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Innovation in Europe: Changing the game to regain a competitive edge

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Innovation in Europe: Changing the game to regain a competitive edge

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AR: A lucrative opportunity in the beauty industry

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AR: A lucrative opportunity in the beauty industry

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Investment in the Chinese computer vision/augmented reality (AR) market surged to $3.9bn over the last year

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A quarter of all products bought online are returned, highlighting the need for improvements in virtual trialling and fit tech

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How These Retailers Use Augmented Reality to Enhance the Customer Experience — In-person Selling and Pop-Up Shops

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Seventy-four per cent of consumers are more likely to buy a product after engaging in a meaningful experience with the brand. Virtual immersion can be key to unlocking that extra meaning.

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One hundred million shoppers are expected to use AR online and in-store by 2020, testament to consumers’ growing familiarity with the genre

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AR can capture people’s attention for over 85 seconds, increase interaction rates by 20 percent, and improve click- through rates to purchase by 33 percent.

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Sephora understands this struggle, and created an augmented reality experience, Virtual Artist App, with ModiFace to ensure Sephora app users can see how makeup products will look on their face via their phone’s camera. Users can also find out which tools or products they’ll need to apply certain products. Additionally, Modiface’s augmented reality technology can show users the effects of months of skincare on their skin -- a visual they won’t find in-store.

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In the interest of convenience and comfortability, Timberland created a virtual fitting room in Moktow Gallery in 2014. Using Kinect motion sensing technology, Timberland’s virtual fitting room allowed shoppers to see an image of their face, and a similarly-sized model body, in different outfits.

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Victorian era tailor; first type of personalisation?

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Fifty-nine per cent of spending in popular video game Fortnite goes on virtual outfits (aka skins) and other cosmetic features for players’ avatars

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Would You Buy a Virtual Pair of Nikes_ _ Fashion-Tech _ BoF

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Fashion brands are beginning to use virtual influencers

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Fashion brands are beginning to use virtual influencers

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Digital models pose new diversity questions to the fashion industry – European CEO

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7 Innovative examples of AR in Marketing

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7 Innovative examples of AR in Marketing

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7 Innovative & Inspiring Examples of Augmented Reality in Marketing

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Gap Case Study: Big Data the new creative director

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Gap Case Study: Big Data the new creative director

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Marketing activities with the largest impact in 2019

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Marketing activities with the largest impact in 2019

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#2: AI and Machine Learning
#3: Marketing Automation
#4: Big data
#5: Improving UX
#8: Internet of things

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The future of fashion from design to manufacturing

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The future of fashion from design to manufacturing

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The Future Of Fashion- From Design To M...ng, How Tech Is Reshaping The Industry

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A Framework for Strategic Sustainability in Organizations

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A Framework for Strategic Sustainability in Organizations

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- System level is when it creates a whole new market or industry
- It can develop through the years and be part of your objectives (by year 3 I want to be here, now I am here)

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McKinsey: implementation of virtual on the fashion chain

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McKinsey: implementation of virtual on the fashion chain

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Household income decrease due to COVID19

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Household income decrease due to COVID19

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First magic mirror back in 2012

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AR VR

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BCG Analysis on future of fashion after COVID-19

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BCG Analysis on future of fashion after COVID-19

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The crisis created by the coronavirus pandemic hit the fashion industry especially hard. Online shopping surged, but not enough to erase the damage done by store closings and economic worries, which caused people to curtail spending on nonessential goods. Industry revenue this year could drop by more than one-third, the equivalent of up to $640 billion in lost sales.

Countries are now beginning to reopen their economies, and companies and people are gradually returning to work. But fashion won't-and shouldn't-return to what it was. The behaviors, preferences, and shifts in mindset that people have adopted during the pandemic will lead to permanent changes, including bifurcated spending, accelerated adoption of e-commerce, and increased demand for purpose-driven brands and sustainable fashion.

For brands, the trends and the dramatic drop in sales will contribute to substantial retail overcapacity. It will lead companies to adopt a new shape of P&L, accelerate the shift to digital and omnichannel distribution, embrace data analytics for decision making, and, for those with cash, pursue M&As when they have the opportunity. The sooner brands come to terms with this new reality, the sooner they can take the steps needed to rebound and succeed. It is time for a reset, not a restart.

