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.
Are we seeing the end of growth for the instant-on, gratification economy?
The stock market as a whole has seen a significant pullback over the last few weeks, but retail indices have been especially hard hit this week as steep rises in the cost of goods sold meet historic consumer inflation, and it looked as though a breaking point might have been found beyond which higher prices would trigger lower demand.
Up-to-the-minute market results, though, suggest that – at least in the USA – those prices may have peaked, and that consumer demand is still strong. Whether this is borne out over the next couple of weeks is, of course, anyone’s guess, but there’s grounded optimism that when high-volatility markets like food and energy are put aside, a tentative balance between consumer spending intentions and price inflation will be found. Indeed, this equilibrium may even have been struck last month, based on brand new data.
But “demand” is not a homogeneous thing; people’s willingness to spend is not universal in its shape and scope. And two stories released this week caught The Interline’s eye in particular because of their possibly gloomy implications for the high-volume, high-velocity, deferred-payment model that has become the public face of mass market fashion.
First is a piece by TechCrunch, which makes the case that, while rapid fulfilment and instant gratification are a sound strategy for growing a business (see the valuations of many technology and service companies that have been built on getting things to people as fat as possible) they may simply not translate into sustainable margins at the unit level.
This flies in the face of one of the axioms that the fashion industry has adopted during and post-COVID: that people who spend increasing amounts of time at home will want rapid gratification through same-day delivery. A huge amount of time and money has been invested on this assumption, from the relatively mundane mass-scaling of existing distribution networks and hubs, to the vision for connected micro-factories that will both produce and ship products close enough to the consumer that last-mile delivery is all that matters.
As the article argues, getting things to people quickly is expensive, and the return on that investment may be diminishing. Unlike food – for which the argument for rapid delivery is much stronger, given that nobody like eating a cold meal – there is a very reasonable question to ask about fashion: how quick is quick enough? And at what point does becoming quicker hurt more than it helps?
The fashion industry has shifted its attention to SHEIN over the last year or so as the new exemplar of fast fashion (with both positive and negative connotations) but from a fulfilment perspective, the company is positively slow. According to user reviews, orders take weeks to reach the UK, compared to next-day or same-day gratification from other brands and retailers. And yet SHEIN has been able to generate an air of ceremony around its deliveries, with the help of savvy (read: unscrupulous) investment in influencer partnerships.
This suggests that shopper sentiment towards instant fulfilment may be cooling. An optimist might point towards this being emblematic of sustainability taking a firmer root in the public conscience, but a pragmatist would likely argue that when people are forced to spend less as a result of external pressures (either all at once, or by decreasing their purchasing frequency) they simply start to care less about how quickly things arrive.
And the week’s other salient story has similar ramifications but for the other element of the gratification economy: deferred payments. The Financial Times interviewed Sebastian Siemiatkowski, Founder and Chief Executive of fintech giant Klarna, which specialises in providing the infrastructure to allow shoppers to get things they want now, and pay for them later.
In light of the previous story, it should come as no surprise that Klarna appears to be expected pushback on a model that, while controversial in its core nature, may also have simply reached its limits. Rumours cited in that FT article appear to suggest that he company. may need to raise funding at a reduced valuation, and cut its workforce to compensate for slowing growth.
These are, of course, cold, abstract, commercial indicators of a more human problem: when money is tight, even the least frugal of us may realise that “buy now, pay later” is unrealistic when the prospect of ever paying seems dim. This is especially true when the thing we’re paying for may be something we objectively do not need – and certainly something we don’t need the same day.
The knock-on effects of this shrinking from the instant gratification model are going to be felt in the boardrooms of technology companies and funds, obviously. And they will be particularly pronounced in the similarly-named gig economy, where workers push through lousy conditions and deeply inequitable compensation structures to provide an additional layer of convenience.
But they will equally be noticed by brands and retailers who are currently evaluating whether the future is in a slower model of fashion. Based on this week’s news, that may be the case, but this raises much more fundamental questions for fashion businesses who must now ask themselves what a more unit-economic approach to fashion might look like, and how per-unit margin can be maximised in a way that compensates for a loss of speed and spread.
Now Available: The PLM Report 2022
PLM is still one of the most important investments a fashion brand or retailer can make. It’s a source of truth at a time of peak uncertainty, and an engine for enterprise digital transformation. Post-pandemic, there are now more fashion PLM sales in a single year than ever before – to the broadest-ever range of companies.
That statistic is an indication of not just how essential a tool PLM has become to brands’ and retailers’ recovery strategies, but also to the theme of this analysis: maximising the chances of each individual product achieving its market objectives, and improving both efficiency and profitability. In place of high volume, velocity, and variety, PLM could be critical to enabling a more considered, data-backed approach.
The PLM Report 2022 is completely free to download, with no strings attached, and includes more than 100 pages of expert analysis, vendor listings, market sizing and much more – making this the most accurate picture anywhere of the PLM market for apparel, footwear, and accessories. Download your copy today!
A case study of intelligent retail planning from Burberry
The world has changed. And retail needs to change with it. Over the course of the pandemic and beyond, Burberry has been spearheading a comprehensive transformation strategy, as part of which the brand implemented Board’s smart retail planning platform. On the 8th June, at 10:00 BST, Burberry’s VP of IT, Product and Supply Chain, Melanie Stocker, will be telling the story of this project as part of Board Day 2022.
The live case study session is free to register for attend, and you’ll also see a new collaboration from Board and The Interline releasing on Monday, which asks what a smart, predictive retail strategy looks like in a world that’s constantly confounding expectations.
And the best from The Interline:
Since our last news analysis, The Interline has published some standout features from both contributors and collaborators.
Working backwards by date, we first have an exclusive feature from Lauren Kunze, which examines the rise of “virtual influencers” by shining a critical light on whether their all-digital nature is a veneer over much more traditional tools and methods.
While Lauren’s feature focuses on digital models, the trends it uncovers also have implications for digital asset creation pipelines in general, and there is food for thought in this piece for any brand that’s designing for one or more digital outputs.
Next we have another exclusive – this one focused on the question of whether fashion has under-prepared for the threats presented by cybercrime.
This is a question The Interline asked around the time of our launch, back in 2020, and even that feature has its roots in a very similar critical piece published several years earlier. In short: like any industry that has rapidly switched from analogue to digital processes, and now towards digital sales and digital ownership, fashion is very likely underestimating just how significant its exposure is to digital threats.
Next, we released the third episode of The Interline Podcast, featuring New Balance’s VP of Design, and Kalypso’s Digital Product Creation and Transformation Lead.
Tackling the subject of championing change through the lens of digital product creation, this episode dives deep into the various ways in which brand and retail businesses can turn discrete technology initiatives into broader enterprise transformation.
The Interline and Kalypso also collaborated on another DPC-focused initiative this month, building on the work we did together to benchmark digital product creation for 2021.
With digital product creation and 3D strategies becoming increasingly essential to many brands’ post-pandemic recoveries and their digital transformation strategies, the capabilities required to scale those strategies are some of the most sought-after today.
Finally, we published our examination of the coming-together of Gerber Technology and Lectra in 2021, looking at what it means for two giants of software and hardware to be “stronger together“.
Look for more new exclusives and collaborations from The Interline next week, and the announcement of an exciting new partnership coming very soon!