The fashion industry is in the midst of an intense debate, with the announcement of “in-season fashion shows” by several major brands and the Council of Fashion Designers of America (CFDA) declaring that the time is ripe for the industry to explore change.
Should runway fashion be available to buy immediately, or should it come to market four to six months later based on the century-old industry calendar?
While fashion brands continue to announce their alignment with or opposition to “buy now,” there is little doubt evolution is in our industry’s near future. We at Kurt Salmon believe the ultimate winners in this change will be those who embrace the customer’s desire for immediate gratification and move quickly to shift their business models to take advantage of this transition. We’ve seen this play out in every other area of discretionary spend: The customer has always rewarded the shift to on-demand models.
In fact, those same industries that have shifted to on-demand models have enjoyed large increases in share of consumers’ discretionary spend as the less-responsive fashion industry has ceded their own share of that wallet by 12%. Over the last ten years, that’s an estimated $299+ billion loss to the fashion industry in the United States.
It is not hard to understand that in the four- to six-month period between runway excitement and retail availability, many experiential, entertainment, electronic, travel and food attractions catch consumers’ attention—and discretionary dollars. But this dwindling of industry share is then further exacerbated for many traditional luxury apparel brands as fast-fashion competitors take away an increasing share of the remaining discretionary wallet spent on apparel and footwear.
Many at the upper end of couture fashion will always have loyal fans willing to wait for their limited supply. So one size does not fit all, and we are likely to see a mix of distribution models for some time to come. But the larger tide will continue to sweep us all to faster, more on-demand commerce models.
IMPLICATIONS FOR THE INDUSTRY
While this development will transform the entire industry, we foresee four specific implications:
Accelerating Shift to Direct-to-Consumer Business Models—Successful brands have already begun growing their direct-selling channels through owned stores, e-commerce, digital marketplaces and, most recently, social selling. In fact, direct-to-consumer channels for premium apparel brands have grown 900 bps on average. We believe this channel shift will continue as brands grow their capability to deliver high volumes of digital content directly to end consumers.
The Reinvention of the Wholesaler-Retailer Relationship—The change in the market-runwaybuy cycle will upend the modus operandi of the last 100+ years. This shift has been underway for some time. The on-demand model will certainly call for the reinvention of historic retail spaces to bring digital content into the stores as well as to global digital marketplaces, allowing global customers to have instant access to their favorite fashions. The inventory risk inherent in on-demand models will also most certainly favor wholesale partners who can leverage inventory across all geographies and channels seamlessly and is the reason physical-digital mergers and acquisitions such as Neiman Marcus/MyTheresa, Saks/Gilt and Farfetch/Browns Fashion are so important.
Pressure on Fast Fashion—The consumers’ need for “see now, buy now” has long been met by Zara, H&M and other fast-fashion leaders. In Europe, where many of the fast-fashion retailers were born, their share of the fashion industry is expected to grow to 35% in 2016, up considerably from their 15% share in 2010. While these fast-fashion retailers will continue to deliver runway-inspired fashion at value, expect the immediate availability of the “real thing” from established fashion brands to be an attractive option for the aspirational customer.
Full-Price Sell-Through—In the United States in particular, this statistic has fallen to cartoonish levels. Responsive, available-now apparel will not only help recapture share of wallet, it is much more likely to bring integrity back to pricing. The industry can train consumers to get their endorphin rush from fashion newness and availability instead of from a red markdown tag.WHAT TO DO NEXT?
While we believe this change is inevitable and highly beneficial to the industry, there is no single path to the future. The exact path forward and the degree of change required will depend on a brand’s heritage, positioning and business model. We believe the winners will be those who are the first to adopt key enablers:
- Responsive supply chains. Differentiated speed models, reduced lead times and predictive analytics delivering the right mix of seasonless and trend-driven product.
- 1:1 consumer engagement. Compelling digital and social experiences with fresh content integrated into immersive store environments.
- Redefined wholesale partnerships. Collaborative planning and inventory management, built around consumer-focused delivery flows.
These brands will offer a more authentic and personalized experience to their consumers, driving loyalty and ultimately recapturing billions in consumer spending. The consumer has spoken and the opportunity is immense.
11 March 2016