THE FUTURE OF FASHION

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February 10, 2020

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THE GLOBALISATION COMBINED WITH THE COMPETITION FROM E-COMMERCE AND THE VISITOR FREQUENCY DROP IN BRICK AND MORTAR RETAIL (INDEPENDENT SHOPS, DEPARTMENT STORES, SHOPPING MALLS) IS OFTEN REFERRED TO AS “RETAIL APOCALYPSE” OR “THE PERFECT STORM”.

BY HENRIK SPANDET

The development poses a number of problems for many fashion and lifestyle brands whereas other brands manage to turn the situation into an opportunity. Why is that so? And what do brands need to consider to stay in business?

At Copenhagen Business School I have the pleasure of being part of teaching a group of international students in “International Fashion Entrepreneurship and Business Development”. At CBS I use “Wipe out”, the game show series, as a metaphor to illustrate what is happening in the industry. In the “Wipe out” game show contestants compete in a obstacle course.

Obstacles, such as the “Big Balls”, four very large red spheres in sequence must be traversed from a running start. In “Wipe out” the rules are very similar to the world of fashion and lifestyle retailing.

  1. You need to develop and move on/jump (develop or die); otherwise you are pushed into the water or punched out at random intervals by for instance the “sucker punch” (a wall covered in boxing gloves in Wipe Out)
  2. You need to think carefully, fast, and you need to adapt when you jump from one large “red ball” to the next (develop fast)

The major brands and retailers (in Denmark some of the most known brands are Bestseller, Ecco, Pandora) manage the “Wipe Out” obstacle course well. They have turned the digital and online sales transformation into a business opportunity whereas the small and medium sized brands often do not have the necessary capital and competences. They are punched out at random.

Succesful brands have transformed their business model. They have upgraded the marketing department and are basing their business on data and algorithms, leading to campaigns based on knowledge and not just feelings. Without data a brand is like a chicken running around with its head cut off. Many of the losers have not been through this transformation. They are stuck in old fashioned business models based on wholesale and sales agents.

In the media 20th March, 2019 Ecco announced a revenue increase by 10% caused by an increase in Ecco´s own stores, increase in online channels (up 36%) and a drop in wholesale (sales to independent shops). Their CEO Steen Borgholm announced that “brick and mortar shops have to understand online. The idea of merging these two channels simply works as a reaction to the drop in visitor frequency in the shops”, Steen Borgholm stated.

The shift in sales channels offers opportunities to brands focusing on Online Direct To Consumer sales. Doing this, the brand obtains an understanding of the need and buying habits of the consumer – which then leads to better products, better shopping experiences and a higher brand loyalty. Direct to Consumer selling is fully controlled and never exposed to short termed push strategies devaluating the brand.

The new generation does not start shopping in brick and mortar retail. The new generation starts the shopping journey via mobile devices, often on Instagram. They know more about the brand and products (and prices) than the staff in the stores. Stores still play a big role as increasing numbers of customers choose to click and collect but off- and on-line shopping needs to be seen as one pair of shoes.

Here are 6 overall trends which I expect to continue within fashion and lifestyle

1. Digital and online transformation will drive the business.

Online business will continue to grow, both partner online and own brand web sites.

Zalando, Asos and others are the new online department stores. They will take market shares from the physical (off-line) stores/department stores. Everybody talks about Amazon as the “big monster”. Nobody knows what to do about the monster. But expect Amazon to be gaining significance and market shares.

2. The independent offline shops will continue to be under significant pressure and the consolidation of brands will continue. 

The multibrand retailers (“independents”) do not have the necessary profitability against the vertical players. The small independent shops are unable to carry the necessary assortment in their shops compared to the large(r) off- and on-line players. Pushing products into multibrand stores is not a winning strategy.

The “retail apocalypse” will continue in the cities, in shopping malls and department stores.

Only retail concepts making a significant difference to the consumer and focusing on branding will sustain.

3. Off-line and Online will increasingly be seen as a mutual sales platform

Online will be combined with offline shops and often they are there not just to ensure revenues but more to help the brands understand how the consumer thinks and acts, and where the purchase is eventually made.

4 . Without data you are just a person with an opinion. 

Datadriven marketing will take over from an industry often being based on emotions. Fashion is business. Online business supported by digital marketing and its algorithms will continue the transformation. And as already stated; without data a brand will be like a chicken running around with its head cut off.

5. The polarisation and consolidation of the fashion and lifestyle industry will continue 

The gap between big and small becomes bigger. The gap between the brands driving a healthy business and the brands being on the edge of closing up will continue.

6. Trend: the circular economy is in fashion.

Following the trend of sustainability the circular economy will be the “new black”. Look at what H&M or Adidas are initiating. We will see more and more brands not only thinking sustainability but also re-using materials in a closed loop. For instance recycled cotton or plastic bottles being reused for fashion. Brands thinking sustainability and having circular thinking as their “why” will be the winners of the future.

Conclusion

Overall, the retailers and brands who will emerge from the current realignment will be those who understand what it means to put the customer first, think in strong branding compared to pushing products. Brands basing their business on data instead of feelings and transforming their business from wholesale to off- and online retailing will be the winners. Thinking sustainability and adopting to the circular economy will be a further strong competitive move.

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