To explore ways that your business can become recession-resilient and prepare for a future defined by unpredictability, visit our partner, Vibe IQ or register for their upcoming webinar on November 15th, which examines the possibilities created by adopting a design-led approach to visual line planning, synchronised across the full spectrum of disciplines from merchandising, product management, design, and sales.
The last few years have been anything but business as usual. Every industry has faced down uncertainty and disruption on a historic scale. But while other sectors saw that disruption concentrated in particular areas, up or downstream, almost every facet of fashion was affected. And this has placed the industry in precarious position from which to mount a recovery to the looming possibility of a global recession that the United Nations believes could equal, or surpass, the 2008 financial crisis.
Upstream, the pandemic put a forced halt on manufacturing. The international logistics network that kept new clothing coming also ceased moving. And as a consequence, the flow of product almost instantly dried up.
Downstream, that drought of new product, combined with the closure of retail channels and acute fears around household income, saw medium-term shortfalls in sales that came close to unravelling major household names.
Culturally, consumer priorities changed on a dime, and they continue to shift unpredictably today. Evergreen product categories suddenly plunged in popularity, while loungewear and performance gear assumed an entirely new importance as people rediscovered the landscapes on their doorsteps, and as the topography of work was fundamentally transformed by an instant shift to remote and hybrid working.
And digital transformation picked up a rapid new pace. Where eCommerce had once been a relatively equal part of fashion’s overall channel mix, now it assumed a dominant role that it has largely held ever since. And the same emphasis on digital holds true for consumer outreach, engagement, and services that blur physical and digital channels, with a majority of US shoppers saying that they are “significantly more likely” to order something if they can purchase online and then later return it to a physical store.
The industry has already seen countless retrospectives of the impact of COVID, and much of the world is currently living through a supply shock caused by conflict in Europe. But for fashion brands, it would be difficult to overstate the roles that both of these forces have played in reshaping the core calculus that sits at the heart of the decision-making processes that aim to bring the right products to market, at the right time.
Directly or partially attributable to those worldwide upheavals, fashion now faces:
- A high plateau of input costs, with spikes originally caused by shortages and shipping bottlenecks having stabilised at or around the high waterline.
- Ongoing supply chain risk and instability, which has seen the majority of brands re-evaluating their exposure to disruption, and seeking to either diversify or shore up their sourcing and manufacturing bases.
- Labour shortages throughout the domestic retail network – something that has been exacerbated by a spotlight being shone on pay imbalances across the value chain.
- Ongoing unpredictability in consumer demand, and tightening trend windows, as the most deep-seated notions of what we wear and when we wear it are being challenged.
- A mandate to adapt tools and processes to accommodate new demands for hybrid and fully-remote working – everywhere from creative design to commercialisation.
Combined, these challenges have put the majority of the apparel, footwear, and accessories industry into protection mode. For all but the largest organisations, spending on transformation and innovation initiatives is at risk of being sidelined in favor of budgets being diverted for pure business continuity and risk mitigation efforts.
In practice, this is likely to be a false distinction. The Interline (and its partner for this piece, Vibe IQ) would argue that digital transformation initiatives are now more essential than ever. With the right technology support, the optimum strategy for brands facing the seemingly-separate pulls of securing their existing operations and forging ahead with future-facing investments, has been to press the latter into the service of the former.
Against a backdrop of unprecedented change, making informed investments in technology can not only secure a brand’s survive and adapt to a potential recession but also deliver unprecedented returns.
Are you recession-ready?
That argument is being underlined as we write. Because just as the fashion industry was beginning to regain its footing, geopolitical instability is being compounded by the creeping emergence of more deeply-rooted economic downturns in many key consumption markets.
According to major analysts, 2022 (and very likely 2023 and beyond) can be characterised as being a “persistent inflationary environment,” which is an another way of saying products will probably be sold at a higher price than they would have been had economies in the USA, UK, and Europe followed a more predictable inflation track.
This is also a universal force, dragging nearly every product and service industry inexorably towards higher prices to offset their own higher costs of goods sold. On a national and international level, inflation on this scale means consumers are paying more for everything: fuel, food, accommodation, and clothing alike.
And in a landscape where governments have long since abandoned the possibility of wages keeping pace with those cost increases, consumers are inevitably diverting spending away from luxuries like fashion, and putting it towards staples and essentials. In a value equation with a new coat on one axis and a weekly grocery shop on the other, the people who cannot afford both will be prioritising their basic needs.
Expectations are that this will not be a quickly-passing cloud. While the most acute impacts of the pandemic were short, sharp, self-contained shocks that created lasting ripple effects, the current erosion of consumer spending power is both more insidious and, likely, more durable.
Needless to say, fashion retail is already feeling the pinch no matter which demographic it targets. Walmart, one of the world’s largest retailers, has seen this wave coming. CEO Doug McMillon was quoted in mid-August as saying that “people are really price-focused now, regardless of income level,” and this sentiment was quickly put into action, with the company cancelling large volumes of orders from its suppliers. However, accompanying cancelled orders was an observation that consumer spending even within fashion categories has also shifted: McMillon noted consumer spend increased on low-cost men’s flannel.
