The fashion industry has gone through many changes from time to time… And today it stands on the principle of a metamorphic evolution.
Gone are the glory days of the 80’s and 90’s, the new era has brought with itself a new way of life. The advent of technology has changed our lives completely and has impacted how the business of fashion runs. Not just the front end, but also the back end.
Today, every facet in the fashion industry works differently, be it the designers who draw magic with their minds or the manufacturers who make the designers’ vision a reality!
This first part - “The Future of Fashion” - dwells into the core of the fashion industry and the many functions that run it, while exploring its future.
This is the first of the ‘Future’ series - a set of 6 articles - where I talk about the Future of the Fashion Industry and its Impact on various functions and stakeholders. In this article, I want to discuss the components which are driving the future of fashion from the consumer perspective.
The consumer has been evolving. While the basic product has not changed, a few things that have are:
- Where he/she buys
- Who influences him/her to buy
- How important is fashion to him/her
These last few years have seen a paradigm shift in consumer behaviour while the industry is still playing catch-up. It is still working in the shadow of the 80’s & 90’s glory days.
Consumers still buy as many clothes if not more, just not as much from the same old established players. Caught up in the idea of forecasting, planning, seasons, trade shows, the fashion industry has been trying to manage the disaggregated stakeholders in the supply chain through the old analog process of mails, excel sheets and endless meetings.
A lot of new companies, who were digital-first and did not understand the rules of the fashion industry, experimented with the idea of a supply chain, and succeeded in changing the very rules of the game. For example, BooHoo, Asos, just to name a few.
First, let’s discuss these sweeping changes in the consumer landscape.
Even in the early 2000’s, fashion and brands were prized possessions. But now, a lot of that wallet share has moved to acquiring experiences whether it’s dining out, holidaying, engaging in online content or gaming. The ability to immortalise people’s experiences through social media is making these ways cooler than just being old-school fashionable.
Decades of peace and development have assured this generation of their financial and physical security. Thus, this new generation is more focused on pursuing their interests and hobbies. This has created the most self-obsessed generation ever and, in return, they are also influencing other generations around them. This has virtually re-written the relevance of fashion in the current generation, where desires have moved beyond acquiring material things.
There was a time when going out for shopping was a pleasurable use of time. But today, with so much to do and such little time in hand, is going out for shopping as big as it used to be? Even older generations have started buying online. And given India’s infrastructure, very few want to brave traffic, parking queues and pollution to go out to shop when they can just easily do it online.
Almost everyone is enjoying the reduced pollution and stress levels, even the birds have returned to the cities. ‘Work from Home’ is now a reality which will not only reduce the need for commercial spaces, but also reduce traffic, minimise travel and make people question the old status quo. Sustainability and ‘green fashion’ are movements that will gain from this awakening as will the renewed advent of slow fashion.
Better awareness of the ecological damages, caused by the fashion industry, is pushing consumers to demand for more sustainable fashion, brands and retailers to care for the world around them. Apparel supply chains have constantly shifted their manufacturing to underdeveloped nations to maintain and reduce costs. Over the last few decades, the inflation of final consumer price in garments is the lowest when compared to all other categories and industries.
This global catastrophe has fast forwarded technology, making work-from-home, disaggregated teams, online meetups, digital economy and virtual living, a reality. So how will this further impact consumer behaviour?
Suddenly, it has dawned upon people that it’s possible to live with less. This thought has brought families together, friends closer and communities first. People are suddenly realising that it’s possible to make time for the ‘more important’ things in life. Marketers may need to work doubly hard on keeping their businesses relevant.
Need for security will impact the ‘where & how’ we buy. It may well accelerate e-commerce businesses by a decade, besides also paving a way for collaboration between the online and brick & mortar industries to work with each other. Just like how, today, one may use multiple debit cards of different banks in the same ATM, in the future, all stores may become fulfilment points across channels - paving the way for a seamless consumer experience.
So, what do all these mean for the fashion industry? While a lot of traditional businesses seem to be failing, there are a lot of new players moving from strength to strength.
What are the lessons to be learnt here?
In these series of articles, for the ease of understanding, the two words have been defined differently. ‘Fashion’ refers to the ability of brands to dictate what the consumers will wear, while ‘Trends’ refers to what the consumers prefer to wear. Consumers mix and match to create trends which brands need to recognise and follow.
In the golden age of brands, the 80’s, 90’s and early 2000’s, brands were able to dictate fashion to their consumers. Today, trends are made on social media and are easily available. It is all happening ‘right now’ and not waiting to be forecast by brands.
This has never been truer. Social Media and E-Commerce have democratised the marketplace. Brands no longer forecast fashion, and designers no longer influence it to the extent they used to. For the first time, since the industrial revolution, the wheel has turned completely. Digital markets have allowed consumers to buy what they want and from whom they want. Brands will find it increasingly difficult to dictate terms to the consumers.
Earlier, brands stood for lifestyle niche. Buying the brand meant buying into its philosophy. If you bought a Nike, you bought into its lifestyle. Wearing the brand communicated that you stood for active lifestyle.
