In previous articles, we saw how companies are transforming the fashion business into a more sustainable ecosystem as new generations demand for sustainable products, including recycling and upcycling:
H&M Conscious Collection, 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.
Parley for the Oceans - YouTube
Together with Parley for the Oceans, adidas introduced in 2015 the first performance footwear concept with an upper made entirely of yarns and filaments reclaimed and recycled from marine plastic waste and illegal deep-sea gillnets.
In 2019 adidas will produce 11 million pairs of shoes containing recycled ocean plastic through intercepting plastic waste on beaches, remote islands and in coastal communities. adidas is committed to using only recycled polyester in every product and on every application where a solution exists by 2024. Creating products with premium materials by Parley, made from up-cycled marine plastic waste, is the first pillar of adidas’ sustainability strategy.
[FUTURECRAFT.LOOP] - Long Documentary - YouTube
Adidas strengthens its commitment to tackling plastic waste with the reveal of FUTURECRAFT.LOOP – a 100% recyclable performance running shoe.
“Taking plastic waste out of the system is the first step, but we can’t stop there,” said Eric Liedtke, Executive Board Member at adidas, responsible for Global Brands. “What happens to your shoes after you’ve worn them out? You throw them away – except there is no away. There are only landfills and incinerators and ultimately an atmosphere choked with excess carbon, or oceans filled with plastic waste. The next step is to end the concept of “waste” entirely. Our dream is that you can keep wearing the same shoes over and over again.”
FUTURECRAFT.LOOP is our first running shoe that is made to be remade. It is a statement of our intent to take responsibility for the entire life of our product; proof that we can build high-performance running shoes that you don’t have to throw away.
ERIC LIEDTKE, EXECUTIVE BOARD MEMBER AT ADIDAS, RESPONSIBLE FOR GLOBAL BRANDS
The FUTURECRAFT.LOOP project is aimed at tackling the problem of plastic waste, enabling a “closed loop” or circular manufacturing model, where the raw materials can be repurposed again and again. But not just repurposed into a water bottle or a tote, but into another pair of high-performance running shoes.
The first-gen shoe is rolling out as part of a global beta program with 200 leading Creators from across the world’s major cities. adidas will challenge them to run, return the shoes and share feedback on their experience, ahead of the second-gen drop.
The insights will be used to shape the roadmap for the wider release targeted for Spring Summer 2021.
Total Retail announced the 2019 top 100 Omnichannel Retailers ranking that reveals the list of publicly traded retailers and brands at the forefront of delivering the seamless cross-channel shopping experiences that consumers have come to expect.
The top performers according to the report were Department Stores, with an average score of 7.35 for the brands within the category, followed by Sporting Goods (7.25 average score) and Home Improvement (7.06 average score). At the bottom of the category rankings was the largest of the segments, Apparel and Accessories, with an average score of 5.60 for the brands within that group.
In addition, Total Retail identified the following omnichannel industry trends that I summarize here:
The continued adoption of buy online, pick up in-store (BOPIS) programs.
Cross-channel shopping journey: An increased focus by retailers to enable customers to have a shared cart across channels (laptop, desktop, smartphone).
Cross-chanell returns: Retailers are catering to customers increasing penchant for wanting to return online purchases in-store.
2019 Top 10 Omnichannel Apparel and Accessories Retailers
2019 Top 10 Omnichannel Footwear Retailers
Regarding Department Stores, the top 5 omnichannel companies are Bloomingdale´s, J.C.Penney, Belk, Macy´s and Kohl´s.
What are the variables used to build the omnichannel retail ranking?
Search in-store products online
Buy online, pick up in-store
Loyalty points earned/ redeemed across channels
Return product across channels
Ship from store/ endless aisle
Pricing consistency across channels
I would include a couple omnichannel capabilities on the list.
RFID as a way to have visibility from a customer journey perspective. Check in store availability is a service provided by Zara since 2016. Just a few retailers have implemented RFID and the benefits are huge as seen when interviewing the responsible of implementing RFID at Brownie, a womenswear brand.
Checking in-store availablity at Zara.com – Floral Print Dress in size Medium
2. Another omnichannel capability is Assortment Optimization (optimizing the merchandise) at store level using offline and online data. This is something commented on Nike Curated Stores.
Nike by Melrose, LA
At Nike by Melrose, the assortment is based on data from what consumers in surrounding zip codes have purchased. The store is so-called Live Store because its product mix is not static and changes according online and offline selling trends.
A retail love story: Macy´s embraces ephemeral experiences as part of their value proposition
According to Coresight Research, in the US, year-to-date announced closures have exceeded the total recorded for the full year 2018. So far this year, US retailers have announced 5,994 store closures and 2,641 store openings. This compares to 5,864 closures and 3,239 openings for the full year 2018.
Even Macy´s (not Macy´s inc) is closing 8 stores in early 2019. From 2016 to 2018, Macy´s decreased its store count from 673 to 649 stores, while Bluemercury (acquired by Macy´s inc in 2015) increased its count from 101 to 163 during the same period.
Macy´s Inc Store Count 2014-2018
The American department store chain is redefining its in-store strategy with new smaller store formats and after aquiring STORY in 2018, announced its expansion plan. The Renaissance of retail is transforming the lack of excitement when visiting department stores.
In 2011, Rachel Shechtman founded STORY believing that shopping could be about more than just buying things – so she wanted to create a different type of store where for example, you could take a yoga class and discover the best water bottle from a small business in Brooklyn. STORY is using a retail approach that embraces hyper-local products and exclusivity, something that Amazon Storefronts is also leveraging.
