Businesses in the fashion and apparel sectors continue to navigate ever-changing consumer preferences, from changing styles to the way consumers shop and what they shop for. Companies must differentiate between short-term trends and those that are strategic, and will have a long-term positive impact on their growth. As technology and innovation accelerate the adoption and accessibility of these trends, successful executives will need to keep the consumer top of mind in 2020 and beyond.
Evolving relationship with e-commerce
Fashion and apparel businesses that have historically relied on traditional department stores to reach a broad customer base have looked to e-commerce to sell directly to the consumer as the traditional brick-and-mortar channel erodes. As the e-commerce channel continues as a growing source of revenue, companies are evolving in the way they embrace the channel. Apparel companies like Nike are adopting strategies from digitally native organizations by investing in their own direct-to-consumer platforms and rebuffing some of the traditional online retailers like Amazon and Zappos. By taking back control of the customer experience from third-party retailers, fashion and apparel companies can avoid costly chargebacks, returns, discounts and allowances, and can hone their brand to draw in new customers while retaining their existing base of loyal purchasers. This direct interaction also allows companies to glean valuable customer data to better understand their consumers’ needs and preferences.
Changing roles of stores
Omnichannel. Phygital. Click and mortar. There have been a number of pithy terms created to describe the emergence of e-commerce while still acknowledging a physical store’s important role in retail sales. And while the role of the traditional store has no doubt diminished in recent years, it remains a critical component of crafting the consumer experience. In addition to allowing customers to touch, feel and smell a product before a purchase, fashion and apparel companies are adopting technologies that allow them to use the store differently. This has generally led to smaller store fronts and less “carry out” sales. Rather, companies are using store fronts to create immersive customer experiences where they can deliver on their brand promises using augmented reality, smart mirrors, radio-frequency identification tracking technology, cameras and sensors to better understand how consumers interact with their products. In addition, buy-online-pickup-in-store options, or BOPIS, cater to the consumers’ desire to shop from the comfort of their home and control when and how they actually receive the product. All of this interaction and gathered data help companies understand consumer preferences and better ways to position or customize their products, hopefully forging further brand loyalty.
More than just a brand
Consumers are making purchasing decisions that focus on values in addition to value. Fashion and apparel companies are adapting by incorporating philanthropy and sustainability in their brand strategies. The “buy one, give one” strategy introduced by companies like Toms and Bombas is becoming more popular. In 2020, more and more companies will develop strategies based on building a community of customers around environmental, charitable and other causes in the United States and abroad. There are opportunities for companies to publicize their environmentally friendly, sustainable and ethical sourcing as well, especially important to millennial and Generation Z consumers. For instance, the fashion industry has a history of waste, pollution and energy over-consumption. An investment in sustainably sourced materials that go into higher quality, longer lasting clothes can speak to the growing population of consumers who care about the values upheld by their favorite brands. This type of investment also allows consumers feel good about the products they purchase. Adopting blockchain technology to increase consumer visibility into a company’s supply chain can be a differentiator when it comes to sustainable and ethical messaging. Diversity and inclusion messages are also an opportunity for organizations within this ecosystem to stand out. Of utmost importance is that the company leadership actually believes in these imperatives and these tenets are at the core of their business; consumers can easily see through brands that promote sustainability solely to increase revenue.
Decreasing desire to own
Digital platforms have made it easier for consumers to share everything, including their closet. Companies like Rent the Runway have made high fashion accessible to younger and cost-sensitive consumers while also fulfilling fashion consumers’ thrill of selecting and wearing something new for each special occasion. Consumers have also taken advantage of peer-to-peer platforms that allow them to monetize their closets. Websites like Thread Up have created platforms where consumers can rent their clothing and accessories to others. Luxury fashion companies could have access to a new tier of consumers as the possibility of offsetting the cost of a splurge purchase with rental income may increase interest in this price point. Companies looking to take advantage in this space should develop a strategy around authenticity, as potential renters will want assurance they are getting what they are paying for when renting from a peer rather than a department store or boutique. Blockchain technology can be leveraged to assure authenticity to consumers.
Despite the tariff relief on Chinese imports due to the Phase One trade deal between the United States and China, businesses in the fashion sector will continue to feel margin pressures in 2020. As more countries continue to face economic challenges, we are likely to see further tariff discussions, which may affect the sector.
Complicating this uncertain picture is the disruption caused by the recent spread of a new coronavirus throughout China and beyond. From fashion-related production slowdowns to factory shutdowns, the epidemic’s economic impact has been significant, and the future damage remains uncertain on the global fashion and apparel sector.
And while consumer spending remains strong, confidence across the overall consumer products ecosystem showed signs of erosion in 2019. If this prevails in 2020, fashion and apparel businesses will need to look toward innovation and improved cost management strategies to maintain profitability.