But today, all you have to do is post a selfie, sweating it out in the gym, and it sends out the same message.
Brands must engage with their consumers at a much deeper level. The brands need to resonate the consumers’ philosophy. Brands, which are unable to do this, run the risk of losing relevance.
We, the insiders of the apparel industry are at the brink of change. To stay relevant, we must innovate processes and think outside the box. And we need to do this today!
• What is the role of DESIGN? Is it just enough to forecast fashion? Do we need to decentralise our teams? Do we need to curate and not just create?
• How will SUPPLY CHAIN move from a forecast-based to a demand-driven model? Would this have an impact on the inventory levels? Are small lot sizes really a challenge?
• Can B&M afford to look at multiple products as one entity? Do we need to adapt a segmentation strategy to manage product? Can we not apply different rules of demand to different segments?
• Are conventional MARKETING & SALES methodologies enough? Do we need to become digital first? Do we need to reimagine offline business too?
• What is the ROLE OF THE VENDOR in this new world? Does he become the innovation and trend-spotting lab for the brands?
The following articles will dwell deep into each function and discover the answers to the above questions. Looking forward to your comments. Let’s make these conversations as rich as possible.
This is the second article in the Future Series. In the previous article, we discussed the changing consumer behaviour and how it’s impacting the industry. In this article, I want to talk about what this means for fashion companies.
In this article, ‘Brands’ refers to both retail brands and fashion brands.
The one major takeaway we get from this fast-changing consumer behaviour is that brands need to reassess their relevance to their consumers as seen here. In the 80’s, 90’s and the early 2000’s, which I refer to as the Golden Era of Fashion brands, the brand made the person. Now, in this newly established status quo, the brand is trying to fit into the life of the person. People’s lifestyles are the biggest decider.
When I look at the Indian market today, it looks like a deluge of opportunism as opposed to well-thought through positioning of brands.
This clearly states establishing - why does a brand need to exist and what is it doing for the consumer.
This is what I call the ‘Why buy me Principle’ for e.g., in the Indian domestic market, we have a plethora of mass-value fashion brands/retailers (not taking names, referring to all of them without any exception) but what exactly is their purpose except that ‘we sell cheap clothes/fashion’.
Whereas, when seen in the international context - a Uniqlo, Zara, H&M have clearly defined what they mean to the consumer. Their positioning is very clear - unique value-added products at low prices, quick adoption of fashion from ramp to the masses and mass production of trendy fashion.
To be relevant in the long run, grow exponentially and leave a clear niche in the consumer psyche, brands need to clearly differentiate and position themselves. This is even more relevant in today’s noisy landscape.
Now, let’s move to another very interesting facet of the fashion brands - the obsession with becoming lifestyle brands.
Brands no more dictate lifestyle choices as consumers absorb them from different social media sources. Influencers are a ‘thing’ today, peddling lifestyles to all. Rarely do we come across someone who buys a complete ensemble of a mannequin or for instance, picks up everything from the same store for decorating the home. Mostly, everyone mixes and matches.
While brands offer a complete lifestyle to establish a ‘lifestyle approach’, their sales mix is usually dominated by one category. Some of the most iconic brands are category-based/predominant brands for e.g., Levis.
With online shopping becoming a more dominant sales channel, the consumer is usually exposed to only a category and not the complete offering. So, the question I pose is: Should brands not put in energy, effort and resources in the same proportion in categories as the sales that it begets?
A simple fix to managing this is knowing when to switch from category to lifestyle. Many brands have bitten the dust by spending disproportionate amounts in building retail and lifestyle offerings when they may have done extremely well if they were category-focused.
Businesses should take clear positions on categories in some channels, while reducing the lifestyle offerings to only owned or controlled spaces. Wouldn’t this help improve inventory productivity? Even today, brands offer nonmoving categories to complete the offering. Does anyone look at the cost of carrying inventory in the name of offering a complete mix, particularly when the consumer is clearly not buying?
There is nothing wrong with Lifestyle Brands, but sometimes a category-based play may well be a smarter one. This choice should be a well calibrated one, otherwise this may be a one-way trip to an early exit.
But defining ‘why and where to play alone’ is not sufficient. Let’s discuss how brands can stay relevant in this new reality.
Indian fashion brands tend to be opportunistic in their communication. Now, whether it is because of the frequent churn at the top, sheer opportunism, bottom line pressures or a typical Indian disregard for our own history, or a combination of all these, I do not know.
But it’s important to tell stories. They are engaging and they help build relationships and values with the consumer. But to tell stories, brands need to know themselves. They need to build a shared purpose and history with the consumer. They need to celebrate wins and take social positions based on their own positioning.
This story telling needs to be consistent.
That way the customer feels that he knows you, there is familiarity. A classic case of consistency in India is possibly – Max - you know exactly what you will get in their stores. Internationally, it could be Nike. Frequent reinventing the brand can alienate the consumers, therefore changes must be handled subtly.
But let’s not divert from the topic. The questions are:
• Do our brands archive? Do they catalogue their history? What was the 1st garment they sold? Which is their best-selling SKU? Do they have a museum/library of their archives? Do they take pride in their history and values?