The pandemic is reshaping the fashion industry. Consumer behaviors and sentiments in the US exemplify what's happening. Shelter-in-place orders affected 300 million people and led to a sharp decline in use of public transportation and an increase in nesting. According to BCG and other research, 81% of US consumers believe that the pandemic will lead to a recession, and more than half worry about their personal finances and plan to spend less on fashion as a result. An increased focus on value is already evident-more than four in ten US consumers say that they expect brands to offer discounts or other promotions once stores reopen.

Shifting consumer sentiments and behaviors have major implications for fashion brands:

Consumers will shop less, and be choosier when they do. Although overall spending will decline, interest will increase in casualwear, activewear, home categories, and beauty products, at the expense of such categories as handbags and formalwear. Instead of conspicuous consumption, think inconspicuous spending.

Channel shifts will accelerate. Sales through digital and social media-especially mobile-will hit overdrive, with digital channels in key markets accounting for a larger portion of total sales. To grab customers' attention, brands will need to strengthen their online presence through customization, community-building, and superior online-shopping interfaces and deliveries.

With more people shopping online, retail stores' role will change. Flagship locations will remain for brand image purposes, but the majority of physical locations are likely to be smaller, sell merchandise that's customized for the area, and be set up to fulfill online orders. Some will also serve as hubs for community activities.

Shifting preferences will squeeze midrange brands. In keeping with past economic contractions, more consumers worldwide will either trade down to lower-priced goods or trade up to premium brands they may perceive as providing more value than they did previously, leaving brands with midrange price points to feel the pinch.

Demand will accelerate for sustainability and purposeful brands. More than ever, consumers will favor brands with a purpose, and sustainability will become a minimum requirement. Brands must ensure that they operate in ways that are environmentally and socially responsible.

Consumers will expect more. People will want convenience, including an intuitive online shopping experience and fast deliveries. As consumers gravitate to social media and more individualized forms of communication over mass media, companies will need to provide shoppers with messaging that is more timely, relevant, and personalized.

Preparing for Fashion's New Reality

Like companies everywhere, fashion brands initially reacted to the COVID-19 crisis by taking quick steps to ensure employee safety and preserve cash. Now, as economies begin to reopen and consumer sentiments reflect a new reality, brands must act on two fronts. (See Exhibit 1.)

Declutter

There's no question that the shape of fashion P&L must change. In fact, we believe that if brands don't act, margins will collapse. (See Exhibit 2.) Our forecasts show fashion industry sales dropping 30% this year (compared with 2019) and up to 15% in 2021. That could lead to a 14% decrease in earnings before interest and taxes (EBIT) over the same period if a company were to take no action to adapt its cost base to account for the lower sales.

Out of necessity, a company's short-term actions should center on right-sizing operations, including rethinking sales channels and adopting a new P&L and associated costs to address shifting preferences and behaviors.

Reset the distribution footprint. Brands must rethink their overall distribution footprint to account for department stores and other wholesale channels that are consolidating or closing, the reduced foot traffic in company-owned stores even as economies start to reopen, and the increase in online shopping. For brands, it's a chance to reset their wholesale and retail partnerships and streamline their sales organizations. If a brand's reset includes a stronger push into direct-to-consumer channels, the company needs to update or expand its website-which could now cost more because every other brand will be doing the same thing, increasing competition for the optimum e-tail experience. Companies also need to solidify ties with multibrand platforms, such as Asos and Zalando, that continue to accelerate, along with such e-commerce giants as Amazon and Alibaba's TMall, which have only gotten stronger during the pandemic.

Companies that own retail outlets need to conduct a thorough analysis of locations and close the low-performing ones. For remaining outlets, they may need to renegotiate rent and rethink layouts and staffing to improve profits from physical stores. That could include using more modular fixtures to make it easier to reconfigure merchandise displays and, if they haven't already, set aside an area of the store to fulfill online orders.

Scrutinize all costs in light of the new P&L. To adjust to lower revenue and preserve operating profits, brands need to review and adjust costs across the board, including cost of goods sold, rent, personnel, marketing, and the like. For example, an overcapacity of unsold merchandise will lead to higher markdowns, which will squeeze margins if brands aren't able to lower unit costs by renegotiating with suppliers. To preserve margins, brands also may need to consolidate materials sources and suppliers and be more vigilant about the timing and management of markdowns.

