One of the biggest challenges – and opportunities – facing the apparel industry in 2015 is how best to embrace the omni-channel retail model, improve the shopping experience, and respond with new supply chain solutions. The changing profile of consumers in Asia is also likely to impact consumption and production, while global compliance and factory safety will continue to be a focal point.

Tom Nelson, VP global product procurement, VF Corporation:
Global compliance and factory safety will be a huge focal point. With all of the problems our industry has faced with Rana Plaza and Tazreen most, if not all, brands and retailers are stepping up their level of expectations for the factories - not only for the general compliance areas, but also in facility safety issues. The big question is whether all of the factories are ready to move to this level as well.

We are seeing higher factory rejections over the past 18 months. We are spending a lot more time setting expectations, inspecting against those expectations and working with the factories on corrective action plans. We are adding a lot more staff to help us in this area. Our expectations have increased and the factories that get this message, understand what is needed and comply with the expectations will grow. The mediocre factories will slowly disappear.

We must look at resolutions as an industry. We are talking with many big brands and retailers now to see how we can move forward together. There is virtually no reason for brands to go on this journey alone. Just look at what the Alliance and Accord have accomplished in 18 months. We can accomplish a lot if we all work together!

Marc Compagnon, executive director of Li & Fung Limited and president of LF Sourcing:
Some of the biggest opportunities for the apparel industry are also its biggest challenges. For example with e-commerce, some brands and retailers are leading while others are lagging, and there is also fierce competition from the etail pure plays that have been very successful. There is great opportunity but it's a matter of getting the right strategy in place.

Similarly, with retail technology. Technology developments around making the shopping experience more personal, customised and memorable are emerging, but it remains to be seen which retailers are going to lead the way in adopting and investing in new technology and ultimately, what the pay off will be. The idea of 'retail as theatre' is big, as is 'retailtainment,' and how to make the customer's buying experience more interactive, educational, memorable and inspiring. It's still early days to see who the winners will be in this area. Millennials, who make up 50.4% of the global consumer base, will play a big part in setting the trends and everyone is keen to tap into that demographic.

And of course there is fast fashion. While some retailers are really leading the way here, the question remains whether there is room for other players to follow in their footsteps.

Roger Lee, CEO at TAL Apparel Limited:
Retailers that are able to truly embrace the omni-channel model will be successful. Today, many retailers still treat each channel separately, and have separate inventories for each channel. This leads to inventory imbalance across channels, which is costly. Most retailers who only focused on one or two channels a few years ago now see that servicing all channels is essential to satisfy consumer demands.

Paul Forman, group chief executive, Coats Plc:
The market dynamics being created by the longer term 'mega trend' of the growth of the Asian middle class present both a challenge and an opportunity. The Asia-Pacific region is fast moving from being primarily a manufacturing base to also being the world's largest consumer market. On the one hand this creates a supply gap as an ever-growing proportion of Asian production is consumed by its local markets, which then raises the question: from where will Western markets source their products? However on the positive there is the huge opportunity offered by the world's largest and most dynamic consumer market.

Time and speed of delivery is the constant challenge for the industry and drives competitive success. Increased speed has to come from driving efficiencies across the whole supply chain. Each part must be evaluated to ensure it consistently and constantly delivers optimum performance; whether that is through improving productivity, innovation or enhancing digital technology.

Managing cost inflation is another on-going challenge, with suppliers at the start of the supply chain feeling the greatest pressure to absorb cost.

Edwin Keh, CEO of the Hong Kong Research Institute of Textiles and Apparel (HKRITA) and lecturer at the Wharton School at the University of Pennsylvania:
The biggest challenge is the rapid change in consumption volume, consumption pattern, and the need for new supply chain solutions.

In the US, even though there is both a general recovery and reduced unemployment, net income is down for most families. Salaries are flat to negative. Household expenses, especially cellular phone bills, are rising. As result discressionary spending, especially for fashion apparel is down.

Western Europe still suffers from weak consumer sentiment and confidence and a slower recovery. Apparel spending will continue to shrink as a per cent of total household spending.

China, globally the fastest growing consumer market for the last few years, is going through an anti-corruption drive. Consumption is shifting away from the conspicuous. Luxury consumption is globally impacted.

Singles day and Cyber Monday have been good news. However these are at the expense of free shipping and deep discounts. While there is significant growth in online sales, these maybe cannibalised from store sales and with the sacrifice of margins.

Apparel fashion chains have to operate in a new turbulent global marketplace. Fulfillment solutions, rapid response, transparency, and sustainable consumption are all challenges for the year ahead.

