A new business model is emerging to bring a competitive lead and to drastically reduce waste
Long gone are the days where having a good product and advertise it well was enough to win customers, with a physical store to place such products. With the current complexity, a world where digital presence became a norm and consumers are closer than ever -- a mere screen away --, the market today is much more exciting than it has ever been.
"On Demand": the New Paradigm
The status quo has changed: where once brands dictated the market, today consumers are the sovereign monarchs, and their wish must be attended because not keeping up-to-date with their demands might bring severe consequences to a brand. The shift of the fashion business model is clear, and it's necessary to seduce the flimsy attention of millennial influencers, comprehend technology advances, and excel on sustainability challenges.
Consumer demands vary depending on the type: basic product (consisted of mass-produced garments, moderate demand and low prices), fashion basic product (core products based on fashion information, with high demand)), and fashion product (consisted of lowest volume, high prices and volatile demand, where customisation or exclusivity are inherent features).
Digital First (In Every Channel)
The consumer is close: easily reachable on digital and mobile platforms, and the majority of its demographic has a ubiquitous name -- millennials. Those digital natives were raised with technology and are now old enough to consume on their own: reaching out those young consumers is about survival, hence the importance of being connected 24/7 and present a mature omnichannel experience -- it's their logical way to shop.
"(...) omnichannel retail is no longer a future aspiration but a baseline requirement", says the conclusion of the 2017 Global Omnichannel Retail Index report. "Tech-savvy customers demand it, and companies can either meet this expectation or watch those customers depart for more digitally savvy competitors", it continues. E-commerce, social media, community apps, physical stores, click and collect, websites: the consumers demand seamless integration of all digital infrastructure of a brand's retail ecosystem. Omnichannel is not just a business jargon, it is the guarantee that the consumer might be able to conclude their shopping in whatever channel they find themselves at a specific moment. How integrated is your brand's digital and physical shopping experience?
Millennials: the digital native generation is now old enough to have consumer power. Connected 24/7, an incredible omnichannel experience is key to reach them successfully.
Fashion brands can use technology to meet consumer demands more precisely, whatever those needs are: creation, production, distribution, sales, transparency and sustainability. Such fashion technology can result in disruptive and innovative solutions, like Louis Vuitton's visual search feature that works with consumer's pictures to match products in its own catalogue.
Need For Speed
In the digital world, everything is instant, including gratification: it is mandatory to have a rapid response to the market's needs. If you are not taking action, your competitors surely are. A "here and now" attitude multiplies the speed that information travels between consumers and back to the brand, so a quick reaction to a trend is likely to result in market share: see the "see now, buy now" adopted by many fashion designers who understood there was profit to be made in the younger generation's sense of urgency. Technology engages the consumer with the brand through the "see now, buy now" process by streamlining fashion shows on Instagram, for instance, or being able to vote the best styles of a collection in real time using new apps, or even joining fashion shows through virtual reality.
Need for speed: reduced lead times are a key factor for competitive advantage. A slow check out process can make consumer give up their purchase.
This type of speed in attending demands in a fast-paced environment, however, is not only about fast-fashion immediacy. It's about survival in a tech world, being more efficient (with customer communication and problem-solving, for example) and less wasteful, like Stella McCartney's partnership with The RealReal (a consignment platform) to encourage resale of unused garments of the brand. It's also about user data management and how fast companies compile and interpret that information to better attend the consumer's demands.
Reduced lead times are another part of the fast-paced concept, bringing efficiency along the whole production chain. This trend is expected to be an easier business model for small-scale companies to incorporate, while larger ones will thrive in selected areas.
In its "10 Consumer Trends 2019", the Euromonitor named it as "We Demand Immediacy": a demand for efficiency that extends beyond instant gratification. Consumers are looking for smooth experiences combined with their lifestyles, and such adequacy allows more time in other areas of their lives.
The New Business Model Tactics for the New Consumer
The "here and now" attitude of the new consumer can reflect in different business strategies according to the brand. Some of the strategies implemented to reach and attend the new consumer demand stands out, and you might know them, although haven’t realised how much they are in tune with these consumer shifts.
This strategy, made popular by streetwear brand Supreme, consists of a limited-edition product or collection released with a very little warning, creating a sense of urgency in anxiety-prone consumers (mostly millennials). The announcements usually require social media platforms, especially Instagram, which also help to create an engaged community of brand followers.
