The Fashion Retailer The New Fashion Retail Paradigm

While reading the latest Monocle´s report on Global Retail: Let´s talk shops, I decided it was the right time to take a step back and have perspective on the latest news that are impacting the fashion retail industry.

This is just a sample of some of the latest topics and news that I feel “key” to understand the current retail paradigm.

New acquisitions (Thom Browne by Zegna or Eloquii by Walmart)
Liquid design based on crowdsourcing at Nyden, H&M newest brand.
New concept store format (Nike by Melrose in LA),
More and more application of Fashion Technology (e.g. Uniqlo 3D knitting)
New Skills: Walmart trains associates in Virtual Reality
New Manufacturing capabilities: automation manufacturing at Adidas
A new unicorn with Farfetch´s IPO
Headquarters relocation and global competition for talent
Streetwear and Luxury: A love story (Virgil Abloh to Louis Vuitton)
New brands (Gap Inc. launched Hill City, a “premium activewear” new brand!)
New channels (J. Crew launched a marketplace, Pernia´s Pop Up shop)
Crowdsourcing deliveries (Walmart´s latest pilot)
…

While digesting this melting pot of news and trends that illustrates The Fashion Revolution, the first thing that come to my mind is technology. I´m not saying systems but ways of working and managing talent (Walmart trains its associates in VR), innovation in fabrics (Uniqlo´s 3D Knitting), new processes (Adidas manufacturing automation), digital stores (Farfetch and the store of the future), … and other innovations already commented in my latest post about Fashion Technology: Fashtech.

THE FASHION REVOLUTION

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Technology: Power to the “People”

Many examples of omnichannel best-practices come from niche players like Bonobos or Everlane, but also from behemoths such as Nike or Amazon (new 4-Star store). Retail companies, including pure players experimenting with offline, are integrating big data analysis and AI (machine learning) in many processes within the merchandise cycle: social sensing as a design input; real-time sales analysis (using data cleansing, removing seasonality, demand transfers…) to optimize the assortment, change store layout or update allocations; Design platforms based on crowdsourcing; Store clustering using machine learning; Assortment optimization based on CRM tracking and online searchs…

Speed and agility are driving and accelerating the change. In retail, big companies have many issues trying to evolve into the NEW while niche players can accelerate their growth based on highly skilled cell-work teams, a design thinking approach, liquid workforce (Crowdsourcing design at H&M, or deliveries at Walmart), omnichannel retail (pop up stores)… Despite some dinosaurs are too big to change, others, like Walmart are reacting on time and acquiring strategic companies to survive to Amazon (Walmart´s 2018 acquisitions include Cornershop, Eloquii and Bare Necessities).

In every revolution, some people embrace change, adapt, others simply don´t. In every revolution, there are winners and losers.

What is the vision from the customer point of view? What fashion shoppers are expecting from stores?

I already made a comment about the lack of excitement of Millennials when visiting a Department Store (e.g. El Corte Inglés) and how fashion retail brands will need to offer more than piles of inventory in the offline channel. Large-format retail stores aren´t cool any more. There is a lack of personalization, curation and authenticity. Navigating in those macro-spaces is far from feeling part of a special community. It´s amazing to see how some of those companies still believe that retail crisis is a matter of “makeup”. The NEW retail is far more than a simple store renewal!

Nobody doubts now that storytelling and customer experience (driven by digitalization) are reshaping the old brick-and-mortar fashion stores. Many and many retail chains are closing stores because they are too big to change, or at least, to change fast. In average, sales are decreasing (still) and traffic too (only prime locations and flagships are safe). In that way, Amazon seems to be killing every traditional dinosaur while, at the same time, is opening curated stores. Darwinian retail is transforming the way people understand spaces and some companies, like the above, are already adapting their assortment at store level.

Louis Vuitton´s Pop up Store at Soho, NYC

Customers want a glocal, differentiated and unique product, with a spirit of community (see Amazon Storefronts site that offers more than one million curated and high-quality products, from small & medium businesses in the US). The clearest example is Nike by Melrose, a live curated store that breaks out with McDonaldization (same burger, same store) and consumer standardization, as described in the fashion retail sociological approach.

Nike by Melrose new store in LA

What is the Future of Brands?

Scott Galloway predicts in FOUR, his latest book, that Alexa will kill brands (Alexa is Amazon´s Virtual Assistant). His findings (from L2) while testing Alexa were the following:

It’s clear that Amazon wants to drive commerce through Alexa, as they are offering a lower price, on many products, if ordered via voice vs. click.
In key categories like batteries, Alexa will suggest Amazon Basics, their private label, and play dumb about other choices (“Sorry, that’s all I found!”) when there are several other brands on amazon.com.