A few months ago I visited STORY concept store in Chelsea, NYC, and included it in a list of best stores to visit in New York. The store changes its merchandise and interior design around every month like a gallery and sells sponsored curated products. It´s a store that fits with Zigmunt Bauman definition of Liquid Modernity, where change is occuring more and more rapidly. Fashion, the art of liquidity concept is inspired by this idea. In the instagram era, STORY is not only about selling products but refreshing customer experience.
STORY, the narrative-driven retail concept shop, is bringing to life an editorial approach to retail in 36 Macy’s stores nationwide (in New York, Washington, Cincinnati, Indianapolis, Chicago, Houston, Atlanta, San Francisco…). Opening with “color” as its inaugural theme, STORY at Macy’s invites customers across the country to explore and experience color through a rainbow of curated, giftable products and through a range of more than 300 fun color-inspired events (March 2019, RIS).
Opening 36 small stores is more a hobbie than a business for a company with revenues of $25 billion but also a strategical and marketing move.
How Macy´s is leveraging the acquisition and expansion of STORY?
Subject-Matter Expert: Rachel Shechtman (founder) joined Macy´s as Brand Experience Officer.
Collaboration: Story partners include American Express, Coty, HP or GE.
Small businesses: Story works with small businesses targeting communities.
Curated merchandise: Authentic products with special stories.
Experience: runs a continuous event schedule that refresehes in-store experience.
Macy´s expects to increase in-store traffic giving customers more reasons to come back again and again thanks to those “new fresh corners or shop-in-shops” that redefine retail experience.
See Rose Go founders, Erin Cavanaugh and Yi Zhou, have over 40 years combined global fashion industry experience including premium brands, Nordstrom, Nike, Converse and American Eagle. Our experience is rooted in customer service, quality product creation and an innovative design process.
Erin most recently led global omni-channel apparel product marketing and insight strategies under Nike, Inc.
Yi’s leadership experience spans creative roles with Nike, American Eagle and Converse as Global Design Director.
The Fashion Retailer (TFR): What is See Rose Go? What is the meaning or story behind the name?
See Rose Go Founders, Erin and Yi (SRG): See Rose Go is a plus size fashion brand committed to creating thoughtfully designed clothing with quality and innovation.
Everything we stand for and create as a brand goes back to our customer and the community we continue to grow. Listening to women describe themselves – their lives, their wins and their struggles – we continue to be moved and inspired by each woman’s tenacity and drive. See Rose Go developed as a rally cry to cheer for her.
Rose came from our desire to identify with a modern and timeless sensibility. She is both modern and classic, feminine and strong. Rose is someone you are friends with, she is the creative dreamer and determined doer within us all. See Rose Go!
TFR: What is the entrepreneurial story that inspired the launch of the brand?
SRG: It all started during a casual afternoon conversation with a friend about fashion. Our friend, who wears a plus size, stated: “You have no idea what it’s like to shop for my body.” We work in fashion, we are around clothing all day. We had just assumed everyone had the same options when shopping. That was an emotional turning point in the conversation and we talked more about her experiences getting dressed in the morning and how poor wardrobe options could affect her emotionally, making her late or setting off negative vibes for the rest of the day.
This conversation effected both of us deeply. We stepped back and asked ourselves why there was not more well-made, timeless clothing for modern women who happen to wear a plus size? We started reaching out to more and more women wearing plus size clothing to talk about their experiences and needs, what was missing, what they wanted. The responses were both alarming and enlightening.
Overall, the needs were consistent: better quality and construction, a considered fit, and cool, versatile style. It was then we realized that we could draw on our unique experience in activewear and fashion to meet those needs.
We keep these insights at the very center of everything we do. At See Rose Go, we want to see all women feeling beautiful and fearless in their lives.
TFR: What is your value proposition and target customer? (e.g. sustainability and quality in large sizes, clothes for special occasions, different fit options within the plus-size segment).
SRG: We are creating the BEST go-to items for women wearing a plus size. See Rose Go is the destination for the best tee shirt, the best pant, the best white shirt… During our creative process, each garment is made with considered design and attention to detail from the seam choice to the fit shape. Our background working in the activewear industry allows us to approach fashion from a functional point of view, which ultimately provides premium style and comfort.
TFR: In terms of business model and product lifecycle, how many collections do you release every year? Do you plan to do capsules or customization?
SRG: We currently have 10 key items as a purposeful selection to launch the brand as essentials. Each style is meant to work both within an individual’s style and as a capsule with each other. We are now hearing and reacting to our customer feedback and will eventually drop new styles as items by material, not collections.
TFR: How does your experience in Design and Merchandising helped you to start the business?
SRG: We have each been leading teams in the fashion industry for 20 years, this experience and network has helped greatly. We understand the importance of consumer centric product and brand building. But it’s our experience of working together as a successful team which has helped the most. Prior to launching See Rose Go, we worked as merchant and designer together for 9 years and fostered a true sense of collaboration. We enjoy working together, we respect each other’s talent, and we welcome being challenged by the other! In the end, we know being challenged ultimately makes us better.
TFR: Compared to some leading retailers offering plus-size clothing, you probably don´t have historical sales to build or optimize your assortment (colors, sizes, fit, prints, amongst other attributes). Also, leading retailers are using machine learning to optimize their forecasting, product ranges and store clustering.
How do you compete to this new scientifically way of understanding “fashion”? How do you approach the customer without analytics?
SRG: We like being a little of the anti. See Rose Go is an e-comm business, but at the same time it is very much a tactile experience (i.e. how does our clothing make you feel?). We do not have AI for forecasting, however we are not at that point. Right now it is about getting to know our customer personally, creating that connection, curating the experience beyond the screen. In a way, it’s back to the product. It is a craft to create quality, and this radiates through our brand.
