We’re at the height of the garment manufacturing boom, but we can’t let it get away from us.
According to a report from McKinsey & Co, we’re on track to see a billion dollar growth in the garment industry by 2020, but with only five of the top 10 manufacturers making a profit, it’s unlikely to be an immediate boon to the economy.
“In the long term, the demand for clothing and other apparel items has declined, as consumers and manufacturers have focused on more niche consumer demand,” the report reads.
That’s a problem, says McKinsey.
“While demand for apparel items remains high, demand for other consumer goods and services has fallen, meaning it’s not likely that these businesses will be able to maintain their profitability,” the consultancy wrote.
“They are also facing significant risks of losing their market share and operating profits, as well as the need to expand production capacity and ramp up capital spending to meet demand.”
That means that the garment business process, which processes clothes and other garments from the raw materials to final goods, will have to grow even faster to stay relevant, and that could hurt the global economy.
McKinsey’s report predicts that the total value of the global garment manufacturing sector will grow from $4.9 trillion in 2020 to $6.4 trillion by 2021.
“As the global market for clothing grows, the overall global manufacturing supply chain is expected to expand to a total of approximately $6 trillion by 2022,” the company writes.
“However, as demand for the apparel industry continues to decline, this sector’s profitability will likely decline as it must compete with the rapidly growing consumer market for apparel products, which is expected increase as the global apparel industry’s growth slows.”
If McKinsey is right, this could have a profound effect on the global fashion industry.
According the consultancy, “in the next decade, there is a good chance that the number of apparel production facilities will increase from around 4 million today to between 5 and 10 million.”
The report also points out that as the supply of raw materials is constrained, it will become more difficult for companies to produce clothing.
“There is a growing perception that manufacturers will no longer be able meet the demand they have for apparel because of the restrictions in their supply chains,” the firm writes.
That could mean more factories closing in the coming years.
“If this trend continues, it could mean that apparel production could become much more expensive than it is today,” the study warns.
The McKinsey report does note that the global demand for garments will also likely drop, with China and India expected to grow their apparel production by around 50% and 55%, respectively.
In the coming year, it is forecast that this will be followed by Europe, Asia and Latin America, all of which will see their garment production increase.
But that won’t happen overnight.
“The global apparel production industry will remain on a slow recovery as demand continues to rise,” the McKinsey analyst writes.
So, if you’re looking for some advice on what you need to do to stay on top of the apparel production boom, you can head over to the McKinseys report for some specific tips.
You can also check out the McKinays report here.