Every week, The Interline analyses one or more vital talking points from across the landscape of fashion technology news. This analysis is also delivered to Interline Insiders by email.
Pressure and unpredictability at every turn underline why fashion will rely on objective intelligence to create products with confidence.
On a personal level, we’re all feeling the teeth of uncertainty this week. In countries where vaccination coverage is high, just as individual lives, holiday travel schedules, and other plans were beginning to emerge from the uncertainty surrounding the Delta wave of the pandemic, the Omicron wave could be about to disrupt them all. Here in the UK, new COVID-related restrictions are set to begin in earnest from Monday, and while retail is currently unaffected – at least directly – the prospect of another holiday season under the shadow of the pandemic has left many industries on shaky foundations for the new year.
And in regions where vaccination coverage is lower, the fear is all the greater; while many of The Interline‘s readers will be awaiting a booster dose, others may not yet have been able to obtain two doses, or even one initial dose. From the perspective of a global, interconnected industry, this vaccine imbalance could cause protracted disruption well into 2022 as recoveries begin to depend even more heavily on immunity.
For brands, retailers, and their suppliers, disruption has now been current long enough to feel more like a new state of affairs than a temporary upheaval. As McKinsey and Business of Fashion revealed in their excellent State Of Fashion 2022 report, the fashion industry has begun to mount a recovery that accepts ongoing reality of COVID, and one that predicts consumer demand will steadily return once the most acute stage of this next wave pandemic wave has subsided.
Crucially, though, the same report suggests that for the industry as a whole to stage a successful recovery, the time has come to “focus intently on the bottom line”. And as we’ll soon see, this is a focus that will all but demand that brand and retail businesses put their trust in objective data if they are going to bring products to market with the least risk possible.
The State of Fashion 2022 report goes further in its illustration of how uncertainty is reshaping the way brand and retail businesses think about their bottom lines. In it, research shows that nearly 70% of fashion executives expect that raising retail prices will be necessary. With a commercial hat on, this should not be surprising: costs have risen almost everywhere in a given product’s lifecycle, and while businesses have, for the most part, swallowed that additional outlay themselves in the hope of a more stable start to 2022, now that it’s evident that stability isn’t coming, they will have little choice other than to pass those heightened costs on to consumers.
In this sense, fashion is not unique; the effects of inflation are being felt everywhere, to a degree that many in the largest consumer demographics will not have seen in their lifetimes. In this context, it’s little wonder that consumer demand could be waning – at least in the short term. Spending on Black Friday 2021 was down 28% from pre-pandemic levels, and while some of this was due to consumers spreading their purchases across a wider window of time, there’s also the possibility that people are simply buying less.
This is not necessarily contradicted by research showing that “spending intent” was increasing in the fourth quarter of 2021 in both the UK and the USA. In practice, that intent most often manifested itself as spending on experiences rather than products; travel, dining out, and other out-of-home activities all competed for wallet share with fashion in the time period covered by that research. And while the top-line economic indicators may look positive, the situation on the ground, for everyday consumers, may be tougher than the statistics suggest.
As these hard-to-quantify shifts in consumer behaviour are taking place, though, there’s little sign of the retail industry (including fashion) doing anything to slow the pace of production. For the entire 2021 calendar year, retail imports are likely to have been at an all-time high, and the congestion that has been evident at global shipping ports has been exacerbated by mega-retailers continuing to bring in goods at incredibly high volumes.
Against that background, something has to give. Uncertain consumer demand, spiking retail prices, significant delays on bringing goods into consumption markets… even if we temporarily push aside all the well-documented sustainability implications of overproduction and over-consumption and their associated price pressures, the commercial balance is still being tipped as we watch. Which is going to lead to an inevitability: fashion will need to reckon, sooner rather than later, with the idea of producing less.
In practice, consumer behaviour may already be forcing the industry’s hand; investment has been pouring in to pre-owned fashion retailers this year, demonstrating further evidence that new clothing needs to compete not only against direct competition, but against the lure of prior seasons’ styles still being in circulation, at lower prices, from reputable sellers as well as from open marketplaces that have recently invested in technology specifically for the authentication of used fashion and footwear.
But there’s an additional layer to all this. For fashion brands and retailers to secure profitability at the same time as raising prices and, potentially, reducing production volume, those organisations need to have supreme confidence in both their understanding of the market, and in how well their products have been calibrated to fit that market.
Unlike pre-pandemic retail, where markdowns were a predictable way to claw back some margin on products that did not sell-through at full price, the uncertain future of retail will make initial success far more important. With fewer products overall to sell, a brand or retailer’s margin per unit will be vital, and the longer a product remains unsold, the further that margin erodes.
And this same requirement will be felt beyond purely commercial considerations: across the sustainability profile of garments, which will dictate their success in a market where shoppers are buying with their values; and across the quality of those garments, which, again, will determine customer loyalty and how well a product fares on the secondary market.
To return to the conclusions from the State of Fashion 2022, the future of fashion will not be kind to “missteps”. And while some of these will be miscalculations of brand identity, or missed opportunities, the most unforgiving of them will be those occasions where brands and retailers bring products to market that are not what the market wants.
The way around this issue should be self-evident: the fashion industry needs to collect, analyse, and act on objective market data at every juncture. In place of intuition, forecasting, and predicted demand, brands and retailers must work to make sure that every product they introduce is designed to respond to a market need. In place of approximate material usage data, or costing based on historical averages, brands should make every effort to improve the profitability of each product before it enters production.
In early 2022, The Interline‘s first editorial topic of the new year will examine not just the importance of retail being informed by objective intelligence, but how different solutions are enabling easy access to the kind of data that will allow the industry to have the strongest possible chance of making a successful recovery at a time when uncertainty still remains the background tapestry of our lives.