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The Status of German Fashion 2021 In partnership with:
Axl Jansen
The Status of German Fashion 2021
TABLE OF CONTENTS
Foreword4
Executive summary6
1. Introduction10
1.1 Objectives of this report 10
2. The state of the German fashion industry today14
2.1 Germany’s place in the global fashion economy 14
2.2 The evolution of Germany’s fashion industry 15
3. The economic impact of the fashion industry20
3.1 Introduction to our impact analysis 20
3.2 The direct impact of fashion manufacturing
and distribution 22
3.3 Other direct impacts 25
3.4 The total impact of the fashion industry 26
4. Strengths, weaknesses, opportunities and threats32
4.1 Strengths 33
4.2 Weaknesses 34
4.3 Opportunities 35
4.4 Threats 35
4.5 Conclusion of SWOT analysis 36
5. Long-term issues for the fashion industry40
5.1 Sustainability 40
5.2 Technology and innovation 42
6. Recommendations and conclusions46
Appendix 1: Interview participants52
Appendix 2: Detailed modelling methodology 53
Appendix 3: Germany’s largest fashion companies56
JANUARY 2021 3
The Status of German Fashion 2021 FOREWORD In a European comparison of the 175 largest fashion brands, Germany ranks second in terms of both the number of companies and total sales revenue. Although these figures do not include the numerous independent designers and brands, they clearly show that Germany is a highly relevant nation as a fashion location. Around 1.3 million people are employed in this country thanks to the fashion industry, which in 2019 contributed a total of around €66 billion to Germany’s gross domestic product—making the industry a force to be reckoned with in comparison to other German economic sectors. In international comparisons, Germany is one of the most important sales markets and, for international brands, one of the most important distribution channels. Nevertheless, there is a lack of political and social acceptance to classify fashion as a relevant economic and cultural asset. Things are different in countries such as France or Italy, whose fashion industries are internationally renowned both for their economic power and as important cultural assets. Since its foundation, Fashion Council Germany has been strongly committed to political lobbying for the fashion industry, in addition to its mission to accompany the German fashion and design landscape into a visionary, technological and sustainable future. In recent years, we have had to register the fact that we in Germany lack an instrument to start a well-founded dialogue with government and business—with facts, analyses and recommendations for action. What was needed was a detailed industry analysis. We are pleased that this is now available with the “Status of German Fashion” and the support of the Federal Ministry for Economic Affairs and Energy. Our dialogue with politicians, including a meeting with Chancellor Merkel in the Chancellery, has already had a notable effect as it underlines the fundamental importance of the German fashion industry as well as the relevance of dealing with its influence on the economy. The “Status of German Fashion” is also the first of its kind: a study that covers the full sweep of the fashion industry’s significant components. There have been important studies in the past, for example on the German fashion retail trade or textile industry, but from Fashion Council Germany’s point of view a consideration of the entire fashion industry was always missing. So far, no study has done justice to the size and diversity of fashion in Germany. Fashion is a cross-sectional industry with complex value chains—the industry includes designers, fashion companies, manufacturers, retailers and wholesalers, as well as trade fairs, fashion magazines and fashion schools. They are all part of the cultural and economic power of fashion. “Made in Germany” is still a globally accepted seal of quality: German fashion companies are internationally regarded as reliable partners. In addition, we are especially strong in the areas of sustainability, technology and innovation, and above all in textile development. The rethinking and conversion of business models in the direction of sustainability, which has long been necessary and will in future be 4 Axl Jansen
The Status of German Fashion 2021
required by EU regulations, is moving into the fashion industry across the board—
albeit with varying nuances. Germany also stands for innovative global sportswear
brands like no other country—with industry giants like adidas and Puma, we are
international leaders.
Despite our strengths, the study also shows that we are not always noticed on the
world stage. As innovative as we are here in Germany in the field of technology,
our experts emphasise our ability to expand in the international competition for
trend-setting design.
Since the 1980s, local fashion production capacity has been declining. This is due
to so-called “offshoring”, i.e. the outsourcing of operations to other countries. This
has kept German fashion companies competitive, but it also means that there
has been a systematic outsourcing of knowledge which, according to the study,
is now lacking in the country today. In contrast to other important sectors of
the economy, fashion is actually the only one that has not engaged in “re-
shoring” in recent years. The challenges of the future are to revolutionise new
sustainability requirements in the supply chain of the fashion industry.
From this and many other findings of the study, there is an urgent need to
act so that Germany can retain and expand its status as an important fashion
player in the near future and in the long term.
Worldwide, retail will continue to shift towards online. Across Europe, the
share of retail sales from e-commerce has more than doubled over the
past decade. Online sales growth has been even faster in Germany. Still,
statistically speaking, e-commerce here appears to be less widespread than
in other European countries. The Covid-19 pandemic caused a massive
increase in online activity here in 2020. The need to be strong in terms of
digitalisation and e-commerce has once again been highlighted by this
year of the pandemic. We expect this will be seen in future statistics.
The year of the study, 2020, was an extremely challenging year for society
and the economy as a whole with the pandemic, and has exposed existing
“grievances” and accelerated negative effects. Today it is evident that the
urgency to find solutions and answers have only become more visible as
a result of the coronavirus crisis, including the example of e-commerce.
This study, the “Status of German Fashion” is therefore a basis, an appeal
and a recommendation for action to shape the future of the German fashion
industry together with all sections of the industry and the government.
Fashion Council Germany, January 2021
5
The Status of German Fashion 2021
EXECUTIVE SUMMARY
Germany is both one of the EU’s largest clothing producers and
€66 billion
one of its largest markets for fashion products.
In this report, we estimate the fashion industry’s total
contribution to the German economy through the employment,
Total contribution
GDP and tax that it supports. We also present key themes
to German GDP
of importance to the industry that have emerged from our
of the fashion
interviews with 44 industry experts and stakeholders selected
industry in 2019.
from across the fashion industry as a whole, including the
strengths and weaknesses of the sector, how it can respond to
opportunities and threats, and recommendations for the future.
The fashion industry is a broad collection of businesses across
several different economic sectors. We define the industry,
based on previous studies,1 to include: the manufacturing of
textiles used for fashion products; the manufacturing of clothing
and footwear; the wholesale and retail of fashion products;
fashion magazines; fashion advertising, and fashion education.
The products included in the definition are clothing, footwear,
accessories, bags and jewellery.
