This article first appeared in The State of Fashion 2022, an in-depth report on the global fashion industry, co-published by BoF and McKinsey & Company. To learn more and download a copy of the report, click here.

Fashion companies face a talent deficit in the year ahead. Amid all-time-high vacancy rates, businesses are struggling to attract and retain talent — particularly in digital, creative and commercial roles. Employees now have more choice than ever about where, when and how to work in a rapidly evolving job market. To complicate matters further, shifting employee priorities are changing the way people think about job satisfaction. As a result of these and other challenges, there will continue to be a shortage of interested, qualified workers in 2022.

Fashion’s public image is only adding to the challenge. Employee concerns over the industry’s environmental and social impact, in addition to inadequate progress on diversity, equity and inclusion (DE&I), are having a real effect on its desirability. Indeed, 49 percent of fashion professionals believe the industry has lost some appeal as an employer in the past 18 months, a BoF survey shows, with the industry’s reluctance to change and poor sustainability credentials cited as common reasons. In the C-suite, the proportion rises to 56 percent. Given these attitudes, fashion companies need to adapt to stay competitive, improving employment conditions and reimagining workplace cultures to reflect changing talent needs.

“There [may be] a perception among some fashion companies that they are ‘too big to fail,’ … [or a notion that employees should feel] ‘lucky enough to be here,’” said Caroline Pill, London-based partner at fashion and retail executive placement firm Kirk Palmer Associates. “[But] people are now attracted to [factors like] ‘what is my impact in the bigger scheme of things?’ [so]… companies who are not going to adapt are going to struggle.”

One contributor to the talent crunch is the impact of the Covid-19 pandemic on business models. With e-commerce’s share of global fashion sales nearly doubling between 2018 and 2020 in some regions, as even digital laggards got in on the act, the imperative to secure the best digital talent became more urgent. With online acceleration came a plethora of new vacancies, as companies scrambled to hire for roles such as authenticators for fashion resale platforms, analysts and data scientists, reflecting brands’ increasing emphasis on big data. Other specialist roles, such as those relating to sustainability, have also proved challenging to fill.

At senior levels, brands saw a wave of resignations in 2021, with some company leaders leaving fashion for other sectors like technology. Indeed, a significant proportion of C-suite executives remain on alert for opportunities in other industries, with 34 percent saying they have considered leaving the fashion industry in the past 18 months. This is a common sentiment across job levels, with nearly half of all fashion professionals in the BoF survey reporting that they have considered moving to another sector. Among this group of potential leavers, 60 percent cite a desire for a deeper sense of purpose as one of their top three reasons, followed by 45 percent citing better salary and benefits. Tellingly, only 14 percent of this group indicate that industry prestige is one of their top three reasons to leave or remain in fashion.

These trends are reflected in the wider economy. Across sectors, a significantly higher proportion of the global workforce is considering leaving their employer this year compared to previous years. Coupled with the specific challenges facing fashion, this suggests a refreshed approach to employer branding and retention strategies will be required in the year ahead. In particular, revised policies will be needed on the front line.

Retailers have struggled to staff their stores and distribution centres in 2021, while rising e-commerce order volumes have challenged in-store fulfilment. Additionally, there were waves of redundancies in the same year amid widespread company restructuring and store and department closures. As a result, some workers re-evaluated their priorities and opted to move away from arduous, low-paid work.

One critical factor in the talent crunch is wage levels: 51 percent of fashion professionals in the BoF survey rate the industry’s competitiveness in salary and benefits as “poor” or “very poor.” With many retail floor and entry-level jobs offering close to minimum wage at a time when inflation is set to rise in major economies, attracting and retaining staff has become a real challenge. Meanwhile, on the first rung of the career ladder, unpaid internships are still commonplace in the US and elsewhere, despite many other industries largely ending the practice. While these challenges are likely to continue throughout 2022, some companies are taking steps to secure a pipeline of future talent, such as LVMH, which plans to recruit 25,000 people under the age of 30 across internships, apprenticeships and permanent positions by the end of 2022.

In e-commerce, negative headlines about low wages and poor working conditions have hit multiple e-commerce companies around the world. At some digital giants in China, a new generation of employees and consumers are campaigning against excessive “996″ work culture, prompting both pay increases and local labour regulator interventions. Pressures to increase minimum wage in the US have resulted in some retailers increasing average starting salaries in an attempt to fill vacancies.

