Editor’s Note
This analysis highlights how the luxury sector’s current deceleration is accelerating a strategic shift toward data-driven inventory management. As the article notes, the margin for error is shrinking, making advanced forecasting tools essential for aligning production with actual demand and avoiding costly overstock.
By aligning inventory more closely with real-time demand, brands can mitigate the risks of overproduction and excess stock.
Meanwhile, the use of artificial intelligence will drive efficiency and personalisation, speed up decision-making and reduce waste by enabling advanced demand forecasting. AI will also help to automate repetitive tasks and improve supply chain visibility. It doesn’t come without challenges, however; among them, potential job losses and the need to reskill the workforce.
Uncertainty is the new normal, as tariffs, labour disputes, legislation and technology drive significant shifts in how goods are sourced globally.
2024 was a year of reckoning for the fashion and luxury goods supply chain. As luxury brands continued to hike their prices, consumers and critics scrutinised the quality and value of goods and found many lacking. Incoming legislation — especially initial preparations for the introduction of digital product passports in Europe — shone a light on the lack of transparency in the industry as it stands. Various reports highlighted the ongoing use of forced labour in the global fashion supply chain, while Bangladeshi garment workers’ fight for fairer pay exposed the power dynamics at play between brands and their suppliers. Meanwhile, the need for flexibility was underlined as the industry grappled with disruptions in key trade routes, a US port strike and damp demand in several key markets.
So what now?
2025 is poised to be another year of uncertainty, largely due to unresolved tariff issues in several countries, particularly the US, says Joëlle Grunberg, partner and leader of McKinsey’s apparel, fashion and luxury group in North America. President-elect Donald Trump, who will be sworn in on 20 January, has proposed additional tariffs on imports into the US of between 10 and 20 per cent for all goods, and between 60 and 100 per cent on goods from China. Other expected challenges include the threat of fresh strikes by US dockworkers, global airfreight capacity restraints, rising shipping costs and — for luxury in particular — a shortage of talent. At the same time, fashion brands are looking to reduce their costs, improve delivery times and comply with evolving sustainability regulations.
Consider it the new normal.
The global personal luxury goods market is expected to grow in the low single digits in 2025 — a marked slowdown from the post-pandemic boom, per Bain. This decline is prompting a reassessment of inventory strategies, with a focus on reducing stock levels to free up cash and improve working capital efficiency, says D’Arpizio.
McKinsey’s Grunberg warns that a reduction in order volumes could place renewed strain on the relationships between brands and their suppliers.
Global logistics company GXO says one of its luxury clients has combined several smaller warehouses into one large, automated facility, which has helped to reduce operating costs, reduce inventory holdings via an omnichannel focus and, at the same time, speed up deliveries.