THE FASHION INDUSTRY MAKES A SIGNIFICANT
1.3 million
CONTRIBUTION TO THE GERMAN ECONOMY
1. We calculate that the fashion industry contributed a total
of €66 billion to Germany’s GDP in 2019. Of this, €28 billion
Total employment
came from the industry’s direct operations. A further €20
supported in
billion was supported by the industry’s purchases in the
Germany by the
supply chain, and €18 billion by industry and supply chain
fashion industry
workers spending their wages. This means that for every
in 2019.
€100 the industry contributes directly, a total of €235 is
contributed to the German economy.
2. We also estimate that the industry supported employment
of close to 1.3 million in the German labour market in 2019.
Of these, 770,000 were employed directly by the industry,
260,000 within the fashion industry’s German supply chain
and 240,000 by worker spending. This means that for every
100 jobs supported directly by the industry, a total of 160 are
supported across the German economy as a whole.
3. We also find that the fashion industry generated €36 billion
in tax revenues in 2019, with the majority coming from VAT
payments and labour taxes.
6 1
British Fashion Council, The value of the UK fashion industry, 2010
The Status of German Fashion 2021
THE INDUSTRY’S STRENGTHS PLACE IT WELL TO TAKE
ADVANTAGE OF GROWTH AREAS AHEAD… Federal Chancellor Angela
Merkel herself asked Fashion
The “Made in Germany” brand has an international reputation Council Germany for more
for quality, reliability, and good value. This extends to fashion: facts and to analyse the status,
the country is also noted for its high-technology approach to positioning and economic
fashion, including technical textiles and the use of advanced power of the German Fashion
manufacturing equipment for clothing and textiles. industry. With the results of
the study we now have the
Germany has a handful of globally recognised brands, proof that the German Fashion
particularly its largest sportswear companies. However, outside Industry has impressive
of this area, our interview respondents noted that the fashion economic power.
industry generally has a low worldwide level of visibility and
more could be done to promote Germany’s fashion brand.
Marie-Louise Berg, FCG Executive
The industry is well placed to respond to the trend towards Board Member and Founder Berg
sustainable fashion: its quality workmanship ties in with Communications Berlin
customers buying fewer, higher-quality items that will last a long
time. Germany’s position as an innovator of new textiles and
manufacturing processes may also mean it can capitalise on
more sustainable techniques.
To maintain global market share, the German fashion industry
will need to continue to invest to stay at the forefront of
fashion technology, as emerging markets mature in this area.
In particular, China is likely to become a strong competitor in
technical fabrics and the production of textile manufacturing
equipment over the medium term.
…BUT POLICY SUPPORT MAY BE NEEDED TO FULLY REALISE
THESE OPPORTUNITIES
Stakeholders identified a number of areas where government
policy could support the industry, including promotion of the
German fashion brand on the world stage. Stakeholders felt that
this, in combination with grass-roots promotion in schools of
German fashion design opportunities, would enable the country
to train, retain and attract design talent.
7
The Status of German Fashion 2021
Our interviewees also identified the need for support from
The fashion industry is government for helping businesses to shift towards more
a major but nevertheless sustainable business practices. German consumers tend to
underestimated economic favour clothing at lower prices, while sustainable clothing tends
factor in Germany. to be possible only at higher price points—financial support
from the government may help to bridge this gap. Stakeholders
also felt that there are actions that the industry could take
Elgar Straub, Managing Director, itself to better navigate threats and opportunities ahead. This
VDMA Textile Care, Fabric and includes greater use of digital technology, particularly among
Leather Technologies retailers, where the use of the internet to sell products and
engage with customers is not quite at the same level as some
other major fashion markets.
The fashion industry is spread widely across Germany, but our
interviewees believed that creating some industry clusters or
“centres of excellence” may help the industry to build the critical
mass needed to attract greater investment. These industry hubs
may also be important for attracting and retaining design talent.
Janine Sametzky
Benjamin Glean
8
The Status of German Fashion 2021
Vicky Lehmann
9
The Status of German Fashion 2021
1. INTRODUCTION
Germany has a “renowned This perception of quality 1.1 OBJECTIVES OF THIS
history for manufacturing extends to fashion REPORT
excellence”,2 with consumers manufacturing. We interviewed
often citing “Made in Germany” experts on the Germany This report assesses the
as the most positively fashion industry5 and a key contribution of the fashion
influential international label theme identified was that the industry to Germany’s
of origin that could be seen German fashion brand stands economy. We also identify
on a product.3 In the US for high quality workmanship and discuss key trends in
for instance, the German and timeless design at the industry, its strengths
brand is outranked only by favourable price-quality ratios, and weaknesses, as well
domestically-produced goods.4 with businesses in the sector as opportunities and
being very reliable to work recommendations for the
with. Germany is also seen as a support needed to sustain
significant innovator in the field further growth.
The textile and clothing of technical synthetic textiles,6
industry is one of Germany’s with a large proportion of We begin in Chapter 2 by
most important consumer goods textile production being in demonstrating how the
industries. We need to use this this area. industry has evolved over the
powerful position much more past few decades and how
actively. We need to highlight The sector is one of the it is placed internationally.
and promote our German fashion largest producers of textiles In Chapter 3 we set out our
design much more, nationally and clothing in both Europe estimates for the industry’s
and internationally. and across the world, and economic footprint. In Chapter
according to the Federal 4 we assess strengths,
Foreign Office, the majority weaknesses, opportunities and
Claudia Hofmann, FCG Executive of Europe’s fashion designers threats for the industry, and
Board Member & Creative are trained in Germany’s 40 analyse how these interact to
Fashion Consultant fashion schools.7 Our analysis suggest potential strategies
provides evidence on the for the future. Chapter 5 takes
extent of the industry’s impact a deeper look into two areas
and reach, but despite its size of particular importance for
and significance, our expert the industry: technological
interviewees note that the innovation and the trend
industry is not given as much towards sustainability. Lastly,
support by the government in Chapter 6, we summarise
as some other sectors of the stakeholders’ suggestions
German economy. for how government and
industry associations could
We also include three best support the industry’s
articles across the report development in the years
from industry experts to ahead.
share their perspectives and
ideas on sustainability and
digitalisation.
