Refreshed for 2022, our regular analysis selects one or more news stories from fashion technology, and presents The Interline‘s take on why they matter to our global brand and retail audience – as well as what they might mean for the longer-term future of fashion. As always, this analysis is also delivered to Interline Insiders by email – and signing up continues to be the best way to get a fresh look at the fashion technology news, completely free, in your inbox.
Read the story of how we helped bring fashion technology to life this summer.
This August, The Interline joined forces with the team behind SOURCING at MAGIC – the milestone fashion industry event – to create a new, dedicated fashion technology community at the Las Vegas MAGIC event. Our perspective on the impact of that partnership was published previously in a full event report, but the detailed digital issue of the show itself has now been released, and is available to read in full.
For readers interested in sourcing, manufacturing, or the wide spectrum of technologies that support fashion’s creative and commercial processes, the entire digital magazine contains valuable insights. But we especially encourage our readers to check out pages 19 to 21, which feature our editor’s thoughts on how closely linked the futures of the fashion industry will be with widespread technology adoption.
Look for further announcements of international initiatives (for 2023 and beyond) that will see The Interline helping to demonstrate the benefits of technology to the widest possible audience.
In difficult circumstances, fashion brands and retailers turn to technology for help with fundamentals.
Fashion brands and retailers continue to feel the pinch as the cost of living crisis continues. Profit outlooks are being revised as we write, and consumer behaviours are evolving day-by-day as major retailers here in the UK adjust their strategies to target a level of discretionary spending that is all-but-vanishing.
In a market where a majority of people have little or no budget for luxuries, it’s little wonder that excess inventory is rapidly becoming a major problem. The Interline has previously written about the bullwhip effect (where the end of a supply shock leads to a glut of surfeit goods) but the current climate is a different prospect. Rather than being left with stock because the volume of product has exceeded consumer appetites, retailers are now saddled with inventory because price points that were previously palatable to their target consumer are now unaffordable.
This is not an easy challenge for any industry to respond to, since it demands a more fundamental rearchitecting of the brand or retailer’s offering. Marking down styles that shoppers can no longer afford is a blunt tool to a much finer problem. A subset of people will buy those deeply-discounted products, but many (perhaps most) will instead be seeking products designed with value in mind. And from the brand’s perspective, creating affordable goods is a fundamentally different objective than pre-planning a discount cycle on products that were originally designed with a more cash-rich buyer in mind.
As a case in point, Adidas released new figures midweek that revealed a near-30% drop in operating profit for the second quarter of 2022. Some of the contributing factors to this decline are remarkable (the brand’s choice to withdraw from the Russian market) but others are both more mundane and more worrying; Adidas CEO Kasper Rørsted is quoted as saying that the company will be “focusing on all factors that we can control to maintain our growth momentum”. This is a carefully-worded statement that weaves around a word that no brand wants to confront: contraction.
But for many organisations, the threat of business de-growth is real. People are buying less, costs remain high, inventory is pilling up, and investors are justifiably nervous that this combination of factors creates a difficult near-term future.
Beyond discounting, retailers have another blunt tool available to them: raising prices. This week saw double-digit price increases across categories at food, beverage, and hygiene giant Unilever, and we are likely to see similar stories from some sectors of fashion as well. But while this will help redress the balance between input costs and sale prices, it does nothing to target the need for brands and retailers to rearchitect what they sell in order to cater to a changing market.
This, then, is the situation fashion faces as we enter the 2022 holiday season, and as even the world’s biggest economy teeters on the precipice between growth and recession. Marking down may be an effective short-term strategy, but in the medium-term both brands and retailers will need to find new ways to remain profitable and competitive.
Some of those methods may end up being found in either new business models or the extension of existing pilots. Resale, for example, is being positioned this week as a way for brands to have their cake and eat it – selling high-priced goods in their first-hand stores, and encouraging value-conscious shoppers to engage with their resale channels instead. This could help to keep consumers in the brand ecosystem, but it has the likely downside of affecting brand reputation and framing the organisation as being out of touch. (“Can’t afford our products, buy used!”)
