Next generation competition is coming not from your industry but your arena— a competitive landscape in which different players address the same customer needs or compete for the same customer resources (i.e. money, time and attention) as you.
In this series, we focus on shifts in human needs and look to the peripheries– exploring the competitive battles at the edge of culture, business and innovation.
---
Episode 3: Fashion
COVID-19 has exposed how tenuous and fragile the business of fashion has become.
Billions of dollars of clothing orders placed with manufacturers around the world have been cancelled. Major physical retailers have shuttered. Online sales are down by as much as 30% in India. A majority of fashion businesses are likely to suffer financial distress over the coming months. Many will not survive.
Industry leaders have long known that the old way of doing things – i.e. seasonally manufacturing items without any advance customer feedback and then, months later, hoping that these items sell in retail stores – doesn’t work. Industry overproduction runs at an incredible 30 – 40% each season.
It's a model that is both financially and environmentally unsustainable. According to the 2019 Global Wellness Trends Report, fashion is the world’s second worst offender in terms of water pollution. It is also responsible for roughly 10% of all carbon emissions.
Creative business models that once seemed niche and not exactly scalable are now a much more promising lifeline for the fashion industry.
---
MADE:
For a business with $2.5 trillion in global annual revenues, fashion is ripe for an overhaul of how it produces and in what quantities.
Experts believe that on-demand manufacturing is an important part of the next normal. Products are made only when a customer places an order. And shipped from the factory directly to the customer so that items arrive within two weeks.
Making clothes on-demand requires rethinking how garments are designed to finding factory partners willing to change the way they work.
Smaller brands such as Misha Nonoo are demonstrating how effective this approach can be -- shifting away from trendy looks to well-made classic pieces that can be worn over and over again.
For fast-fashion brands, it is appealing because it would allow them to rapidly respond to the latest trends while avoiding wasted inventory and markdowns.
---
SOLD:
Strong brands matter more than ever to pull in customers.
The more impersonally goods are sold online, the more urgent it is that shops stand out for customer service.
Zara is aggressively overhauling its store network to focus on more muscular flagships. It has already been closing smaller outlets, while opening fewer, larger stores for the past few years.
Stores now act as distribution hubs. Clothes with RFID tags enables online orders to be fulfilled from wherever the stock is, be that in warehouses or stores.
Meanwhile, brands that have lost a bit of their lustre are forging collaborations with cultural tastemakers to regain their cool.
Gap has recently signed Kanye West to reinvigorate its brand which has been tarnished by its reliance on discounts to pull in customers and clothes that are described as being “indistinguishable” from other retailers. West, who has a young fan base willing to consider buying “pretty much anything that he puts his name on” has signed a 10 year agreement to design and sell clothes under the Yeezy Gap label.
---
USED:
Renting clothes has become increasingly popular over the past few years and is seen as a relatively guilt-free way to partake in fashion.
Renting reached a cultural moment recently when Carrie Symonds married Boris Johnson (Prime Minister of the UK) in a designer wedding dress she had rented for 45 GBP. It would have cost her 2870 GBP to buy it.
With Covid forcing scaled down, intimate weddings, will we see more Indian brides opt for rental designer pieces? They can still keep up appearances without the expense of outfits and jewellery that will only be worn once.
US firm Rent the Runway research estimates that 20% of the retail market will be rental by 2025.
Meanwhile, Etsy, the crafts and handmade marketplace is buying Depop, the British second hand fashion resale app, for $1.6 bn to tap into the fast-growing trend of generation Z young people reselling clothes and sneakers online. Depop has registered users in almost 160 countries and its 2 million active sellers sold $650m worth of secondhand clothes and other fashion items last year with Depop taking a $70m cut.
---
E-commerce is only in its third decade. It may turn the next one into a time of vibrant upheaval. Pessimists might see dead malls, abandoned high streets, millions of unemployed shop assistants and craftspeople, dwindling retail tax revenues and piles of Amazon delivered clutter. Yet it's also pushing traditional retailers to create new forms of value through more sustainable business models.
---
Culture evolves. Customer expectations are moving faster than ever before.
Someone is already rethinking your category.
---