• Are they sharing inside stories of victories and struggles with their consumers?
• Do they control their narrative themselves?
• Most importantly, is it integrated across all media, retail, online etc.?
In this new reality, brands need to start becoming virtual people, confidantes, a friend to the consumer. Brands that do that will find it easy to build loyalty even in this world of transitory relationships.
Story telling is not very expensive, but it takes dogged persistence and in today’s digital environment, it makes for compelling engagement.
But is that enough? How do we then win consumers’ trust?
Consumers have become cynical with opportunism and posturing from brands. The number of scams and exposés in the recent past have taken the sheen away from businesses. The trust factor is gone.
A classic example would be ‘greenwashing’. Several brands in the recent past have been taken to task for misleading consumers and making them feel good about their purchases.
How do you build Honesty and Sincerity?
There is no easy way out here. It must be through clearly laid down values which are demonstrated by senior management and communicated through all consumer touch points. Need I repeat that integrated and consistent approach to this is the only way. A classic example here would be the Tata brand.
So, it’s not true that brands cannot influence consumers like they used to. The truth is that they need to build credibility, something that takes time along with consistency and an integrated approach to building brands. Consumers can see through you, and in a world where no secret can be hidden for long, only genuine values will win in the long run.
And finally, let’s talk about accepting and facing reality.
Brands need to reconfigure their businesses into becoming digital first. What does this phrase even mean today? Is this just a jargon? Let’s understand in simple words.
• Do we manage our websites as flagship stores?
• What percentage of our online sales come from our own website?
• Do we review online sales with the same intensity as we do our retail sales?
• Are our fulfilment centres geared for e-commerce?
• Do we manage our own digital marketing?
• Have we created the right set of competencies in the brand?
• Are we planning merchandise and supply chains differently for online businesses?
Building sales through online channel partners by managing them like key accounts is not thinking digital. Most brands, today, look at online as another channel. They still think brick & mortar and go digital by extension. The trick is in reversing this thinking.
I would simply say that most brands are still living in their glory days. They need to evolve into becoming a trusted friend, who is consistent and engaging in a virtual world: they need to become virtual companions.
Month-end pressures and living quarter-to-quarter is a reality. But to not build the brand while still managing operational issues is condemning the business to an eternity in duress.
Today, it is still possible to grow through physical expansion as the economy is still opening. But in the very near future, as the markets mature, these questions will come back to bite us. This will happen as the consumer gets more discerning with social media and international brands keep upgrading them.
Building the brand will define who survives and grows in the future.
This is the third article in the ‘Future’ series that explores the changing landscape of the fashion industry and the evolution of various functions & stakeholders in it. In this article, I have discussed the evolving role of fashion design.
In this article, ‘design’ refers to commercial fashion design for brand/retail and not couture.
To begin with, we will first discuss:
• Recommendation on brand categorisation and its use in creating effective and relevant design team structure
• How to build competencies based on product strategy
• Go beyond the concept of seasons
• Move to managing multiple calendars
• Evolve to a digital-first world
• To conclude, I will also talk about how this impacts the day-to-day life of a designer
Before moving ahead we should revisit how I have defined the words ‘Fashion’ and ‘Trend’ differently here, but for quick reference ‘fashion’ refers to the brands’ ability to dictate what to wear and ‘trends’ is about evolving consumer taste which gains mass appeal.
I work on a very simple categorisation of brands:
As we saw in the previous article, brands no longer impact or set trends the way they used to in the 80’s, 90’s and the early 2000’s. So, based on this, I have redefined how we could classify brands. Simply put, there are three variants:
Having defined the business segment, we now move on to how we should structure our design teams to get the best value for the business.
I have always maintained that design teams should be structured differently for different business models. What works for a trend maker will not work for a trend adopter following trends.
A properly structured team can be of immense value to business. So, to attach designers to some buying teams, in a scattered manner - as is the case in many companies - may also not be a desirable solution.
The role of design should change from forecasting to innovation to trendspotting, based on the category of brand. However, there is something of these elements in each category of brands, just in varying degrees, based on how their brand is positioned as given in the infographic below.
In India, the role of the design teams and how they should be structured, is not well understood. I cannot stress enough, how properly structuring a design team can greatly enhance reaction time and speed to market, thus enhancing business value many times over.
Here are two important aspects I want to point out:
1. In brands, where trend-spotting and quick response is important, I always feel that it is better to have two verticals within the design team
(a) The classical design team, that forecasts fashion, manages brand salience, gives direction and creates designs and
(b) Curates and manages co-create with other partners to ensure quick response to market.
2. Brands need to structure design teams in a way that works best for them. But across the world today, design teams are being moved to a more disaggregated way of working. Many, category-specialist, design teams are being relocated to factories. In some cases, vendors are being asked to set up design teams to support the brands. This allows for flexibility and faster speed to market.
Now let’s understand product strategy and how to build capabilities around it for effectiveness.
