The fashion industry is undergoing a seismic change. We can see and analyze this change through the latest news about the sector, in specialized media and in the reports of international consultants.
The report The State of Fashion 2018- FOB & McKinsey – which you can download for free here – seeks to highlight the changes that are shaping the sector during this year, but at the same time makes a necessary review of all those trends that in the long term will constitute the background of major transformations. These are connected forces that will drive new processes and shape the new reality of the industry in the years to come. The following is an analysis of the most relevant conclusions of this report.
Resilient fashion: its challenges
In the report’s survey, McK & FOB consulted with top management:
What do you think will be the biggest challenge for the fashion industry during these years?
The main challenges identified were as follows: Facing volatility, uncertainty and changes in the global economy | Competition fostered by the Internet and the omnichannel | Digitization of the value chain | Reduced traffic in physical stores.
The days when the West was the pillar of the world economy are a thing of the past. Economic growth has shifted from the West to emerging markets in the South and East. During 2018, more than half of all clothing, footwear and fashion accessories will be marketed outside Europe and North America. The most developed metropolises in emerging markets are the new growth centers for the textile clothing and retail sector.
For this reason fashion brands that market their products in stagnant markets in the developed world face an expectation of flat sales and therefore must move and seek other alternatives in order to continue growing. If we add to this the incredible growth of online commerce that crosses borders, it becomes very difficult for local players to compete. Normally, they do it with an average value proposition and when any other player who does it better appears, they quickly become the new winner in the market.
Moreover, the drastic acceleration in the adoption of disruptive technologies such as robotics, mobile internet, advanced analysis, virtual and augmented reality and artificial intelligence increases the possibility of altering entire industries, including fashion.
The global fashion sector is moving towards digital adoption by the traditional consumer and online sales of clothing, accessories and footwear will continue to grow rapidly in emerging markets.
Today’s shopper’s familiarity with digital channels and content has changed the purchasing process from a simple, traditional system to a complex path through various physical and online points of contact. But no matter what they are, no matter the number of these points of contact, digital customers expect to have a brand experience that is consistent in each and every one of their interactions.
RRSS, seamless interaction and immediate delivery.
In e-commerce, digital platforms are raising the level of service.
As we said, digital customers now expect perfect functionality and immediate attention in every interaction or purchase. Because they have become accustomed to fast deliveries they are no longer seen as a value of a premium service but rather as an obligation of the usual service. That’s why companies are constantly competing to deliver their products faster. And of course, social networks are increasingly catching the consumer’s attention.
As purchasing decisions are influenced by social networks, where criticism or likes from peers and influencers are very important, forces have been generated that directly impact the fashion marketing system.
With information and the ease of comparing at the palm of their hands, consumers become less loyal to the brand: among millennials, 2 out of 3 say they are willing to switch brands for a discount of 30% or more. But while they are very price-sensitive, they also base their buying decisions on the fact that a company’s practices and mission are in line with their own values. This is a generation that has higher expectations of what a company should be able to deliver: convenience, quality, orientation to values, novelty and price.
Resilient Fashion vs. Apocalypse Retail
Originated by the increase in online commerce – “the .com store” – fashion brands have suffered a significant decrease in traffic in their physical stores. For this reason, managers are looking for ways to reduce stores’ operating costs; re-evaluating the sales network, calculating the viability of each point of sale; and improving the shopping experience to attract consumers again.
Declining sales in department stores, combined with the need to improve margins and control brand exposure, continued price reductions and analysis of customer digital footprint data, are moving companies to the direct-to-consumer sales model.
While fashion players are focusing all their efforts on providing a smooth shopping experience that is integrated across contact points, there are still significant obstacles with complex technology implications, as well as unresolved management, operational and logistical issues. It has even been perfectly demonstrated that the effort put into the omnichannel has serious difficulties in producing profitability.
Meanwhile, the fashion industry is being altered by innovative business models. Examples range from data-driven subscription services to shared economy initiatives and peer-to-peer sales.
Análisis del Big Data.
La gran cantidad de datos disponibles sobre la huella del cliente digital y las operaciones comerciales han propiciado el uso del Big Data a través de su almacenamiento y posterior análisis. Esto ha generado una serie de oportunidades que eran impensadas pocos años atrás, como la determinación dinámica de precios hasta la reposición optimizada de los modelos.
The resilient fashion supply chain is very agile and fast.
The main brands of ultra-fast fashion drastically shorten the period of time that passes between the design of each of the new models and their arrival in the store.
In recent years the system of fashion creation and production has been profoundly altered by the accelerated pace that has been generated between the digital customer, their expectations and brands that try to predict and quickly satisfy their desires.
Fast fashion sales have grown steadily by more than 20% in the last three years and new online players are gaining ground. To keep up with them, leading fashion brands must accelerate the process that begins with the design and ends with the arrival of each style in the store, by concentrating on supply optimization and having an explosive reaction.
RRSS, the accelerator of global trends.
This fast-paced rhythm is driven by social networks, which communicate global fashion trends to more and more consumers in less time than in the recent past. Industry leaders continue to raise predictive standards through consumer profiling and analytics that allow them to know their needs in advance and improve responsiveness.
However, betting on speed and flexibility as a system brings with it new challenges. The shortened pre-production times require important changes in the traditional business model and in the configuration of the supply chain. Above all, they require a shift towards a consumer-centered model, where the consumer is the main driving force behind creation, design, manufacturing and marketing.
Supply on demand, the goal of resilient fashion
With the customer at the center of their strategy, fashion companies are designing, buying and producing today in a totally different way than they did in the past. Organizations that follow the old model of yesteryear and continue to apply the same rules of a market that no longer exists, with extensive product development processes, face greater risks and insurance on excess inventory at a time when they cannot meet consumer demands.
On the contrary, other companies have been conceived that have been modifying or building super-versatile supply chains based on predictive design. It is these fashion brands that are the most evolved and set the pace of supply, pushing the limits of their creative processes, applying constant improvement in their sourcing system, where the goal is close to a digital, on demand and always connected supply chain.