, “WHO Extends 25 Sven Smit, Martin Hirt, Ezra worldbank.org/en/country/nigeria/ news/articles/2020-11-30/ Call For a Moratorium on Covid Greenberg, Susan Lund, Kevin Buehler, publication/nigeria-economic-update- pandemic-widens-gap-between-russia- Booster Doses Until the End of the Arvind Govindarajan, “Looking resilience-through-reforms s-richest-and-poorest-regions Year”, CNBC, September 8, 2021, beyond the pandemic: Could the https://www.cnbc.com/2021/09/08/ world economy gain more than it lost 38 Gita Gopinath, “Transcript of 47 “In Argentina, nearly half in poverty who-extends-call-for-a-moratorium- to COVID-19?”, McKinsey, June 14, October 2021 World Economic as coronavirus deepens economic on-covid-booster-doses-until-the-end- 2021, https://www.mckinsey.com/ Outlook Press Briefing”, International crisis”, Reuters via NBC News, October of-the-year.html business-functions/strategy-and- Monetary Fund, October 12, 2021, 1, 2020, https://www.nbcnews.com/ corporate-finance/our-insights/ https://www.imf.org/en/News/ news/latino/argentina-nearly- 18 Sarun Charumilind, Matt Craven, looking-beyond-the-pandemic-could- Articles/2021/10/13/tr101221- half-poverty-coronavirus-deepens- Jessica Lamb, Adam Sabow, Shubham the-world-economy-gain-more-than- transcript-of-october-2021-world- economic-crisis-n1241704 Singhal, Matt Wilson, “When Will the it-lost-to-covid-19 economic-outlook-press-briefing Covid-19 Pandemic End?”, McKinsey, 48 Greg Iacurci, “The legacy of 2020: August 23, 2021, https://www. 26 Ibid. 39 “Transcript: World Bank Group Riches for the wealthy, well educated mckinsey.com/industries/healthcare- Press Conference by President and often White, financial pain for systems-and-services/our-insights/ 27 Ibid. David Malpass at the 2021 Annual others”, CNBC, January 1, 2021, when-will-the-covid-19-pandemic-end Meetings”, The World Bank, October https://www.cnbc.com/2021/01/01/ 28 Ibid. 13, 2021, https://www.worldbank. the-covid-recession-brought-extreme- 19 “Post-COVID-19 recovery must not org/en/news/speech/2021/10/13/ inequality-in-2020.html leave anyone behind — DG Okonjo- 29 McKinsey & Company Covid-19 transcript-world-bank-group-press- Iweala at Aid for Trade event”, World US Consumer Pulse Survey Feb 8–22, conference-by-president-david- 49 Daniel Gerszon Mahler, Nishant Trade Organization, March 23, 2021, 2021, N=2,076, sampled and weighted malpass-at-the-2021-annual-meetings Yonzan, Christoph Lakner, R. Andres https://www.wto.org/english/news_e/ to match the US general population Castaneda Aguilar, Haoyu Wu, news21_e/aid_23mar21_e.htm 18+ years 40 Paul Sweeney, “Levelling up: so you “Updated estimates of the impact of want to level up?”, Centre for Cities, June COVID-19 on global poverty: Turning 20 Zoe Suen, “What Vietnam’s Factory 30 Cathaleen Chen, Tamison 17, 2021, https://www.centreforcities. the corner on the pandemic in 2021?”, Closures Mean for Fashion”, The O’Connor, “The Revenge Shopping org/levelling-up/ World Bank Blogs, June 24, 2021, Business of Fashion, September 10, Opportunity”, The Business of https://blogs.worldbank.org/opendata/ 134

updated-estimates-impact-covid- 62 “How Unequal is South Africa”, 76 Paul Berger, “Where Did All 8, 2021, https://www.ft.com/ 19-global-poverty-turning-corner- Stats SA, February 4, 2020, http://www. the Shipping Containers Go?”, content/d6726026-e4ce-466f-975f- pandemic-2021 statssa.gov.za/?p=12930 The Wall Street Journal, August 6e9983d33d72; Song Jung-a, “Strikes at 4, 2021, https://www.wsj.com/ Korea’s global shipping giant threaten 50 “The State of Fashion 2021 2021”, 63 Dibyendu Chaudhuri , Parijat articles/where-did-all-the-shipping- supply chain ‘turmoil’”, Financial The Business of Fashion and McKinsey, Ghosh, “Why inequality is India’s worst containers-go-11628104583 Times, September 1, 2021, https:// December 2, 2020, https://www. enemy”, Down To Earth, March 5, 2021, www.ft.com/content/a0ae694b-9b4f- businessoffashion.com/reports/ https://www.downtoearth.org.in/blog/ 77 McKinsey analysis 4601-90c1-4bd974e89950; “Nike and news-analysis/the-state-of-fashion- economy/why-inequality-is-india-s- Adidas supplier suspends production at 2021-industry-report-bof-mckinsey worst-enemy-75778 78 “US Bans All Xinjiang Cotton Vietnam plant due to COVID”, Reuters, Products”, Bloomberg via The July 14, 2021, https://www.reuters. 51 Sarah Kent, “Fashion Is Still Failing 64 “Indian states by GDP”, Ministry Business of Fashion, January 13, com/world/asia-pacific/vietnam- on Workers’ Rights”, The Business of Statistics and Programme 2021, https://www.businessoffashion. operations-footwear-giant-pou-chen- of Fashion, March 22, 2021, https:// Implementation, March 1, 2021, com/news/global-markets/ hit-by-covid-19-curbs-2021-07-14/; www.businessoffashion.com/articles/ https://statisticstimes.com/economy/ us-bans-all-xinjiang-cotton-products Delphine Strauss, “Supply chain sustainability/fashion-is-still-failing- india/indian-states-gdp.php disruption threatens to hold back UK on-workers-rights 79 “China and the world: Inside the economic recovery”, Financial Times, 65 “An uneven and gender-unequal dynamics of a changing relationship”, August 26, 2021, https://www.ft.com/ 52 Chase Peterson-Withorn, “Nearly COVID-19 recovery: Update on McKinsey Global Institute, July content/3befa5f6-e80a-4f83-b608- 500 People Became Billionaires During gender and employment trends 2021”, 1, 2019, https://www.mckinsey. 28f1682af856 The Pandemic Year”, Forbes, April International Labour Organization, com/featured-insights/china/ 6, 2021, https://www.forbes.com/ October 26, 2021, china-and-the-world-inside-the- 88 Sarah Kent, “Sustainability Comes sites/chasewithorn/2021/04/06/ https://www.ilo.org/employment/ dynamics-of-a-changing-relationship At a Cost. Fashion Isn’t Paying”, The nearly-500-people-have-become- Whatwedo/Publications/policy-briefs/ Business of Fashion, April 8, 2021, billionaires-during-the-pandemic- WCMS_824865/lang--en/index.htm 80 Justin Harper, “Suez blockage is https://www.businessoffashion.com/ year/?sh=3facdc8325c0 holding up $9.6bn of goods a day”, articles/sustainability/sustainability- 66 “We must prioritize a gender- BBC, March 26, 2021, https://www.bbc. comes-at-a-cost-fashion-isnt-paying; 53 Rakesh Kochhar, “The Pandemic responsive recovery from COVID-19”, co.uk/news/business-56533250 Emily Chan, “Why Isn’t Sustainable Stalls Growth in the Global Middle United Nations Human Rights Office, Fashion More Affordable?”, Class, Pushes Poverty Up Sharply”, July 27, 2021, https://www.ohchr. 81 BoF Interview with Joseph Phi, Vogue, August 1, 2020, https:// Pew Research Center, March 18, org/EN/NewsEvents/Pages/Women- September 2021 www.vogue.co.uk/fashion/article/ 2021, https://www.pewresearch.org/ Covid19.aspx sustainable-fashion-affordable global/2021/03/18/the-pandemic- 82 Darren Dodd, “Supply chain stalls-growth-in-the-global-middle- 67 Anu Narayanswamy, Emily woes leave companies struggling 89 Danny Parisi, “American Eagle, class-pushes-poverty-up-sharply/ Rauhala, Júlia Ledur, Youjin Shin, to cope”, Financial Times , August Walmart invest in direct shipping “How the pandemic set back women’s 23, 2021, https://www.ft.com/ to avoid third-party carrier 54 Jonathan Cheng, “China Is the Only progress in the global workforce”, content/3b35a981-d17e-450d-ac30- congestion”, Glossy, September 3, Major Economy to Report Economic The Washington Post, August 28, ec2ab8a60951; Primrose Riordan, 2021, https://www.glossy.co/fashion/ Growth for 2020”, The Wall Street 2021, https://www.washingtonpost. Harry Dempsey, Chris Giles, “Shipping american-eagle-walmart-invest-in- Journal, January 18, 2021, https://www. com/world/interactive/2021/ bottlenecks set to prolong supply direct-shipping-to-avoid-third-party- wsj.com/articles/china-is-the-only- coronavirus-women-work/ chain turmoil”, Financial Times, carrier-congestion/ major-economy-to-report-economic- August 16, 2021, https://www.ft.com/ growth-for-2020-11610936187 68 Johannes Koettl, Nayib Rivera, content/e1263950-1173-4832-a011- 90 Daphne Milner, “Turkish Fashion Sofia Gomez