Typically design and innovation capabilities should be built based on the following principle:
• Dominate - What we are known for
• Excel - What we are good at
• Manage - Where we are present
And the way to build capability is to ensure total control on the ‘Dominate Category’ - get the best talent, support with investment in innovation and market it well. Then have an adequate play between create and curate for the ‘Excel Category’. And finally, handle the ‘Manage Category’ through collaboration with partners.
Brands should own the direction and the selection of products going into their lines - but is it necessary to create everything by oneself?
Having large design teams slows down the reaction time to market and obsessing over originality can prove very expensive in terms of time lost, particularly when one can be original through smart curation.
The myth of seasonal planning and launches has been bust. Seasons used to be about getting the consumer to refresh their wardrobes ensuring higher buys. Now, the consumer has moved to buying whenever they want. With promotions going round the year, brands need to plan their go-to-market cycles more frequently and design teams need to align to this.
The challenge here is to maintain the homogeneity and look & feel of the brand along with multiple drops, curation and ensure that the consumer feels at home even with such frequent launch cycles.
Go-to-market cycles can and should be different for different categories based on their lead times, and for various channels based on their requirements to re-fresh. Which would then mean a different calendar, say for jeans, as against one for, say graphic tees and so on.
This means splitting the product line into multiple calendars with different go-to-market deadlines and cycles. This can exponentially increase response time to market, if managed with rigour.
And now, let’s talk about the most fundamental change taking place in design.
3D is the defining change in the tech side on design. This will ease visualisation by internal teams and customers, virtualising the sampling, fit testing and speeding up the complete process of concept-to-shelf.
Virtual roadshows, testing design on controlled social media and allowing selection through voting will not only reduce development cycles, but will also be the single most powerful tool in reducing sampling spends and enabling speed to market.
Let me summarise the above-mentioned points from a 30k-height perspective and what it would mean for the designers in day-to-day working.
1. Research has a new meaning. Designers must expand their horizons beyond forecasting agencies. They must look at unconventional resources like social media, streaming platforms, politics, sports as everything ignites a trend these days.
2. Aquire new skill sets. Integrate within their work style 3D softwares, virtual draping softwares, virtual fittings on 3D models, virtual fashion shows, virtual roadshows, online visual merchandising to name a few.
3. Change in team structuring. One person cannot do it all. Apart from creators and curators, specialists in 3D softwares may also be needed.
4. Change in processes and prioritisation. Relook at how tech packs are created? Do we have the time to follow conventional methods? With virtual coming to the forefront, hand and feel may lose priority. What one sees is what sells. Designers need to keep this in mind. With consumers also shifting to online buying, the optics of the product have higher relevance.
5. Commercial calls. We no longer have the time to obsess over smaller details. The bigger picture must be given more importance. A ‘not so right’ product at the ‘right time’ will make more money than a ‘perfect product’ at the ‘wrong time’. Once the trend is obsolete, the merchandise is wasted. It does not matter if it matches the Pantone perfectly.
6. Work on smaller, closer to market ranges and manage multiple calendars instead of working on one big seasonal launch. Create & curate small collections which tie into larger stories.
7. Behavioural changes required. Start managing relationships with vendors. Become educators who can guide vendors in understanding the brand handwriting and ethos. Designers need to think out of the box, not just in design but also in processes.
This is the fourth article of the ‘Future’ series exploring the changing world of the fashion industry and what it means for its various stakeholders. In this chapter, I shall be discussing the evolving role of the Buying and Merchandising function in the Brands and Retail companies.
To keep it simple, for this article, the term ‘Buying’ refers to the buying, merchandising, product management and planning functions. The term ‘Brands’ refers to both fashion and retail brands.
Many important topics like - the changing relevance of seasons, product strategy, fashion vs. trends, multiple go-to-market calendars, have already been covered in the previous article, hence I am not touching upon it again.
But, before we start, let’s look at why this central function needs an overhaul? As we discussed in the first article, fashion brands are no longer in the driver’s seat, they don’t dictate trends anymore. So, brands find it increasingly difficult to forecast sales accurately in these uncertain times which leads to:
• Inefficient inventory buildup and reduced availability of right merchandise
• Lower sales, higher inventories and higher markdowns
• Moving to inventory planning linked to sales
• Building a bestseller-led strategy through ‘test and repeat’ merchandising
• The importance of defining the product architecture by supply chain logic
• Supported by a segmented approach to OTB management
• Augmented by dynamic pricing
• Finally, the use of AI to,
improve inventory efficiency and increase profitability for brands in the future.
Hence, let us explore how businesses can be more robust and closer to their consumers, starting with removing an anomaly in the thinking that drives planning today.
Planograms are the holy grail of retail. There are numerous AI-driven softwares that help visualise and manage this complex architecture. Unfortunately, brands use a cluster of different planograms to plan storage and display in different types of stores, and then use that capacity for filling the store with inventory.
Planograms should be viewed more as display optimiser to enable higher sales through better visibility rather than an inventory tool. Modern store fixtures are flexible and allow for open or stacked displays enabling reducing or increasing inventory holding capacity.
Hence, inventories must be reflective of sales and not planned for filling up fixed planograms. Once the inventory is defined (ideally based on weeks cover), then planograms should be used to optimise visibility.