Sue Butler, director at Kurt Salmon:
Apart from concerns about whether the financial recovery will be sustainable or whether it will falter, the biggest challenge will be for businesses to develop a solid understanding of the development of a digital retail landscape and the constant evolution of consumer behaviour in how they shop across all channels. Companies will the need to structure their businesses so that all the customer touch points are much more connected and the business operates in a more cross-functional way.

Another challenge will be to innovate and exceed customer expectations without eroding profitability - and this requires a real understanding of the true end-to-end cost to serve. Also paramount to serving demand across multiple channels is a single, accurate, view of stock availability.

As consumers are being inundated with more and more choice - to the extent where there is probably too much - it is more important than ever for retailers to have a differentiated product offer and that the brand connects to the target customer. Differentiation can come in the form of product, or in the customer experience.

Tim Armstrong, apparel origin and value chain consultant:
Historically, big shifts in sourcing have been driven by improvements in communication for this fashion and season-sensitive industry: as communication improved, production could increasingly distance itself from the point of sale (PoS). Currently, the industry still has to stock and sell a large portion that won't sell at its initial retail price leading to a x3 initial mark-up from FOB to retail and x5 for more fashion and branded goods. This is unlike most other industries and is caused by trying to push a huge amount of merchandise through an expensive (and advertised) retail window, which is often very wasteful.

Obviously at such high retail margins internet shopping (despite the inherent inefficiency of supplying goods one by one) will increase - but with some NGOs in developing countries selling "compassion" goods straight from the artisanal maker to the buyer, there could now develop a direct contact between maker and user unseen since the demise of individual (popular) tailoring maybe 70 years ago.

So just imagine a new model where the consumer can communicate directly with the producer, cutting out any expensive retail and selling only against a confirmed order and possibly customising product to a user's needs: e-tailoring.

Now the communication revolution has been taken a step further. Not only do most people around the world have a mobile phone - even in the heart of the African bush they have a high bandwidth connection powered remotely with a solar panel - but increasingly combined with new mobile-money forms of payment that also cuts out the retail banker.

The implications of this will be tremendous both for mass market basics pushing sales on price, and for fashion sensitives selling on demand.

While production for mass market basics is best centralised and done en masse to get a better price, communication will also allow buyers to shop around as never before. But the mass production model will also have to allow for increasing range and customisation, as cheaper garments allow people to express their fashion creatively at a rate never seen before, and have more clothes in their closets than ever before.

While for the fashion business, ordering online will increase as consumers become more savvy about buying products that they don't try on. This will also be helped by the explosion in consumer air travel leading to cheaper courier packets, and by the development of new super container ships allowing faster and cheaper movement from garment making hubs to areas of high demand.

Rick Helfenbein, president of Luen Thai (USA), and chairman of the American Apparel & Footwear Association (AAFA):
Retailers in 2015 will continue the promotional strategy of marking up, in order to mark down (retail-speak terminology for: obtaining a higher IMU to get a higher EMU). This situation requires a lowered first price from the retailer's direct suppliers.

At the same time manufacturers are challenged to cut cost, they are also faced with higher global labour and material requirements. Since the internet now allows competing countries to see both minimum wage and living wage, expect wage pressures to continue their upward spiral. 

Looking for a back door, these same manufacturers are now more aggressively renewing their interest in free trade agreements - making FTAs the best opportunity for 2015 and beyond. 

Matthijs Crietee, secretary general at the International Apparel Federation (IAF):
The biggest challenge, which is also the biggest opportunity, is to move away from the destructive image of low cost, low worth products with negative impact on the environment and workers. The seeds for improvement have already been sewn and can be seen around us. Think about new services in stores and about investments in new materials and wearable tech which help to (re)entice the customer.

Think too about dealing with diversity - also both a challenge and an opportunity - which is a great way for the industry to add new value. Consumers within different countries are expecting global brands and retailers to cater more effectively to their specific tastes. And, in connection, consumers are increasingly enticed by a brand's local roots translated into specific designs and crafts. Dealing with diversity requires complex investments spanning the supply chain.

2015 will be a year in which these investments will become more mainstream so that they will have a more profound effect on the overall view that the world's customers, citizens, workers, investors and policy makers have of our industry.

Dr Achim Berg, a partner at McKinsey & Company and co-leader of McKinsey's Apparel, Fashion & Luxury Group:
First of all, in apparel retail, I think we're going to see declining frequency in visits to brick & mortar shops. As far as the economic situation goes, it could be somewhat tough due to uncertainty in emerging markets and slower growth in the incumbent markets. That said, while I don't expect that we'll see the greatest growth next year, we do know that apparel has always found a way to make it happen, since people will always need to dress themselves.