All of this took place well in advance of the upcoming holidays, and other retailers are now following suit in a more reactionary way: marking products down dramatically in an effort to shift inventory prior to the season in which some brands and retail groups normally see up to three quarters of their annual trading volume concentrated. This, combined with the shift in consumer spending habits, further amplifies the need for brands to review their assortments and adjust to the spending changes of their consumer base.
The need for agility in tackling all the existing challenges we have already enumerated further underscore the need for brands and retailers to rethink the way they use technology to optimise not just the assortments they bring to market, but the routes they take to get there.
Long-term change requires a long-term response.
In the immediate term, the solution would seem simple: prioritise in whatever way that has the least impact on profit margins. This may mean making adjustments to planning and merchandising in a way that keeps the brand accessible without compromising its market position.
This delicate balancing act will require a combination of process evolution and, in many cases, a frank re-evaluation of the technology ecosystem that the brand or retailer currently uses to support their go-to-market lifecycles. Many businesses have already invested in digital design and digital product creation tools, as well as product lifecycle management (PLM) and supply chain management solution, but these these tools rarely support a complete workflow that can incorporate demand-sensing, assortment planning, and a flexible approach to merchandising.
Instead there is often a patchwork of different tools rather than a single, cohesive environment that tackles the entire go-to-market lifecycle. Excel spreadsheets and Smartsheets are typically where planning takes root, but these lack the visual component that underpins assortment building. And while online collaborative boards such as Miro have found a great deal of traction during the pandemic, these tools have manually-intensive workflows where style data and visual assets are constantly being copied and pasted from other sources such as PLM and DAM systems. Additionally, since tools like Miro are disconnected from product information, technical specifications, and other key data, decisions made in these whiteboard tools stay there. Any ensuing actions – such as changes to a style’s design to support a better cost target – need to manually actioned outside of the whiteboarding tool. While these whiteboarding tools supported visual collaboration, they created “data dead ends” that prevent brands from being truly agile.
Adopting technology with purpose.
For many brands, the choice of what technology to adapt to changing market conditions has been driven by necessity: they have needed to work with what was available, either within their existing ecosystems (where PLM is concerned) or from the raft of different subscription-based, cloud-native SaaS solutions that were designed to serve different industries (as is the case with collaborative boards) but that could be tweaked to serve fashion’s needs in a hurry.
This rapid repurposing of tools is not, though, a solution for the longer term. Now, faced with the immediate mandate to adjust their assortments to appeal to consumers whose behaviours have been fundamentally altered by global disruption and economic pressure, and with their own input costs remaining high, brands may be asking themselves how well-suited their technology ecosystem is to creating a more lasting response.
Can a patchwork of different tools provide the agility they need to respond to fast fluctuations in demand? Do their end-to-end processes allow them to capture and make use of real-time, multi-channel adoption rates and product-level performance data? Does their overall technology ecosystem support real-time collaboration and accountability between the various parties who are responsible for taking the planning, selling, and delivery decisions that bring products to market? If a design needs to be dropped, or altered to meet a new target margin or to cater to an unexpected demand, does that requirement cascade through the brand’s process and technology landscape?
If the answer to some (or all) of these questions is no, then to sharpen their competitive edge against the immediate threat of recession, brands and retailers should be seeking a way to coordinate and centralise everything involved in bringing the right product assortment to market. The near-term shift in the market, towards value, will demand a method of intelligently allocating inventory across channels, and will require a technology environment that allows stakeholders throughout the value chain to collaborate on building an offer that is responsive to the needs of a consumer for whom disposable income is at a premium.
But brands will need to answer the same questions even when that immediate emphasis on affordability fades. Pessimism may be the prevailing mood today, but economic cycles are commonplace, and as economies begin to recover in the future, spending habits will shift again – and the fashion industry will need to re-adjust its planning, selling, forecasting, and all-round go-to-market strategies to capitalise on new opportunities.
The most obvious manifestation of mis-alignment between assortment plan and market demand is excess inventory – something retailers from the largest to the smallest are wrestling with today. But for every inventory burden faced in 2022/23, the same root causes could create many more missed opportunities in the years to come.
Which means that, while fashion’s key priority today is building the capability to remain relevant to increasingly price-conscious consumers, the same solutions that will be put in place to address that challenge will also help unlock the level of agility needed to adjust course as the market picks up again in the near future.
Finding your Vibe.
Whether we focus on the stormy short-term horizon or the opaque mid-to-long-term, it’s clear that fashion brands can benefit from finding and implementing a solution that supports smart, proactive decision-making across visual line planning, assortment building, omni-channel allocation and adoption, and much more. And that solution should allow them to make those decisions in an environment that factors in the contributions of everyone who contributes to the value chain – allowing users to plan, showcase, refine, and go to market faster and more intelligently.
To explore ways that your business can become recession-resilient and prepare for a future defined by unpredictability, visit our partner, Vibe IQ or register for their upcoming webinar on November 15th, which examines the possibilities created by adopting a design-led approach to visual line planning, synchronised across the full spectrum of disciplines from merchandising, product management, design, and sales.
About Our Partner: Vibe IQ enables brands to accelerate their go-to-market processes with collaborative apps & an extendable cloud platform.
