As the coronavirus pandemic exposed many weaknesses in the apparel supply chain, it also opened a significant opportunity for technology companies to fill those gaps and gain a wider audience. Investments in these companies are increasing as consumers demand more from the industry, whether through quicker lead times, sustainable sourcing and manufacturing, or fewer resources used. But even as tech takes a larger role in the supply chain, it’s difficult for nascent businesses in a largely unproven field to get investors’ attention.
In a recent panel discussion during the Sourcing Journal Hong Kong Sourcing Summit, Rick Yu, chief marketing officer and co-founder of TG3D Studio, put it bluntly: “There are not many tech investors who understand fashion.”
But although the knowledge may only be elementary for now, Yu recognized the importance of keeping a dialogue with investors, and offering up measurable success stories with customers that have adopted the company’s 3D body scanning solution.
“Some investors will tell you what kind of value propositions they’re interested in seeing, and you need to make good decisions on whether it’s a nice extension of your existing product or requires you to pivot to something completely new,” Yu said. “Based on that, you need to find your timeline accordingly and execute. It’s always a good practice to keep your investors on tabs of your progress with demos so you’re always the first one they think of when the opportunity comes.”
Related Stories
Walden Lam, co-founder and CEO of Unspun, which creates made-to-order jeans through automated, localized manufacturing, noted that fashion is still a niche segment when it comes to innovation, making it harder for some venture capitalists to drum up enthusiasm on investments. But he noted that recently, more hardware startups have successfully exited or gone public.
“Corporate ventures have only recently started investing in fashion tech startups,” said Lam. “What corporate venture investors typically want is to have more financially driven, institutional investors come in and be able to ‘take care of the startup’ all of the way through to an exit or a liquidity event so that they don’t have to be providing the funding all the way through.”
Top tech must stay ahead of shopper desires
Fashion tech players have to appeal to numerous sides, stating their case to not only the investors but to new brand prospects as well as they aim to establish their value proposition. This requires a deep understanding of the modern trends that consumers desire and the changes necessary to adapt to them.
Unspun and TG3D Studio have worked together to answer these calls, even bringing a custom fit jeans program to H&M’s Weekday brand late last year.
“When any business is trying to introduce a new business model or change the consumer behavior, they run into the classic chicken-and-egg situation, which requires the businesses and consumers to contribute to the uptaking of any business model,” Yu said. “We need to provide both business and consumer interfacing solutions and at the same time work with pioneering companies to accelerate the market adoption.”
There’s perhaps been no bigger indicator of shopper demands than the push for sustainability in the supply chain. Alexander Chan, co-director of The Mills Fabrica, an incubator dedicated to promoting tech startups in the fashion industry, described the overall culture of sustainability and ESG initiatives as “disproportionately” growing in 2020.
And Jeffery Hsu, chief innovation and marketing officer at digital textile transfer printing and dyeing technology NTX, noted that the sustainability conversation changed so much in the last 10 years from a consumer awareness standpoint that technology firms continued to push the limits on what they can accomplish.
Hsu highlighted NTX’s Cooltrans platform as an example of the progress made, with the solution’s waterless textile coloration capabilities able to reduce up to 90 percent of water used in the dyeing process, as compared to “5 to 10 percent changes” when these technologies were first introduced years ago.
Public opinion, hesitance to test, pose new barriers to tech adoption
Even with the advent of new technologies and no shortage of promotion, brands still often hold back from taking the plunge, with obvious challenges being cost and time invested. Chan noted that new investments represent a break in the traditional sourcing relationship between brands and their suppliers, in that they require a willingness to try new pilot programs. And in the case of sustainability initiatives, worries over the perception of greenwashing still scares off many brands, according to Chan.
“When a large brand is trying to make changes to the supply chain and to their products, it’s easy for consumers to immediately criticize them,” Chan said. “If you do one pilot, 99 percent of the rest of the brand still isn’t sustainable. That kind of PR or marketing risk is something that brands often consider when trying something new.”
Of course, even if consumers overreact to idea of brands not doing enough, greenwashing certainly remains a legitimate problem, especially as buzzwords like “biodegradable” and “waterless” still float throughout many eco-friendly apparel campaigns.
Knowing that NTX was late to the game, only launching to the public in 2020, Hsu and his team went to third-party outlets to ensure that the claims they made were authentic.
“We’ve gone to third-party players such as the Sustainable Apparel Coalition (SAC) where they have the Higg Index,” Hsu said. “It’s not perfect, but it at least gives you an ‘apples to apples’ comparison based off of the best information that is out there. Third-party players that have no real horse in the race, but only look at the outcome, have allowed us to do things that at least get us in the door, so to speak.”
In Case You Missed It: All of the sessions from this year’s Sourcing Journal Hong Kong Summit: “Recovery & Reinvention” are available to purchase and view on-demand. Click here for access.