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.
The early casualties of eCommerce over-acceleration begin to emerge.
The prevailing assumption has been that the pandemic pushed the eCommerce clock forward by several years, and that this acceleration would prove permanent. With physical stores closed, web and mobile sales picked up the slack, but even after the acute phase of COVID (at least in the USA and Europe) abated, population-level data shows that people continued to prefer to shop online.
Many businesses – at both the brand / retail level, and in related technology and services – made expansion decisions based on the expectation that the new, steeper curve of eCommerce growth had irreversibly detached from the old one. DTC brands scaled up their online infrastructure, retailers hired in a major way to manage a redistribution of business across channels. And technology and platform providers had little choice but to invest in hitting a target they hadn’t expected to have to hit for several years, in the space of less than one.
News released this week, though, suggests that, after its steep pandemic-era up-curve, eCommerce’s share of the total retail space is now travelling sideways – destined to rejoin the original growth curve rather than outpace it. The most visible indication of this came from a candid article penned by Shopify CEO Tobias Lütke, explaining the technology giant’s decision to cut 10% from its workforce after scaling up during COVID.
The article captures the situation in a stark way, with Lütke saying that the “bet didn’t pay off”. And the shape and size of that bet could be an indication of similar belt-tightening that may need to take place within the walls of other technology companies that rushed ahead to a destination that eCommerce is now unlikely to reach for several years. Similar conversations will also be underway at the headquarters of fashion brands that expanded their operations with similarly ambitious targets in mind.
Indeed, those conversations could well have been one of the driving factors behind a leading digital, direct-to-consumer brand establishing a wholesale business. At first glance this reads very much like a company hitting a certain growth threshold and diversifying its routes to market, but in light of what’s likely to be an industry-wide pullback from over-ambitious online DTC growth strategies, a deeper examination looks more like a brand realising that the speed of growth in a single channel will not be sufficient to sustain the business.
There is also a technology implication here. As much as platforms like Shopify have done to democratise selling, and to allow smaller brands to tap into resources and partnerships that might previously have been closed to them, wholesale and marketplace relationships offer an established route to new customer acquisition, multi-channel footprint, and other infrastructure. And as compelling as the vision for a brand to entirely own its route to market is, that vision is now set to be tempered by more practical considerations – making the opportunities offered by existing business models attractive in entirely new ways.
It’s important to remember that eCommerce is not experiencing a contraction. The channel’s share of the overall retail market still has considerable growth potential, representing only around 15% of all sales, but its runaway, pandemic-era status is now being folded back into the pre-COVID multi-channel mix.
And in a multi-channel scenario, where shoppers expect consistency of experience, and where brands and retailers must lean on process efficiency and technology to effectively juggle priorities, working digitally will be a top priority – whether a channel is wholly owned, or whether it makes use of someone else’s well-worn route to market.
See fashion technology in action: The Interline travels to SOURCING at MAGIC
This month saw the announcement of The Interline’s new partnership with SOURCING at MAGIC, which will see our Editor travelling to Las Vegas this time next week to present a curated programme of technology discussions in the new SOURCE Lounge – a place for SOURCING at MAGIC’s multinational brand, retail, and supply chain visitors to see technology in action.
Our Editor will also be taking part in a conversation on the main education stage, supporting Dr. Eric S. Ackerman, VP of Commercial Technology for Perry Ellis International, in dissecting what the Metaverse means for fashion, and what a first-mover brand was able to learn from its experiences.
Already attending SOURCING at MAGIC? The SOURCE Lounge sessions are free to attend – included in your ticket. Interested in seeing fashion technology in action? Sign up to attend SOURCING at MAGIC, 7th – 10th August, with a hybrid approach allowing delegates to take in the show in person or online.
Could inertia overtake initial optimism around the Metaverse?
A great deal of pandemic-era and post-pandemic attention has been paid to the Metaverse – and rightly so, given The Interline’s belief that real-time interactivity and digital-first workflows will transform fashion just as they have other product-centric and experience-focused industries – but there are indications this week that we may see a similar walking-back of growth expectations in this area as well.
First came the news that Meta would be increasing the price of the Quest 2 VR headset – a move that, however it’s spun, runs counter to the company’s vision for owning the “immersive internet” through the sheer scale of its hardware install base – one of the primary reasons that Meta felt confident enough to aim for a billion active Metaverse users by the end of this decade.