TFR: Do you feel fashion is becoming more science than art?
SRG: For some brands, it definitely is. With larger markets, bigger brands are driven to use science to make an informed, safe decision. The downside is there is little room to be proactive or take initiative when recognizing a new opportunity. Customers also not landing in the scalable business data miss out and then leave the brand.
TFR: How do you solve the sizing issue when purchasing online when size is such a sensitive shopping factor for your customers? You recently launched the “buy now pay later”. Could you explain in more details the program and how do you feel you are going to reduce the cost of reverse logistics?
SRG: Sizing is difficult due to inconsistency between brands. See Rose Go sizing is based on a few factors: a compilation study of the plus size industry, the aesthetic we want to provide and allowing for our customer’s own style. Our top sizing is 1, 2, 3. This allows a woman to fluctuate within her own size or buy up or down based on her preference of fit. All of our bottoms are sized 14-24 for a more precise fit.
We see a strength in a “try now pay later” option because of our low return rate and confidence in our quality. Our 25-35 years old customer base prefers having alternative payment methods, adding that option combined to conveniences for her while shopping. She can now experience See Rose Go quality at home and pay later, or return it. See Rose Go is gaining sales or feedback on product; with either outcome we are growing and improving the brand.
TFR: As a “start-up”, what do you feel are the key success factors that brings you to compete with legacy retailers?
SRG: There are several benefits to being a start-up. As a smaller team we are effective and efficient. This helps us to act faster on initiatives. Another major factor is the use of capital. All of our spending must have a ROI. While our actions are faster, they require us to be more accountable to ourselves and our company. On top of these two factors we choose to collaborate with people who demonstrate an enthusiasm for our mission which feeds into everyone’s passion and drive!
Lastly to add, our newest product launch is coming May 1st, we excited to bring back our sold out Tunic Shirt in 2 new color options! We are offering 10% off when customers pre-order the new Tunic starting 4/29. The code is GET10 for 10% off the pre-order. The Tunic Shirt is a beloved best seller we are excited to bring back in more colors and an extended size range.
Tunic Shirt in the Timeless Stripe, crafted in reclaimed material
Mass-market fashion retailers are localized at the bottom of the Maslow´s pyramid of needs. Those brands´ business models are based on high traffic, high volume and low margin. But some organizations also have different value proposition in their portfolio of brands (e.g. Massimo Dutti within Inditex). Leading mass-market fashion businesses offer collections more frequently than the average market. This freshness describes the fast-fashion business model, where Zara, which is capable of translating trends in products in a matter of weeks, revolutionized design, manufacturing and retailing.
These companies put the customer at the center of their organizations and operations are build to reflect it. The results are more collections, a wider range of options with a reduced shelf life, higher stock turns that lower promotions needs and therefore ensure better margins and cash flows. But even if mass-market retailers share some characteristics, their approach to fashion, manufacturing, innovation, marketing and retail is quite different. For example, H&M outsources its production, releases limited edition or capsules with famous designer and invests heavily in advertising. Fast Retailing is not focus on fashion but technical garments innovation thanks to Takumis, industry experts that offer technical support to their partner factories.
INDITEX: Inditex is one of the world’s largest fashion retailers, with eight brands (Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, Uterqüe and Lefties) selling in 202 markets through its online platform or its over 7,000 stores in 96 markets. It was founded in Galicia (Spain) in 1985 by Amacio Ortega and Rosalia Mera. Pablo Isla, awarded as best-performing CEO in the world by Harvard Business Review (2018) is the CEO of Inditex since 2005. In 2017, the group achieved net sales of €25,3 billion and EBITDA of €5,3 billion (10% margin). See Inditex Annual Report here.
H&M: The first Hennes store opened in the Swedish city Västerås in 1947. Today, Hennes & Mauritz AB (H&M Group) is one of the leading fashion retail groups with the following brands: H&M, COS, Monki, Weekday, & Other Stories, Cheap Monday, H&M Home, ARKET and Afound. In 2017, achieved revenues of €20,1 billion and EBITDA margin of 10%. See its Annual Report (2017) here.
Fast Retailing: The public japanese retail holding company was founded as Ogōri Shōji Co., Ltd. in 1963 by Tadashi Yanai (current President and CEO) and is headquartered in Yamaguchi, Japan. Today, its brand portfolio include Uniqlo, Theory, Princesse Tam Tam, PLST, GU, Comptoir des Cotonniers and J Brand. In 2018, Fast Retailing achieved revenues of €16,3 billion (¥2.130.060 million) and EBITDA margin of 13%. See consolidated business results here.
GAP Inc: Doris and Don Fisher opened the first GAP store in 1969. It has grown from a single store to a global fashion business with six brands — Gap, Banana Republic, Old Navy, Athleta, Intermix, and Hill City. Gap’s clothes are available in 90 countries worldwide through over 3,100 company-operated stores, almost 400 franchise stores, and e-commerce sites. Achieved revenues of €12,9 billion and EBITDA margin of 9,3% in 2017. See its annual report here.
Another organization it is worth to mention:
L Brands: Through Victoria’s Secret, PINK and Bath & Body Works, L Brands is an American fashion retailer, founded in 1963 by Leslie H. Wexner, that sells lingerie, personal care and beauty products, apparel and accessories. The company operates nearly 3,000 company-owned specialty stores. L Brands achieved revenues of €11,6 billion in 2018.