Fashion companies will no longer be able to rely upon the appeal of their brands or the glamour of the industry to attract talent.

In the coming year, fashion companies will no longer be able to rely upon the appeal of their brands or the glamour of the industry to attract talent. Instead, to compete with other sectors, companies will need to reimagine their talent strategies and move away from some unhealthy entrenched practices, such as hiring from inner circles. In addition, they should broaden their talent pools, embrace objective candidate assessments and leverage cutting-edge software, such as resume screening and job simulation tools, to safeguard fairness.

Post-recruitment, leading companies will foster a sense of belonging and equity of opportunity, engaging more closely with employees to develop comprehensive recruitment, retention and inclusion policies. This will include clearly articulating their corporate purpose, values and career development opportunities.

In 2022, authenticity, flexibility and employee wellbeing will prove to be stronger pulls than ever. Some companies have already made public moves to demonstrate these values: Nike closed its offices for a week to give staff a “mental health break,” while Tapestry plans to extend remote working as long-term solutions for some employees. Hybrid home and office working can also boost loyalty. Some 46 percent of fashion respondents to the BoF survey say flexible working is one of their top three most important factors when choosing to remain with their employers. Hybrid working is set to become table stakes in some markets, alongside flexible working hours, and reluctant or slow-moving brands are likely to lose out to their more adaptable peers. Where hybrid working is not possible, on-site employees will demand other flexible conditions.

Employees today want their employers to reflect their values, meaning that a company’s position on corporate social responsibility (CSR) issues, including sustainability and DE&I, will play a big role in attracting and retaining talent. Indeed, one recent study revealed that 64 percent of Millennials said they would not take a job if the employer did not have a strong CSR policy. In addition, some 83 percent say they would be more loyal to an employer that helps them contribute to social and environmental causes. That said, when putting their values into practice in different markets and working cultures, companies need to ensure they take local sensitivities and priorities into account.

“[Our values] are not different in any region [and] that’s very important to us… but there may be nuances to the way that a goal is achieved… [in markets as distinct as China and Brazil, for example, so we have] a level of independence in each geographical region, to do what’s right by that culture and that country. The end goal is still aligned,” said Sian Keane, chief people officer of luxury e-tailer Farfetch.

There is plenty of evidence to show that gender-diverse and ethnically diverse companies financially outperform their peers. However, there is still little diversity at the top of fashion companies, with senior roles regularly dominated by white men — one of the only exceptions being the chief diversity officer role. Some 42 percent of fashion professionals rate the industry’s performance as “poor” or “very poor” in prioritising DE&I as a core value, the BoF surveys shows. According to a separate survey by the Council of Fashion Designers of America (CFDA) and PVH, industry professionals most frequently describe the state of DE&I in fashion as “evolving” and “improving,” while less than half of respondents believe actions taken in 2021 will lead to lasting change. Furthermore, some 50 percent of employees of colour say that a career in fashion is not equally accessible to all qualified candidates.

Still, some companies are taking steps to show employees, consumers and investors that improving DE&I is a priority. In 2021, Target and Nordstrom were among the companies to publish more detailed employee demographic information, taking responsibility for the lack of diverse representation at leadership level and committing to regular updates on progress. Prada, working with the Dorchester Industries Experimental Design Lab, launched a three-year programme for artists of colour, aiming to recruit talent from outside the company’s regular Italian fashion school recruiting grounds.

Over the coming year, the fashion industry’s progress on DE&I and sustainability will continue to be put under the spotlight, with brands held accountable by their employees for putting their public values into practice. Listening and responding to these shifts will be crucial for many brands that are aiming to attract a new, diverse generation of talent. Companies that lose momentum and fail to demonstrate progress, conversely, could end up closer to the bottom of employer league tables. These measures are also key to ensuring the relevance of their brands with customers.

While many of the forces currently shaping the fashion industry employment landscape have evolved slowly over time, there is now an urgency to implement changes. Companies that have long relied on the inherent allure of the industry and the power of their brands to secure the best talent will need to accelerate their efforts to improve workplace culture — ensuring that employees are sufficiently represented in key decision-making processes and that the company is “walking the talk” when it comes to demonstrating their values. In the years ahead, these actions will draw a line between employers that win the battle for talent and those left behind.