I have often found this to be an extremely misunderstood concept amongst buying and planning teams, which keep filling up inventory in stores without it having a direct link to sales.
Having understood that the first step is to buy what can be sold as against to buying to fill display areas or complete the offering, we now move to discussing more fundamental changes in the operations of the Buying and Planning function.
This is probably the only industry where goods come in with a deliberately, limited shelf life as we have pre-decided the products’ fate. Imagine if car models had to be taken out every six months to pave the way for new cars, what would happen to their inventory and markdowns?
However, the question I ask is - Is this pre-defined life cycle relevant anymore?
Brands define their product line based on their understanding of their own positioning and what they perceive the consumer will buy from them.
But in reality, post launch, the market clearly repositions a brand in terms of how they perceive it and what they want to buy from it. And we know this through their bestselling products.
This is what I refer to as the ‘Bestseller strategy’ for brands. This means that every product that becomes a fast-moving bestseller should be immediately moved to a ‘replenishment pipe’ – with defined threshold ROS (rate of sale), below which it should be discontinued. This is the way all other industries operate – but why not fashion?
• It should be a high velocity product
• It should be possible to be put on a replenishment pipe
• It should have wide acceptability across channels and geographies
Of course, this needs a calibrated approach – for e.g., faddish products, long leads etc., cannot be taken on replenishment even if they become bestsellers – may be repeated, but not replenished.
Basically, do brands need to rethink core as well? Should their bestsellers become core, rather than piling up inventory, offering products which are ‘classic by definition’ as core, but no one is buying? These are questions which I would like the reader to consider and comment on.
But the question then becomes - How do brands consistently score hits or in other words bestsellers?
Buying is as much an art as it is a science. Some of the best buyers are those who can smell a bestseller way in advance and take a punt on the numbers, thereby maximising sales and profits. But these legendary buyers are hard to come by.
Here, I must mention that there are many AI-based tools that promise to rate or predict product saleability or identify trends. Well, this may help in guiding product creation, but the actual hits can only be assured with requisite testing.
So, how do companies keep scoring hits? Social networking provides an amazing opportunity as does sample testing in select channels.
• Create a limited test group for testing new products, connected through social networking.
• Keep launching new products, styles in that group - get it rated, tested and based on that decide on what to proceed with.
• This creates fertile ground to keep innovating and experimenting with trends. It becomes even more viable if designs are presented in 3D where the customer can’t make out that it is not a real sample, allowing for quick decision-making even before test ordering.
This is a simple solution to creating more hits through testing. The trick in quick go-to-market and product launch is in operating with platformed raw materials. This is today being used by most tech savvy brands – a simple way to keep scoring hits in the business.
But how do we build these strategies into our product architecture in a way that optimises supply chain?
The key to this is really marrying back-end supply chain with demand planning and buying. Let’s first understand what the supply chain pipes (clustering supply logic through different rules and lead times) are. They can be simply explained as in this infographic:
It’s simplistic working and is very easy to understand. But why is this not followed by most companies?
Well, two reasons (a) because of multiple channels – operating with their own demand rules and (b) the product architecture is not made with this logic in mind.
The buying team holds the ‘can’ on this and getting design, supply chain, demand planning and sales teams to align all the external stakeholders to ensure that this works, is the key to becoming inventory and margin efficient in the future.
The product line architecture must be made with these pipes in mind, and different calendars and rules must be applied to product design, order trigger and go-to-market strategy to make this work.
But to try all this we need to have OTB, how does that get sorted?
The most dreaded word for the buyer is OTB or Open-to-Buy. There never seems to be enough money available to buy what is truly needed. The best approach is to manage OTB for each supply chain segment differently, as explained in the infographic.
The issue with managing ‘buy’ values is that mostly these segments are not managed separately. This leads to unjustified spends in each segment, and hence does not allow for ‘buy optimisation’.
While this increases the buying inefficiency, how does one then reduce markdowns, keep inventory less and freshness high in the channels?
Or should I say dynamic markdowns. This means tracking products and their ROS (Rate of Sale) rigorously and marking down products basis how they are faring without waiting for end of season.
• Allow for different locations, colours, sizes to sell at different prices based on product performance.
• Be dynamic and the markdown should keep changing with time and ROS.
• Also sometimes incentivise future buys through coupons instead of just markdowns.
This will result in increased sales, less inventory during clearance and lower markdowns. This lower inventory, during clearance, will allow brands to sell fresh merchandise in the hopes of catching early bestseller trends and increasing trading weeks for fresh merchandise.
But is this level of detail humanly possible?
Technology is changing the world and it should also be used to bring precision in the ‘Buying Decision Making’ process. The best areas to use this are:
• Dynamic Pricing
• Predictive ROS (Rate of Sales)
• Bestseller Management aligned to Supply Chain Pipes
• Merchandise Financial Planning and OTB management aligned to Supply Chain Pipes
• 3D design for improved speed to market and testing
This use will free up the buying team’s time and enable them to value add in other areas like innovation and promotions to name a few.
