By Anna Salewski, Founder & CEO at SCROBLE
The ever-increasing demands of contemporary consumers are far more than challenging. It is indispensable for fashion brands and retailers to keep up with the latest and create new concepts to remain profitable. While some are addressed by start-ups and innovators, other consumer wishes still await materialisation; especially when it comes to offline shopping. However, it remains crucial for brands and retailers to catch up with them and enable digitalisation to fulfil consumers’ dreams.The concept of physical stores will not cease to exist anytime soon, but it will become much more sophisticated. How else can it be convincing to a demanding customer? But digitalisation in fashion seems to be a slow and complicated process. In this paper, we take a closer look at issues preventing the fashion industry, especially offline retail, from innovating and try to figure out some ways to address them.
Digitalisation: New area for fashion business
It requires a specialist to gauge needs and define which type of innovation fashion really needs. A brand’s core business is to design and produce beautiful garments and not to dive into digitalisation per se. Another factor also affects the pace of digitalisation in fashion – one that touches upon the variety of brand profiles and their strategies. Influenced by culture and history, brands are often symbols of status quo or carry other aspirational messages. Each brand has its own unique way of communicating with its customers. Just like in any other industry, fashion brands need to compete based on their differentiated products and message to connect with their customers. This continues with digital concepts. However, the same does not apply to customers. They prefer a unified approach and enjoy experimenting with X or Z brand, while keeping everything in one place – their wardrobe. There is a certain conflict between the goals and strategies of users and fashion brands that makes digitalisation for users’ convenience even harder. Thus, it appears extremely difficult to find a way to satisfy consumers’ fashion needs. Digitalisation in fashion is the key, but fashion brands are confronted with this complex situation. As result, conglomerates with the right budget are experimenting with digital solutions. However, what we see are mostly apps that are nice to have, entertaining and amusing, but veer towards gamification of fashion and branding of a particular fashion label rather than confronting existing consumer problems. Smaller brands with limited budgets need to study in-depth and understand the alternative they choose before working on a digital solution. However, defining what makes sense is difficult.
Customer Wishes within the Existing Business Model in Fashion
As described by BOF, existing business model shapes and influences many processes within the fashion retail. I will look closer only at a single point within the business model – the communication between brands/retailers and their customers. Fashion brands using different distribution strategies, but they all have one process in common–managing the creation of the collection. Throughout the history of “already produced” fashion as we know it, there was almost no involvement of the customer feedback within this process. The entire involvement of the customer occurred and was also limited to a conversation about existing collections ready to be sold in the store. Another example of existing customer involvement are the loyalty programs. We all have a full pocket (or now a mobile phone) of them, created a long time ago and still existing as a customer binding system. Lesser processes reflect and respond directly to customers’ needs and communicate with users.
Well, times are changing now. The personalisation, we exercise in many aspects of our lives right up to when we sit on the couch watching personalised streaming services or driving cars produced according to our personal wishes, immensely changes our lifestyle and influences within our purchase decisions. Why am I saying this? It is because knowing what customers want is crucial for success in any industry and also counts strongly for fashion.
However, there is no technology to make this interaction possible yet. No one can expect the customer to download an application for every fashion brand and brands probably will never outsource this process to multi-brand retail. Thus, an analysis of customer behaviour is hugely required, especially in connection to selection and influence, up to the product discovery and purchase process. In fact, most fashion brands are trying to find and use valuable analytics to understand current and to predict future customer needs. So, what is wrong with that? Nothing; except the fact that it is a kind of “blind date”–created to be general and with no connection to the personality of the fashion brand and its own fashion lovers. Also, any valuable analytics are created almost only from online sources because offline retail remains a “data black” hole according Forbes (please be reminded here that 80% of total sales will be done even in 2020 over offline retail). While big players have recognised the importance of data and customer interaction for better customer understanding by introducing concepts like ”stores of the future”, it is important to reflect what we will know about the customers’ behaviour with this innovation. Would this kind of in-store digital experience via retail devices deliver this desired information that will help fashion brands improve performance? I think no. We are still far from what we really need, but we are making a first step toward closer customer relationships, understanding its importance and establishing a way of how industry can learn more about the client’s wishes and desires.Interestingly, if we look at five top profitable fashion brands according to McKinsey, we would recognise one similarity among them – they use the exclusive distribution strategy (sales only or almost completely in their own-branded stores). They have direct access to both online and offline consumers, with the greatest (currently technologically possible) insights into customers’ lives. This strategy allows the brands to have the closest contact with their customers, gaining the best understanding of their behaviour. We should not see this as an endorsement for the distribution strategy. However, we need to recognise the extreme need to be digitally connected with the customer, disregarding distribution channels, through instant connection between brands and users. It is clearly evidential that without the broad understanding of users’ behaviour, brands will lose the opportunity to improve their performance.