2
World Economic Forum, Policy recommendations for Germany
3
YouGov, “Made in Germany” is the best thing you can see stamped on your product, 2019. Survey of over 6,000 consumers across
10 23 countries.
4
Statista Made in Country Index, 2017. A poll of 43,000 consumers representing 90% of world population.
5
See Appendix 1 for list of participants.
6
Technical textiles are those manufactured primarily for their functional performance rather than aesthetics.
7
Deutschland.de, Study in Germany: Fashion, 2018The Status of German Fashion 2021
DEFINING THE FASHION INDUSTRY
In this report, we define the fashion industry as To estimate the economic impact of the
relating to the following products and services8: industry’s provision of the above products and
services, we consider the economic impact
• Clothing (men’s, women’s and children’s wear)
of the following sectors, aligning as closely as
• Bags & luggage possible to the standard industry classifications
used in economic statistics9:
• Footwear
• Accessories • Textile manufacturing (focusing on where the
output is used for fashion products)
• Jewellery & watches
• Manufacturing of clothing and footwear
• Fashion magazines
• Other fashion manufacturing (accessories,
• Fashion education jewellery etc.)
• Fashion advertising • Fashion wholesaling
Specific types of clothing such as sportswear • Fashion retailing
and workwear are included across the • Advertising and marketing services used by
categories of menswear, womenswear, the fashion industry
childrenswear, and footwear.
• Magazine publishing (focusing on fashion
magazines)
• Higher education (focusing on fashion courses)
8
Reflecting previous work carried out by Oxford Economics & British Fashion Council in The Value of the UK Fashion Industry, 2012
9
Detailed descriptions of these industries and how they are used are given in Appendix 2. 11The Status of German Fashion 2021
Max Menning
12The Status of German Fashion 2021
13The Status of German Fashion 2021
2. T
HE STATE OF THE GERMAN
FASHION INDUSTRY TODAY
2.1 GERMANY’S PLACE IN THE GLOBAL FASHION ECONOMY
Germany is a major Beyond producing materials and fifth-largest importer for
manufacturer, with the fourth- and finished garments, textiles. The country’s largest
highest total manufacturing Germany specialises in export markets for German
output in the world.10 This producing machinery for textiles and clothing include
prominence extends to the textile, clothing and leather neighbours such as Poland,
fashion industry, as Germany production. In 2018, this Austria, Switzerland, France
is one of the largest producers sector’s output was worth €1.9 and the Netherlands, as well as
of clothing in the EU. In billion, the highest in the EU27, Italy and the UK. The largest
2018, the country’s clothing and it employed more than import suppliers were China,
manufacturing sector was 23,000 people. Bangladesh, Italy, Turkey and
worth €2.3 billion in terms of Vietnam.14
gross value added (GVA),11 Germany’s fashion industry is
behind Italy as the second highly integrated with world As one of the largest economies
largest producer in the EU27. markets, with significant in the world, Germany has one
On a global scale, however, imports and exports of fashion of the world’s most significant
the major EU producers goods. For instance, in 2018 consumer markets for the sale
manufacture significantly less Germany was the third largest of fashion products. In 2019
clothing than China, which exporter of textiles in the alone, consumers in Germany
produced €66 billion of world by value, behind India spent €76 billion on clothing
clothing in 2018. and China.13 Germany was also and footwear, just behind the
the fifth largest exporter of UK as the highest spenders
Germany is also a notable clothing, and the fourth largest in Europe, and sixth highest
manufacturer of textiles, exporter of footwear. It was also in the world behind the larger
producing €3.1bn worth of the second largest importer economies of the US, China,
GVA in 2018, again the second of clothing and footwear India and Japan.15
largest in Europe behind Italy’s
€5.5bn.12 Fig. 1: Gross value added by clothing manufacturing sector,
2018, five largest EU countries
If something is manufactured Italy
in the German textile and
clothing industry it stands for
quality. Germany
Nina Knaudt, CEO, Rianna + Nina France
Portugal
Spain
0 1 2 3 4 5 6 7 8 9
Source: Eurostat € billions
10
Oxford Economics Global Industry database
11
Gross value added is a measure of economic output. Eurostat, Structural Business Statistics database
12
This international comparison includes a significant amount of textile manufacturing that is unrelated to clothing and fashion, as
suitable data do not exist to focus solely on that portion of the industry. However, we have excluded the following sub-sectors, which
are are least likely to be related to clothing: manufacturing of rope/twine/nets; manufacturing of carpets/rugs; manufacturing of
14 articles such as towels, sheets, linen.
13
Oxford Economics Global Trade database
14
Destatis.
15
Figures from Oxford Economics’ Global Economics databaseThe Status of German Fashion 2021
Fig. 2: Consumer spending on clothing, top 5 European
countries, 2019
United Kingdom
Germany
Italy
France
Spain
0 10 20 30 40 50 60 70 80 90
Source: Eurostat € billions
The manual work is
2.2 THE EVOLUTION OF GERMANY’S FASHION INDUSTRY disappearing more and more
in Germany and is not being
Germany continues to hold a terms of gross value added made attractive by politics. I
position near the top of the (after adjusting for inflation), think people underestimate the
world rankings for production and by 55% for textile necessity for this.
despite manufacturing output manufacturing. This compares
of clothing and footwear to growth of 46% over the
declining in Germany by 91% same time period for the overall William Fan, Founder, William Fan
between 1980 and 2020 in German manufacturing sector.
Fig. 3: Gross value added of the German clothing and textile16 manufacturing sectors versus
total manufacturing industry, real terms
Index 1980 = 100
180
160
140
120
100
80
60
Textiles manufacturing
40
Clothing manufacturing
20
Total manufacturing
0
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
12
14
16
18
20
20
20
20
20
20
19
19
19
19
19
19
19
20
20
19
19
20
19
20
20
20
Source: Oxford Economics Global-Industry-Datenbank
16
For this long-running time series comparison the data includes the entirety of the German textile manufacturing sector, with no exclusions. 15The Status of German Fashion 2021
A key reason for this As Fig. 3 above shows, the 2010 and 2012, and did not
downward trend is that size of the clothing and textile re-shore any production. This
German textile and manufacturing sectors began is the largest net share of any
clothing companies have to shrink around the early industry—17% of electronics
relocated their operations to 1990s. This trend was fuelled manufacturers also offshored
another country (known as in part by offshoring, and production during that
“offshoring”), or outsourced even in the early 2010s, 17% of timeframe, but 2% reshored
manufacturing to other German textile manufacturers operations.