Tamayo, “The spectacular ada04df1e93c Exports Surpass Last Year’s Sales”, The 55 Stella Yifan Xie, “China Beat Back surge of the Saudi female labor Business of Fashion, February 19, 2021, Covid-19, but It’s Come at a Cost— force”, Brookings, April 21, 2021, 83 Annachiara Biondi, “Supply https://www.businessoffashion.com/ Growing Inequality”, The Wall Street https://www.brookings.edu/blog/ chain disruption: Fashion’s news/global-markets/turkish-fashion- Journal, October 21, 2020, https:// future-development/2021/04/21/ Christmas concern”, Vogue Business, exports-surpass-last-years-sales www.wsj.com/articles/china-beat- the-spectacular-surge-of-the-saudi- September 13, 2021, https://www. back-covid-19-but-its-come-at-a- female-labor-force/ voguebusiness.com/consumers/ 91 Saskia Hedrich, Julian Hügl, costgrowing-inequality-11603281656 supply-chain-disruption-fashions- Patricio Ibanez, Karl-Hendrik Magnus, 69 Johannes Koettl, Jumana Alaref, christmas-concern “Revamping fashion souring: speed 56 Ibid. “Why are Saudi women suddenly and flexibility to the fore. McKinsey starting to take jobs?”, Brookings, May 84 Joanna Konings, Rico Luman, “5 Apparel CPO Survey 2021”, McKinsey, 57 “China Should Brace for Higher 19, 2021, https://www.brookings.edu/ reasons global shipping costs will November 15, 2021, https://www. Luxury Goods Taxes, Analysts Say”, blog/future-development/2021/05/19/ continue to rise”, ING, June 7, 2021, mckinsey.com/industries/retail/ Bloomberg via The Business of why-are-saudi-women-suddenly- https://think.ing.com/articles/ how-we-help-clients/apparel-fashion- Fashion, October 20, 2021, https:// starting-to-take-jobs/ the-rise-and-rise-of-global-shipping- luxury www.businessoffashion.com/news/ costs china/china-should-brace-for-higher- 70 Ibid. 92 BoF Interview with Stefan Larsson, luxury-goods-taxes-analysts-says 85 Jaana Remes, Steve Saxon, October 2021 71 Oxford Economics, Global Risk “What’s going on with shipping 58 Casey Hall, “Could a Chinese Survey, “Supply-chain disruption to rates?”, McKinsey, August 20, 93 Kim Bhasin, Jordyn Holman, Crackdown on ‘Excessive Incomes’ persist”, September 14, 2021 2021, https://www.mckinsey. and Henry Ren, “US Retailers See Damage Luxury Sales?”, The Business com/industries/travel-logistics- Millions in Sales Delays Amid Shipping of Fashion, August 24, 2021, https:// 72 Caila Schwartz, “U.S. Retailers Face and-infrastructure/our-insights/ Logjam”, Bloomberg, February 26, www.businessoffashion.com/ Extra $223B in Costs of Goods This whats-going-on-with-shipping-rates 2021, https://www.bloomberg.com/ briefings/china/will-chinas-calls-for- Holiday Shopping Season”, Salesforce, news/articles/2021-02-26/u-s- a-crackdown-on-excessive-incomes- July 20, 2021, https://www.salesforce. 86 Brian Baskin, Alexandra Mondalek, retailers-see-millions-in-sales-delays- damage-luxury-sales com/blog/holiday-shopping- “Why Price Inflation Is Coming to amid-shipping-logjam; James Davey, predictions/ Fashion”, The Business of Fashion, “ASOS boss exits as fast fashion retailer 59 Ibid. August 4, 2021, https://www. warns on profit”, Reuters, October 11, 73 BoF-McKinsey State of Fashion businessoffashion.com/articles/ 2021, https://www.reuters.com/world/ 60 “The World Bank in South Africa”, 2022 Survey retail/why-price-inflation-is-coming- uk/asos-says-ceo-nick-beighton-step- The World Bank, March 18, 2021, to-fashion; Vikram Alexei Kansara, down-2021-10-11/ https://www.worldbank.org/en/ 74 BoF Interview with Joseph Phi, “Why Luxury Brands Are Raising country/southafrica/overview#1 September 2021 Prices in a Pandemic”, The Business of 94 Erik Nordstrom, Nordstrom Q2 Fashion, May 15, 2020, https://www. 2021 Earnings Call, August 24, 2021 61 “Recovering from COVID-19 and 75 Olaf Storbeck, “Pandemic supply businessoffashion.com/briefings/ inequality: the experience of South chain problems could cost Adidas luxury/why-luxury-brands-are-raising- 95 Knut Alicke, Elena Dumitrescu, Africa.”, United Nations, May 2021, €500m in sales this year”, Financial prices-in-a-pandemic Markus Leopoldseder, Max Schlichter, https://www.un.org/development/ Times, August 5, 2021, https://www. “How great supply-chain organizations desa/dspd/wp-content/uploads/ ft.com/content/907df1b9-abe0-487e- 87 Kathrin Hille, John Reed, “Covid work”, McKinsey, September 24, 2020, sites/22/2021/05/Futshane_paper.pdf 96b1-164b82df7c87 surge in Vietnam hits global supply https://www.mckinsey.com/business- chains”, Financial Times, August functions/operations/our-insights/ 135

The State of Fashion 2022 how-great-supply-chain- https://www.businessoffashion.com/ 2021, https://www.businessoffashion. returning-office-workers-seek-sweet- organizations-work news/china/shenzhen-plans-to-be-a- com/articles/luxury/ spot-between-casual-and-formal duty-free-retail-hub travel-luxury-coronavirus-ecommerce- 96 Primrose Riordan, Harry china-luxury-tourism-duty-free 133 BoF-McKinsey State of Fashion Dempsey, Chris Giles, “Shipping 107 Chavie Lieber, “How Fashion is 2022 Survey. Rounded to the nearest bottlenecks set to prolong supply Targeting the Travel Rebound”, The 117 Louise Nichol, “The Real Reason whole number. chain turmoil”, Financial Times, Business of Fashion, June 2, 2021, Luxury Brands Are Investing in August 16, 2021, https://www.ft.com/ https://www.businessoffashion.com/ the Dubai Expo”, The Business 134 StyleSage e-commerce analytics, content/e1263950-1173-4832-a011- articles/luxury/how-fashion-is- of Fashion, September 30, 2021, StyleSage, https://app.stylesage.co/ ada04df1e93c targeting-the-travel-rebound https://www.businessoffashion. dashboard/home/trends/radar/ com/articles/global-markets/ top-100 97 “VF Corporation Announces 108 Sarah Joseph, “Dior’s first the-real-reason-luxury-brands-are- Regional Transformation Plan to exhibition in the Middle East investing-in-the-dubai-expo 135 BoF Interview with Geraldine Enable Long-term Growth in Asia”, is all set to take place in Qatar”, Wharry, October 2021 Business Wire, January 11, 2021, Emirates Woman, August 4, 2021, 118 Ibid. https://www.businesswire.com/ https://emirateswoman.com/ 136 StyleSage e-commerce analytics, news/home/20210111005417/en/ diors-first-exhibition-middle-east-set- 119 BoF interview with Shaway Yeh, StyleSage, https://app.stylesage.co/ VF-Corporation-Announces-Regional- take-place-qatar/ October 2021 dashboard/home/trends/radar/ Transformation-Plan-to-Enable-Long- top-100 term-Growth-in-Asia 109 Maghan McDowell, “Europe is still 120 BoF Interview with Avinash a bargain for luxury shoppers”, Vogue Wadhwani, October 2021 137 Cathaleen Chen, “Why Retailers 98 “Helena Helmersson, CEO at H&M, Business, August 14, 2019, https:// Are Embracing Fashion Week’s Sexiest finds purpose in retail”, The Do, https:// www.voguebusiness.com/companies/ 121 Annachiara Biondi, “When Trends”, The Business of Fashion, thedo.world/helena-helmersson-ceo- global-luxury-price-discrepancies- will European Luxury Recover?”, September 20, 2021, https://www. at-hm-finds-purpose-in-retail/ louis-vuitton-gucci-balenciaga Vogue Business, June 14, 2021, businessoffashion.com/articles/retail/ https://www.voguebusiness.com/ why-retailers-are-embracing-fashion- 99 Luca Solca, “The Anatomy of 110 Casey Hall, “The Real Reason consumers/european-luxury-market- weeks-sexiest-trends Travel Retail”, The Business of Louis Vuitton is Launching its Global recovery-2022 Fashion, July 31, 2015, https://www. Exhibition in Wuhan”, The Business 138 BoF Interview with Libby Wadle, businessoffashion.com/opinions/ of Fashion, October 29, 2020, https:// 122 Maria Rugolo, “Time to Buy: October 2021 retail/the-anatomy-of-travel-retail- www.businessoffashion.com/articles/ Current Wardrobes No Longer Getting market-luxury-goods china/the-real-reason-louis-vuitton- Us By”, NPD, April 28, 2021, https:// 139 Cathaleen Chen, “Why Retailers is-launching-its-global-exhibition- www.npd.com/news/blog/2021/ Are Embracing Fashion Week’s Sexiest 100 Urs Binggeli, Margaux Constantin, in-wuhan time-to-buy-current-wardrobes-no- Trends”, The Business of Fashion, Eliav Pollack, “COVID-19 