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.
Digital channels and discounting: the cost of convenience?
According to the newly released Adobe Digital Economy Index, shoppers in the UK are spending more on e-Commerce than they did pre-pandemic. In one sense this was to be expected, with the COVID-related restrictions on brick-and-mortar stores in 2020 and 2021 leaving digital as the only option on the table. In 2022, though, while total online spend decreased by 8.6% from the high waterline established in 2021, the average number of items per transaction increased from 3.3 to 3.4. So, compared to the height of the pandemic, UK customers are spending less but buying more – indicating that rather than there being a decrease in people’s desire to buy fashion online, there’s now a greater appetite for discounts.
The same Index also details how more than half (56.8%) of purchases took place on smartphones, representing a 10.9% YoY increase in the share of mobile commerce versus online shopping from other devices.
Correlation doesn’t necessarily imply causation, but if we stack these two statistics side-by-side, could it be that online shopping is becoming something of a nexus for negative consumption practices? Is mobile commerce being seen as an opportunity to continue to apply the cycle of inaccurate forecasting and deep discounting, when the industry should instead we looking to re-evaluate how much product it creates in the first place?
There could be a possible neuroeconomic reason for this. Through a study using fMRI technology, MIT Sloan School of Management observed brain activity at the moment of purchase, when consumers make the “buy” decision either using cash or credit cards. The results revealed that credit cards activate the reward centre of our brains and motivate us to spend. Combine this with the knowledge that smartphones are Gen Z’s preferred method of accessing the internet, and the ongoing, problematic dominance of “buy now, pay later” services that defer payment using superficially similar structures to credit cards… the conditions for more impulsive spending are there if fashion decides it wants to leverage them to maximise the revenue potential of discounting – even if discounting is itself a symptom of a deeper problem.
And the “opportunity” presented today could be just the tip of the iceberg: it’s predicted that mobile commerce could account for more than 10% of all retail transactions (not just online) by 2025.
Today, we exist in what’s been called the “attention economy”, with brands and retailers increasingly competing for small windows of attention as much as they are for shares of discretionary spending. The average human will read, listen to, or look at something for 8 seconds. That’s a vanishingly small opportunity to articulate a value proposition, and perhaps the best way for a brand or retailer to capitalise on this attention is via at-a-glance offers like steep discounts, rather than encouraging passing digital shoppers to conduct deep research into different products.
This is all fine for fashion brands that want to put discounts front and centre to capitalise on these short snatches of attention, but the issue arises when we ask ourselves whether this type of spending might encourage the cycle of fast, disposable, over-produced fashion. Generally speaking, sustainability requirements are going to require brands to make less not more, but this evolution is only likely to happen if the negative impacts of overproduction persist. If, instead, the industry pursues a strategy of turning mobile commerce into a dedicated channel for offloading products that have been marked down, then the environmentally-necessary overhaul to planning and forecasting might be kicked even further down the road.
On a brighter note, earlier in January a notable product lead from Amazon moved over to circular fashion tech startup, Teleport. The platform is a social thrifting app as well as a community for sharing and shopping outfit videos in a ‘positive, Gen Z-driven fashion community’. A very different face to mobile fashion shopping, then, and one that we can place on the opposite side of the scale to mobile discount mills. Although ‘re-commerce’ has been on the fashion agenda for a while, this is an encouraging step in the right direction of making circularity, not markdown deals, into smartphone users’ default mode.
Trial and Error: Hermès versus the ‘MetaBirkin’
Right now, there have not been too many legal cases that capture the attention of those at the intersection of art, fashion, and technology. But as fashion wrestles with the questions and implications of what it means for an industry that has traded exclusively in physical products to now have a much more significant digital component, we’re set to see many more.
The first crucible for this year is going to centre on the “MetaBirkin”. On the 30th of January 2023, the trial between luxury house Hermès and artist Mason Rothschild is scheduled to commence in the U.S. District Court for the Southern District of New York. And it’s going to combine two trending themes: non-fungible tokens (NFTs) and the metaverse.
A bit of backstory. In November 2021, Rothschild created and sold one hundred NFTs, linking to images of digital Hermès BIRKIN bags, covered in various designs. By early January 2022, Rothschild had sold MetaBirkin NFTs to the value of over $1 million. These remixes and experiments were not endorsed by Hermès in any way.
The charges that Hermès has brought against Rothschild include, unsurprisingly, trademark infringement and dilution, misappropriation of its BIRKIN trademark, cybersquatting, false designation of origin and description, and injury to business reputation.
