Fashion´s digital transformation from off- to online
The COVID-19 pandemic is simultaneously an unprecedented health crisis and a global economic shock. The ever-expanding shadow of a global epidemic caused by the coronavirus outbreak in Wuhan, China, continuously impacting the fashion industry specifically, that 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 had to close their doors for month and some of them even forever. The strategic decision of fashion giant Inditex to permanently close 1,200 Zara brick-and-mortars over the next two years to invest $ 1billion in reinforcing its online business indicates the necessary change of direction that many companies now have to go through.
Despite the challenging trading environment and the significant decrease in customer demand as a consequence of social distancing measures that were taken, the online retailer Zalando, for example, was able to grow their GMV by 14% compared to last year and is expecting also a double-digit growth for the rest of the year. In comparison, offline retailers in central Europe reported on average 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 percent of Chinese consumers saying they avoided shopping malls in the first two month after 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 minimize 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
My Theresa, Asos, Louisa via Roma, Amazon, Alibaba. They all have one thing in common, they are big operating, standardized machines with a customer base of millions 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 own online shop, a strong engagement with customers through social media is important more than ever as consumers are spending more time online during the crisis, why social media channels like Instagram have seen significant spikes 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.
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 significantly increase efficiency. The benefits will flow to consumers as well 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 brick-and-mortar 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 in the 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 worked with Tom Tailor, Joop! and Zalando SE.
