Global volatility is the new normal and companies in all industries have to adapt and track external factors such as weather or social media. Climate change is not only impacting retail sales (revenues) but also other phases across the value chain like wool or cotton production (costs). Managing supply chain assets like fabrics and textiles suppliers is becoming more strategical than ever.
Companies are facing more uncertainty while technology, or fashtech, is trying to balance it thru Artificial Intelligence or machine learning. Technology is helping to optimize financial or merchandise forecasting, stores clustering, improve allocations while reducing loss-sales and mantain margins. Some companies are betting also on sustainability and innovation like Patagonia, EcoAlf or Adidas using eco-fabrics, zero-waste or 3D Knitting.
Others like Reformation present a business model that is 100% eco-friendly and use pro-social technologies. Slow fashion, circular economy, ethical fashion, upcycling, vegan fashion… Transparent and sustainable business models in the fashion industry are emerging as they are more a responsibility than a trend.
Long tailers are the ones that are taking advantage of it thanks to their agility and flexibility, but also top leading fast-fashion retailers are investing on sustainability and give visibility of what their suppliers are. Inditex Join Life or Green to Wear + and Adidas collab with Parley for the Oceans (trainers made from recycled ocean plastic) are a few examples.
Stora Enso partners with H&M group and Inter IKEA group to industrialize TreeToTextile. TreeToTextile AB is a joint venture between H&M group, Inter IKEA group and innovator Lars Stigsson since 2014, with the aim of developing new textile fibers in a sustainable way at attractive cost levels.
Strategical sourcing to ensure meeting demand and quality
In order to control their supply chains, some luxury retailers are using vertical integration and acquiring other companies to ensure the quality and supply of materials. Many years ago, in 1999, Ermenegildo Zegna Group acquired Agnona because the italian womenswear brand was, with Loro Piana, the only company to have a trade agreement regarding vicuña wool with Peruvian government.
Vertical integration or taking control of the complete production chain is a must in the luxury industry. Gucci, Hermés, Prada, Chanel or Zegna are acquiring some of their suppliers to ensure supply of merino wool, crocodile or python.
Luxury Fashion Retail is special and unique because it takes, in many cases, control of every phase in the supply chain. Nowadays, when sustainability is on top of mind, retailers and suppliers need to ensure not only quality but also that human, animal and environmental rights are respected. Global volatily creates more uncertainty and many players are betting on acquiring suppliers while environmental profit-and-loss statement is becoming a standard in the luxury segment.