Rothschild’s counter-argument centres around the premise that because the ‘MetaBirkins’ are NFTs, they should function as artwork – something that is shielded by the First Amendment (upholding the freedom of speech) and something that has been tested in various scenarios, including Andy Warhol’s famous painting of soup cans.
While the legal precedent for artistic use of trademarked properties is fairly robust, this case brings multiple new elements into the equation, and is likely to be used to establish some guidelines and resolve some confusion regarding where trademarks intersect with the Web3 and digital goods spaces. The main questions that the case will touch on are whether trademarks in the traditional sense are actually enforceable in a virtual context, and to what extent the First Amendment (free speech) trumps another’s trademark rights.
In the same court, Nike Inc. recently won a round in its trademark infringement lawsuit against sneaker marketplace StockX LLC, when the court declined to force the athletic-wear company to disclose the money it makes from shoes, digital sneakers, and NFTs. Nike first filed a lawsuit against StockX in February 2022, alleging that the sneaker resale retailer uses Nike’s trademark without consent, freerides on Nike’s goodwill, and misleads consumers.
These two cases are the first two in what is likely to be many more litigation battles in this nebulous space of intellectual property rights and their enforcement in the digital world. And while not every fashion brand is going to find their styles being remixed or re-appropriated by an artist, all of them will – sooner rather than later – find themselves asking who owns digital rights, and why the vision for Web3 is still going to be filtered through the established cogs of copyright and commercial intellectual property for the foreseeable future.
Microsoft’s move away from the Metaverse, towards AI
On Monday 23rd January, Microsoft announced it was to extend its partnership with OpenAI. The new multibillion-dollar investment follows previous investments in 2019 and 2021, but this one is higher-profile since it comes after ChatGPT made such a monumental splash inside and outside AI communities that it allegedly has Google spooked.
Accompanying the announcement, Microsoft stated that its mission is ‘a shared ambition to responsibly advance cutting-edge AI research and democratise AI as a new technology platform.’ No massive surprises there. At the same time, though, Microsoft is decelerating its efforts in the metaverse: downscaling to its HoloLens mixed-reality hardware team, and discontinuing two of its virtual reality (VR) software activities. Cost-cutting, it seems, is coming for fringe activities to help fund what technology giants see as the safer bet of AI.
This indicates that Microsoft is going all in on OpenAI’s AI text and image models as being the future, as opposed to the metaverse as we have come to think of it. Instead of experiences that are embodied and immersive (to borrow Meta’s favourite terms) and that require hardware to fully appreciate, a much more concrete short-term bet is that people want smarter versions of what they already have – web search, voice assistants – instead of entirely new and untested virtual worlds.
Users of ChatGPT have already repurposed it to replace Google’s search (with both impressive and sometimes impressively-misleading results), and experiments with bridging the GPT3 API and Apple’s extensible shortcuts framework have yielded fascinating implications for the potential future of voice assistants.
This is not to imply that the Metaverse as a concept is dead. Microsoft notably pulled out of the smartphone race once it saw that other companies were likely to command the lion’s share of the market, and this move could simply be recognition that the company formerly known as Facebook is just too far ahead to bother competing with.
On the other hand, The Interline’s prediction at the start of 2023 that this year would be defined more by practical, immediately compelling implementations than by bold, uncertain visions is being borne out in this swing away from arguably the bravest (or most foolhardy) vision of them all.
The best from The Interline:
This week we published two collaborations that articulate the role The Interline is playing in advancing the cause of technology education and adoption around the world, along with two pieces carefully selected from our industry-defining DPC Report.
First, we released the latest result from our ongoing partnership with SOURCING at MAGIC – who also sponsored the DPC Report. This is a look-forward at how technology is going to influence fashion’s ability to respond to its most pressing challenges, and to capitalise on its biggest and boldest opportunities. As The Interline and SOURCING at MAGIC continue to work together to bring fashion technology to life in North America, we’ll be looking at all these challenges and opportunities in greater detail.
Next, we published an exclusive interview with the COO of Première Vision, Igor Bonnet, who shared his perspective on why it’s vital for technology to assume a prominent place at major fashion industry events. The Interline will be supporting that ambition in Europe next month, hosting a series of panel discussions as the centrepiece of Première Vision’s first afternoon of education dedicated to fashion technology.
We then selected our first editorial from the DPC Report to be published independently, and it’s a timely look at how generative AI image models are likely to impact fashion – both as a creative aid, and as a large-scale threat to copyright.
Finally, we released the latest in our series of executive interviews from the DPC – this time talking to Yazan Malkosh of Swatchbook about what it’s going to take for high-quality, futureproof material digitisation to happen on the doorstep of the supply chain.
