10 Most Leading Fashion Industry Challenges in 2022

With consumer behavior significantly altered, digital transformation accelerating rapidly, and concern around issues such as sustainability and diversity growing, the industry will face challenges new and old as it continues its recovery.

Fashion’s pandemic recovery won’t be smooth sailing. From mounting supply chain bottlenecks to age-old problems such as sky-high returns, these are the challenges fashion must contend with by 2022.

Forecasts for fashion in 2022 look promising, with the industry primarily expected to continue its positive COVID-19 recovery. However, with disruption giving rise to new consumer behavior in the apparel industry, rapidly accelerating digital transformation, and intensified concern around issues such as sustainability, inclusivity, fair pay, and working conditions, businesses cannot afford to let their guard down.

To maintain a positive trend in 2022, businesses must ensure that they act in all stakeholders’ interests—investors, employees, customers, and society. Alike — and commit to overcoming issues such as environmental impact, lacking diversity, and distrust.

ShopExp’s team of experts answers ‘what are the current challenges facing the fashion retail industry?” details the most significant fashion industry challenges businesses to face and provides tips on how to overcome them.

The 10 Current Challenges Fashion Retail Industry is Facing this Year 2022

1. The talent deficit

Fashion’s public image offers jobseekers little encouragement, with concern over environmental and social impact limiting appeal. Half of all professionals in the apparel industry feel as though fashion’s desirability has fallen since 2019, according to Business of Fashion, due to its poor sustainability credentials and reluctance to change.

To attract talent, the apparel industry must increase the minimum wage, eliminate unpaid internships, and hire from a wider pool of candidates. LVMH has committed to training 25,000 young people from all backgrounds through internships, apprenticeships, and permanent opportunities in 2022.

Businesses must also appease post-pandemic desires by continuing to offer flexibility. Fashion house Tapestry, for example, will allow employees to continue working from home.

This same respect must be shown throughout the supply chain. Low wages and poor conditions in supplier factories must be addressed. 64% of Millennials shun employers that demonstrate poor social responsibility, according to Cone Communications, low wages and poor conditions in supplier factories must be addressed.

2. The sustainability gap

According to the UN, fashion ranks among the world’s most polluting industries, contributing 8-10% of global carbon emissions.

With consumers demanding improvements and regulatory action such as New York’s ‘Fashion Sustainability and Social Accountability Act’ adding pressure, 15% of fashion executives cite sustainability as a top-three concern, according to McKinsey.

With 70%+ of emissions resulting from manufacturing, businesses must turn to sustainable materials that are recyclable, regenerative, and responsibly sourced. Lululemon has committed to using 75% recycled polyester, reducing emissions by 45%.

Adopting on-demand manufacturing models will also be crucial. Slow fashion marketplace MIVE, supported by the ShopExp mobile body measuring tool, has created an emissions-free process where every garment is produced according to the customer’s precise measurements. This eliminates overproduction, minimizes returns, and drastically cuts emissions.

3. Unnecessary textile waste

Despite the high environmental cost of producing garments, much of it is deposited into landfills within 12 months. Globally, fashion creates 40 million tons of textile waste annually, according to the Ellen MacArthur Foundation, and much of it is unnecessary. Despite cotton’s recyclable nature, less than 1% of cotton materials were recycled in 2020.

If fashion is to reduce its volume of waste, it will require closed-loop systems that keep garments in constant circulation.

Achieving this will require changes to how garments are designed, with a focus on recyclability and the ease of collecting and sorting.

4. Changing desires

Gen Z and Millennial shoppers are expected to drive the industry’s recovery, with fashion among the top three categories where they are set to spend. However, attracting these customers will require a commitment to innovation. In fact, according to Context Consulting, half would prefer greater technology use in retail over lower prices. Leading brands are exploring opportunities such as blockchain and digital fashion as interest grows in fashion NFTs and virtual worlds. With 71% of consumers willing to shop more with brands that incorporate augmented reality into the customer journey, this is an area retailers must also consider. Virtual try-on tools allow customers to visualize garments on their bodies without getting undressed, providing the convenient, engaging, personalized experience that modern consumers desire.

5. Supply chain bottlenecks

Fashion’s intricate supply chain suffers from unprecedented disruption, from material scarcity to staffing shortages, logistical delays, and rising costs.

Adidas estimates lost sales of $590m in 2021, and half of all apparel businesses have suffered a similar fate. Surging consumer spending will only intensify the balance between supply and demand, with 49% fearing this will pose 2022’s biggest challenge.

To minimize disruption, companies must rethink their sourcing strategies and build greater flexibility into their supply chains. Brands should work with suppliers to scale up nearshoring, moving manufacturing operations closer to their customers to avoid material supply bottlenecks, minimize shipping costs, and continue providing near-instant delivery.