tourism longer-getting-us-by/ September 20, 2021, https://www. spend recovery in numbers”, 111 Ritsuko Ando, Kim Coghill, businessoffashion.com/articles/retail/ McKinsey, October 20, 2020, https:// “More stores shutter in Tokyo’s 123 Lyst data analysis, September 20, why-retailers-are-embracing-fashion- www.mckinsey.com/industries/ high-end Ginza Six mall amid travel 2021, Lyst weeks-sexiest-trends travel-logistics-and-infrastructure/ bans”, Reuters, January 20, 2021, our-insights/covid-19-tourism-spend- https://www.reuters.com/business/ 124 StyleSage e-commerce analytics, 140 StyleSage e-commerce analytics, recovery-in-numbers healthcare-pharmaceuticals/more- StyleSage, https://app.stylesage.co/ StyleSage, https://app.stylesage.co/ stores-shutter-tokyos-high-end-ginza- dashboard/home/trends/radar/ dashboard/home/trends/radar/ 101 Limei Hoang, “Is The six-mall-amid-travel-bans-2021-01-20/ top-100 top-100 Future of Luxury Global Or Local?”, Luxury Society, June 112 “Q1 2021-2022 Earnings release 125 Cathaleen Chen, Tamison 141 Ashley Armstrong, “Shining 15, 2021, https://luxurysociety. - New financial materials on Global O’Connor, “The Revenge Shopping a light on Shein, the fastest riser com/en/articles/2021/06/ Blue website”, Global Blue, September Opportunity”, March 15, 2021, in online fashion”, The Times, future-luxury-global-or-local 3, 2021, https://www.globalblue. https://www.businessoffashion. September 13, 2021, https:// com/corporate/media/press/ com/articles/retail/ www.thetimes.co.uk/article/ 102 Zoe Suen, “How ‘Revenge Travel’ q1-2021-2022-earnings-release the-revenge-shopping-opportunity shining-a-light-on-shein-the-fastest- Will Impact Luxury Sales”, The riser-in-online-fashion-qnw3h5hd2 Business of Fashion, April 30, 2021, 113 “Americans - and Advertisers - are 126 StyleSage e-commerce analytics, https://www.businessoffashion.com/ hopeful about travel”, Nielsen, April 22, StyleSage, https://app.stylesage.co/ 142 Priya Elan, “‘Worst of the worst’: articles/china/what-will-revenge- 2021, https://www.nielsen.com/us/en/ dashboard/home/trends/radar/ why is fast fashion retailer Shein travel-look-like-for-luxury insights/article/2021/americans-and- top-100 launching a reality show?”, The advertisers-are-hopeful-about-travel/; Guardian, August 29, 2021, https:// 103 Caoimhe Gordon, “Tourism to Chavie Lieber, “How Fashion is 127 Ibid. www.theguardian.com/fashion/2021/ localism – how retailers in prime Targeting the Travel Rebound”, The aug/29/fast-fashion-retailer-shein- cities are shifting strategies”, Retail Business of Fashion, June 2, 2021, 128 StyleSage e-commerce analytics, design-reality-show Week, August 26, 2021, https://www. https://www.businessoffashion.com/ StyleSage, https://app.stylesage.co/ retail-week.com/customer/tourism- articles/luxury/how-fashion-is- dashboard/home/trends/radar/ 143 BoF Interview with Geraldine to-localism-how-retailers-in-prime- targeting-the-travel-rebound top-100 Wharry, October 2021 cities-are-shifting-strategies/7040441. article 114 Martin Moodie, “Dufry awarded 129 Cathaleen Chen, “The Shoe Styles 144 “Global trends among Generation new duty free & duty paid contracts That Will Rule the Summer”, The Z”, Global Web Index, 2021, 104 Queennie Yang, “Hainan’s at Salgado Filho International Business of Fashion, April 30, 2021, https://www.gwi.com/reports/ Duty-Free Retail Sales Surge 257% Airport, Brazil”, The Moodie Davitt https://www.businessoffashion.com/ global-trends-among-gen-z in H1”, The Business of Fashion, Report, March 25, 2021, https:// articles/retail/the-shoe-styles-that- August 10, 2021, https://www. www.moodiedavittreport.com/ will-rule-the-summer 145 A term first coined by Sara Wilson businessoffashion.com/news/china/ dufry-awarded-new-duty-free-duty- in Harvard Business Review, April hainans-duty-free-retail-sales-surge- paid-contracts-at-salgado-filho- 130 Ibid. 2020 257-in-h1 international-airport-brazil/ 131 Chavie Lieber, “Selling ‘Office’ 146 BoF interview with Robert Triefus, 105 Aimee Kim, Alex Sawaya, and 115 “Dufry Wins New Duty-Free and Clothes to the Work-From- September 2021 Michael Straub, “Hainan’s $40 Duty-Paid Concession Contracts at Home Woman”, The Business of Billion Prize: The New Battleground Salgado Filho International Airport Fashion, May 4, 2021, https://www. 147 “Global Games Market Forecast”, for Global Luxury”, McKinsey, July in Porto Alegre, Brazil”, Dufry, March businessoffashion.com/articles/retail/ Newzoo, June 2021, https://newzoo. 22, 2021, https://www.mckinsey. 21, 2021, https://www.dufry.com/ selling-office-clothes-to-the-work- com/key-numbers/ com/cn/our-insights/our-insights/ en/press_release/2021-03-25/dufry- from-home-woman hainans-40-billion-prize-the-new- wins-new-duty-free-and-duty-paid- 148 Christopher Travers, “Epic battleground-for-global-luxury concession-contracts-salgado-filho 132 Lauren Cochrane, “Returning office Games to Pour $1 Billion Into workers seek sweet spot between casual Metaverse Development, Crushing 106 Queennie Yang, “Shenzhen Plans 116 Chantal Fernandez, “What Luxury and formal”, The Guardian, August Traditional Social Networks”, Virtual to Be a Duty Free Retail Hub”, The Can Do About the Tourism Crisis”, 2, 2021, https://www.theguardian. Humans, April 20, 2021, https:// Business of Fashion, March 19, 2021, The Business of Fashion, July 20, com/fashion/2021/aug/02/ www.virtualhumans.org/article/ 136

epic-games-to-pour-1-billion-into- 160 Harriet Lloyd-Smith, “Louis Worth-604-5-Billion-by-2027-COVID- 180 Sarah Perez, “Instagram launches metaverse-development-crushing- Vuitton marks 200th birthday with 19-Updated.html a new section for shopping product traditional-social-networks art video game”, Wallpaper, August drops”, TechCrunch, May 26, 2021, 3, 2021, https://www.wallpaper.com/ 170 Casey Hall, “Weibo Enters the https://techcrunch.com/2021/05/26/ 149 “Transcendent Retail: APAC”, art/louis-vuitton-video-game-200th- E-Commerce Race. Should Brands be instagram-launches-a-new-section- Jing Daily & Wunderman Thompson anniversary; Scott Nover, Excited or Cautious?”, The Business for-shopping-product-drops/ Intelligence, July 15, 2021, https:// “Months after the Beeple sale, of Fashion, May 4, 2020, https://www. jingdaily.com/downloads/ Christie’s is still betting on NFTs”, businessoffashion.com/articles/china/ 181 Maghan McDowell, “Snapchat transcendent-retail-apac/; Jack Quartz, July 30, 2021, https:// weibo-enters-e-commerce-race- boosts AR try-on tools: Farfetch, Prada Stanley, “Balenciaga Invites Players to qz.com/2039999/christies-is-riding- should-brands-be-excited-or-cautious dive in”, Vogue Business, May 21, 2021, Explore the ‘Afterworld’ for Fall 2021 the-nft-wave-beyond-the-beeple-sale/ https://www.voguebusiness.com/ Collection”, Hypebeast, December 7, 171 Andrew Lipsman, “US social technology/snapchat-boosts-ar-try-on- 2020, https://hypebeast.com/2020/12/ 161 “Burberry Drops NFT Collection in commerce is following in China’s tools-farfetch-prada-dive-in balenciaga-fall-2021-collection- Mythical Games’ Blankos Block Party”, footsteps”, eMarketer, https://www. afterworld-age-of-tomorrow-video- Burberry, August 4, 2021, https:// emarketer.com/content/us-social- 182 William White, “Walmart game www.burberryplc.com/en/news/ commerce-following-chinas-footsteps Doubles Down on TikTok Shopping, brand/2021/Blankos.html Hosts All-New Live Stream 150 Marc Bain, “Balenciaga and 172 Jasmine Enberg, “Social Commerce Shopping Event”, Walmart, March Fortnite Are a Match Made in the 162 “Farfetch teams with DRESSX Forecasts 2021; How a Trend ‘Made 9, 2021, https://corporate.walmart. Metaverse”, The Business of Fashion, for pre-order collection campaign”, in China’ Is Shaping Up in the US”, com/newsroom/2021/03/09/ September 20, 2021, https://www. Retail Tech Innovation Hub, August 26, eMarketer, June 28, 2021, https:// walmart-doubles-down-on-tiktok- businessoffashion.com/articles/ 2020, https://retailtechinnovationhub. www.emarketer.com/content/ shopping-hosts-all-new-live-stream- luxury/balenciaga-and-fortnite-are-a- com/home/2021/8/26/ social-commerce-forecasts-2021 shopping-event match-made-in-the-metaverse farfetch-teams-with-dressx-for-pre- order-collection-campaign; Dana 173 Kathryn Lundstrom, “Nearly Half 183 Sarah Perez, “TikTok expands 151 McKinsey interview with Daria Thomas, “Dolce & of TikTokers Are Buying Stuff From Shopify partnership, pilots TikTok Shapovalova, October 2021 Gabbana Is Bringing NFTs to the Brands They See on the Platform”, Shopping in US, UK and Canada”, Traditional World of Couture”, AdWeek, May 3, 2021 https://www. TechCrunch, August 24, 2021, https:// 152 BoF interview with Daria Vogue UK, August 27, 2021, https:// adweek.com/brand-marketing/ techcrunch.com/2021/08/24/tiktok- Shapovalova, September 2021 www.vogue.co.uk/fashion/article/ nearly-half-of-tiktokers-are-buying- expands-shopify-partnership-pilots- dolce-and-gabbana-nfts-couture; stuff-from-brands-they-see-on-the- tiktok-shopping-in-us-uk-and-canada/ 153 Whitney Bauck, “Immaterial gains: “Farfetch teams with DRESSX for platform/ the NFT boom comes for fashion”, pre-order collection campaign”, Retail 184 M.C. Nanda, “The Gamer Chat App Financial Times, August 25, 2021, Tech Innovation Hub, August 26, 174 “Social Commerce 2021: Social Influencing Menswear”, The Business https://www.ft.com/content/556efec9- 2020, https://retailtechinnovationhub. media and ecommerce convergence of Fashion, June 21, 2021, https:// c391-4a40-84a0-76231b4ce065 com/home/2021/8/26/ trends bring growth opportunity for www.businessoffashion.com/articles/ farfetch-teams-with-dressx-for-pre- brands”, Insider Intelligence, July 27, technology/the-gamer-chat-app- 154 Sophie Soar, “How I Became... order-collection-campaign 2021, http://www.insiderintelligence. influencing-menswear Managing Director at Dimension com/insights/social-commerce-brand- Studio”, The Business of 163 Tanzeel Akhtar, “Dolce & trends-marketing-strategies 185 Zoe Suen, “Livestreaming: How Fashion, May 10, 2021, https:// Gabbana’s First NFT Collection sells Brands Can Make It Work”, The www.businessoffashion.com/ for $5.7m”, Coindesk, September 30, 175 Zoe Suen, “Livestreaming: How Business of Fashion, September 9, articles/workplace-talent/ 2021, https://www.coindesk.com/ Brands Can Make It Work”, The 2021, https://www.businessoffashion. how-i-became-executive-producer-of- business/2021/09/30/dolce-gabbanas- Business of Fashion, September 9, com/case-studies/technology/ balenciagas-afterworld first-nft-collection-sells-for-57-m/ 2021, https://www.businessoffashion. livestreaming-how-brands-can-make- com/case-studies/technology/ it-work-download-the-case-study 155 Rachel Douglass, “Tommy 164 M.C. Nanda, “The Limits of livestreaming-how-brands-can-make- Hilfiger partners with virtual Virtual Fashion”, The Business it-work-download-the-case-study 186 Casey Hall, “H&M Invests in marketing company for future of Fashion, April 26, 2021, Indian Social Commerce Player Trell”, digital ventures”, Fashion United, https://www.businessoffashion. 176 Arun Arora, Daniel Glaser, Aimee The Business of Fashion, July 15, 2021, September 23, 2021, https:// com/articles/technology/ Kim, Philipp Kluge, Sajal Kohli, https://www.businessoffashion.com/ fashionunited.uk/news/fashion/ the-limits-of-virtual-fashion Natalya Sak, “It’s showtime! How news/global-markets/hm-invests-in- tommy-hilfiger-partners-with-virtual- live commerce is transforming the indian-social-commerce-player-trell marketing-company-for-future-digital- 165 Joe Tidy, “Fake Banksy NFT shopping experience”, McKinsey, ventures/2021092357870 sold through artist’s website for July 21, 2021, https://www. 187 “#BoFLIVE: Fashion’s New £244k”, BBC News, August 31, mckinsey.com/business-functions/ Paths to Purchase”, The Business of 156 Angelica Villa, “Beeple NFT fetches 2021, https://www.bbc.co.uk/news/ mckinsey-digital/our-insights/ Fashion, November 5, 2020, https:// unprecedented $69.3m at Christies”, technology-58399338 its-showtime-how-live-commerce-is- www.businessoffashion.com/videos/ Art News, March 11, 2021, https:// transforming-the-shopping-experience retail/boflive-fashions-new-paths-to- www.artnews.com/art-news/market/ 166 M.C. Nanda, “The Limits of purchase beeple-makes-69-million-1234586424/ Virtual Fashion”, The Business 177 Zoe Suen, “Livestreaming: How of Fashion, April 26, 2021, Brands Can Make It Work”, The 188 Zoe Suen, “Impulsive, Addictive 157 Yashu Gola, “OpenSea trading https://www.businessoffashion. Business of Fashion, September 9, 2021, Social Commerce Is China’s volume explodes 76,240% YTD amid com/articles/technology/ https://courses.businessoffashion. Latest Craze”, The Business of NFT boom”, Cointelegraph, August 13, the-limits-of-virtual-fashion com/courses/take/case-study- Fashion, May 1, 2018, https://www. 2021, https://cointelegraph.com/news/ livestreaming-global-ecommerce/ businessoffashion.com/articles/china/ opensea-trading-volume-explodes-76- 167 Sanika Gothivarekar, “Social pdfs/27711527-livestreaming-how- impulsive-addictive-social-commerce- 240-ytd-amid-nft-boom media: As much for shopping as for brands-can-make-it-work is-chinas-latest-craze socializing”, Bazaarvoice, May 18, 2021, 158 “What the NFT Gold Rush https://www.bazaarvoice.com/blog/ 178 Nazmul Islam, Oscar Orozco, 189 Lauren Thomas, “Nordstrom Means for Fashion”, The Business of social-media-is-for-shopping/ “Some brand new Q2 forecasts, NCAA debuts platform for shoppable shows Fashion, May 14, 2021, https://www. brand deals, and is now the right time as more retailers experiment with businessoffashion.com/podcasts/ 168 “US social commerce sales for OOH ads”, eMarketer, July 29, livestreaming”, CNBC, March 17, 2021, technology/nft-fashion-podcast 2019-2025”, eMarketer, May 2021, 2021, https://www.emarketer.com/ https://www.cnbc.com/2021/03/17/ https://www.emarketer.com/ content/podcast-some-brand-new-q2- nordstrom-jwn-to-launch-shoppable- 159 Chunk Dobrosielski, “Digital-Only chart/247601/us-social-commerce- forecasts-ncaa-brand-deals-now-right- livestreaming-network-.html Fashion Firm Teams With Adidas, sales-2017-2023-billions-change time-ooh-ads?ECID=SOC1001 Karlie Kloss on NFT Auction”, 190 “Fashion’s new tastemakers”, Sourcing Journal, March 24, 2021, 169 “Global Social Commerce 179 Rimma Kats, “UK Social Buyer Vogue Business June 9, 2021, https:// https://sourcingjournal.com/topics/ Market Worth $604.5 Billion Audience Will Grow to 10 Million www.voguebusiness.com/fashion/ technology/the-fabricant-nft- by 2027 - COVID-19 Updated”, This Year”, eMarketer, June 4, 2020, fashions-new-tastemakers digital-fashion-karlie-kloss-adidas- GlobeNewswire, September 7, 2020, https://www.emarketer.com/content/ blockchain-269822/ https://www.globenewswire.com/ uk-social-buyer-audience-will-grow- 191 “A new textiles economy: news-release/2020/09/07/2089546/0/ to-10-million-this-year Redesigning fashion’s future”, en/Global-Social-Commerce-Market- Ellen MacArthur Foundation, 2017, 137