We may all feel that this is all common sense. Well yes, but there are some legacy concepts in play, in the industry today, that needs to be challenged going forward. And that is what needs to change.
1. Plan inventory linked to sales, not to display and offerings.
2. Stop looking at the business with a ‘one size fits all’ solution to calendars, product architecture, product launches, OTB management, markdowns and clearance sales.
3. Relook at product lifecycles – decision to take a product off should be based on rate of sales rather than some perceived period called ‘season’. Imagine if best-selling car models were taken off shelves every six months just because the car company had to offer new line-ups every six months, what will the scenario be?
Treating each product on its own merit is the only solution to higher efficiency.
This is the penultimate post in the ‘Future’ series - a set of 6 articles - that explores the changing face of the fashion industry. In this article, I will discuss how the sourcing function needs to undergo a change to keep fashion companies abreast of their new realities.
For this article, the term ‘Sourcing’ refers to the procurement, manufacturing and quality functions in the fashion industry.
In this chapter, I will discuss how the sourcing function needs to:
• Redefine objectives and sourcing structures
• Relook at how we define costs
• Move to a ‘consulting’ from ‘policing’ way of working
• Go digital - and all that it entails to ensure that fashion companies are ahead of the curve
Let’s start the discussion with understanding the purpose of having a sourcing function.
Is the function relevant anymore?
Let us start with a little bit of history. The word merchandiser or merchant comes from the traders in the 1800’s, who would come in their ships and display their wares to the buyers. And from there was also born this function called sourcing. Retailers would come to traders wanting them to source specific merchandise for their customers and stores.
In the golden age of fashion brands (80’s through to the early 2000’s), sourcing took on the role of ensuring lowest possible cost for products delivered on time and within defined quality parameters.
And this has been the legacy ‘L1’ (lowest cost) sourcing.
As per capita incomes rose in manufacturing countries, sourcing organisations shifted to procuring from cheaper and cheaper locations like China, Bangladesh and now African countries. Unlike other industries, apparel retail prices have been very stable over the last few decades, in fact even coming down in many cases.
But is L1 a relevant objective in today’s brave new world? A classic example would be Zara who is a value retailer but with high-cost procurement strategy. A sizeable amount of their production happens in Europe to enable faster speed to market.
Let’s look at Image - 01 to understand the four pillars of the sourcing function.
Fashion companies need to structure their sourcing teams and clearly define their KPI’s based on their own business models, which we discussed in our previous article. Now, look at the importance of each of these four pillars. The way teams are structured will change to adapt to the brand positioning.
The above Image – 02 is indicative and will differ case to case, but the working, key deliverables and structure of sourcing teams will depend on these varied requirements. All companies need these structures but in varying degrees, and that will determine the no. of people in each department, their strength and the processes they follow.
This brings us to another key aspect of the business - how do we define cost itself?
Today, the biggest issue with companies is the way they look at the product cost. The moment we shift from defining deliverables in terms of ‘landed cost’ to ‘EPLC - end of product lifecycle cost’, the whole game changes. It is explained with a simplistic example in Image - 03 below.
In the above example, while it appears that the product is more expensive at Rs 110, it is actually cheaper for the company. And this is where the real problem lies with pushing L1 costs across different supply chain pipes.
What is needed is a wholistic approach to cost (defined here as EPLC) and that is an organisational objective as against simple ‘landed cost’ which is a sourcing objective. Now, the moment an organisation starts mapping and reducing its EPLC, the following questions would need to be answered:
• Location of sourcing hub, near-shoring and speed to market
• Volume of purchase or buying small lots and multiple times based on demand
• Vendor as a curator/fashion innovator or as only a low-cost manufacturer
This will re-orient sourcing teams to think differently for the company.
But having understood that sourcing functions must move away from L1 sourcing to applying different sourcing models for different business requirements and different supply chain pipes. We need to now move to another topic, changing the very way in which we work.
Currently sourcing and quality teams have a policing approach to the procurement and manufacturing function. The greater the control, the happier the sourcing teams.
• In this new world, can companies continue to invest in very large sourcing and quality teams?
• Isn’t quality and timely delivery the responsibility of the vendor? Then why do we need such large sourcing teams?
• How much of the work done by the teams is value adding to the company and what part is simply ‘passing the parcel’, ‘follow up’ and ‘filling up data sheets?’ Do we even need people for this work?
In the future, sourcing functions need to move to working in a manner where they are like a consulting function.
• Support vendors with becoming flexible and cost efficient
• Help brands and businesses with innovation, design, and development
• Negotiations, product re-engineering, source substitutions, strategic alignments for raw materials
• Train vendors to become better at managing their own quality
In the next section, we will discuss how digitisation will completely change the way sourcing organisations will function.
The Image - 04 speaks a thousand words. It gives a quick glimpse of how companies will work digitally in the future.
Apparel Supply Chains of the future will need to work with AI, virtual products and digital connectivity in ways that we have only begun to scratch the surface of. The real winners are going to be those who recognise this new oncoming reality and experiment with newer ways of working today, which will prepare them for tomorrow’s reality. I am sharing some ideas of what the future may contain (and it is not too far away).
