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From Offline to Online: Fashion's Digital Transformation

Some apparel, fashion, and luxury companies won’t survive the current crisis, others will emerge better positioned for the future. Much will depend on their flexibility and readiness for a digital transformation of their business models.
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Photo Credit: WTVOX

The COVID-19 pandemic is simultaneously an unprecedented health crisis and a global economic shock. The ever-expanding shadow of the global pandemic is continuously and specifically impacting the fashion industry, the fast-moving and trend-driven industry which is still highly reliant on offline channels. Department stores across the globe, like Macy's, Neiman Marcus or Bergdorf Goodman were forced to close their doors for a month, but some - for forever. The strategic decision of fashion giant Inditex to permanently close 1,200 Zara stores over the next two years to invest $ 1 billion in reinforcing its online business indicates the necessary change of direction that many companies now have to go through.

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Strategic investment: Zara has decided to close 1,200 stores to invest in e-commerce business. Photo Credit: Next Group

Despite the challenging trading environment and the significant decrease in customer demand as a consequence of the social distancing measures taken, the online retailer Zalando, for example, was able to grow their GMV by 14%, compared to 2019, and is expecting also a double-digit growth for the rest of the year. In comparison, offline retailers in central Europe reported on a revenue loss between 30 to 60 percent from April to June and a decline in purchase intent of 70 to 80 percent. And it will continue to be critical during and after the recovery period.

 

In China, the return of offline traffic has been gradual, with 74% of Chinese consumers saying they avoided shopping malls in the first two months after the stores reopened, which suggests that some percentage of offline sales will permanently migrate to e-commerce. But digital is not only an increasingly important sales channel, it can also help companies in times of low liquidity to adapt cost structures and make each step of the value chain better, faster, and cheaper.

 

Although no one in the industry foresaw the intensity of this crisis, some fashion companies are finding that they are better equipped than others, largely because of their digital know-how and analytics capabilities—not just to ensure business continuity and minimise the downside of COVID-19, but also to emerge from the crisis in a position of strength. But what trends did they implement earlier than others?

 

Holistic Operating Business Models Around Digital B2B Platforms

Mytheresa, Asos, Louisa via Roma, Amazon, Alibaba: they all have one thing in common - they are big operating, standardised machines with a customer base of millions and with platform strategies where brands with the right digital infrastructure can connect and upload their stock while having access to consumer and assortment insights.

 

Expansion of B2C Retail Channels

Apart from having an online shop, a strong engagement with customers through social media is more important than ever, as consumers are spending more time online during the crisis, and that's why social media channels like Instagram have seen significant increase in usage. Frequent communication and promotion to consumers is key, even if most consumers aren’t currently spending. The integration of Instagram shopping features makes shopping as easy as clicking on a liked item to be routed to the product page to make a purchase. These days it’s all about giving convenience, especially keeping in mind that our digital natives of Gen-Z and Millennials will form the future of the retail landscape.

 

Provision of Excellent Omni-Channel Experience

Besides scaling up digital sales efforts, it is essential to reconfigure the store footprint accordingly by reducing presence in “B” areas, devoting less store space to product categories with high online penetration and making it easy for customers to perform an omni-channel operation. A fully integrated management of stock in stores and warehouses is core to any omni-channel operation and is used so far only by 18% of European retailers.

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Store of the future: Inside Tommy Hilfiger´s Omni-Channel Store in Amsterdam. Photo Credit: Miguel Jimenez

Leverage Big Data and Analytics to Manage the Supply Chain

In addition, automating logistics through a digital warehouse design and an analytical approach for product development can significantly increase efficiency. The benefits will flow to consumers in the form of better product availability and faster, cheaper, and more accurate deliveries. Digital sourcing platforms lead to transparency, flexibility and cost efficiency by choosing the right suppliers for products.

 

Of course, a digital business transformation is connected to huge investments, especially while solving Spring/Summer stock pressure, investing in Fall/Winter production and new collection development. Nevertheless, for executives in the fashion sector and all related subsectors, such as beauty or sporting goods, the imperative is clear: make digital and analytics a core element of your company’s strategy. Physical distancing could continue in the post-COVID-19 world as the “new normal,” making consumers less likely to visit stores, and a contact-free economy could emerge, raising e-commerce and automation to a new level.

Sabrina Gildehaus is a fashion expert and specialist from Berlin who now lives in Kiev, Ukraine. She is the founder of the fashion consultancy Gildehaus. Her mission is to support and develop fashion brands and create a community of fashion experts.

She has more than 10 years of professional experience in the fashion industry. Previously, she has worked with brands like Tom Tailor, Joop! and Zalando SE. 

gildehaus.com.ua

instagram.com/sabrina.gildehaus/

 

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