Every week, The Interline rounds up the most vital talking points from across the landscape of fashion technology news. This roundup is also delivered to Interline Insiders by email.
Big shifts in the foundations of consumer power highlight the importance of having flexibility and a finger on the pulse – everywhere from product creation to point of sale.
One of the biggest news stories this week doesn’t seem, on the surface, to have much to do with fashion retail. But hear us out, because it provides, in The Interline‘s opinion, a rare insight into the roots of the key forces that are shaping the future of our industry.
The story we’re referring to is the battle between individual social media investors and institutional money that has grabbed headlines and, depending on your perspective, either pulled back the veil on the machinations behind the scenes of supposedly free and open trade, or demonstrated the unprecedented and undesirable instability that comes with the sudden democratisation of long-established industries like finance.
There are many well-written summaries of precisely what happened this week (a particularly snappy favourite is this one), but the essence is this: big investors had over-extended themselves to short, or to bet on the decreasing value of, shares in ailing videogame retailer GameStop. In practice, that sort of bet barely qualifies as a bet at all – if enough money is applied to driving a share price down by betting against it, then that reduction in value becomes a self-fulfilling prophecy, provided the force behind it remains in place. And that’s what several hedge funds were, quite literally, banking on: the near-certainty that GameStop would continue to decline in value, and that their short positions would therefore pay out.
This near-certainty was frustrated by an entirely new trend: a cohort of individual investors, many of whom were not wealthy, but rather average-net-worth people, who mobilised using the social media platform Reddit to collectively drive up GameStop’s share price. This worked, and at least one hedge fund was forced to close its short position, losing reportedly billions of dollars. And now the investment platform that allowed many of the individuals to buy shares and options in GameStop is going to be the subject of a Senate hearing, where it stands accused of artificially stabilising the market by allowing big money to continue to trade, and blocking individuals from doing the same.
If the mechanisms of this story are complicated – and they absolutely are to anyone not completely immersed in the stock market – then the motivations behind it are even more complex. Depending on who you believe, the objective of the Reddit force is to get rich, to tear down the financial establishment, or some combination of the two.
In the media at least, this is being pitched as a David and Goliath battle – a new movement in a time period already not exactly short on movements, uprisings, and righteous or misdirected anger – between a place that power has typically say, on Wall Street, and the place it now seemingly resides, in the hands of regular people.
So what does this all have to do with fashion? The parallels start on the surface, but they go a lot deeper.
First and most obviously, GameStop is a physical retailer in an industry that has overwhelmingly gone online. In 2020, here in the UK, around two thirds of all videogame sales were digital, purchased through a platform holder’s online storefront, rather than bought as a disc in a case on a shelf. And while GameStop is a US retailer, the forces contributing to this distribution of sales channels are likely to be very similar, painting the prospects of a chain retailer of boxed games in a very negative light.
It was precisely this turn of fortunes that led big investors to bet against GameStop. Indeed, short positions are common in other stocks where the pandemic has either caused or exacerbated pre-existing declines. Cinemas being another prime example.
It’s no secret that fashion retail, at least in a physical sense, is also experiencing a COVID-catalysed decline – potentially the worst in 25 years. For those retailers that are publicly traded, the same potential for short-selling exists, with unscrupulous investors willing to force down the value of companies at an incredibly fraught time.
Indeed, US apparel retailer Express looks to have already become a target for this ongoing tug of war between Wall Street and social media investors, with shares increasing almost tenfold between the 21st and 27th January, and still trading today at close to six times their price on the 21st. Crucially, there is nothing fundamental that has changed about Express’s product mix, its outlook, or the retail market in North America to account for this spike. It’s pure speculation, and the result of friction stemming from the squeeze between old money and new.
But there’s also something much bigger lurking behind the scenes of these stories: the realisation that variables, and indeed entire industries, that used to be effectively centrally controlled can now be influenced to a staggering degree by distributed influencers. In finance this is manifesting this week in the headline-grabbing disruption to stock markets, but in fashion it’s been evident for some time in the steady migration of trend control from the hands of runway and couture companies, and into the hands of street style icons, polished YouTube presenters, and Instagram and TikTok influencers macro and micro.
It’s fair to say that consumer influence over the direction of fashion is at the highest point it has perhaps ever been. Where once luxury was reserved for the elites, today it’s for everyone, embracing cross-discipline, cross-media, and cross-functional collaborations into the melange that is luxury streetwear and luxury sports and technical performance partnerships.
Most importantly for our audience’s purposes, the democratisation of where fashion is headed has a lot in common with the movement that is driving the tectonic disruption in the stock market today. And it extends far beyond shoppers and influencers dictating the direction of style and trend: transparency of ethics, equality, and diversity are now beyond what LVMH’s Head of Corporate Responsibility calls a “tipping point” of accountability, and sustainability is more crucial than ever, with Giorgio Armani this week referring to disposable fashion as “the worst imaginable concept“.
Both of these are very clear trends and both are guaranteed to steer the fashion retail industry from here – and both are, for the most part, consumer-driven trends. Which speaks even further to the idea that fashion brands and retailers now need to be prepared to be told where to move (as our January focus on planning for the future articulated), and they need to be ready to be held to account for the standards they adhere to along the way.
Unlike finance, though, where individual investors arguably have the technological edge in terms of agility (app-based brokerages are both a powerful and potentially dangerous concept), in fashion retail the tools already exist to allow brands, retailers, and their suppliers to not just react to this redistribution of power, but to embrace it: from smart planning solutions to intelligent stock allocation platforms, and from rapid-iteration 3D design to planned scarcity digital fashion items. And while the finance sector is making headlines this week for kicking back against change in a range of none-too-subtle ways, fashion can point to plenty of prior evidence of taking change in its stride.
This has been a concerning week for any industry that relies on a status quo, and it’s become very clear in the last few days that a lot of the financial systems we trust can bend or break outright when that status quo is challenged by anyone outside those systems. Fortunately, The Interline does not see fashion as that kind of industry – provided it makes the right investments in technology to keep its finger on the pulse.