Reduce supplier costs and increase flexibility. Brands with a strong supply chain will be in a better position to take advantage of the recovery once economies start to rebound. Because the near-term future could still be unstable, they need to forge close supplier partnerships in order to remain as flexible as possible, reduce costs, decrease the time it takes to get inventory to market, and increase risk sharing. Brands and suppliers need to come up with mutually beneficial solutions to minimize cancellations and other adjustments to orders. As part of solidifying their supply chain, brands need to adopt agile in-season inventory management.

Adopt zero-based organization redesign and AI-powered decision making. Undertaking a zero-based organization redesign is another way that brands can make their operating model leaner and more agile. In this process, a company determines the systems it would put in place if it were launching today, often using data analytics to forecast and augment decision making and identify areas of cost savings. A reorganization could lead a company to adopt a bionic operating model, one that seamlessly integrates the capabilities of people and technology. A bionic operating model also gives brands the opportunity to digitize their product development and supply chain to make both of them more agile and effective.

Invest

Companies must invest in areas that allow them to create advantage in adversity, building the organization, capabilities, and processes that they need for the future and that they can use to capitalize on opportunities to expand and gain market share.

Build a strong AI and technology backbone to digitize core processes. Adoption of advanced analytics and artificial intelligence (AI) will be among the fashion industry's most significant changes in the coming decade, and one of its biggest challenges. Brands have been slow adopters for the most part, but laggards can take a page from companies that already use these technologies. Data will become an even more important competitive advantage: the brands with the most usable data will win. The biggest winners will be the brands that can codify data from all sales channels and consolidate it onto a single analytics platform to improve decision making on such core processes as planning, buying, promotions, markdowns, and in-season inventory management. Creating a market-leading e-commerce platform is another part of building out a more robust tech backbone.

Build brand online and digitize pathways. Digital commerce could increase to 35% to 55% of total sales in key markets, so brands must boost their digital presence to keep up. Purchases of all kinds-whether online or offline-are being influenced by digital, including mobile and social selling. Winning at digital is winning overall. Online platforms will continue to gain market share through acquisitions and organic growth. But significant opportunities remain for brands that can build community and engagement around what they offer. They can also take advantage of increasing consumer interest in the resale and re-commerce markets.

A key growth area over the next decade will be personalization at scale, one-on-one engagement with customers across multiple channels, including in stores, on social media, and through digital. We call this clienteling 2.0. A number of brands and retailers are already testing this concept; some found success during pandemic-generated lockdowns, after turning store associates into digital stylists and having them engage with consumers and sell merchandise directly through WeChat and Instagram.

Retain and cultivate talent with analytics and digital skills. Finding data scientists, data analysts, and other people with the digital skills brands need to remake their business will be a challenge. Although the COVID-19 crisis has brought widespread layoffs, it may not have increased the available supply of people with the needed skills. If a brand's efforts include expanding its tech backbone or e-commerce operations, the ramifications extend beyond new talent to the existing workforce as well. That could include deciding which people to bring back to work first, or how to upskill people to take on new duties. Brands that are scaling down sales channels or other operations also need to consider the feasibility of reskilling people from those functions for completely new roles.

Look for M&A opportunities. Although most brands will lose revenue through 2022, we believe some could be in a position to benefit from industry consolidation and bankruptcies. Companies with cash to spend can take advantage of industry valuations that have dropped by an average 33% year-to-date, to a near-recession-era low of 7.8 times enterprise value over EBITDA. (See Exhibit 3.)

The next two to three years could be the most tumultuous that most people in the fashion industry will ever know. Agile, decisive brands that can free up capital to invest can set themselves up to create advantage in adversity. They can right-size operations and adopt new business practices while continuing to give customers what they want. Make no mistake, though, these actions will not be easy, and the window for taking them will be brief. But brands that act quickly can give themselves a better chance of not just surviving the chaos but becoming stronger because of it.

About Boston Consulting Group

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The crisis created by the coronavirus pandemic hit the fashion industry especially hard. Online shopping surged, but not enough to erase the damage done by store closings and economic worries, which caused people to curtail spending on nonessential goods. Industry revenue this year could drop by more than one-third, the equivalent of up to $640 billion in lost sales.