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Change is Here for Retail, So What’s Next?

Retail may be spending much of its time bemoaning the state of things, but the change has happened—and the next step is figuring out the next step.

“What has gone on for 50 or 100 years cannot continue to go on much longer,” Pano Anthos, founder and managing director of innovation accelerator XRC Labs, said speaking at the American Apparel & Footwear Association’s Supply Chain Innovation sourcing conference in New York City Wednesday. Technology and the trends that come with it are giving the consumer more and more opportunities to disrupt retail, whether retailers like it or not, Anthos added.

Where the retail process was once, ‘we will tell you what to wear, we will supply it, you will buy it,’ that’s old hat. Consumers now control everything from dictating what they want to buy, to when and where they want to buy it. Even omnichannel is on its way to becoming old news.

“It’s not omnichannel anymore. The customer is the channel,” Anthos said.

In the midst of this major shakeup for the sector, retail is also scrambling to accommodate see now, want now buying, and many are struggling to get out of their prehistoric ways when it comes to manufacturing. But that won’t hold for much longer either.

“Planes can’t get any faster and ships can’t get any faster, for the most part,” Anthos said. “The change that’s going to happen is on the manufacturing side.”

Jose Suarez, founder and CEO of quality assurance company Impactiva, is calling this new normal a demand chain instead of a supply chain.

“If you look at it as a demand chain and you realize that agility is the future, it is all about speed and flexibility,” Suarez said. “It’s producing a lot more skus in a lot less production runs and in a lot less time.”

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The only way to do that is to partner with factories and foster relationships that are more than transactional—and though that won’t come as new information for those in the sector, it’s something an alarming number of retailers still aren’t putting into place yet.

What’s around the bend for apparel

Those retailers that aren’t catching on are going to be even more hard pressed when they accept the reality that they’re competing with factories too.

“A lot of factories are becoming retailers,” said Rick Horowitch, VP of global strategy and solutions business development for Bureau Veritas, who moderated the panel. Factories are, on their own, realizing that they can deliver what customers want, and some are starting to go straight to the shopper, cutting out the middleman (read: retailer) altogether.

Others, whether factories or not, are also getting into the game, offering product that can be made to order by the customer and presented directly to them in a matter of hours.

That’s what Boston’s Ministry of Supply is doing. The company, a brainchild of two MIT grads, started as a place to get performance clothing, and while it’s still known for that, now there’s a machine in its Boston store on Newbury Street making 3-D Print-Knit blazers in 90 minutes (that’s 90 minutes on the machine, but then the jacket goes through a dry cleaning process to get the fit right, buttons and trimmings are added and customers can typically get their jackets in about a week, according to an associate at the store).

“Yes we are at sort of the Stone Age of all of this, but it is happening,” Horowitch said. “The idea of full collections within 10 days, the idea of mass customization, we’re just starting to see all of this.”

What’s it going to take to evolve?

For one, as Despina Papadopoulos, founder and CEO of New York City design and development studio Principled Design, explained, the industry has got to get past focusing on competition and learn how to share ideas for the good of the sector.

“Companies need to take more risk,” Anthos said plainly. “They need to be willing to fail and celebrate, so to speak.”

At Amazon, which has been known to take risks, fail and try, try again, employees are empowered to think and create, though they have to write a press release to “sell” their idea before getting the company’s blessing.

The retailer Anthos has been most impressed with, however, isn’t Amazon. It’s TJX.

“They really understand their customer and they really understand that they have very little ego. They’re eager to figure out what’s next,” he said. “They’ve been a disruptor, but they also understand that if you’ve been a disruptor, you can be disrupted.”

Suarez agreed that moving toward a more modern model is a lot about changing company culture to accept risk, but it’s also about finding talent, because making the change is about process.

“It all comes back to designing world class processes and learning out everything you do in a company or else you’re going to have a hard time five, 10 years down the line,” he said.

The first step according to the panelists? Put together an innovation team of the best, brightest and most innovative in your organization, figure out the projects you want to tackle and get started.

“Think about who your customer is,” Papadopoulos said. “Move toward them and it doesn’t just become innovation for innovation’s sake.”