Every week, The Interline rounds up the most vital talking points from across the fashion technology landscape. We provide our take on what matters, and why. This roundup is also delivered to Interline Insiders by email.
The social commerce war heats up, supported by government intervention.
Last week, we covered America’s big technology antitrust hearings, and we looked at why Amazon’s third party marketplace agreements were being subjected to new scrutiny. This week has seen several new developments that are, collectively, advancing that line of inquiry – and bringing even larger government powers to bear in a way that could have a profound impact on the future of retail.
First, Attorneys General in California and New York revealed that potential litigation could follow last week’s hearings, centring on two key themes: that shoppers are sometimes unaware that the products they’re buying from Amazon fulfilment are not from Amazon itself; and that Amazon is potentially using intelligence gathered from third-party sellers to develop more directly competitive own-brand alternatives.
This level of state intervention seems like small fry compared to this week’s other developments, whereby China’s central bank – The People’s Bank of China – recommended another antitrust investigation into AliPay, WeChat Pay, and their parent companies Alibaba and Tencent.
The principles of this investigation are similar to the ones we saw in America. The contention is that two technology giants have abused their market dominance to corner a combined 94% of the non-cash payment market in China. Their reach matters to the fashion retail industry because video content – whether livestreamed or curated and uploaded to a video-sharing service like TikTok – has become a primary channel for engagement and sale in China post-COVID. And those sales are being handled through payment gateways like AliPay and WeChat, giving those companies a significant leg-up in monopolising the field of social commerce as well.
It is, perhaps, no coincidence that as the Chinese authorities eyed up a probe of the two tech giants for their dominance of digital payments, US President Trump enacted a “ban” (the specifics are currently unclear) on American companies transacting with Tencent past mid-September, and on WeChat as a whole. TikTok (via its parent company ByteDance) is also included in the executive order, although Microsoft’s interest in purchasing the social network’s US operations could prevent this.
In one fell swoop, $75 billion in value was wiped off Chinese tech stocks, and the potential for those payment services and that shoppable video platform to extend even further into the US was at least forestalled.
We have written before about the gulf that exists between China’s social commerce infrastructure and the equivalents that were (un)available in the Western hemisphere. Until the launch of Instagram’s shopping feature – which was quietly expanded last month in a trial where it replaced the platform’s ‘explore’ function with a shopping catalogue – Western brands and retailers had no single, viable flow from a customer being exposed to a product to that customer paying for it. One twist in that journey would always lead to them leaving the app in question.
It’s hard not to see this week’s launch of Instagram Reels – a direct competitor to TikTok that can tap into the Instagram Shopping backend – as anything other than calculated. While the feature has no doubt been in development for some time, its availability to users at the same time as all the above government intervention into its competition is either fortuitous or suspicious, depending on your perspective.
Either way, as shares in Tencent in Alibaba fell, Facebook (Instagram’s parent) investors will have been left satisfied by a 6% spike in that stock.
From The Interline’s point of view, these state-level moves have bought Western companies valuable time to figure out how to tackle social commerce in the United States and in the conglomeration of nations that make up the UK and Europe.
And tackle it they must: eCommerce sales remain the primary driver behind brands’ and retailers’ ability to stay afloat, with brands revealing that online revenue has assumed a prominent position in their overall business. Ignoring China’s ability to have a smooth flow from promo to purchase would be to ignore a huge piece of what it will take to build a social commerce channel to capitalise on that trend in the West.
Retailers may be using TikTok (and Instagram Reels now it’s available) to have influencers tout just how safe it is to return to their stores, but the real interest for anyone monitoring the technology side of the equation will be how they’re going to adjust to consumers’ desire to buy directly through those platforms instead.
Amid ongoing sourcing difficulties, digital materials and different materials go hand-in-hand.
This month The Interline is focusing on digital materials, which is an area of fashion technology that’s assumed a vital importance in light of the pandemic – which has cancelled physical material shows for the time being – and because of the industry’s accelerated adoption of digital product creation and 3D workflows.
There are still barriers to a successful, all-digital materials workflow, but such a workflow is unquestionably the way forward right now, as a study released this week showed that brands and retailers continue to struggle with sourcing raw materials, as well as production capacity.
That same study also revealed that the majority of fashion businesses are, despite those difficulties, not willing to compromise on sustainability efforts. Which leads to a stark outcome: if you cannot source materials the traditional way, and you cannot cut corners to source them cheaper or quicker, but with a hidden cost, then you need to find both alternative methods and alternative materials.
The methods are an area The Interline will be covering in depth this month, and our collaboration with Cotton Incorporated has shown just how quickly the traditional way of doing things can change at the source.
The alternative materials are also out there, with companies like Lane Eight debuting fitness shoes made entirely from sustainable and recycled materials, Adidas’s admirable ongoing efforts to turn ocean plastic into shoes, HeiQ’s antiviral technology (which has now been proven to block particles of the virus that causes COVID-19) being added to jeans, and even the announcement that we could one day see cotton being genetically engineered to grow in a chosen shade, rather than being dyed after the fact.
Whether we’re looking at physical or digital materials, change is afoot.