C&A: Founded in 1841 by Clemens and August Brenninkmeijer and with headquarters in Belgium and Germany. C&A labels are Baby Club, Palomino, Here & There, Clockhouse, Rodeo Sports, Canda, Yessica, Your Sixth Sense, Angelo Litroco and Westbury.
SUSTAINABILITY FROM THE SUPPLY SIDE: Technological innovation is at the heart of sustainable development
Organizations have adopted technologies to improve their inventory accuracy, visibility and traceability, obtain real-time data and use AI analytics to better forecast or allocate, while keeping track of their omnichannel customers, amongst other benefits. Technology, specially Industry 4.0., is changing the way fashion retailers design, source, plan, move, stock, deliver and service products.
In previous articles, we saw how Supply (companies) is transforming the fashion business into a more sustainable ecosystem as new generations demand for sustainable products, including recycling and upcycling. Demand is continuously evolving and we see a growing concern over healthy and authenticity. A clear example is how brands like Nike, Patagonia, The Reformation or Stella McCartney are embracing activism. Fashion politics is the new black while customers are more and more concerned about environmental issues and show preference for purpose-driven brands.
How is Fashtech speeding up sustainability in Fashion?
Blockchain is ensuring transparency across the value chain. RFID, real time inventory visibility. The benefits of 3D Printing in fashion and sustainability are many and include lower transportation costs due to additive manufacturing and customization, energy cost reduction and material savings. Then, IoT allows companies to understand customer needs and track product usage like Nike+ which measures and records the distance and pace of a walk or run (Read more about Sports and Fashion in the Ironman era here).
So, there is no doubt that companies that innovate and invest on fashtech will speed up their sustainability value proposition, from eco-friendly fabrics to more efficient processes.
The result of the partnership between Avery Dennison and EVRYTHNG (IoT Cloud-based platform) was that every product was ‘born’ digital with the ability to capture real-time data, enhance consumer experiences, and make more efficient manufacturing and selling processes.
SUSTAINABILITY FROM THE DEMAND SIDE: What if those technologies could enhance sustainability starting from our closets?
This video made me think about the possibilities of using IoT, for example, to enhance environmental, social and governance (ESG) habits from the demand side. This is about redefining customers behaviour in the second most polluting industry: Fashion. It´s all about thinking in a sustainable way from beginning to end with a customer centric approach. Companies are not the only ones to be sustainable, it´s all of us.
What if instead of buying (X) items a year, we purshased half the amount? Wouldn´t you pay more for a long-lasting product that ensures environmental and human sustainability?
What if we had a closet and every garment had an RFID label powered by IoT to track usability? Linked to a mobile application we could see a list of the most used items and their attributes (e.g. brand, color, size, price, days of usage).
What pair of shoes do you use the most (e.g. number days, miles/km)?
What are the best product attributes I should look at when buying according to my preferences, sales history and usage?
What is the most sustainable pullover according to x, y, z parameters?
What is the reason of not using an item? (e.g. color, quality, fit, size, total look)
How many times have you packed your winter clothes when spring is coming and realized that you didn´t use many pullovers, jackets or shoes? Our closet has items barely worn but we keep buying new items every season. Technology could help us to make our planet more sustainable, starting in our closet.
What if an app could show us that 4 pair of shoes contribute to 80% of the total usage (in hours, days) in a closet of 20 pairs? Then you could filter according to different attributes like “occasion” (e.g. sport event, cocktail party, work), quality (e.g. cashmere, cotton,linen) or features (e.g. long-sleeve, french collar, slim fit).
If the retailer includes the information in the label, the customer could see how sustainable the product is. For instance, type of fabrics, supplier location, carbon footprint, sustainability programs or initiatives of the brand, and so on. The objective is to promote an ethical consumerism, understanding the impact of things we buy and own.
Inside your closet: Units by brand, usage by brand (illustrative)
The app could then recommend us what to shop according to product usage, telling us what are the colors, fabrics, patterns or fit that we use/ wear the most. Even total look recommendations or how to combine different garments. At the same time, inform about unused products that could be recycled.
But I´m not saying that our closet must be a 100% rational utilitarian asset, because fashion is not only about covering physiological needs, as described in Maslow´s Pyramid. Some categories are more seasonal than others, and fashionability also impacts on usage patterns. Basics will, by definition, be used far above than a suit/ dress for a ceremony, for example. Also, some categories like accessories cover intangible needs like status or self-fulfillment and their ROI is therefore, different. The main idea is to compare products with similar attributes or needs and see how we could make better decisions when shopping apparel.
Product traceability and supplier information (illustrative)
Companies could benefit from the app not only tracking product usage, like Nike+ is doing, but also having customers feedback and recommendations on products (e.g. color, fit, quality, size). In an ideal scenario, where customers would share their data (e.g. product location, usage), fashion companies could be able to know how the closet of their customers is, helping them to segment their demand and competition in a level that is far away from nowaday´s understanding.
“Think. Then buy”, Adolfo Dominguez latest advertising Campaign. * Every Spaniard buys, on average, 34 items a year and throw away 12-14 Kg of clothes.
Sustainability should be an attitude and come from the demand side too, like Adolfo Dominguez (men and womenwear brand) is proposing in his latest campaign or Patagonia suggested in 2011 ago with the “Don´t Buy this Jacket” ad.
The Fashion Industry, like other industries, has seen the rise of big corporations such as LVMH or Kering in luxury segment. Some are more diversified than others, like LVMH. It’s diversified portfolio includes high-end brands in the categories of wines & spirits, fashion & leather goods, perfumes & cosmetics, watches & jewelry, selective retailing (e.g. Sephora) and other activities (e.g. Radio Classique, Le Parisien).