Fashion doesn´t sell batteries or water, as example of low value-added products that boost traffic, but sells many categories that are considered basics. Apparel and accessories produce items that are repeated in every collection, rotate more than the average and are as boring as necessary (like water bottles). So, categories that are “transparent” (difficult to differentiate from customer´s point of view) will struggle facing online. If a customer is looking for a set of white socks, Alexa (or other VA device) recommendation will surely convince. At this point, brand is killed.

According to Time Inc/YouGov Survey (2015), in 2007/08, 80% of US Customers remembered a favorite brand. In 2014/15, only 61%. This trend is showing a dangerous symptom of our liquid era, and it´s not amnesia. This could be triggered by the fact that new generations prefer experience than ownership, or having an iPhone rather than clothes. New generations are infoxicated (information intoxication) and are deeply filtering and segmenting their needs. Even big brands could lose market share if they don´t approach Millennials and Gen Z with a different approach.

The relationship between brands and customers is changing and companies from every level of the fashion pyramid seems to understand it, excepts perhaps, the ones at the bottom. This is where Alexa (Amazon) will start killing, offering its private label and increasing therefore the “brand´s amnesia” mentioned above.

Galloway puts the example of private label and the Food Industry, but fashion retailers will suffer too. At the bottom of the fashion pyramid you can find food chains (yes, food) selling clothing at a very good price, in the same store where you can buy tomatoes and beer (Carrefour, Lidl). Traditional Fashion retail brands located on this segment are suffering the offline apocalypse because their value proposition is basically price. Who knows if Alexa is going to recommend a white cotton t-shirt from Carrefour instead of a Mango t-shirt? (as example of low value-added, basic product).

A way to escape from this killing of brands in the mainstream segment of the pyramid is going niche. GAP inc, for example, is diversifying its portfolio of brands with Hill City.a premium, high-performance lifestyle brand for men” when activewear and yoga are a trend.

If Alexa is going to kill all brands from the bottom of the pyramid, what will happen to the others?
How luxury brands are facing the retail disruption?

LIQUID, BUT UNIQUE. LUXURY LOVES STREETWEAR

VIRGIL ABLOH – It´s difficult to understand what hiring Virgil Abloh means, not only to Louis Vuitton, but to the Luxury Fashion Industry. He´s probably going to writte a new story in a business with more than a century of history.

Virgil, the Mixmaster, is not a designer. He is a DJ (house/tech music), entrepreneur (Off-White), architect and artist. He is the King of Collaborations (e.g. Vans, Nike, Moncler, Levi´s…), a real influencer and highly connected to other celebrities and trend setters. With him, Louis Vuitton is betting for streetwear and refreshing its DNA. Again, it´s about being unique, not only because price (exclusivity) but because of scarcity (limited editions). “Buy it now, or never”. “Be cool now, or never”.

Consumerism in the liquid era is fast, compulsive and ephemeral. We already have a perfect illustration of this thanks to Banksy´s self-destructing painting The Girl With Balloon (October 2018). “The urge to destroy is also a creative urge” as Bakunin said.

It´s all about freshness and scarcity. Zara´s magic business formula, based on creating this fast fashion need, “buy it now or you won’t have it”, could be one of the main reasons why LVMH is betting for Abloh. The objetive is accelerating it´s merchandise cycle or time to market, reducing product time-on-offer. Luxury fashion customers are tired of traditional messages such as sustainable, high-quality fabrics, hand-made, made in Italy (or locally), made-to-measure, and so on. All these are commodities when you pay luxury items! Brands need to go beyond this common attributes. Coolness is the Holy Grail in today´s luxury.

If LVMH is betting for streetwear is because customers want something more exciting, with a different story while ensuring the exclusivity of the label. Luxury is embracing street style. Even a historical fashion house like Zegna has decided to become cool and acquire Thom Browne. Ermenegildo Zegna produces the best men suits worldwide, even produces for other luxury brands. But, as I said, quality is a basic when you pay $$$. This could explain why many brands are embracing this revel counterculture attitude thru capsules collaborations, hiring talent or acquiring “streetwear” players.

Streetwear is more than an attitude. Streetwear guides fashion, it´s the new luxury. If somebody has something to do with it, that´s James Jebbia and Supreme. The skateborading store that opened in 1994, in NYC, has become the new Mecca for apparel and footwear fans.