companies around the world. offshored production between
Fig. 4: Share of German manufacturers that offshored and re-shored production, by sector,
2010-201217
Textiles
Electronics
Elecrical equipment
Motor vehicles
Machinery and equipment
Rubber and plastics
Chemicals
Metals
Offshoring
Other
Paper and printing Reshoring
Food and beverages
-10% -5% 0% 5% 10% 15% 20%
Source: Zanker et al Share of manufacturers
2.2.1 German fashion and online retail
Although domestic production A worldwide trend in This means that the penetration
of clothing has continued to consumption patterns over that of e-commerce in Germany was
slowly decline since 2010, time period has been towards notably above the European
fashion consumption in online retail sales, with the average and well ahead of
Germany has held firm and global e-commerce market for the share of 3.7% in Italy, for
even been slowly but steadily all products estimated to be instance. However, e-commerce
increasing over the past worth nearly $3.5 trillion in 2019, penetration in 2019 was slightly
decade: total expenditure on up from $2 trillion in 2016.19 greater in the US at 16.5%, and
clothing and footwear rose Across Europe as a whole, the much greater in the UK, where
by an annual average of 0.5% share of retail sales that comes e-commerce sales made up
between 2010 and 2019 after from e-commerce more than 19.7% of retail sales.
adjusting for inflation.18 doubled from 4.8% in 2012
to 10.1% by 2019. Growth in
online sales was even faster in
Germany, rising from a share of
5.9% in 2012 to 15.9% in 2019.20
17
Zanker et al, Globale Produktion von einer starken Heimatbasis aus, 2013
18
Eurostat, Final consumption expenditure of households by consumption purpose database
16 19
Digital Commerce 360, Global ecommerce sales to reach nearly $3.46 trillion in 2019, November 2019
20
Centre for Retail Research, Online: UK, Europe & N. America 2020 estimatesThe Status of German Fashion 2021
Fig. 5: Retail e-commerce sales as a proportion of total retail restrictions on the opening
trade in selected countries, 2012 and 2019 of physical shops were put
E-commerce share of total retail in place and advice on social
distancing encouraged people
25%
to go out less in public.
2012 2019 Revenue in Germany for online
15% retailers22 grew year on year
in real terms by over 30% in
April, May and June 2020 as
10% restrictions took hold – much
faster than the average annual
growth of approximately 8%
5% seen across 2017, 2018 and
2019. E-commerce typically
sees a seasonal boost in
0%
UK US Germany France Europe Italy November and December each
average year, but in 2020 revenue for
Source: Retail Research
online retailers climbed in April
and remained high across the
The adoption of online sales of retailers in the UK in 2019, year. This compares to the
by retailers in Germany may 49% in the Netherlands and retail sector as a whole, which
be less broad-based than in 61% in Denmark.21 saw revenue fall year on year in
other European countries: in real terms in April 2020. Total
2019, 28% of German retailers While e-commerce has grown retail sales growth and revenue
gained at least 1% of their rapidly in recent years, the recovered to typical levels after
revenue from e-commerce. COVID-19 health crisis in 2020 that month, but did not see
This puts Germany in 13th saw online retail revenue the rapid, sustained growth
place in the EU28, behind 42% grow even more rapidly, as experienced by online retailers.
Fig. 6: Annual growth in Germany of total retail sales and sales by internet and mail order
companies, real terms
Year-on-year change
35%
Total retail trade Online & mail order
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-19
Fe 0
M 0
A 0
M 0
0
19
19
-19
-19
-19
19
9
-19
19
-19
-19
20
0
Se 0
20
l-1
2
2
-2
-2
-2
l-2
-2
n-
b-
n-
p-
n-
b-
n-
p-
ec
ar
pr
ay
ug
ct
ov
Ju
ar
pr
ay
ug
Ju
Ja
Ju
Fe
Se
Ja
Ju
O
M
A
D
M
N
A
A
Source: Destatis
21
Eurostat, E-commerce sales database
22
Online retailers in this context refers purely to businesses whose main activity is selling online or through mail order, it does not
include the online sales revenue of mainly physical retailers. 17The Status of German Fashion 2021
GERMANY’S LARGEST FASHION COMPANIES
Germany’s sports clothing companies are prominent brands domestically and internationally. The
adidas Group, whose major brands are adidas and Reebok, had €23.6 billion of sales in Germany
in 2019, making it by far the largest German fashion company, followed by Puma with €5.5 billion.
Other large fashion companies include German retailer Otto Group, the German subsidiary of
Swedish retailer H&M and German luxury brand Hugo Boss.
Fig. 7: Germany’s 10 largest fashion brands by sales revenue in Germany, 201923
Rank Company Brands Sales, 2019, €bn
1 adidas Group adidas, Reebok etc. 23.6
2 Puma Puma, Cobra 5.5
3 Hugo Boss Boss, Hugo 2.9
4 C&A Deutschland C&A, Canda, Clockhouse, Yessica, Rodeo etc. 2.2
5 Kik Kik, Ergee 2.1
6 New Yorker New Yorker 1.9
7 S. Oliver Group S. Oliver, Comma, Liebeskind Berlin etc 1.3
8 Esprit Esprit 1.1
9 Takko Takko 1.1
10 Ernsting’s Family Ernsting’s Family 1.1
Fig. 8: Germany’s 10 largest fashion retailers by sales revenue in Germany, 201924
Rank Company Brands Sales, 2019, €bn
1 Otto Group Otto, Baur, Bonprix, Heine Schwab, About You etc. 4.7
2 H&M, Hamburg H&M, COS, Weekday, Monki etc. 3.2
3 C&A C&A stores and online 2.2
4 Zalando Online shops and outlets 2.0
5 Deichmann Deichmann, Snipes, Onygo, Soulbob, Ochsner 2.0
6 Schwarz Gruppe Lidl, Kaufland 1.5
7 Tengelmann Kik 1.5
8 P&C Düsseldorf P&C Modehäuser, Anson’s 1.4
9 HBC Kaufhof 1.2
10 TJX Deutschland TK Maxx 1.1
23
Textilwirtschaft Deutschland Die Grössten Deutschen Modemarken 2019.