Luxury and M&A
On the one hand, niche brands from the Long Tail and also sustainable brands are competing to legacy players with a different value proposition and also from an online strategy approach.
On the other hand, Gucci, Hermés, Prada, Chanel or Zegna are acquiring some of their suppliers to ensure supply of merino wool, crocodile or python. Companies are investing in every phase of the value chain (raw materials, farms, suppliers) but also in other retailers thru acquisitions. Even family-owned companies like Ermenegildo Zegna invested in another emerging retailer, Thom Browne. On the other hand,
Why corporations or luxury fashion conglomerates? In a volatile economy, having the know-how of a specific industry is a key lever when diversifying in the same segment. Luxury is a clear example of how brands can take profit of being part of a conglomerate and take advantage from economies of scale, centralization of capabilities (e.g. purchasing power, technology, advertising), access to an exclusive network of suppliers, access to capital, access to professional talent, amongst others. The bigger the corporation is, the more control of competitive advantages in a specific industry will have.
But corporations are not always perfect marriages. Some have established cash cows and startups in their portfolio and having to deal different business models and different growth rates and business needs is not easy. In 2018, while Puma and Stella McCartney exited Kering group, Coach acquired Kate Spade and Michael Kors did so with Jimmy Choo.
These are the most important fashion corporations in the fashion and luxury industry:
LVMH: LVMH Louis Vuitton Moët Hennessy is a french multinational luxury conglomerate formed in 1987. It is the only group present in all five major sectors of the luxury market: Wines & Spirits, Fashion & Leather Goods, Perfumes & Cosmetics, Watches & Jewelry and Selective Retailing. LVMH currently employs 156,000 people across the world and reported sales of 46.8 billion euros in 2018. It´s current president and CEO is Bernard Arnault. See complete 2018 consolidated financial statement here.
KERING: In 1963, François Pinault founds Établissements Pinault, a timber trading company, in Rennes (France). The group’s first strategic move comes in 1990 with its diversification into specialized retail distribution. Its focus will then shift to the luxury industry in the late 1990s. After acquiring Le Printemps and an equity stake in La Redoute, it becomes Pinault Printemps Redoute in 1994, PPR in 2005 and Kering in 2013. Kering is a global Luxury group composed of iconic and dynamic Houses in Fashion, Leather Goods, Jewelry and Watches. In 2018, the Group achieved revenues of €13.7 billion with a EBITDA margin of 32,5%. See Group Key Figures here.
Richemont: Switzerland-based luxury goods holding company founded in 1988 by South African businessman Johann Rupert. Richemont owns several of the world’s leading companies in the field of luxury goods, with particular strengths in jewellery, watches and writing instruments. In 2010, Richemont acquired the majority of the shares of NET-A-PORTER.COM, the premier online luxury fashion retailer that merged with YOOX Group in 2015. In 2018, Richemont achieved revenues of €10.9 billion with an operating profit of €1,8 billion.
Prada Group: is an Italian luxury fashion house, specializing in leather handbags, travel accessories, shoes, ready-to-wear, perfumes and other fashion accessories, founded in 1913 by Mario Prada. Today, Miuccia Prada is head of Design and Patrizio Bertelli is the CEO. Prada Group achieved revenues of €3 billions in 2017, an EBIT margin of 11,8% with 625 DOS in 70 countries.
OTB: OTB is an international fashion group, the parent company of fashion brands Diesel, Maison Margiela, Paula Cademartori, Marni, Viktor & Rolf, Brave Kid and Staff International. The brand is chaired by Diesel founder Renzo Rosso. In 2017, OTB achieved revenues of 1.52 billion euro and EBIT of 21.5 million euros.
AEFFE: Italian luxury group created in 1988 by Alberta Ferretti. In 2018 achieved revenues of €346,6 million and EBITDA of €43,3 million.
PVH: PVH Corp., formerly known as the Phillips-Van Heusen Corporation, is an American clothing company founded in 1881. Today, is one of the largest global apparel companies with nearly $9 billion in revenues and an EBIT of 632 millions in 2017. See Annual Report here.
Arcadia Group: is a British multinational retailing company headquartered in London and owned by Taveta Investments. Their story began in the early 1900s when 18-year-old Lithuanian émigré Montague Burton established a chain of Burton stores selling ready-to-wear and bespoke suits. In 2017, Arcadia Group achieved revenues of £1,9 billion and EBIT of £119,3 M.
VF Corporation: In October 1899, the company is first established in Pennsylvania as the Reading Glove and Mitten Manufacturing Company by John Barbey and a group of investors. Today VF is an American worldwide apparel and footwear company with more than 25 brands organized into four categories: outdoor, active, work and jeans. In 2017, achieved revenues of $11,8 billion and EBIT margin of 12,7%. See annual report here.
Millennials are driving companies to sustainable practices even if their business model is based on volume, low margins. New generations demand for sustainable products and a visible and transparent value chain: from “sheep to shop”, something that blockchain is already enabling. Another interesting trend to mention is nownership, or the end of ownership as repair and rental business models continue to evolve (e.g. Bag Romance, Haute Vault). Note that Rent The Runway was recently valued at $1 Billion (March 2019).
Sustainability goes beyond fashion and embraces other industries such as the Food and Beverages Industry. There is a growing concern over healthy, authenticity and provenance. A clear example is the declining consumption in sugary drinks in Western Countries. Are Millennials going to kill Coke?
Sustainable Fashion article commented on what brands are leading the “eco” trend and how they are achieving it. Other initiatives have been launched such as Make Fashion Circular, that brings together industry leaders including Burberry, Gap Inc., H&M, HSBC, NIKE Inc., PVH and Stella McCartney as core partners. Fortunately, there is a growing number of companies exploring circular fashion potentials.