The State of Fashion 2022 https://ellenmacarthurfoundation. 204 Prachi Patel, “Shay Sethi talks fashion-is-overselling-circularity- Greenhouse gas emissions”, McKinsey org/a-new-textiles-economy about the future of fabric recycling”, and-recycling-but-there-is- & Company and Global Fashion C&en, March 14, 2021, https://cen. hope/?sh=267787605d95 Agenda, August 26, 2020, https:// 192 “Increasing the circularity in acs.org/environment/recycling/ www.mckinsey.com/industries/retail/ textiles, plastics and/or electronics Shay-Sethi-talks-future-fabric/99/ 218 BoF Interview with Claire our-insights/fashion-on-climate value chains”, European Commission, i9; John Mowbray, “Eastman eyes Bergkamp, October 2021 June 22, 2021, https://ec.europa. textile for chemical recycling”, 232  Jonathan Woetzel, Dickon Pinner eu/info/funding-tenders/ Ecotextile, February 4, 2021, https:// 219 Ibid. et al, “Climate risk and response: opportunities/portal/screen/ www.ecotextile.com/2021020427337/ Physical hazards and socioeconomic opportunities/topic-details/ materials-production-news/eastman- 220 “Companies Taking Action”, impacts”, McKinsey & Company, horizon-cl6-2021-circbio-01-04 eyes-textiles-for-chemical-recycling. Science Based Targets, October 29, January 16, 2020, https://www. html 2021, https://sciencebasedtargets.org/ mckinsey.com/business-functions/ 193 “Fashion on Climate – How the companies-taking-action sustainability/our-insights/ industry can urgently act to reduce its 205 “Two champions of post- climate-risk-and-response-physical- Greenhouse gas emissions”, McKinsey consumer textile recycling joining 221 “Companies Taking Action”, hazards-and-socioeconomic-impacts & Company and Global Fashion forces”, Lenzing, June 2, 2021, https:// Science Based Targets, October 19, Agenda, August 26, 2020, https:// www.lenzing.com/newsroom/ 2021, https://sciencebasedtargets.org/ 233 “Global Warming of 1.5 degrees”, www.mckinsey.com/industries/retail/ press-releases/press-release/ companies-taking-action#table IPCC Special Report, 2019, https:// our-insights/fashion-on-climate two-champions-of-post-consumer- www.ipcc.ch/sr15/; Harry Bowcott, textile-recycling-joining-forces 222 “Global Climate Action at COP26”, Lori Fomenko, Alastair Hamilton, 194 “Preferred Fiber & Materials United Nations Climate Change, Mekala Krishnan, Mihir Mysore, Alexis Market Report 2021”, Textile 206 “HKRITA Green Machine https://unfccc.int/climate-action/ Trittipo, Oliver Walker, “Protecting Exchange, August 17, 2021, for Isko”, Innovation in Textiles, global-climate-action-at-cop-26 people from a changing climate: https://textileexchange.org/ July 7, 2021, https://www. The case for resilience”, McKinsey, textile-exchange-preferred-fiber-and- innovationintextiles.com/ 223 “AR6 Climate Change 2021: November 8, 2021, https://www. materials-market-report-2021/ hkrita-green-machine-for-isko/ The Physical Science Basis”, IPCC, mckinsey.com/business-functions/ August 9, 2021, https://www.ipcc.ch/ sustainability/our-insights/ 195 Jasmin Malik Chua, “Fashion Can’t 207 Tanuvi Joe, “Circular fashion: assessment-report/ar6/ protecting-people-from-a-changing- Solve the Ocean Plastic Problem”, The HKRITA, H&M Set Up Green Machine climate-the-case-for-resilience Business of Fashion, December 22, To Produce Garments Out of Recycled 224 “Nationally determined 2020, https://www.businessoffashion. Polyester”, Green Queen, January 25, contributions under the Paris 234 For further details on how a com/articles/sustainability/fashion- 2021, https://www.greenqueen.com. Agreement. Synthesis report by the changing climate will impact lives cant-solve-the-ocean-plastic-problem hk/circular-fashion-hkrita-hm-set-up- secretariat”, UNFCCC, September and livelihoods, see “Protecting green-machine-to-produce-garments- 17, 2021, https://unfccc.int/ people from a changing climate: 196 “EU strategy for sustainable out-of-recycled-polyester/ documents/306848 the case for resilience”, McKinsey, textiles”, European Commission, November 8, 2021, https://www. https://ec.europa.eu/info/law/ 208 Ben Smee, “Recycling textile 225 “Fashion on Climate – How the mckinsey.com/business-functions/ better-regulation/have-your-say/ waste: ‘A solution exists, we can’t industry can urgently act to reduce its sustainability/our-insights/ initiatives/12822-EU-strategy-for- go backwards’”, The Guardian, May Greenhouse gas emissions”, McKinsey protecting-people-from-a-changing- sustainable-textiles_en 29, 2021, https://www.theguardian. & Company and Global Fashion climate-the-case-for-resilience com/environment/2021/may/30/ Agenda, August 26, 2020, https:// 197 “Parliamentary questions”, recycling-textile-waste-a-solution- www.mckinsey.com/industries/retail/ 235 Jonathan Woetzel, Dickon European Parliament, November 16, exists-we-cant-go-backwards our-insights/fashion-on-climate Pinner et al, “Will India get too hot to 2020, https://www.europarl.europa.eu/ work?”, McKinsey Global Institute, doceo/document/E-9-2020-004882- 209 BoF Interview with Ronna Chao, 226 “A new textiles economy: November 25, 2020, https://www. ASW_EN.html September 2021 Redesigning fashion’s future”, mckinsey.com/business-functions/ Ellen MacArthur Foundation, 2017, sustainability/our-insights/ 198 BoF Interview with Patrik 210 “Textiles 2030 Roadmap”, https://ellenmacarthurfoundation. will-india-get-too-hot-to-work Lundstrom, September 2021 WRAP, April 25, 2021, https:// org/a-new-textiles-economy wrap.org.uk/resources/guide/ 236 Uma Pal, Amanda Rycerz and 199 “Facilitating a Circular Economy textiles-2030-roadmap 227 “Fashion Industry Charter for Álvaro Linares, “Physical Climate for Textiles”, NIST, September Climate Action: Progress Report”, Risk for Global Cotton Production”, 2021, https://www.nist.gov/ 211 “Fibersort launches to revolutionise Fashion Charter, https://www. Global Analysis by Acclimatise UK, news-events/events/2021/09/ recycling of post-consumer textiles”, fashioncharter.org/ June, 2021, http://www.acclimatise. facilitating-circular-economy-textiles Innovation in Textiles, March 11, 2020, uk.com/wp-content/uploads/2021/06/ https://www.innovationintextiles.com/ 228 “Climate Action Strategy 2025”, Cotton2040-GAReport-FullReport- 200 “Brands join forces for circularity fibersort-launches-to-revolutionise- H&M Group, July 2018; https:// highres.pdf in Bangladesh”, Innovation in recycling-of-postconsumer-textiles hmgroup.com/sustainability/circular- Textiles, April 23, 2021, https://www. and-climate-positive/climate/; 237 For further details on how a innovationintextiles.com/brands-join- 212 BoF Interview with Patrik “Climate Action Strategy 2025”, Levi changing climate will impact lives forces-for-circularity-in-bangladesh/ Lundstrom, September 2021 Strauss & Co, August 2018, https:// and livelihoods, see “Protecting www.levistrauss.com/wp-content/ people from a changing climate: 201 “Preferred Fiber & Materials 213 BoF Interview with Claire uploads/2018/07/LSCO_Climate_ the case for resilience”, McKinsey, Market Report 2021”, Textile Bergkamp, October 2021 Action_Strategy_2025.pdf November 8, 2021, https://www. Exchange, August 17, 2021, mckinsey.com/business-functions/ https://textileexchange.org/ 214 “The Jeans Redesign: Insights 229 Lululemon Impact Agenda, sustainability/our-insights/ textile-exchange-preferred-fiber-and- from the first two years”, Ellen October 2020, https://pnimages. protecting-people-from-a-changing- materials-market-report-2021/ MacArthur Foundation, 2021, https:// lululemon.com/content/dam/ climate-the-case-for-resilience ellenmacarthurfoundation.org/ lululemon/www-images/Footer/ 202 “About The Billie system”, the-jeans-redesign Sustainability/lululemon_ 238 “ECB economy-wide climate stress The Billie Upcycling, https:// ImpactAgenda_October202023. test”, ECB Occasional Paper Series No. thebillieupcycling.com/meet-billie/ 215 “Our Circular Design Software pdf; “Recycled Nylon and Polyester”, 281, September, 2021, https://www. helps your fashion brand become Stella McCartney, https://www. ecb.europa.eu/pub/pdf/scpops/ecb. 203 “Renewcell and Beyond Retro sustainable”, Circular Fashion, https:// stellamccartney.com/gb/en/ op281~05a7735b1c.en.pdf partner on textile-to-textile recycling”, circular.fashion/en/software/brands. sustainability/recycled-nylon- Renewcell, November 3, 2020, html polyester.html 239 “Handle with Care: Understanding https://www.renewcell.com/en/ the hidden environmental costs of renewcell-and-beyond-retro-partner- 216 BoF Interview with Shaway Yeh, 230 “A brief history of Flyleather and cotton”, World Wildlife Magazine, on-textile-to-textile-recycling/; Brett October 2021 Nike’s partnership with ELeather”, Spring, 2014, https://www. Mathews, “Levi’s and Re:newcell ELeather, https://www.eleathergroup. worldwildlife.org/magazine/issues/ partner on Circulose jeans”, Apparel 217 Brooke Roberts-Islam, “Fashion Is com/a-brief-history-of-nikes- spring-2014/articles/handle-with-care; Insider, July 22, 2020, https:// Overselling Circularity And Recycling— partnership-with-eleather/ “Environmental impact of the textile apparelinsider.com/levis-and- But There Is Hope”, Forbes, October 1, and clothing industry”, European renewcell-partner-on-circulose-jeans/ 2021, https://www.forbes.com/sites/ 231 “Fashion on Climate – How the Parliamentary Research Service, brookerobertsislam/2021/10/01/ industry can urgently act to reduce its January, 2019, europarl.europa.eu. 138

