Factory closures have eased, goods are flowing again, no ships are stuck in the Suez Canal and consumers are shopping. And yet, nothing is back to normal.
There have been seismic shifts in the fashion retail industry in the past few years. The consumer has more power than ever and isn’t afraid to wield it, supply is still not aligning with demand, technology and analytics are more essential to maximize efficiency and productivity, and governmental regulations plus consumer pressure have shifted sustainability from a nice-to-have to a must-have.
But while the “new normal” catchphrase gets tossed around a lot, has its meaning truly sunk in?
“These norms are not news to you; you told us so when we surveyed you,” said Murali Gokki, managing director, AlixPartners, at last week’s Fall Summit as he presented findings from the joint Sourcing Journal + AlixPartners 2022 Fashion in Focus Survey Report, New Norms and Paradigm Shifts. “But treating them as incremental challenges would be a mistake, because these new norms have turned into paradigm shifts.”
Gokki and AlixPartners director Ryan Poole highlighted statistics from the newly released report, which was divided into four paradigm shifts—Digital First, Focused Assortment, Productivity Mindset, and Sustainability and Social Stewardship. The report reveals not only what brands and retailers are doing within each area and the goals they’re setting for themselves, but how they are (or not) tracking their progress.
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Digital First: Targeting the Metail Consumer
Forget retail, it’s all about “metail” now, as in all-about-me, consumer-centric, retail. And naturally, there’s a heavy digital component underpinning all of it.
“Don’t confuse ‘digital first’ with just digital commerce. It’s more about digital engagement,” Gokki said. “The metail consumer is not just buying digitally, but also creating digital content about your brand and posting it on social media. We need to meet the consumer where they are, and that is digitally.”
The survey uncovered that most of the industry’s digital investment is still skewed to digital commerce, digital marketing and fulfillment (only 59 percent are prioritizing digital tools to engage with customers, while 67 percent prioritize third-party technology to drive efficiencies). But more focus must be paid to how it all connects to the digital consumer, with emphasis on a curated, personalized experience and product.
Gokki cited the report’s case study on Fabletics, “which uses its tech stacks and digital listening to continuously improve the products and services for its customers,” resulting in a return rate of just about 5 percent, “one of the lowest in the industry.”
Focused Product Assortment: Managing Inventory
Deciding what the metail consumer wants is hard enough. Aligning product to those needs—at the right time and in the right amounts—is even harder.
Brands and retailers have lately been faced with an inventory glut, which is foreshadowing a heavily discounted holiday season. While some inventory excess was deliberately created as a hedge against uncertainty or to reduce out of stocks, things went too far, especially as consumer confidence has dropped. “Buyers overbought and consumers have exhibited demand reduction,” Poole said.
Brands and retailers also overzealously expanded into new categories that may have strayed too far from their core. “Does every brand need an athleisure line?” asked Poole. “Are all those colors and styles necessary? Miscalculations can be very costly.”
Dated calculation methods, namely Excel spreadsheets and the use of historical data, have also proven costly, yet more than half of respondents can’t seem to give them up.
Productivity Mindset: Boosting End-to-End Efficiencies
This third paradigm shift focuses more upstream, looking at how, and why, brands and retailers use technology to help their suppliers be more productive. “Brands might think it’s the responsibility of the factory, not the buyer, but we found that when the two work together and change behaviors, you can improve productivity by 20 percent,” Gokki said. “We have to have a shared goal of improving together.”
Yet when asked about collaboration/production technology tools being used to improve efficiency, not one tool—from virtual design tools to PLM solutions to real-time manufacturing visibility—reached 50 percent or more usage. Why are these numbers so low?
Sustainability: Nice-to-Have to Must-Have
The fact that there are 18 new laws on the books, with many more coming, means that sustainability and corporate social responsibility are no longer mere buzzwords. They must be an essential component of any business strategy, and they must be meticulously tracked and measured to ensure compliance.
When it comes to sustainability, however, brands and retailers seemed to spend more time talking about setting robust goals and targets, than actively measuring how they plan to achieve them.
“Seventy eight percent of executives say their companies have specific, measurable sustainability objectives, and 56 percent say they are ahead or on target to meet their sustainability goals,” Poole said. “But how do they even know that if only 19 percent are ‘tracking and actively utilizing’ that data?”
To download the full Sourcing Journal + AlixPartners 2022 Fashion in Focus Survey Report, New Norms and Paradigm Shifts, click here.