With the digital platforms coming into the mainstream, disaggregated components of supply chain will be integrated into a single marketplace. Data will be available at a click of a button to all. This ease of access will lead to an integrated view of inventory, capacities, capabilities, prices, lead times and demand, enabling a seamless supply chain.
A large part of the sourcing merchant’s day is spent on mundane activities like follow ups and documentation. A virtual merchandiser will probably be an AI-based software that handles all these activities. In the future, this digital merchandiser may even be smart enough to take some of the decisions itself. Such applications may soon become the main stay in the sourcing function.
World over, 3D softwares are replacing the conventional process of sketching, sampling and sample presentations. Today, the roadshows are just a click away. Virtual roadshows, digital or video approvals on design and fits are reducing months from the calendar and making business faster and agile.
The ‘Test & Repeat’ model is going to be the future of the apparel industry. Brands and retailers will make less or opt for virtual products to test. Only the products that work will be manufactured. Quick repeat orders will soon become a reality. Preparing for smaller lots with multiple quick replenishments will come into play.
Future ready technology is enabling all business stakeholders to collaborate on digital platforms. This is shrinking the lead times and enabling everyone to make quicker decisions. This is also presenting a single source of truth in the whole supply chain, which will virtually eliminate hours of agonising and hundreds of man-days.
A single click platform is the future of the apparel industry and adoption of technology-based assistance is the way ahead for sourcing teams across the industry.
The sourcing function needs to rediscover its purpose and value addition in this emerging new world. Today, a lot of fashion companies suffer from this preconceived notion of how sourcing needs to function and what it is supposed to deliver. A hard look is required at some of our most dearly held ideas.
• Digital is the only way forward. The pandemic has really brought this to light and probably started the process of fast-forwarding adoption
• Sourcing needs to rediscover its purpose, restructure and realign itself to be relevant in today’s changing market
• Fashion companies need to relook at some of their cherished ideas about L1 sourcing and how to measure costs
This is the final article in the ‘Future’ series - a set of 6 articles - on the changing landscape of the fashion industry and what it means for its various stakeholders. We started this series with changing consumer trends and in this article, we will understand how it impacts the supplier base.
For this article, the word ‘Vendor’ refers to finished goods, raw materials, trims and other ancillaries, which support the product manufacturing process. The term ‘Brands’ shall refer to both fashion and retail companies.
Some relevant topics - like seasons, multiple go-to-market strategies, supply chain pipes, EPLC, digitisation of the disaggregated supply chain have already been covered in previous articles.
• Position themselves to their customers
• Structure for flexibility
• Plan for additional financing
• Become fashion consultants and
• Digitise their operations
to remain ahead in this quickly changing world.
So, let’s start this discussion by quickly understanding how the brand requirements are changing and from that derive, what a vendor’s strategy should be.
There are a few things changing in the fashion world. Brands are looking for the following and are willing to pay a premium for the same:
• Vendors handling smaller volumes with ease
• Vendors taking on some of the brand’s inventory pressures
• Vendors bringing flexible working on the table in terms of delivery phasing, inventory parking to name a few
• Vendors who are also their trend, innovation, and design partners
The reasons for the above have been discussed in greater details in the previous chapters.
Having understood the above, let us first see how vendors should strategise to be relevant in the coming era.
I have a very simple way of looking at this that’s explained in image no.1 below:
There are two other positions available as well (a) the classic low-cost/high-volume vendor and (b) the niche vendor. The low-cost/high-vol vendor will continue to face growth and uncertainty issues unless they transition to either flexible or value-add vendors.
This takes us to the next point, which is flexibility.
Vendors like to have orders in hand (sometimes a full season’s orders at a go, helping them fill their order books and planning lines well in advance) to manage their lines well, but brands are no longer able to forecast as before. Hence, they are looking at various ways like replenishment, vendor managed inventory and quick turnaround to manage their demand.
Brands want to drive demand-based supply, which is closer to market, that gives very little time for planning. However, vendors find this uncertainty difficult to manage.
Factories are built for volume, efficiency and cost reduction; this needs to move to flexibility with lot of sizes, digital solutions for flexibility and cost optimisation with an understanding of additional services being offered.
To set everyone’s mind at rest, I should mention here that while there will be smaller lots, it does not mean overall volumes will decline. It is just that it will be split into smaller lots. Vendors need to look at how their factories and procurement are organised to meet this. Can they manage quick changes, smaller lots without impacting their overall efficiency?
Stemming from this, let’s discuss the next point - what is the meaning of ‘managing some of the brand’s inventory pressures’?
In an uncertain market, brands will need to look at different supply chain pipes. These pipes will be supported through platforming of inventory at various stages of the manufacturing process to enable flexibility and speed to market.
This brings us to the next point which is money.
It’s an often-repeated question, ‘how are we to invest in all these, it will cost a lot of money’? Yes. But if the vendor clearly positions him/herself as one of the above then the business relationship will become a partnership rather than a contractual one. This will become an umbilical cord that cannot be quickly cut.