An alternative – and one that we have written about recently in our news analysis – is to scale a digital business unit to compensate for losses in a physical one. There are numerous practical barriers to this, clearly (to be decoded in more detail in our upcoming DPC Report) but financial results released this week by Meta suggest that enterprise enthusiasm for the Metaverse – and with it the possible market for digital fashion – could be fading at the same pace as investors’ patience with the scale and timeline for investment in bringing that vision to life. And with a target of “the 2030s” for the “excitement” of the Metaverse to be realised, digital fashion is highly unlikely to alleviate the immediate pressure on brands’ and retailers’ finances.
Instead, we expect to see fashion businesses going back to basics – strategically speaking, and with their technology investments. Solutions such as intelligent assortment planning, PLM, and supply chain management – all of which can be used in combination to calibrate collections for a rapidly-changing, price-sensitive market – may not be as glamorous as virtual reality, but they probably do offer fashion’s best chances of keeping growth on the long-term horizon by minimising the risk of contraction today.
And the best from the Interline:
Since our last newsletter, we have published an exclusive collaboration, two episodes of The Interline Podcast, as well as two different perspectives on how the fashion industry’s sustainability and circularity ambitions are progressing.
First – and most relevant, in light of the news collected above – is our partnership with the team behind retail collaboration hub Vibe IQ. This detailed article predicts the likely impacts of regional and global recession on retailers’ and brands’ bottom lines, and emphasises the importance of intelligent, proactive assortment planning and smart go-to-market strategy – both as a tool to build short-term assortments that prioritise value, and as a way of building in the level of agility that will be required in the longer term.
If any of this week’s news has resonated with you, our partner, Vibe IQ, has a webinar dedicated to the topic of becoming recession-ready on 15th November.
Since our last newsletter, we have also released two episodes of The Interline Podcast – both looking at sustainability and transparency, but from very different angles. The first, featuring the Senior Manager of Global Materials & Sustainability at sustainable clothing company Icebreaker, spotlights the work involved in establishing true supply chain transparency – from raw material to finished product.
The second tackles sustainability industry-wide, examining why individual brand successes (like the ones exhibited in the previous episode) are still the exception rather than the rule, and underscoring the need for urgent action across environmental and humanitarian initiatives.
Featuring Fashion Revolution – creators of the yearly Fashion Transparency Index – this episode is essential listening for anyone interested in understanding where fashion is falling short of both its self-imposed targets for better treatment of people and planet, and the changes to the regulatory environment that are already being proposed.
On a similar theme, we published a new exclusive delving into fashion’s relationship with resale and circular business models. Both of these are framed as tools that the industry will use to help mitigate the impact of overproduction, with the basic calculus being that the longer existing products remain saleable, the fewer new products will be needed.
The question many brands and retailers face, though, is where those sales occur. If they take place through third party marketplaces and peer-to-peer platforms, the changes of insights from those platforms making their way into the planning process are slim – meaning that resale channels will do little to curb overproduction. Instead, there is a strong argument for both retailers and direct to consumer brands to control their own secondary markets, as a way of creating genuine circularity at the same time as wringing maximum profit from each individual product. How far is that vision being realised? That’s one of several questions Dakota Murphey tackles in this piece.
Our final exclusive comes from Richard Donne, and it interrogates fashion’s Metaverse obsession – asking whether the investments made in digital engagement, sales of digital garments, and real-time experiences are detracting from the work that needs to take place in the supply chain for real progress to be made towards sustainability objectives.
Using the fate of a major supply chain technology platform as an example, this piece asks whether digital fashion is likely to prove a net benefit for sustainability – through the promotion of more sustainable consumer behaviours – or a distraction from one of fashion’s most pressing challenges.
Look for new announcements, stories, and much more from The Interline as we move into November, and stay tuned for updates on our first-ever DPC Report as we come closer to the launch of another industry-defining publication.