Ever-increasing customer demands against ever-limiting reality
Millions of customers eat and breathe fashion and mostly show their love online. They browse e-shops, spend time on social media and do online shopping. However, where is offline retail? In that sense, we have a disconnected universe. It follows a different pace and leads a different life, so to speak. Despite tech solutions trying to make purchases smoother and faster for the consumer by integrating stock approvals and delivery tools from online to offline, these environments are not easy to connect. There is currently no magical, seamless connection between offline and online shopping universes. Whichever option we may choose – online or offline – we will always be required to compromise on the benefits of the other. For instance, we compromise the sense of touch when we choose online and the sense of unlimited freedom of choice when we choose offline. Existing technology is unable to help in bridging the gap.Opening hours of physical retail shops is a problem nobody could solve yet – how could they? Is it even solvable? Well, it might be! I have a vision for how we could change the existing shopping reality by extending/digitalising fashion retail. Today, more than ever before, there is a high demand for flexibility because of the busyness of post-modern life and an even bigger need for convenience and user experience. We need to be in control of our shopping decisions. These needs are only partially addressed by existing solutions. Online shopping alone is not the solution to the needs mentioned above, because it is a different service altogether – it does not replicate the experience of shopping offline. Even if subscription services that sell/rent fashion-in-a-parcel address the same issues, they still provide a different kind of service and are far from making city shops more accessible, or let’s say digital, to the consumer. As mentioned in my earlier article, we have seen innovation in the offline fashion space. However, innovation is reserved for certain types of retailers and brands and goes in a different direction. Smart mirrors and digital shelves including i-Pad assistance make the customer experience richer and enjoyable, but do not touch upon real issues that exasperate customers on a daily basis and that could really solve brands’ and retailers’ problems. The same matters for new retailer software solutions (ordering online, delivering offline and vice versa). They only partially solve the problem. Why? This kind of service stands at the end of the product discovery chain, helping with delivery and access to the garment. The services can only support consumers who actively choose that retailer or brand after going through the decision-making and product discovery process, previously unassisted. And here we have dramatic figures about product accessibility – almost “96% of shoppers have left stores empty handed because they couldn’t find what they needed“. I would say it also reflects the time we probably invest in product discovery. (I don’t even start talking about lost amount of relevant data within this process). The manner in which we do offline shopping presently enables very limited product discovery within the available time, mostly wasted in searching.
Diversified retailer profiles bring an extra layer of complexity
To understand the challenges better, we need to distinguish between high-street retailers, usually owned by big brands that sell their namesake products and the rest, i.e. those who offer a multi-brand selection known as the “wholesale” concept. The latter creates diversity in the high-street, but they take high risk while attracting a customer.We must also consider the size of the brand. Smaller brands cannot afford what a giant like Louis Vuitton, with almost 3948 own stores, can. We have multi-retailers, shop owners and fashion conglomerates that operate multiple brands and their respective offline stores and brands that sell their own products in their own shops and within other retailers.Implementing any digital product or service by the brand will have far-reaching consequences for its different distribution channels. It brings another layer of complexity that prevents digitalising products or experiences in fashion. The risks of losing control on branding and its protection are another logical consequence of the processes.
Far-reaching consequences for customers and environment
Unsold inventory, which costs brands over 210 billion dollars a year, should qualify as a very important consequence. I see it as an outcome and logical result of all the problems, including the old business model described above. It was not such a major problem in the past. Living in an economy of speed and consumer consciousness has changed everything. Trend forecasts and predictions are not efficient enough and allow incorrect type or quantities of items to be produced and distributed. It is not a matter of which AI-driven tool provides it, if simply the way of collecting necessary data does not exist yet. We should eliminate unnecessary orders even more urgently than improving supply chains. Technology could and should help in doing it, because any even sustainably produced garment is unsustainable per se if no one will purchase it. Personalised production on-demand is an answer for some fashion brands, but the most would need another digital concept. Customer experience is another challenge. Technology in fashion, nowadays, is not really changing the way we go about fashion shopping. It is just transforming/digitalising single processes. Whether online or offline, I still browse platforms and visit city shops, trying to find what I need or look for inspiration. This makes me think that fashion shopping is obsolete, even if digitalised. Real innovation would enable me to do something entirely different, connecting the dots of offline and online shopping. Only then would innovation improve the quality of life, in the sense of saving time and having unlimited freedom of choice.
Is it possible to develop a new business model and technology that transforms fashion into one with the ability to solve existing challenges by creating a new win-win business and reality for shoppers?
Photos by Francis Duval