240 “Presenting Gucci’s Nature Preuss, “Armedangels integrates Constantin Will Certify All Watches retail-consumer/neiman-marcus-says- Positive Climate Strategy”, Circularity.ID into clothing”, With Blockchain Technology Starting notified-46-mln-customers-about- Equilibrium, January 26, 2021, https:// Fashion United, September 2, in 2021”, November 5, 2020, https:// data-breach-2021-09-30/ equilibrium.gucci.com/natural- 2021, https://fashionunited. robbreport.com/style/watch-collector/ climate-solutions-portfolio-projects/ de/nachrichten/business/ vacheron-constantin-blockchain- 273 BoF Interview with Lance Spitzner, armedangels-integriert-circularity-id- certification-1234579311/ October 2021 241 “The Colour Story Collection”, in-kleidung/2021090242580 H&M, March 29, 2021, https:// 263 Tom Phillips, “Prada to 274 “Site da Renner sai do ar após www2.hm.com/en_gb/life/culture/ 253 “Digital Passports for Clothing”, leverage NFC to authenticate ataque hacker – entenda o caso” inside-h-m/colour-story-innovation. The Fast Forward BSR, 2021, https:// fashion products”, NFCW, August [Translated “Renner’s website goes html www.bsr.org/en/emerging-issues/ 31, 2021, https://www.nfcw.com/ down after hacker attack – understand digital-passports-for-clothing nfc-world/prada-to-leverage-nfc- the case”], CNN Brasil, August 20, 242 Anna Granskog, Libbi Lee, to-authenticate-fashion-products/; 2021, https://www.cnnbrasil.com.br/ Karl-Hendrik Magnus, Corinne 254 “AAFA Advocates for Labeling Tom Phillips, “Paco Rabanne launches business/site-da-renner-continua- Sawers, “Consumer Sentiment on Modernization”, American Apparel first NFC-enabled ‘connected fora-do-ar-apos-ataque-hacker/ Sustainability in Fashion”, McKinsey, & Footwear Association, June fragrance’”, NFCW, July 6, 2021, July 2020, https://www.mckinsey. 10, 2021, https://www.aafaglobal. https://www.nfcw.com/nfc-world/ 275 Supantha Mukherjee, Colm com/industries/retail/our-insights/ org/AAFA/AAFA_News/2020_ paco-rabanne-launches-first-nfc- Fulton, “Coop, other ransomware-hit survey-consumer-sentiment-on- Letters_and_Comments/ enabled-connected-fragrance/; firms, could take weeks to recover, sustainability-in-fashion AAFA_Advocates_for_Labeling_ Nazanin Lankarani, “Tell your Watch say experts”, July 5, 2021, https:// Modernization.aspx to Hold that Pose”, The New York www.reuters.com/technology/ 243 “Global Landscape of Climate Times, November 3, 2020, https:// coop-other-ransomware-hit-firms- Finance, 2019”, Climate Policy 255 Diana Lee, Rahul Malik, “The www.nytimes.com/2020/11/03/ could-take-weeks-recover-say- Initiative, November 7, 2019, https:// Future of Fashion Resale”, BoF fashion/watches-authentication-apps- experts-2021-07-05/ www.climatepolicyinitiative.org/ Insights, July 2021, https://www. switzerland.html publication/global-landscape-of- businessoffashion.com/reports/retail/ 276 “Retail giant E-Land closes nearly climate-finance-2019/ the-future-of-fashion-resale-report- 264 Gerry Hough, Praveen Adhi, half of stores due to ransomware bof-insights Tyler Harris, “RFID’s Renaissanse attack”, The Korea Times, November 244 “UNEP Adaptation in Retail”, McKinsey, May 7, 2021, 22, 2020, https://www.koreatimes. Gap Report”, 2016, https:// 256 Chavie Lieber, “Resale Sites Race https://www.mckinsey.com/ co.kr/www/tech/2020/11/694_299692. unepdtu.org/publications/ to Staff Up in the Fight Against Fakes”, industries/retail/our-insights/ html the-adaptation-finance-gap-report/ The Business of Fashion, July 15, 2021, rfids-renaissance-in-retail?cid=soc-web https://www.businessoffashion.com/ 277 Kathryn Rattigan, “FabFitFun 245 “Regenerative Fund for articles/luxury/resale-sites-race-to- 265 Rachel Deeley, “Fashion’s Settles Class Action for $625,000 for Nature”, Kering, https://www. staff-up-in-the-fight-against-fakes Untapped Opportunity to Fight Alleged Data Security Failures”, The kering.com/en/sustainability/ Climate Change”, The Business of National Law Review, September 16, safeguarding-the-planet/ 257 Chavie Lieber, “Resale Sites Race Fashion, February 4, 2021, https:// 2021, https://www.natlawreview.com/ regenerative-fund-for-nature/ to Staff Up in the Fight Against Fakes”, www.businessoffashion.com/articles/ article/fabfitfun-settles-class-action- The Business of Fashion, July 15, 2021, sustainability/fashions-untapped- 625000-alleged-data-security-failures 246 Emily Farra, “Stella McCartney, https://www.businessoffashion.com/ opportunity-to-fight-climate-change Burberry, and Kering Forge a New articles/luxury/resale-sites-race-to- 278 BoF Interview with Stefan Larsson, Kind of Sustainable Partnership”, staff-up-in-the-fight-against-fakes 266 “LVMH partners with other major September 2021 Vogue Business, January 22, 2021, luxury companies on Aura, the first https://www.vogue.com/article/ 258 “U.S. Men are More Likely than global luxury blockchain”, LVMH Press 279 Theo Leggett, “Amazon hit with apparel-impact-institute-kering-stella- Women to Buy Counterfeits, According Release, April 20, 2021, https://www. $886m fine for alleged data law breach”, mccartney-burberry-sustainable- to New Survey”, The Fashion Law, lvmh.com/news-documents/news/ BBC, July 30, 2021, https://www.bbc. fashion-partnership August 27, 2021, https://www. lvmh-partners-with-other-major- co.uk/news/business-58024116 thefashionlaw.com/u-s-men-are- luxury-companies-on-aura-the-first- 247 “Zalando Invests in Textile more-likely-than-women-to-buy- global-luxury-blockchain/ 280 Dimitri Sirota, “Why U.S. Regeneration Technology Group counterfeits-according-to-new-survey/ Companies Should Know About Infinited Fiber Company”, Zalando, 267 M.C. Nanda, Robert Williams, The CCPA And New York SHIELD September 28, 2021, https://corporate. 259 “Trade in fake goods is now 3.3% “Cartier, Prada Link Up with LVMH in Act”, September 15, 2020, zalando.com/en/newsroom/ of world trade and rising”, OECD, Blockchain Alliance”, April 20, 2021, https://www.forbes.com/sites/ news-stories/zalando-invests-textile- March 18, 2019, https://www.oecd.org/ https://www.businessoffashion.com/ forbestechcouncil/2020/09/16/ regeneration-technology-group- newsroom/trade-in-fake-goods-is- articles/technology/cartier-prada-link- why-us-companies-should-know- infinited-fiber-company now-33-of-world-trade-and-rising.htm up-with-lvmh-in-blockchain-alliance about-the-ccpa-and-new-york-shield- act/?sh=6d75cf9e32e1 248 Catherine Salfino, “How to 260 “LVMH, Richemont and Prada 268 “The State of Fashion 2021”, The Cultivate Loyalty with Next Gen Team Up for New Blockchain Business of Fashion and McKinsey, 281 Noah Ramirez, “Brazil’s national Shoppers”, Sourcing Journal, August Venture Aimed at Tracing, December 2, 2020, https://www. data privacy legislation comes 12, 2021, https://sourcingjournal. Authenticating Luxury Goods”, businessoffashion.com/reports/ into force”, Osano, July 20, 2021, com/topics/lifestyle-monitor/ The Fashion Law, April 21, 2021, news-analysis/download-the-report- https://www.osano.com/articles/ customer-loyalty-gen-z-shoppers- https://www.thefashionlaw.com/ the-state-of-fashion-2021 lgpd-enforcement-begins tiktok-salesforce-covid19-cotton- lvmh-richemont-and-prada-team-up- clothing-295476/ for-new-blockchain-venture-aimed-at- 269 Patricia Stainer, “Alarming 282 Josh Horwitz, “China passes tracing-authenticating-luxury-goods/; Cybersecurity Statistics for 2021 new personal data privacy law, to 249 Douglas Broom, “This start-up “China Inspection Group first and the Future“, April 29, 2021, take effect Nov. 1”, Reuters, August is making digital passports… for launched the luxury identification and https://www.retarus.com/blog/en/ 20, 2021, https://www.reuters.com/ clothes. Here’s what that means for the traceability signature, opening a new alarming-cybersecurity-statistics-for- world/china/china-passes-new- fashion industry”, World Economic era of authenticity protection”, PR 2021-and-the-future/ personal-data-privacy-law-take-effect- Forum, May 18, 2021, https://www. Newswire, April 20, 2020, https://www. nov-1-2021-08-20/ weforum.org/agenda/2021/05/ prnasia.com/story/277861-1.shtml 270 Data Breach Investigations Report tracking-fashion-clothes-sustainable/ 2021, Verizon, 2021 283 BoF Interview with Susan Scafidi, 261 Joelle Diderich, Natalia Theodosi, October 2021 250 Whitney Bauck, “Immaterial gains: “Why Luxury Brands Are Sitting Out 271 Rachel Abrams, Vindu Goel, “Card the NFT boom comes for fashion”, the Resale Market Boom”, WWD, Data Stolen From 5 Million Saks and 284 Henning Soller, James Kaplan, Financial Times, August 25, 2021, September 1, 2021, https://wwd. Lord & Raylor customers”, The New Lisa Donchak, Venky Anant, “The https://www.ft.com/content/556efec9- com/fashion-news/designer-luxury/ York Times, April 1, 2018, https://www. consumer-data opportunity and c391-4a40-84a0-76231b4ce065; luxury-brands-reluctant-to-join- nytimes.com/2018/04/01/technology/ the privacy imperative”, McKinsey, McKinsey proprietary analysis resale-market-1234898376/ saks-lord-taylor-credit-cards.html April 27, 2020, https://www. mckinsey.com/business-functions/ 251 Ibid. 262 “IBM and Arianee join forces”, 272 “Neiman Marcus says notified risk-and-resilience/our-insights/ Arianee Press Release, July 8, 2021, 4.6 mln customers about data the-consumer-data-opportunity-and- 252 Circularity.ID White https://www.arianee.org/newsfeed/ breach”, Reuters, September 30, 2021, the-privacy-imperative Paper, December 2019; Simone ibm; Paige Reddinger, “Vacheron https://www.reuters.com/business/ 139

The State of Fashion 2022 285 McKinsey Future of Wellness 298 Sheena Butler-Young, “Can 312 “Amazon hiring 125,000 US 327 Chantal Fernandez, “Retailers Survey, August 2020, N=1,500+ per Fashion Compete with Tech for workers at increased average Pledged Action on Diversity. market Executive Talent?”, The Business hourly wage,” AlJazeera.com, Delivery Is Proving More of Fashion, September 2, 2021, September 14, 2021, https://www. Elusive”, The Business of Fashion, 286 “Cost of a Data Breach Report https://www.businessoffashion. aljazeera.com/economy/2021/9/14/ February 8, 2021, https://www. 2021”, IBM, 2021 com/articles/workplace-talent/ amazon-to-hire-125000-us-workers- businessoffashion.com/articles/retail/ can-fashion-compete-with-tech-for- at-increased-hourly-wage retailers-pledged-action-on-diversity- 287 BoF Interview with Lance Spitzner, executive-talent delivery-is-proving-more-elusive October 2021 313 Cathaleen Chen, “When Your 299 “The State of Fashion 2021”, The Corporate Diversity Strategy Isn’t 328 Baselined to 2010 288 “Data breaches up 3 percent in Q2 Business of Fashion and McKinsey, Enough”, The Business of Fashion, 2021”, Identity Theft Resource Center, December 2, 2020, https://www. June 22, 2020, https://www. 329 Estimated for the companies with July 8, 2021, https://www.idtheftcenter. businessoffashion.com/reports/ businessoffashion.com/articles/ NOPAT forecast based on analyst org/data-breaches-are-up-38-percent- news-analysis/download-the-report- workplace-talent/fashion-diversity- consensus. Based on NOPAT for in-q2-2021-the-identity-theft- the-state-of-fashion-2021 inclusion-corporate-strategies industry and WACC weighted by EV resource-center-predicts-a-new-all- time-high-by-years-end/ 300 “The future of work after 314 Kelsie Sandoval, “Nike closes 330 The number quoted will not COVID-19”, McKinsey Global corporate head office for a week to translate directly into total industry 289 “2021 Data Breach Investigations Institute, February 18, 2021, https:// allow employees to focus on mental revenue growth due to survivor bias Report”, Verizon, https://www.verizon. www.mckinsey.com/featured-insights/ health”, Independent, August 30, 2021, and the fact that listed companies com/business/resources/reports/ future-of-work/the-future-of-work- https://www.independent.co.uk/news/ are likely outperforming smaller dbir/; “X-Force Threat Intelligence after-covid-19 world/americas/nike-mental-health- players, for one due to stronger digital Index-2021”, IBM Security, February, employees-break-paid-b1911380.html capabilities 2021, https://ibm.ent.box.com/s/ 301 Chavie Lieber, “Resale Sites Race hs5pcayhbbhjvj8di5sqdpbbd88tsh89 to Staff Up in the Fight Against Fakes”, 315 Danny Parisi, “With prolonged 331 Lauren Thomas, “Nike shares fall The Business of Fashion, July 15, 2021, WFH, fashion brands are rethinking as supply chain havoc leads retailer 290 “Cost of a Data Breach Report 21”, https://www.businessoffashion.com/ office life”, Digiday, September 14, to slash revenue forecast”, CNBC, IBM, July 2021, https://www.ibm.com/ articles/luxury/resale-sites-race-to- 2021, https://digiday.com/marketing/ September 23, 2021, https://www. security/data-breach staff-up-in-the-fight-against-fakes with-prolonged-wfh-fashion-brands- cnbc.com/2021/09/23/nike-nke-q1- are-rethinking-office-life/ 2022-earnings.html; “Boohoo Warn on 291 Kevin Eiden, James Kaplan et 302 Sheena Butler-Young, “Can Supplies as Business Faces Christmas al, “Organisational cyber maturity: Fashion Compete with Tech for 316 BoF Community Survey 2022, Crunch”, Bloomberg via The Business A survey of industries”, McKinsey Executive Talent?”, The Business N=630 of Fashion, September 30, 2021, https:// & Co, August 4, 2021, https://www. of Fashion, September 2, 2021, www.businessoffashion.com/news/ mckinsey.com/business-functions/ https://www.businessoffashion. 317 “The Next Great Disruption retail/hm-boohoo-warn-on-supplies- risk-and-resilience/our-insights/ com/articles/workplace-talent/ Is Hybrid Work—Are We Ready?”, as-business-faces-christmas-crunch organizational-cyber-maturity-a- can-fashion-compete-with-tech-for- Microsoft, March 22, 2021, https:// survey-of-industries executive-talent www.microsoft.com/en-us/worklab/ 332 Kellie Ell, “One Year of Playing work-trend-index/hybrid-work in Lockdown, the Activewear Market 292 Kevin Eiden, James Kaplan et 303 BoF Community Survey 2022, continues to Grow”, WWD, March 17, al, “Organisational cyber maturity: N=630 318 Afdel Aziz, “The Power for 2021, https://wwd.com/fashion-news/ A survey of industries”, McKinsey, Purpose: The Business Case for activewear/activewear-in-lockdown- August 4, 2021, https://www. 304 Ibid. Purpose (All the Data You Were one-year-later-1234779475 mckinsey.com/business-functions/ Looking For Part 2)”, Forbes, March risk-and-resilience/our-insights/ 305 Ibid. 20 2020, https://www.forbes.com/ 333 Julienna Law, “Moncler Can Thank organizational-cyber-maturity-a- sites/afdhelaziz/2020/03/07/ China For its Comeback”, Jing Daily, survey-of-industries 306 “The Next Great Disruption the-power-of-purpose-the- April 22, 2021, https://jingdaily.com/ Is Hybrid Work – Are We Ready?”, business-case-for-purpose-all- moncler-q1-2021-china-remo-ruffini/ 293 Training employees to avoid Microsoft, March 22, 2021, https:// the-data-you-were-looking-for-pt- clicking on phishing emails aimed at www.microsoft.com/en-us/worklab/ 2/?sh=53d08e0a3cf7 334 Pandora Annual Report 2020 tricking individuals into revealing work-trend-index/hybrid-work personal information e.g., passwords 319 Ibid. 335 Emily Chow, “Dragons Fly as and credit card numbers through 307 Cathaleen Chen, “The Retail Chinese millennials take a shine to fraudulent emails Workforce of the Future”, The Business 320 BoF Interview with Sian Keane, gold”, Reuters, August 30, 2021, https:// of Fashion, April 14, 2021, https://www. October 2021 www.reuters.com/world/china/ 294 Kevin Eiden, James Kaplan, businessoffashion.com/articles/retail/ dragons-fly-chinese-millennials-take- Bartlomiej Kazimierski, Charlie Lewis, the-retail-workforce-of-the-future 321 Diversity Matters Data Set shine-gold-2021-08-29/ Kevin Telford, “Organizational Cyber Maturity: A Survey of Industries”, 308 BoF Community Survey 2022, 322 State of Diversity, Equity & 336 “The State of Fashion: Watches August 4, 2021, https://www. N=630 Inclusion in Fashion, CFDA, PVH and Jewellery Report”, The Business mckinsey.com/business-functions/ Corp., February 2021, https:// of Fashion and McKinsey, June 14, risk-and-resilience/our-insights/ 309 Chris Giles, Martin Arnold, “ECB s3.amazonaws.com/cfda.f.mrhenry. 