18 24
Textilwirtschaft Deutschland Die Grössten Bekleidungseinzelhändler in Deutschland 2019.The Status of German Fashion 2021
Lisa Wassmann
19The Status of German Fashion 2021
3. T
HE ECONOMIC IMPACT OF
THE FASHION INDUSTRY
In this chapter, we present 3.1 INTRODUCTION TO OUR IMPACT ANALYSIS
our estimates of the fashion
industry’s contribution to the We assess the impact of the This approach enables us to
German economy. German fashion industry using build a picture of the fashion
a standard means of analysis industry’s total contribution to
called an economic impact the German economy across
I believe that one of our great assessment. This involves three key metrics:25
assets, which I always feel as a quantifying the industry’s
retailer, is that we are the largest economic impact across three • GDP—more specifically,
the fashion industry’s
and most relevant consumer channels:
“gross value added” (GVA)
market in Europe.
• Direct impact—this contribution to gross
encompasses the economic domestic product (GDP).
activity and employment In simple terms, GVA is the
Michael Kliger, CEO, Mytheresa
supported by the fashion sum of income generated
industry’s own activities in by the industry in the form
Germany. of employee compensation,
business profits and taxes
• Indirect impact—this
on production.
reflects the economic
activity and employment • Employment—total
supported in supply chains headcount of employment
as the German fashion supported by the industry’s
industry purchases goods activity.
and services from other
German businesses. • Tax—the amount of tax
revenue generated by the
• Induced impact—this industry for the German
comprises the wider government, including VAT
economic activity on fashion purchases, labour
supported in Germany as taxes and corporation taxes.
employees of the fashion
industry, and those in the The modelling upon which
industry’s domestic supply this report is based computes
chains, spend their earnings, the economic footprint of the
for example, in local retail fashion industry in Germany
and leisure establishments. for 2019, based on the latest
economic data available at the
time of writing.
25
The impact results are presented on a “gross” basis. They therefore ignore any displacement of activity from other industries.
Nor do they consider what the resources currently used by the fashion industry or stimulated by its expenditure could alternatively
20 produce in their second-most productive usage. Our economic impact analysis therefore estimates the actual economic footprint of
the fashion industry in Germany each year, but does not estimate the extent to which the size of the German economy might differ if
the fashion industry did not exist.The Status of German Fashion 2021
THE CHANNELS OF ECONOMIC IMPACT IN OUR MODEL
More detail on the methodology used to create these estimates can be found in Appendix 2.
The German fashion industry
DIRECT employs staff, and its
IMPACT operations generate GDP
and tax for the authorities.
It also spends money with suppliers who employ staff, generate
GDP and pay taxes, and support other suppliers in turn.
INDIRECT
IMPACT
Employees (including within suppliers) spend their earnings in
the wider economy, generating more GDP, jobs and tax revenues.
INDUCED
IMPACT
Added together, these three effects—direct, indirect, induced—
comprise the total economic impact of the fashion industry.
TOTAL
IMPACT
21The Status of German Fashion 2021
3.2 THE DIRECT IMPACT OF FASHION MANUFACTURING AND DISTRIBUTION
The largest components of 3.2.1 Direct impact on GDP Of this €27 billion total, by
the German fashion industry far the largest contribution
We estimate that in 2019,
are fashion wholesaling and came from fashion retail, at
fashion manufacturing
retailing (collectively referred 65% of the total, and fashion
and distribution directly
to here as “distribution”) wholesale contributed a
contributed €27 billion to
and manufacturing. These further 20%.26 This highlights
German GDP in gross value
sectors are the core of the the importance of the
added terms, equivalent to
industry and provide fashion distribution of fashion
approximately 1% of Germany’s
products to consumers, either products to the overall
total €3.4 trillion GDP. This
by manufacturing them or value of the German fashion
means the core of the fashion
importing them from overseas. industry, with manufacturing
industry is slightly larger than
contributing 15% to the total.
the agriculture, forestry &
fishing industry (€25 billion
The German fashion industry Breaking down the impact
GVA) and slightly smaller than
has traditionally always been of the fashion industry by
the telecommunications sector
very reliable, just as the Germans product type, womenswear
(€28 billion). For reference,
are reliable. and menswear were the
this compares to an estimated
most important, together
€122 billion contribution from
accounting for over 60% of the
the automotive manufacturing
Adrian Runhof, CEO, Talbot Runhof total direct GVA contribution
sector in 2019.
in 2019.
Fig. 9: Direct GVA of the German fashion industry versus other German industries, 2019
Food, drink & tobacco manufacturing 49
Computer & electronics manufacturing 44
Arts, entertainment & recreation services 42
Telecommunications 28
Fashion manufacturing and distribution 27
Agriculture, forestry & fishing 25
Publishing activities 15
0 10 20 30 40 50 60
Source: Oxford Economics, OECD € Billion
26
Fashion companies are split into the different sectors used here mostly according to their primary activity. Statistics are then
22 recorded along these sector lines by Statistisches Bundesamt (“Destatis”), whose data we use for this analysis.The Status of German Fashion 2021
Fig. 10: Direct GVA impact of the Fig. 11: Direct GVA impact of the German
German fashion industry by sector, 2019 fashion industry by product category, 2019
0.3 3% 2%
3.7 8%
11%
40%
5.5 € Billion € Billion
15%
17.8
22%
Fashion retail Womenswear Childrenswear
Fashion wholesale Menswear Accessories
Manufacturing of fashion products Footwear Luggage & Bags
Fashion textiles manufacturing Jewellery & Watches
Source: Eurostat, Destatis, Oxford Economics Source: Eurostat, Destatis, Oxford Economics
3.2.2 Direct impact on employment
In 2019, the German fashion Fig. 12: Direct employment impact of the German fashion
industry employed a total of industry by segment, 2019
750,000 workers, nearly 2% 7,000
out of total employment in
Germany of 45 million in 2019.
By far the largest component 73,000
was the retail sector, with
596,000 or 79% of the 75,000 Fashion retail
total—reflecting the relatively
labour-intensive nature of Manufacturing of
this sector. Fashion wholesale fashion products
and manufacturing of fashion
products each employed Fashion wholesale
approximately another 10% of
the total. 596,000 Fashion textiles
manufacturing
Source: Eurostat, Destatis, Oxford Economics
23The Status of German Fashion 2021
Labour productivity, defined Fig. 13: Average labour productivity (GVA per worker), 2019
as GVA per worker, varied
significantly between the Fashion wholesale 76
different segments of the
German fashion industry.