What is Circular Economy and what is the impact in the Fashion Industry?
According to Ellen MacArthur Foundation, looking beyond the current take-make-waste extractive industrial model, a circular economy aims to redefine growth, focusing on positive society-wide benefits. It entails gradually decoupling economic activity from the consumption of finite resources, and designing waste out of the system. Underpinned by a transition to renewable energy sources, the circular model builds economic, natural, and social capital. It is based on three principles:
Another interesting definition of Circular Fashion is the following: “Clothes, shoes or accessories that are designed, sourced, produced and provided with the intention to be used and circulate responsibly and effectively in society for as long as possible in their most valuable form, and hereafter return safely to the biosphere when no longer of human use”. (Dr. Anna Brismar, 2017, circularfashion.com)
Circular Fashion Value Chain – McKinsey & Company
Fashion is the second most polluting industry globally
The fashion industry is the second largest polluter in the world, just after the oil industry. According to Ellen MacArthur Foundation, every second, the equivalent of one garbage truck of textiles is landfilled or burned. An estimated USD 500 billion value is lost every year due to clothing being barely worn and rarely recycled. If nothing changes, by 2050 the fashion industry will use up a quarter of the world’s carbon budget. Washing clothes releases half a million tonnes of plastic microfibres into the ocean every year, equivalent to more than 50 billion plastic bottles.
So, isn´t “Sustainable Fashion” of “Fashion Sustainability” an Oxymoron? How companies that base their business model on product freshness and inventory turnover, while selling in more than a thousand stores globally, call themselves sustainable?
What are the companies leading in Circular Economy Innovation in Fashion or Apparel?
Dyecoo is one of the companies awarded during the Circular Economy awards, an initiative of the World Economic Forum and the Forum of Young Global Leaders. The technology uses reclaimed CO₂ as the dyeing medium in a closed loop process. When pressurized, CO₂ becomes supercritical (SC-CO₂). In this state CO₂ has a very high solvent power, allowing the dye to dissolve easily. The process of dyeing cloth uses no water at all, and no chemicals other than the dyes themselves. The company already has partnerships with major brands like Nike and IKEA.
Patagonia is synonym of sustainability, a brand born with the aim of respecting the environment and from its early ages, the company applied circular economy, transparency of their supply chain and a close collaboration with “heavy users” in order to innovate and perform their products.
In 2011, Patagonia was already protecting the ecosystem, introducing the Common Threads Initiative – Reduce, Repair, Reuse, Recycle, Reimagine. Then, launched other initiatives or programs like Worn Wear, that allows customers to trade in their older gear for credit toward buying new products from the company. In 2017, Worn Wear has a specialized online shop.
Today, the California-based company is more than a brand. It breaks the politics´ taboo, endorsing democratic candidates that will help protect natural resources in Nevada and Montana, for example. The company said it is making the move “because of the urgent and unprecedented threats to our public lands and waters” as described in Fashion Politics.
Another interesting program, created by Ecoalf, is the project Upcycling the Oceans that collects the trash that is destroying the oceans and turns it into top quality yarn to produce fabrics and products. Ecoalf Foundation has managed to involve more than 2500 fishermen in 32 ports, amounting to a total of 440 sea trawlers and collecting more than 300 tons of trash from the bottom of the Mediterranean Sea. Furthermore, the brand uses recycled materials as recycled wool, nylon, cotton and used tyres to produce t-shirts, pullovers, jackets and flip-flops.
A competitor of Patagonia, The North Face, is also investing in circular economy with its Renewed Program that reduces waste by remaking refurbished clothing. Many outdoor clothing brands include sustainability into their DNA or value proposition, a logic move or characteristic when your customers enjoy “outdoor” sports.
But here we need to distinguish functional apparel from fashion because a customer buying a jacket from Patagonia is buying functionality, technical features (e.g. lighweight, waterproof, breathability) and maybe status, but not fashion. Aesthetic is always important, buy here (outdoor clothing), clothes are not out-of-date every season.
“FASHION” AND SUSTAINABILITY
“What you wear is how you present yourself to the world, especially today, when human contacts are so quick. Fashion is instant language” – Miuccia Prada.
Fashion means freshness. To be trendy, translated in business operations, means to reduce collection periods and accelerate inventory turns. It means high levels of consumption and therefore waste. This is why fashion, fast-fashion or value brands, which value proposition is built on ephemeral needs, should be mentioned apart when talking about sustainabilty.
H&M Group, a so-called fast-fashion company (but still far from Inditex Zara in that sense) publishes a Sustainability Summary every year. Anna Gedda, Head of Sustainability at H&M, said “a company of our size and scale has a responsibility as well as a great opportunity to lead the change towards a more sustainable fashion and design industry.”
Joaquin Villalba is the CEO and co-founder of Nextail, a smart platform for retail merchandising.
A retail industry veteran, Joaquin has almost two decades of experience in innovation, retail and operations.
Prior to Nextail, Joaquin was Head of European Logistics for Zara-Inditex, the world’s largest fashion retailer. In that capacity, he oversaw more than a thousand retail stores with over $10 billion in annual sales. He also led technical innovation for the company, creating new solutions to manage product flow in high-volume flagship stores.
Joaquin is a frequent speaker at retail industry events and a lecturer in operations executive programs. He is an Industrial Engineer and holds an MBA from INSEAD. Joaquin and his wife, Rocio are raising their three children, all under the age of three! Rocio is also Nextail’s most prolific headhunter.
The Fashion Retailer: What is Nextail?