From a purely pragmatic, commercial perspective, Meta remains a public company, and it has been subsidising the retail price of the Quest 2 since its release – a strategy that will have certainly had a shelf life in investors’ minds. Nevertheless, while the incredibly popular headset (the Quest 2 accounted for 78% of AR/VR head-mounted display hardware sales last year) still represents by far the lowest barrier of entry into a VR ecosystem that’s going to stand the test of time, this price increase will put the brakes on on the volume of people who are able to buy into that ecosystem soon.
And as countless analysts have noted, Meta’s vision for the Metaverse hinges on it dominating the space through sheer numbers – making it essentially the de facto platform provider (if such a thing can be said to exist) for the future of the web.
That acquire-it-all strategy also suffered a setback this week, with the US FTC attempting to block the company’s acquisition of VR studio Within, which is known for developing the VR fitness platform Supernatural.
As The Interline has often suggested, the rush for the Metaverse to exist as an entirely new frontier, freed from conventional ownership and IP rules, is likely to prove premature, and we fully expect to see even more instances of traditional copyright and antitrust law infringe on any company’s attempt to dominate a new space by simply buying up as much of it as possible.
At the same time, dissatisfaction with Meta’s core products and financial performance is growing – something that could easily start to threaten the company’s R&D investment in building out its vision for the Metaverse. Especially when that investment now accounts for close to $3 billion per quarter.
Will we begin to see investors circling now that Meta has recorded its first-ever revenue drop, and with an increasingly uncertain timeline applied to achieving a return on its gigantic investments in bringing the Metaverse (or at least one man’s vision for it) to life?
Like a lot of COVID-catalysed change, the question will be answered by how far the vision measured up to the cold commercial reality.
And the best from The Interline:
Since our last newsletter, we have published a range of new collaborations, announcements, reports, and exclusives.
Our collaboration with the team behind SOURCING at MAGIC, the milestone fashion industry event that our team are partnering on in just over a week’s time, explores the close relationship between fashion and technology, and examines how job roles across the full creative and commercial spectrum are now being influenced by technology.
Also in the events space, our exclusive report from Première Vision Paris was published earlier this week – also underlining the increasingly important role that digital tools and methods will play in the future of sourcing, material innovation, supply chain transparency, and much more.
The latest episode of The Interline podcast, published at the end of last week, also touches on some of the Metaverse-related themes covered in this news analysis – emphasising the importance of the right foundations being laid if Metaverse and digital fashion are to achieve broader adoption in the near future.
Ben’s guest for this episode is Marjorie Hernandez, Founder of LUKSO, and Co-Founder of The Dematerialised – and many of the themes explored in this show are also tackled in our 2020 collaboration with LUKSO.
Next we published our first exclusive from Martyn Ewoma, which aims to get ahead of the cultural transformations being brought about by fashion’s experiments with digital identities and the Metaverse, by looking back at how individual identity and brand authenticity were built in the Web2 era.
Mark Harrop then made an impassioned case for fashion to address the true scope of the root of digital fashion: the transition from isolated applications of “3D” to a more comprehensive digital product creation workflow. More than just a change of label, this represents a shift in direction for the industry, and Mark’s exclusive article provides a roadmap of what fashion will need to achieve in order to scale DPC to the level needed for the near future.
We also recently explored technology innovation of an entirely different stripe, in our exclusive interview with Catherine Roggero-Lovisi, President and COO of Modern Meadow. This conversation shone a spotlight on the advances that are being made in biofabrication – the architecting of new materials at the molecular level. For anyone interested in the future of materials, this frank discussion highlights the potential, the possibility space, and the amount of work that’s going to be involved in taking a bold new vision for sustainable, portable, material sourcing to scale.
And finally our PLM conversations series came to a close, highlighting the last in the executive profiles that were originally published in the industry-defining PLM Report 2022:
- Paul Magel of CGS set out his vision for streamlined supply chains, real-time data visibility, and digital transparency and accountability.
- Andrew Dalziel of Infor discussed the importance of machine learning in eliminating the repetitive tasks involved in design, development and production.
- Jakob Lunøe, of Delogue, explained how digitialization, value chain transparency, and digital product creation are transforming the day-to-day lives of fashion professionals, and how PLM can support them.