Workers in fashion wholesale Germany average 67
contributed an average of
€76,000 a year to GDP,
13% more than the average Textiles manufacturing 51
across the German economy.
In contrast, productivity in Manufacturing of
49
fashion retailing was €30,000 fashion products
on average, less than half the
average across all sectors. Fashion industry average 37
3.2.3 Direct impact on tax
revenues Fashion retail 30
The fashion industry directly
supported €22 billion in tax 0 20 40 60 80
payments in 2019. Close to € Thousands per year
60% of this total came from the Source: Eurostat, Destatis, Oxford Economics
value added tax (VAT) collected
from the retail sale of fashion Fig. 14: Direct contribution to German tax revenue by type of
goods. Taxes on labour, in the tax, 2019
form of employee and employer € Billion
social security payments 14
and employee income tax,
accounted for another 39% 12 13.3
of total tax payments by the
industry. The remaining 2% 10
came from corporation tax.
8
I think the combination of 6 6.6
Made in Germany and real
technical innovation coupled with 4
digital innovation is the biggest
opportunity in the industry. 2
1.9 0.5
0
VAT on Social security Labour Corporation
David Fischer, Founder, Highsnobiety products payments income tax tax
Source: Eurostat, Destatis, Oxford Economics
24The Status of German Fashion 2021
3.3 OTHER DIRECT IMPACTS
As well as the impacts arising In 2019 the advertising For this study, we have
from fashion distribution sector’s activities within the estimated the economic
and manufacturing, further fashion industry supported impact of the 11 most
economic activity is €640 million in German important German fashion
supported in sectors such as GDP. More than a third of publications identified by the
fashion marketing, magazines this contribution came from German Fashion Council.27
and education. advertising for womenswear, Together, these magazines
while advertising for menswear sold more than 36 million
3.3.1 The direct impact of and footwear accounted for copies in Germany in 2019,
marketing and advertising 22% and 16% of the impact generating an estimated €364
respectively. Employment of million in sales and advertising
By helping other segments of
approximately 15,000 was also revenue. We estimated that
the fashion industry market
supported in the sector. this economic activity directly
their products and build brand
contributed €156 million to
recognition, advertising plays
3.3.2 The direct impact of German GDP and supported
an important role for many
fashion magazines employment of 2,300.
companies operating in the
sector. Retailers, in particular, Fashion magazines are
3.3.3 The direct impact of
are large users of advertising another facet of the industry,
fashion education
services, fuelling an estimated logistically separate from retail
76% of fashion advertising and production, but closely By training new designers and
revenues. The remaining 24% linked in terms of the topics of other textiles and clothing
of fashion advertising output written content produced. specialists, higher education
comes from the wholesale and institutions also play an
the manufacturing sectors. important role in the fashion
industry. The quality and
Fig. 15: Direct GVA impact of fashion advertising in Germany importance of Germany’s
by product group, 2019 fashion schools is highlighted
15 10 by the Federal Foreign Office,
who note that the majority
of Europe’s fashion designers
48 are trained in Germany’s 40
Womenswear
fashion schools.28
Menswear
68
257 Footwear
€ Million Jewellery & Watches
Childrenswear
99
Accessories
Luggage & Bags
140
Source: Eurostat, Destatis, Oxford Economics
27
The publications for which we’ve estimated an economic impact are Brigitte, Cosmopolitan, Elle, Glamour, GQ, Grazia, Harper’s 25
Bazaar, Icon, InStyle, Madame and Vogue.
28
Deutschland.de, Study in Germany: Fashion, 2018The Status of German Fashion 2021
Fashion education’s economic 3.4 THE TOTAL IMPACT OF THE FASHION INDUSTRY
contribution can be measured
by the salaries of the staff The impact of the German manufacturing and distribution
involved in teaching fashion fashion industry on the of fashion products (€27
subjects in German higher economy is not limited to its billion), as well as fashion
education institutions. To direct contribution. To provide advertising, magazines and
estimate this amount, we used a more complete picture, the education (a further €1 billion).
higher education statistics for supply chain (“indirect”) impact The sector’s procurement
the subjects Textile Design and the consumer spending spending supported a further
and Textile and Clothing (“induced”) impact need to be €20 billion throughout its
Technology/Industry as the considered. In this section, we supply chain. The wage
courses most related to fashion present our estimates of the spending of the industry’s
education. These higher total impact of the industry on workers, and of the workers it
education subjects had nearly the German economy. supports throughout its supply
800 first-year students enrolled chain, contributed a further
in 2019/20 (down from 1,200 3.4.1 Total impact on GDP €18 billion to German GDP.
earlier in the decade), and
Across the three impact
nearly 6,000 students across This means that for every
channels, the German
all years and degree types.29 €100 contributed directly by
fashion industry supported
the industry, a total of €235 is
€66 billion in GDP in 2019.
Combining the total number supported across the economy.
Out of this total, €28 billion
of students on fashion degree
was supported by the
courses with estimates of
industry directly through the
average class size and average
academic pay suggests that
Fig. 16: Total GDP contribution by the German fashion
academic wages—i.e. the
industry, 2019
value added of the fashion
education sectors—amounted € Billion
to €17.9 million in 2019, across 70
66
300 academic jobs.
60
18 18
I believe that the German retail 50
sector is incredibly important
for the inner-city environment,
40 20 20
more must certainly be done to
support it.
30
Dieter Holzer, CEO, Marc O’Polo 20
28 28
10
0
Direct Indirect Induced Total
Source: Oxford Economics
26 29
Destatis, Institutions of higher education; statistics of students databaseThe Status of German Fashion 2021
3.4.2 Total impact on Fig. 17: Total employment contribution by the German fashion
employment industry, 2019
In 2019, the German Thousands
fashion industry supported 1,400
employment of close to 1.3
million. With 770,000 workers 1,270
1,200
employed directly by the
industry (750,000 across 240 240
production and distribution, 1,000
and close to a further 20,000
260 260
across fashion advertising, 800
magazines and education),
the direct employment impact 600
represented more than
60% of the total. Another
400
260,000 individuals were 770 770
employed throughout the
industry’s supply chain, 200
while 240,000 workers were
in jobs supported by the 0
consumption spending of Direct Indirect Induced Total
direct and indirect employees. Source: Oxford Economics
This means that for every 100 Fig. 18: Total contribution to German tax revenue by type of
people employed directly by tax, 2019
the industry, total employment VAT on products Social security payments
of 160 is supported across the
economy. Labour income tax Corporate tax
€ Billion
3.4.3 Total impact on tax
30
revenues
The German fashion industry
supported a total of €36 billion 25
23
in tax revenue in 2019 across
the direct, indirect and induced
20
channels. VAT paid by fashion
consumers, and by workers
across the sector and its supply 15
chain, accounted close to half of
the total. Taxes on labour also
made an important contribution 10
8
to total tax payments, with
6
social security and labour
5
income tax accounting for 36%
and 13% of the total respectively.