Mike Flanagan, CEO of apparel industry consultancy Clothesource:
Challenges include an inflated operational cost base at a time of modest growth. And a strong reverse in the general drift between demand and supply.

  • Modest growth. Though it's always being argued that rich-world markets are sluggish, volume (as opposed to value) growth in most North American and European markets is fine. The problems for retailers are:
    - Consumer price resistance in Europe and North America;
    - Real declines in Japan;
    - Prospects of sharp declines in the Persian Gulf (a cash cow for some retailers - especially in the UK);
    - Changes in China. Not about slowing demand, but about maturity. Consumer tastes, and ways of talking to them, are changing too fast in China for foreigners to keep up with - and it's Chinese brands leading the change. The days of paying a premium for posh Western stuff may be coming to an end;
    - Limited access to most non-Chinese developing markets. You can't really operate freely in India or Argentina, there's real sourcing protectionism brewing in Turkey, South Africa, Mexico and Brazil and the high likelihood of catastrophic decline in Russia;
    - I'm not sure how much of the shine on London sales comes ultimately from oil-rich tourists from Nigeria, Russia and the Middle East. But in 2015 we're going to find out.
  • Inflated operational cost base. The expensive part of retailing is selling, not buying. And over the past 20 years, costs relative to sales, have grown as:
    - The cost of transactional websites in garment retailing has grown way beyond anyone's imaginings. Not just in apparel. In British food and clothing, the real volume growth is coming from the chains that don't have transactional internet (it's no coincidence Tesco and Sainsbury saw off Lidl and Aldi off when they first launched here; now they're preoccupied with selling online, they're losing sales to them. Just as M&S is to Primark);
    - Chains expanded to countries where they may not be doing too well when it comes to profit;
    -  Rapid bricks and mortar expansion among clothes specialists at a time competition and the web are cutting sales/square foot;
    - The not so slow decline of two other channels as destinations for clothes shopping: department stores (think JCPenney and Sears, or House of Fraser and Debenhams), and food-dominant superstores.

Julia Hughes, president, United States Fashion Industry Association (USFIA):
The biggest opportunity is the potential to truly open markets for textile and apparel products. We just celebrated the 10th anniversary of the end of the quotas. On 1 January 2005, the Multi-Fiber Arrangement (MFA) system of quotas officially expired, theoretically allowing fashion brands and retailers to manage their sourcing and supply chains without restrictions.

While the United States Fashion Industry Association (USFIA) celebrates that victory, the fact is there has been very little action to open markets globally since then. Duties for textile and apparel remain exorbitantly high - and there has not been any serious discussion at the World Trade Organization (WTO) to lower duties and eliminate the remaining non-tariff barriers to trade. And frankly, from a US perspective, the free trade agreements the United States has negotiated since the end of quotas are still extremely limited by the restrictive yarn-forward rule of origin.

However, USFIA remains hopeful about on-going global trade negotiations, especially the Trans-Pacific Partnership (TPP) between the United States and several Pacific nations, as well as the Transatlantic Trade & Investment Partnership (TTIP) between the United States and the European Union. If these agreements include flexible rules for textile and apparel trade that reflect 21st-century global value chains, as well as harmonisation of burdensome global regulations, we could open many of the most important markets for both imports and exports. In addition, the WTO Trade Facilitation Agreement could be another exciting opportunity, because while it would not eliminate duties, it could mark the beginning of a global commitment to remove administrative barriers at borders.

The biggest challenge for the fashion industry, and indeed the United States, is the political gridlock in Washington, DC. Specifically, the gridlock inhibits our ability to have a real discussion about the benefits of free trade. President Obama and the Republican Congressional leadership believe trade is one of the policy areas where they can find consensus. Insiders think we'll see efforts to get congressional approval for Trade Promotion Authority (TPA) in early 2015 - and trade might even be the very first issue the 114th Congress tackles! Once TPA is approved, the US negotiators will move quickly to try to conclude TPP, and then the TTIP talks will begin in earnest. But how much time do we really have? While we just elected the new Congress in November, many observers predict there will only be six or eight months for Congress to pass legislation before they focus entirely on the 2016 presidential and congressional campaigns. Unfortunately, as we approach next fall, it may be almost impossible to get bipartisan agreement on any issue.