Joaquín Villalba: Nextail is a smart platform for retail merchandising. Developed by retail experts, it delivers agile data-driven decisions to meet increasing consumer demands. Using Nextail’s AI and advanced analytics, global retailers like Pepe Jeans, Twinset and Neck and Neck are automating dynamic buying and merchandising. Within weeks, sales and margins increase while stock levels are reduced.
TFR: What is the entrepreneur story that inspired the launch of the company?
J.Villalba: My background in engineering means a lifelong fascination with improving the way things work. On entering the world of retail, I often saw frustrated customers not finding what they wanted, and it’s because retailers had very static processes in place meaning they couldn’t act fast enough to meet customer demand.
During my time at Zara, I reflected on what moved the founder of Inditex, Amancio Ortega, to pursue a more innovative retail concept. The operational inefficiencies and inaccessibility of retail at that time drove his innovation. His dissatisfaction with the existing retail model inspired him to create something new, which is exactly how I felt with Nextail.
We want to change commerce by transforming how retailers buy new collections and distribute products, using an agile approach based on bottom-up decisions and automation. Essentially, I wanted to fix the frustrations of those customers I’d seen early on in my retail career.
My co-founder, Carlos Miragall, and I met whilst studying engineering together in Valencia. He was Senior Manager of A.T. Kearney, working on strategic and operational projects across several industries including retail.
He didn’t hesitate in joining the Nextail adventure which was just starting in an accelerator in Miami. I’m thankful he did – not only is it important to have people you trust around you, it’s more fun to celebrate the successes with those who have shared the journey!
TFR: Retail is facing new challenges in every phase of the value chain. Retailers are struggling to sell at full price and have difficulties to optimize their stocks (e.g. manage the right stock turns, calculating in-season forecast). What are the main challenges regarding inventory management?
J.Villalba: These days much of the merchandising function is impacted by the shortening of product life cycles. At the same time as the shift in product life cycle, retailers are now having to deal with how inventory moves through a more complex, multichannel customer journey – like consumers buying online to return in store, or the unexpectedly high returns rates after sales events.
Traditional top-down decision-making designed for seasonal cycles no longer suits the need for speed in today’s industry. Retailers bound to these methods are finding they have too much stock, which results in year-round discounting, as well as missing out on sales they could have captured.
Regardless of a retailer’s market, from fast fashion through to luxury, today’s agile retailers have to reorganize their collections and their decision-making processes to suit this pace. Restructuring the way customer feedback is acted upon means an increase in capsules, or “drops” where the first allocation to stores is smaller, and a search for shorter production times. Today’s retailers need to upgrade their capabilities to use data in order to predict which products will need reallocating, reordering or promoting.
Without advanced systems built especially for these challenges, this can result in misallocation of stock, leading to overstocks and lost sales. Traditional decision-making methods, like using only past sales to calculate future demand, statically clustering stores and relying on intuition, do not stand up to the pressures of retail today.
TFR: Making supply meet demand in an uncertain global economy, when trends and weather are also volatile, is very difficult. How is Nextail helping retailers to reduce those risks?
J.Villalba: Today retailers must make more decisions in a shorter window of time. We develop solutions which help automate those decisions, enabling agility in the retailers’ business.
Nextail’s machine learning allows for improved demand prediction, powering the decisions behind each store in a retailers’ network and each SKU in its assortment according to its own expected behavior. Nextail’s algorithms use historical sales and stock data to learn about the behavior of different product attributes in different stores, model seasonality and promotional factors at store and family level or calculate size curves to account for the demographics of each store. The result is an incredibly granular forecast that estimates probabilistically how products will perform in the future.
Nextail Transfers – Click to watch
Even when historical data is not rich enough, for example when a retailer is launching a new product, or opening a new location, the algorithms can dynamically cluster by store and product attributes, extracted by computer vision, to create a robust forecast.
But the work does not stop at the forecast, Nextail delivers the actual decision that will maximize the sales of the retailer, for example dynamically ranking the stores at product, color and sku level based on their sales probability in the case of warehouse scarcity. As of now, Nextail can help retailers in taking better decisions around buying, allocation and replenishment and stock rebalancing.
TFR: Could you briefly explain a business case from the fashion apparel industry where Nextail participated? What was the need of your client and how did you solve it?
J.Villalba: A leading Italian brand decided to undergo a transformation regarding their merchandising decisions. Having previously relied on a nearly manual Excel database for inventory management, they had an unstructured approach to stock allocation.
As a result of the Nextail integration, the brand saw a 10% uplift in sell-through in Spring/Summer 2018, compared to the previous season. The company culture has become more agile with old static habits being broken.
There has also been a significant decrease in human error, due to less human intervention. This has freed up employees’ time so they can focus on more strategic tasks, such as providing better service in-store and maintaining support service across all stores, rather than only in the high-volume stores.
With Nextail, the retailer was able to lower stock levels in stores and yet still increase sales by having the right merchandise in the right stores.
TFR: There is a big demand for Data scientists. How do you manage to find these profiles and keep them happy?
J.Villalba: When people across the business are working on something they know is transforming an industry, it’s hugely rewarding. Being a part of that change is really motivating for our team. We’re working on state-of-the-art technology – machine learning and artificial intelligence to automate decision making that is ground-breaking for any industry, as well as entirely new for retail.
It’s also crucial for us to be visible and engaged in the community, especially through events. Jose Luis, our VP of Data Science and Analytics speaks frequently at events such as Big Data Spain, and IE Exponential Learning events and we have team members who we met through the IE Data Science Bootcamp they run throughout the year. Word of mouth recommendations from existing team members are also valuable.