Burberry, for instance, created "The B Series", a monthly drop on every 17th, available for 24 hours only. The frenzy is real, as it's the buzz -- and the criticism. Although "drop culture" is appealing in terms of reaching for young consumers (which are critical for a brand's long term survival), the message might confuse more traditional luxury consumers, who expect craftsmanship and are more interested in a solid heritage, not necessarily a hype exclusivity. The secret is to attend both demands without alienating any of the consumers, adopting proposals for a younger consumer and respecting life-long customers.
Product drops: a strategy beloved my millennials and made even more popular by social media. Here, the "B Series" implemented at Burberry by Riccardo Tisci, which sells, for 24h only, one single exclusive piece every month on Instagram. | Credit: courtesy Burberry.
Remember the waiting list for Louis Vuitton and Stephen Sprouse's first collaboration in 2001? Be it luxury or not (fast-fashion chains offer popular collaborations as well), collaboration creates a sense of exclusivity for the customers and gives more creative power for the brands, not to mention the ability to align their vision and connect to like-minded artists, influencers or even other brands (like the Louis Vuitton x Supreme collaboration). This strategy can also be aligned with product "drop" to create a bigger buzz.
People tend to trust other people over brands, so collaborations and partnerships with digital influencers can help give a voice and a face to a brand.
Customisation and Personalisation
Exclusivity is always in the mind of the consumer and guides their behaviour in different ways. Beyond product drops and collaboration, brands can also offer uniqueness through customisation and personalisation. Simple details like patches, pins and badges, embroidery, embossing or painting of names and monograms, and tailoring (like some of Levi's shops).
Customisation and personalisation: a quest for uniqueness that exemplifies how fashion on-demand puts the focus on the consumer's wishes.
Made to order is also a big trend part of the new consumer behaviour since it joins exclusivity and sustainability (by avoiding over-producing and therefore, fashion waste), and technology allows a re-invention of that system in a completely digital process. This brings us to a new business model called Direct To Consumer (D2C), which uses consumer demand and technology to make real-time fashion.
The D2C business model benefits smaller brands -- Warby Parker glasses, for example --, that created a disruption in the market by offering a more natural communication in order to strengthen the relationship with the consumers. The direct approach (no middle man) gives more control to the brand and can save both money and time. However, retails giants are also benefiting from this business model, including names like Nike, Adidas, Levi's, and Nespresso. Due to the size of their production chain, larger companies must adopt the fashion on-demand model more slowly, given the cost and the impact of such transformations.
Demand Beyond Products
Sustainability is another big shift in consumer behaviour and in the fashion business model in general. The concern for more sustainable practices, and eco-friendly alternatives for fabrics and materials, are increasing constantly; and improving marks towards the subject can mean a significant competitive advantage -- not to mention a better planet.
Consumers demand not only products but transparency as well. In a digital world with strong social media communities, contradictory messages and less than ideal practices can be quickly uncovered.
Transparency is also crucial. With tech-savvy and incredibly fast consumers, a company not honest with their practices is waiting for a backlash and exposure of their contradictory messages. One example is Spice Girl's t-shirt with charity Comic Relief, that despite being sold with a feminist message and campaign, was being produced in Bangladesh by women who earned 40c per hour. Take an active position on social issues, and be willing to question old practices and identities.
The Lesson: Don't Take The Consumer for Granted
Technology can help brands engage with consumers more deeply, staying in touch with their demands. It also allows production and distribution to be adjusted for consumer demands.
The biggest slip a company can make in today's market is to ignore the central position the consumer is in. They have a lot to choose from and are equipped with digital speed to look for -- and research -- their demands. In order to gain a competitive edge and scale up your business, it's important to understand consumers' shifts as to develop an exciting and meaningful relationship with them, not necessarily applying every new tactic available in different business models, but evaluating what would resonate the most with your public. Take risks and think of ways of re-inventing your brand identity and detaching from old successes to gain the heart of the consumer over and over again.
Create memorable experiences in all channels and update them to appeal to your customers, giving them all your attention and focus. The market might have changed its features, but the old saying is still accurate: the customer is always right.
This is also applied in a B2B context, giving more attention to the buyers' demand with apps that help develop fashion collections more efficiently. As the expansion of Industry 4.0 accelerates, the digital world will drive more authentic online experiences by the day, with new ways of engaging with each other in our personal or professional lives. Sign up now to know more.