The second major challenge for the fashion industry remains how to expand ethical sourcing. The industry had many accomplishments in 2014 - and the achievements of the Alliance for Bangladesh Worker Safety and the Accord on Fire & Building Safety are a testament to the commitment of brands and retailers to improve working conditions in their supply chains. But much work remains to be done to bring American expectations about workers' rights, factory conditions and sustainability to the rest of the world. While we will continue to work on our mission to eliminate barriers to trade, we expect ethical sourcing will be an equally important focus for us this year.

Josh Green, co-founder and CEO of Panjiva, which provides data to the global trade community:
In 2015, the biggest challenge for US companies will be holding on to top talent. With the US economy growing steadily, great talent will be offered new, exciting, and lucrative opportunities. Companies that have become complacent about taking care of their best people - back when most everyone felt lucky just to have a job - will lose their best people.

Multinationals will again face the challenge of managing complexity, the complexity that results when different regions are on fundamentally different growth paths. In 2015, the best bet is that Europe will stagnate, growth in Asia will slow, and growth in the Americas will speed up. Structuring your organisation to operate successfully across these very different economic environments is hard.

For years, the biggest opportunity has been capturing share in (rapidly) emerging markets. This year, some developed economies, such as the US, will again feel like the land of opportunity. The question, of course, is how to capture share. A lot of people are talking about omnichannel - getting in front of consumers wherever they are. But with everyone trying to get in front of consumers wherever they are, omnichannel becomes a must-have, not a source of competitive advantage. In this environment, brands that can understand their customers well enough to create an emotional bond with them will dominate (as they always have).

Magdalena Kondej, head of apparel and footwear at Euromonitor International:

  • Persistent weakness in Western Europe: 
    Although the global economy looks set to strengthen in 2015, Western Europe is once again predicted to see little to no growth in terms of apparel value sales. On-going austerity measures are keeping a lid on growth with a reduction in non-essential spending. That said, a number of value-led apparel brands are using this environment as an opportunity to further expand their market share. Primark in Spain, for example, has managed to overtake all Inditex brands with the exception of Zara to become the number two apparel and footwear specialist chain in the country, and the successful run of value apparel is expected to continue across the majority of European countries.
  • Ukrainian and Russian crises: 
    The Russian market is facing strong headwinds in 2015, coming under pressure from the Ukraine crisis and currency fluctuations. In a response to the weak rouble, a number of multinational companies including Apple, McDonald's, Renault and Cartier have already shifted their price tags up. Similar efforts to offset the drop in value sales that fashion companies make in Russian currency are almost certain and will become more pronounced in 2015. This will have a dual effect on consumer spending. In the immediate term, shoppers are likely to rush to purchase any non-perishable consumer goods before further price increases take place. On the other hand, spiralling inflation will continue to dent consumer confidence, which is already at an all-time low. And fashion as a beyond need-based category is likely to take a hit.

Rick Horwitch, vice president, Strategy and Solutions Business Development for Bureau Veritas, and chairman of the Americas Apparel Producers Network (AAPN):
I would put the challenges, and opportunities, into two macro buckets:

  • Speed/time and efficiency/cost management
    Over the last several years, retailers and brands have adjusted to the 'new normal' of smaller inventories, shorter lead times and quick response to consumer demands. I have meet with hundreds of sourcing executives and factory owners around the world, and everyone has said the same thing: 'Time' is the biggest challenge they face. Price has been replaced by efficiency and cost management. 'Cheaper, faster, better' is no longer an aspiration, it's a reality. This means long-standing business models, and processes, need to change, in a collaborative manner.
    Meaningful results are being realised through value and time justification exercise. A key in unlocking the opportunities is proactive data analysis to understand the root cause of issues and develop action plans. We have seen numerous customers achieve great results in improved time, cost and total quality (and customer experience) through proactive use of analytics.
  • Transparency, traceability and accountability
    NGO, government and consumer pressures (including social media) continued to increase in 2014. There is no indication these activities will decrease in 2015. Federal and State governments are legislating that companies be accountable for their entire supply chains. The issues, however, go beyond social, labour and safety (like the Alliance and Accord efforts in Bangladesh). Environmental transparency and accountability is gaining greater momentum. The Chinese government enacted a law regarding the discharge standard of water pollutants for dyeing and finishing in the textile industry, aimed at Chinese manufacturers. The Chinese NGO the Institute of Public & Environmental Affairs (IPE) is using this requirement to challenge US and EU brands and retailers (similar to Greenpeace's ZDHC initiative) to put pressure on their supply chains to comply.