We know that personal/professional development is massively important for both talent acquisition and retention. That’s why we’re recently introduced our Head of Talent. They’re promoting the accelerated and scalable growth of talent, and reinforcing the company values and organizational culture that will allow us to keep attracting and developing top talent.
We currently have more than 90 professionals from the world of retail, technology and operations, based between Spain, Italy, the United Kingdom, Russia and the USA.
TFR: Do you feel fashion is becoming more science than art?
J.Villalba: There needs to be a balance. At Nextail, we are passionate about how data and technology can transform the fashion retail industry. This doesn’t mean that there is no space for art in fashion. Some roles, such as buying, will always require a degree of intuition, and product design is a creative art – neither can be replaced by science alone. In these spaces, leveraging technology can empower individuals, from making more informed decisions based on historical data, to freeing up time with automation. Using technology in that way means creative experts get to focus on innovation and in turn deliver a more engaging product offering for shoppers.
TFR: As a start-up, what do you think are the key success factors that brings you to compete with big companies like JDA, Oracle or SAP?
J.Villalba: Passion, innovation and impact. Our passion singles us out. We’re very lucky in that our team is formed of many retail experts – not only have we attracted talent from leading retailers and retail consultants, but our founders had firsthand experience in what the industry needed. At our core we are retail. That means our solutions speak very directly to our industry’s needs. Many of us in the company have seen directly from the inside how the customer has changed, how the markets’ needs have shifted and understand the complexities of merchandising and allocation.
We’ve taken the depth of that knowledge and have a committed vertical focus – something that other software companies can’t do, due to their size. That means our artificial intelligence and machine learning are developed specifically for companies in the business of selling seasonal products.
We’re also incredibly committed to making sure we have a significant bottom line impact, not just by improving collaboration and communication or by automating transactions, but by improving the quality of the decisions. Also, we didn’t want to develop a technology that took several months to deliver value. Nextail starts impacting a retailers’ bottom line right after implementation. That same quest for impact filters down to every new product feature and team output.
Finally, innovation is in our DNA, all our platform is based on new technology, native for the cloud and designed to scale and transform how companies make decisions. For example, the look and feel of the Nextail platform is designed to look like a consumer app, easy to use by anyone, especially when compared to traditional systems…
Passion, innovation and impact are the core values of Nextail. If you feel that you share them, please get in touch with us!
If you think about what retailers are “reinventing” the fashion retail business and also leading the omnichannel era, you will probably mention Zara, Nike, H&M… and a few niche players like Everlane, Bonobos, Goop or Rent the Runway. Some might mention Amazon, but Amazon Fashion has room for improvement yet… Those companies are going beyond of selling products, and their value proposition includes a digital customer-centric approach, innovation, curated experience and sustainability. Bonprix is probably not in the average “top-of-mind”.
Bonprix was founded in Hamburg (Germany) in 1986 as a mail order company specializing in apparel and evolved to an omnichannel retailer including online, print catalogues and offline stores. As a subsidiary of the Otto Group, the company operates in 30 countries across Europe, Russia, North America and South America. In 2018, generated revenues of €1,56 billion and e-commerce represents around 80% of revenues.
The company offers a wide range of styles and sizes including womenswear, menswear, kidswear, accessories, home textiles and interior design organized in 5 private label brands: bpc, bpc selection, BODYFLIRT, RAINBOW and John Baner. Assortment is refreshed in a monthly basis and it´s value proposition is “fashion at exceptional value-for-money” (similar to Primark).
On February the 14th (Valentine´s day, maybe a strategical date?), Bonprix opened an omnichannel pilot store in Hamburg (Moenckebergstrasse 11) with a clear objective: delivering a digitally driven shopping experience. The new store includes a fashion bar, smart fitting rooms (RFID technology that automatically update the shopping bag in the app), self check-out points and payment via app… A store in the era of fashion technology or fashtech.
The customer experience
The article about Innovative Customer Experience in NYC, commented about what stores where excelling at customer experience and why. In this case, Bonprix store in Hamburg is presenting a trend floor, like a showroom. Far from stocking inventory and presenting all the sizes, every single garment and accessory is showcased as part of Bonprix’s style worlds. The “fashion connect” concept is aimed at style-savvy women aged 30+ and features popular pieces from younger, more on-trend brands Bodyflirt and Rainbow.
The Trend Floor
In this new concept store, every item has its own QR code. Customers scan the code to add it in the shopping bag. Then head to the fitting rooms or select “Buy It Now” to pay without trying it on. In case the customer needs to try on clothing, they can wait having a drink at the “fashion bar” while shop assistants will prepare the “order”. A similar process happens at Flight Club, when shop assistants ask you about your size and then you seat and wait for it. But there is no digital experience or bar…
The fitting room experience is also innovative. Once everything has been prepared, the customer is invited to their personal fitting room. The size of the fitting room is above the average, rooms are well ventilated and offer a choice of four mood lighting settings. A large screen displays the contents of the bonprix app and shows the next steps. If the customer needs a different size, or advice from a fashion assistant, they can order it directly to their fitting room.
Other retailers are betting on innovation and have a similar approach to digital customer experience like Rebecca Minkoff. The difference is that Rebecca Minkoff sells t-shirts at 70€ and Bonprix at 10€. So, a mass-market fashion retailer is offering a “similar” customer experience than an affordable-luxury brand (customer service would be different). It´s an example of how a pure-player is using bricks to test their products, optimize the assortment and get closer to the customer while delivering a service. “Fashion Connect” acts like a pop-up store, making noise and delivering a fresh and multy-sensory fashion experience. Bonprix is a clear competitor of Amazon Fashion, but with more experience, both online and offline.