6. Spiralling returns

The pandemic has caused a spike in e-commerce shopping rates. However, customers also return a more significant portion of their purchases, with 16.6% of goods. Returned in 2021, according to the National Retail Federation—an increase of 56% from 2020.

Fashion must take action to reverse this trend, with 30-40% of online fashion purchases typically returned, according to PwC.

To reduce fashion e-commerce return rates, brands must analyze their return data to uncover patterns and learn customer behaviors and characteristics likely contributing to the issue. More often than not, retailers will find product clarity is the primary issue, with up to 70% of returns due to poor fit or style. Here, practices such as importing visuals, providing comprehensive sizing information, and implementing features such as live chat to assist customers in finding the right size can help.

However, innovative retailers are leveraging fit technology, such as ShopExp’s Virtual TryOn tool, to help customers find products they love that fit right. When using the tool, which relies on a combination of computer vision, 3D matching technologies, and machine learning, retail fashion businesses can offer customers personalized, trustworthy size and fit recommendations and a photorealistic virtual try-on experience from just two photos. Using ShopExp, brands have cut return rates by up to 40%.

7. Rising distrust

By the Changing Markets Foundation, as much as 60% of fashion’s eco-claims have been considered unfounded or misleading. With fashion among the industries trusted least by consumers, according to Edelman, brands must find ways to back up their sustainability claims.

Demonstrating progress will be particularly important to young consumers, according to Cotton Incorporated, with 43% actively seeking companies with solid sustainability reputations.

To rebuild trust, brands must improve traceability and transparency. Blockchain-enabled product passports can share information with consumers, such as materials used, manufacturing processes, and supplier working conditions.

Retailers like Pangaia are already demonstrating this potential, with two-thirds of brands planning to adopt the technology in 2022.

Standardization can also help—the Higg Index, for instance, provides a standardized way for brands to measure environmental and social impact across a product’s life cycle.

8. Diversity and inclusion

Some 42% of fashion professionals say the industry is ‘poor’ at prioritizing diversity and inclusion, according to BoF.

Fashion’s lack of diversity shows in the products it sells — plus-size makes up just 21% of the US fashion market, according to Coresight Research, despite serving 70% of women. Likewise, 31% of non-binary people feel unable to wear work attire that accurately represents their gender expression.

Building diverse teams and involving employees in key decision-making processes will be vital. Diversity from within the company will help brands to understand the needs of the complex fashion market and ensure products and marketing genuinely serve the consumer base.

Brands such as Nordstrom have begun to publish detailed employee demographic information, highlighting underrepresented groups and challenging themselves to improve.

9. Size and fit

Sizing continues to pose a significant problem for fashion consumers, with 62% struggling to find clothing that fits.

A lack of standardization causes confusion among consumers, and vanity sizing—assigning smaller sizes to make consumers feel good—complicates the issue. The problem is complicated further as shoppers move online, with a lack of dressing rooms to try on garments.

To overcome the issue, womenswear brand Denim 1822 has created over 100 jean styles and offers sizes ranging from 00 to 24W. Using ShopExp’s Virtual TyrOn, 1822 Denim scans customers’ bodies to match them to their perfect size and fit intricately. 92% of customers have expressed satisfaction with their recommendations, with conversions up and returns down.

10. Building cyber resilience

As big data in fashion retail reach new heights, so does the risk of brand-damaging cyber attacks. Retail is the fourth most targeted industry, with data-compromising events in the industry rocketing 152% between 2019 and 2020.

The loss of trust can cost businesses millions. Likewise, regulatory acts such as California’s Consumer Privacy Act can result in enormous fines for targeted companies.

Never has it been more important to build cyber resilience in fashion retail. Brands must allocate a greater proportion of their budgets to cybersecurity and, seeking support from specialist firms, build in-house cyber competency.

With the threat landscape constantly evolving, brands must actively monitor cyber risk throughout the value chain and consider how data is handled — from collection to use and disposal.

Overcoming 2022’s biggest fashion industry challenges

The challenges faced by fashion in 2022 are wide-ranging, from long-term challenges such as sustainability and sizing struggles to growing issues such as diversity and distrust.

However, having survived one of the most challenging periods the fashion industry has ever faced, businesses have proven themselves capable of persevering. By adapting to changing consumer behavior, listening to the concerns of customers and colleagues, and investing in the right solutions and software, apparel industry businesses can overcome the challenges 2022 throws at them.

Get in touch to discover how ShopExp’s fit personalization platform can help your brand overcome 2022’s biggest challenges.