0
Direct Indirect Induced
Source: Oxford Economics Totals do not sum due to rounding
27The Status of German Fashion 2021
WORLDWIDE SALES OF THE LARGEST GLOBAL FASHION BRANDS
Analysis from industry body TextilWirtschaft looks at the largest 175 European fashion brands and
their worldwide revenue. We have grouped these companies by their country of origin in the table
below. These statistics suggest that German fashion brands had the second-highest global sales
of firms in the top 175, with 51 compared to France’s 17, the largest (adidas Group) contributed
nearly a third to the total revenue for German brands.
Fig. 19: Worldwide sales revenue by 175 largest European fashion brands, grouped by country
of origin, top 10 country results30
Rank Country Count of brands included Sum of sales revenue, 2019, €m
1 France 17 66.0
2 Germany 51 55.8
3 Spain 5 32.5
4 Italy 52 30.8
5 UK 20 22.7
6 Sweden 3 22.4
7 Ireland 1 8.9
8 Netherlands 7 6.6
9 Switzerland 8 5.7
10 Denmark 3 4.1
28The Status of German Fashion 2021
Iain Brown
29The Status of German Fashion 2021
CIRCULAR BUSINESS MODELS – FASHION’S NEW PARADIGM
Provided by Karl-Hendrik Magnus, Senior Partner and leader of McKinsey’s apparel, fashion, and
luxury group in Germany; Felix Rölkens, Associate Partner and core member of the group, and
David Barrelet, Consultant and member of the group.
Amid rising pressure to operate more waste and volumes), recycling, refurbishing,
sustainably, the fashion industry has started reselling, renting and repairing. Each of the six
to engage with circular business models such “Rs” can help companies align more closely
as resale and recycling. However, progress has with consumer—and increasingly investor—
been slow. Today, less than 1% of the material expectations. In addition, loops of use and reuse
in clothing is recycled, dwarfed by other can create a multiplier effect that can build
industries such as paper, where recycling rates value, if used effectively.
are up to 72%.31 The current situation presents a
challenge for fashion companies but also offers Change rarely happens all at once though.
an opportunity, both to engage more closely with This is apparent in fashion, with a few brands
customers and to add value to the bottom line. pioneering or scaling up circular business
models, while others hold back. One pioneering
Europe produces around 2 million tonnes of example is adidas’s fully recyclable footwear due
textile waste a year, or 5.5 kilos per person.32 for launch in 2021, which can be worn, returned,
Germany alone is responsible for around and recycled into new running shoes. This
400,000 tonnes of waste annually, second only follows other innovations from the company,
to Italy. Across Europe and the wider world, such as producing 11 million pairs of shoes in
the vast majority of discarded clothes are 2019 from recycled ocean plastic. The company
incinerated or go to landfill. One reason for the has also committed to using only recycled
scale of this waste is that the fashion industry polyester in every product by 2024.35
uses a high-volume operating model that is
arguably the antithesis of sustainability. Fashion Another company to embrace circularity
consumers operate in a similar way, tending to is Berlin-based Zalando, a digital fashion
favour either luxury items or disposable fashion. marketplace. Zalando announced a “pre-
This in turn leads to overproduction and more owned” category in February 2020 that allows
waste. Indeed, garment production volumes are customers to shop for pre-owned items or sell
predicted to grow by 2.7% annually between their own articles to the company.36 To facilitate
now and 2030.33 this, Zalando has set up a reverse logistics
process, carrying out quality checks on pre-
Despite high levels of production and owned products before then reselling them
consumption, consumers increasingly wish to on the same terms as new clothes in terms of
reflect their sustainability values in their fashion delivery, right of return and payment options.37
purchasing decisions. In a recent McKinsey
survey, more than 60% of consumers said a Alongside the efforts of these large businesses,
brand’s promotion of sustainability was an a wave of young German brands is shaking
important factor in deciding whether or not up the status quo by putting sustainability at
to buy.34 Consumers are concerned about all the center of their business models. Cologne-
aspects of sustainability, from the supply chain based Airpaq, for example, produces upcycled
to packaging, but their sharpest focus is on backpack and accessories from car airbags
materials, which they want to see produced and seatbelts.38 Munich-based Bewoodz is a
using sustainable processes. sustainable eyewear brand that uses natural
materials and prioritises ethical production,
The good news for fashion companies is that animal welfare, and eco dyes and printing. In the
these dynamics can be effectively managed, and same vein, Friends That Rhyme manufactures
potentially harnessed for commercial advantage. handbags from vintage fabrics.
To get there, companies must embrace six
principles of circularity: reducing (emissions,
31
Paper Mart, European Paper Recycling Rate Increased to 72 percent in 2019, July 2020
32
LABFRESH, based on data from 15 European countries
33
McKinsey & Co, Fashion on climate, 2020
30 34
McKinsey & Co, Consumer sentiment on sustainability in fashion, 2020
35
Adidas, Adidas Unlocks A Circular Future For Sports With Futurecraft.Loop, 2019
36
Zalando, Zalando announces pre-owned category, 2020
37
Die Welt, Mit der Secondhand-Idee will Zalando den Umwelt-Makel Loswerden, 2020.