2021, https://www.businessoffashion. organizational-cyber-maturity-a- official and OECD warn of rising be/2021/01/CFDA-PVH_State-of-DEI- com/reports/luxury/state-of-fashion- survey-of-industries inflation risks”, Financial Times, in-Fashion_02-2021.pdf watches-jewellery-industry-report September 21, 2021, https://www. 295 Kevin Sneader, Shubham ft.com/content/55300c7b-ab06-40c4- 323 BoF Community Survey 2022, 337 Tanya Krishna, “How Titan Singhal, “Trends that will define a5f4-ed02ddb31374 N=630 Jewellery has Virtually Brought 2021 and beyond: Six months on”, the Store to Customer’s Home?”, McKinsey, July 21, 2021, https:// 310 Sheena Butler-Young, “Why LVMH 324 “State of Diversity, Equity & Indianretailer.com, June 4, 2021. www.mckinsey.com/industries/ is on a Gen-Z Hiring Spree”, The Inclusion in Fashion”, CFDA, PVH https://www.indianretailer.com/ public-and-social-sector/our-insights/ Business of Fashion, September 24, Corp., February 2021, https:// interview/retail-people/profiles/ Trends-that-will-define-2021-and- 2021, https://www.businessoffashion. s3.amazonaws.com/cfda.f.mrhenry. how-tanishq-is-navigating-through- beyond-Six-months-on com/articles/workplace-talent/ be/2021/01/CFDA-PVH_State-of-DEI- second-covid-wave-with-utmost-ease. why-lvmh-is-on-a-gen-z-hiring-spree in-Fashion_02-2021.pdf i1850/ 296 “State of Diversity, Equity & Inclusion in Fashion”, CFDA, PVH 311 Daria Labutina, “Russia’s Online 325 Ibid. 338 Emily Chow, “Dragons fly as Chinese Corp., February 2021, https:// Fashion Leader Wildberries Under millennials take a shine to gold”, Reuters, s3.amazonaws.com/cfda.f.mrhenry. Fire From Staff”, The Business 326 Robert Williams, “Prada and August 30, 2021, https://www.reuters. be/2021/01/CFDA-PVH_State-of-DEI- of Fashion, September 17, 2021, Theaster Gates Launch Experimental com/world/china/dragons-fly-chinese- in-Fashion_02-2021.pdf https://www.businessoffashion. Design Hub in Chicago”, The Business of millennials-take-shine-gold-2021-08-29/; com/news/global-markets/ Fashion, September 1, 2021 https://www. Arnold Ma, “3 Ways Foreign Luxury 297 BoF Community Survey 2022, russias-online-fashion-leader- businessoffashion.com/news/luxury/ Brands Can Tap Into China’s Gaucho N=630 wildberries-under-fire-from-staff prada-and-theaster-gates-launch- Trend”, Jing Daily, June 17, 2021, https:// experimental-design-hub-in-chicago jingdaily.com/china-guochao-western- brands-dior-lining/ 140

339 Nathaniel Meyersohn, “Stores 351 Audrey Schomer, “Amazon is Agreement”, December 2019, are closing. This discount chain plans launching a live-streaming video https://www.pradagroup.com/en/ to move in”, CNN, March 5, 2021, version of a home shopping network”, news-media/news-section/prada-and- https://edition.cnn.com/2021/03/04/ Business Insider, February 12, 2019, loreal.html; “L’Oréal and Armani renew business/burlington-store-openings/ https://www.businessinsider.com/ their partnership in beauty”, March 22, index.html amazon-launches-amazon-live-2019-2 2018, https://www.loreal-finance.com/ eng/news-release/loreal-and-armani- 340 Emilie Veyretout, “Dior mise 352 Liz Flora, “Social commerce app renew-their-partnership-beauty; sur une cosmétique écoresponsable Flip emerges as the TikTok of online Emma Sandler, “How Chanel’s Beauty avec sa ligne Capture Totale C.E.L.L. beauty shopping”, Glossy, September products propel its continued growth”, Energy”, Madame Figaro, January 7, 2021, https://www.glossy.co/beauty/ July 22, 2019, https://www.glossy.co/ 8, 2020, https://madame.lefigaro. social-commerce-app-flip-emerges-as- beauty/how-chanels-beauty-products- fr/beaute/dior-mise-sur-une- the-tiktok-of-online-beauty-shopping/ propel-its-continued-growth/ cosmetique-ecoresponsable-avec- capture-totale-cell-energy-gisele- 353 Liz Flora, “Ulta Beauty partners 362 Laure Guilbault, “Hermès to bundchen-080120-178967 with livestream shopping app Launch Skincare, Cosmetics”, The Supergreat”, Glossy, July 23, 2021, Business of Fashion, March 21, 2019, 341 Rachel Strugatz, “The Face https://www.glossy.co/beauty/ https://www.businessoffashion. Changing TikTok Skin Care”, The ulta-beauty-partners-with-livestream- com/articles/news-analysis/ Business of Fashion, September 15, shopping-app-supergreat/ hermes-to-launch-skincare-cosmetics 2021, https://www.businessoffashion. com/articles/beauty/ 354 Matthew Townsend, “Live-Selling the-face-changing-tiktok-skin-care Provider CommentSold Gains Big Backer in Permira”, Bloomberg, August 342 “L’Oréal Targets 50% Digital Sales 18, 2021, https://www.bloomberg. with New E-Commerce Tie-Ins”, com/news/articles/2021-08-18/ BrainStation, November 6, 2020, live-selling-powered-by-commentsold- https://brainstation.io/magazine/ livestream-gets-permira-investment loreal-targets-50-digital-sales-with- new-e-commerce-tie-ins 355 Amanda Lim, “Human approach to beauty: L’Occitane online sales grow 343 Rachel Strugatz, “Sephora and 69% thanks to social selling initiatives”, Ulta Battle for the Big-Box Retail Cosmetics Design-Asia, June 29, 2021, Market”, The Business of Fashion, https://www.cosmeticsdesign-asia. December 20, 2020, https://www. com/Article/2021/06/29/L-Occitane- businessoffashion.com/articles/ online-sales-grow-69-thanks-to-social- beauty/sephora-and-ulta-battle-for- selling-initiatives the-big-box-retail-market 356 McKinsey interview with 344 Diana Pearl, “Beauty Testers Harminder Matharu, October 2021 are Back”, The Business of Fashion, August 11, 2021, https://www. 357 Lauren Sherman, “Chanel businessoffashion.com/articles/ Surpasses $11 Billion in Sales, beauty/beauty-testers-are-back Dismisses Rumours of Imminent Sale”, The Business of Fashion, June 17, 2019, 345 “The State of Smoooth Report: https://www.businessoffashion.com/ Fresh Faces and Full Carts”, Klarna, articles/luxury/chanel-11-billion-sales- 2021, https://www.klarna.com/us/ dismisses-rumours business/fresh-faces-full-carts-report/ 358 Pamela N. Danziger, “5 Reasons 346 Yatsen Holdings Limited 2020 That Glossier Is So Successful”, Forbes, annual report November 7, 2018, https://www.forbes. com/sites/pamdanziger/2018/11/07/5- 347 Kathryn Lundstrom, “Nearly Half keys-to-beauty-brand-glossiers- of TikTokers Are Buying Stuff From success/?sh=310a7c5d417d; Mila Brands They See on the Platform”, Wenin, “Tiffany Masterson on beauty AdWeek, May 3, 2021, https://www. and the thinking process behind Drunk adweek.com/brand-marketing/ Elephant”, Prestige, September 23, nearly-half-of-tiktokers-are-buying- 2020, https://www.prestigeonline. stuff-from-brands-they-see-on-the- com/th/beauty-wellness/beauty/ platform/ tiffany-masterson-drunk-elephant/ 348 Andrew Lipsman, “Social 359 Sheena Butler-Young, “Why LVMH Commerce 2021: Media and Is On a Gen-Z Hiring Spree”, The Commerce Convergence Creates Business of Fashion, September 24, Growth Opportunity for Brands”, 2021, https://www.businessoffashion. eMarketer, February 3, 2021, https:// com/articles/workplace-talent/ www.emarketer.com/content/ why-lvmh-is-on-a-gen-z-hiring-spree social-commerce-2021 360 Charlotte Bitmead, “Hermès Are 349 “Scaling social commerce: Shopify Launching A Beauty Line Inspired introduces new in-app shopping By Their Iconic Birkin Bag”, January experiences on TikTok”, Shopify, 17, 2020, https://www.elle.com/ August 24, 2021, https://news.shopify. uk/beauty/make-up/a30561451/ com/scaling-social-commerce-shopify- hermes-makeup-line/ introduces-new-in-app-shopping- experiences-on-tiktok 361 “L’Oréal and Valentino announce a worldwide license agreement for 350 Liz Flora, “Pinterest doubles down fine fragrances and luxury beauty”, on social commerce”, Glossy, August 11, May 28, 2018, https://www.loreal- 2021, https://www.glossy.co/beauty/ finance.com/eng/news-release/ pinterest-doubles-down-on-social- loreal-and-valentino-announce- commerce/ worldwide-license-agreement- fine-fragrances-and-luxury; “Prada and L’Oreal: Long-Term License 141

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