38
Eco Lookbook, Ethical and Sustainable Fashion Labels in Germany, 2020The Status of German Fashion 2021
Despite these examples, the industry as a whole more about extended lifespans and less about
faces challenges in turning circular principles the norms of high-volume production.
into workable strategies. One challenge
relates to taking back used items, which At the same time, decision makers should
remains a logistical stumbling block for many consider how to further engage and educate
companies—particularly those with fragmented consumers. For younger consumers, born
geographic footprints. One solution is to use into digital interactions and heightened
specialist reverse logistics companies, which environmental awareness, circular fashion makes
can recover items from disposal or secondary sense. However, many older consumers may
resale. US clothing company Patagonia, for need encouragement and advice to make the
instance, works with start-up Trove to buy switch. The onus, therefore, is on the industry
back items and sell them at a reduced price. to meet the needs of the younger cohort and
Trove handles purchasing, processing and to engage more closely with those needing a
pricing so that second-hand items are ready helping hand. By enabling resale, recycling and
to be sold alongside new collections. A similar repair—for example through in-store mending
operating model can work for clothing rentals, stations—the industry can support consumers
with third parties managing the entire process, in making circularity integral to their fashion
from warehousing and cleaning garments to decisions. Alongside those efforts, fashion
managing customer feedback. companies throughout the value chain should
collaborate to make the necessary investment
The root cause of circularity shortfalls often lies in automation and infrastructure needed for
in the design process, which may fail to take into sustainable processes. In a time of change, it is
account the durability or recyclability essential to often those that make the boldest commitments
making circularity work. To obtain the maximum that realise the richest rewards.
value from products, designers will need to think
Vicky Lehmann
31The Status of German Fashion 2021
4. S
TRENGTHS, WEAKNESSES,
OPPORTUNITIES AND
THREATS
Our economic footprint list of interviewees). These
The strength of the German analysis provides a static interviewees were selected so
fashion industry is its technology, viewpoint; a picture of the as to cover as broad a range
know-how and human capital. impact of the fashion industry of the different aspects of the
at one point in time. To fashion industry as possible, to
understand the industry from gain a thorough understanding
Prof. Dr. Phil., Dipl.-Des Marina a more dynamic perspective, of the issues being faced.
Wachs, Industrial Designer and we asked industry experts
Professor, Hochschule Niederrhein about the outlook for We used these responses, in
University of Applied Sciences the sector, drawing on its conjunction with findings from
strengths and weaknesses. a literature review, to conduct
We talked to 44 major figures an analysis of the industry’s
within fashion brands, fashion strengths, weaknesses,
fairs, retail, media and other opportunities and threats—also
areas (see Appendix 1 for a known as a SWOT analysis.
OVERVIEW OF STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS
• Strengths: The German fashion industry • Opportunities: Germany’s specialty of producing
enjoys an international reputation for quality, quality workmanship and advanced technical
reliability, and value. The country is also noted textiles provides it with a relatively unique
for its technologically-advanced approach offering that it can take to new markets, including
to fashion, including technical textiles and emerging economies. This may be particularly
advanced clothing and textile manufacturing the case when it comes to the growing trend
equipment. Its large home market is a positive towards sustainability, which means customers
for German businesses as it is possible to buying fewer, higher quality items that will last
achieve a high volume of sales domestically. a long time. Germany’s innovation includes
development of “smart” textiles that can sense
• Weaknesses: Interviewees expressed concern and react to environmental stimuli (such as
that the German fashion industry suffers from
changing colour or thermal properties)—this area
a relatively low level of visibility on the world
is predicted to be a major global growth area
stage, despite its reputation for quality and
over the medium term.
value. Its sports brands and a few other labels
are internationally recognisable companies, • Threats: to maintain global market share
but overall, there are comparatively few world- Germany will need to continue to invest to stay
famous German fashion brands. Stakeholders at the forefront of the fashion technologies
noted that this may be in part because the in which it has its niche, as emerging markets
country has its speciality in functional clothing, mature in this area. In particular, China is likely to
with less of a modern tradition than other become a strong competitor in technical textiles
countries have for the avant-garde designs and the production of textile manufacturing
that draw attention at international shows. equipment over the medium term. Global crises
These characteristics, combined with a greater (such as COVID-19) and trade wars that affect
trend for outsourcing production than in Italy, supply chains are a threat to the German fashion
say, contribute to the country’s difficulties in industry, which is one of the world’s largest
retaining and attracting design talent. importers and exporters of clothing and textiles.
32The Status of German Fashion 2021
ABOUT SWOT ANALYSIS
SWOT analysis provides a framework to assess current industry trends and gain insights into
key future risks that are likely to shape market outcomes. Strengths and weaknesses refer to
internal factors which are likely to influence the German fashion industry’s response to external
threats and opportunities. An overview of the framework of SWOT analysis is provided in the
figure below. Following identification of the themes that populate each area, it is possible to draw
conclusions as to the best strategies for the industry.
Fig. 20: The SWOT analysis framework
Strengths (internal) Weaknesses (internal)
How do I overcome the weaknesses
Opportunities How do I use these strengths to take
that prevent me taking advantage of
(external) advantage of the opportunities?
these opportunities?
Threats How do I use my strengths to reduce the How do I address the weaknesses
(external) likelihood and impact of these threats? that will make these threats a reality?
4.1 STRENGTHS as a producer of textile Well-known global sports
manufacturing machines, brands: Germany’s global
Reputation for quality and including innovations such as 3D sports brands, such as
reliability: A high proportion knitting machines, and digital adidas and Puma, were seen
of respondents referenced design techniques. The technical as strong ambassadors for
the quality of German-made “know-how” of companies in the German fashion on the world
clothing as one of the fashion industry was given as a strength stage. Other examples given
industry’s core strengths. for the industry, with the depth of well-known German brands
Reference was made to both of this knowledge setting the included Hugo Boss, as well as
the quality of workmanship and German fashion industry apart Karl Lagerfeld and Jil Sander
the materials used, with many from those of other countries, on the creative side of the
noting that Germany is known particularly in the area of German industry.
for providing good value for technical textiles. In part this is
its clothing. Respondents also due to the country’s strong links
noted that German companies between universities and textile Germany is very far ahead in
in the sector are reliable research institutes.39 the world market for technical
business partners in terms of textiles and technical fibers.
delivering on time and to a Strong home market: The
consistent level of quality. fact that Germany has one
of the largest markets for Holger Max-Lang, President,
Advanced technology: fashion in the world was Northern & Eastern Europe, Middle
Germany’s textile research identified as a key strength East, Lectra Deutschland GmbH
institutes and university for domestic companies. This
departments were noted as an means there is a ready source
example of how the country of potential demand to grow
drives global innovation in a new company without the
fashion and textiles. This challenges of having to look
extends to Germany’s position outside the country’s borders.
39
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