Vendors need to develop a sense of these requirements, which a brand has, and offer workable solutions rather than going to them with a manufacturing set-up with capacity and cost offerings.
This begs another question, why do vendors need to invest in design?
It’s important that vendors start offering fashion, trend, and innovation solutions rather than products and technology. Brands need quick solutions in a fast-changing world. Doing everything by oneself takes time.
Vendors, managing design and development, can ensure quicker go-to-market solutions. This will increase business both for the brand and the vendor, alongside establish an unshakable position for the vendor.
Being a simple low-cost vendor is a commodity which will no longer yield benefits. Brands need solutions - this is where vendors need to pitch.
All this is a big ask. Flexibility means ‘uncertainty’ for the vendor. Can they handle so much uncertainty in their business? The answer lies in going digital.
Factories still operate with analog systems. Even today, there are questions around digitisation. So, where should factories digitise and why? There are many good factory erp systems available, but factories need to gain scale to be able to afford them. But they must go beyond basic ERP systems to look at some cutting edge softwares. Some of these are given below:
• AI-based planning optimisation to manage quick changeovers, smaller lots, optimisation of workstations, material handling and integration of departments, allocation and optimisation of cost
• Payroll, upgradation, and skill management of workers
• 3D design for quick approvals, virtual sampling, and speed to market
• Automation of routine tasks like procurement optimisation, RFQ’s, PO’s - coordination of procurement and follow up for raw materials
• Digitise quality-management systems and compliance data management
• And finally, providing a dashboard to their customers with live data on status, performance, and quality management of styles to build trust and transparency with the customer.
The above can seriously bring in maximum control, lower costs, higher efficiencies, and all data available on the click of a button.
In India, vendor bases are small and scaling up is an issue. Labour, regulations, higher cost of capital and rising costs (subject for a future chapter) have laid waste to fertile business opportunities. On the other hand, brands are getting more and more organised, demanding transparency, dependability, consistency, and flexibility.
Can apparel manufacturers survive in this unfriendly environment? This is a question often asked by factories and vendors. Younger generations are not interested in continuing the family business, they feel the return on effort (ROE) is too low.
Caught up in this quagmire, how do vendors grow businesses?
To conclude, I would only say suppliers need to clearly redefine their objective and how they look at themselves. Move from being a provider of products to a provider of solutions and services. They must:
• Position their business clearly with their customer to stay relevant
• Build long term associations through becoming a solution -provider rather than a manufacturer and,
• Digitise to overcome the uncertainty and challenges thrown up by the system and new market changes.
In the long run, vendors who look at adding value to their customers, either through clever supply chain solutions or design and innovations, will continue to grow even in these uncertain times, where their customers are trying to come to grips with the market.
We, at Inside Apparel, had an exciting three months since our launch. This last series had a lot of feedback in the industry and has been a topic of many a discussion. Here, we are sharing some of the thoughts shared by our readers.
We’ve had so much and such diverse discussions from industry leaders, business owners and many senior colleagues, in our comments’ section that it would have taken a book to write it all down so we would ask our readers to go through them sometime, at leisure.
We have been very lucky and privileged to have such a consistent readership and would request everyone to partake in their wisdom. We’ve not covered a few extremely detailed and thought-provoking comments here, but they will be featured as future articles. Enjoy.
“You are absolutely right that while consumption patterns may not change, execution models will. Companies need to move rapidly to relook at the cost models. Several core processes may have to be executed through a combination of in-house and outsourcing”.
“I think that a herd mentality has taken over the Indian fashion brands where they try to outdo each other with massive discounts and offers, damaging the very foundations of the brand. We seem to have forgotten the basic lessons of marketing: segment, position, differentiate and build a relationship with your core customer to dominate the segment. Most brands have confused targeting and positioning with unclear value proposition.
We don’t need to look at international fashion brands for inspiration. Just look at the new wave of domestic brands like Man company, Bombay Shaving Co, etc. in personal care category. They seem to be following each of your recommendations to a fault. The Indian fashion brands have to ask a serious question- how much are they investing in Brand building vs how much they are frittering away in terms of discounts/offers?”
“Category vs. Lifestyle is a classic struggle. We noticed that almost 80% of our sales were coming only in 2 categories. Yet we had a large inventory of other categories as we wanted to give the customer the full range. But as pressures of inventory came in, we slowly defaulted to being a category-focused brand. But what should large format retailers do? They need to carry everything”.
“Sticking to one’s core is important, I recollect even Gap moving away from their khaki chino, denim shirt and gap logo sweatshirt look in late 90’s, getting their learnings and sticking to what they stand for. When we started our career in fashion industry 3 decades ago it was “brand made a man” (or woman) and now the consumer defines, and brands adapt”.
“For designers-retail/clothing/fashion, it is now very important to be a virtual designer in every sense. Virtual being the keyword here. My little experience with entrepreneurship has totally reinforced this. Traditional methods of working definitely need to be thrown out of the window and new design practices have to be adapted. It’s now or never as the customer in the coming future is online. Virtual designing/ representation/ roadshows/ marketing need to be the strongest asset of any brand’s design team - I can’t stress more on that, or they will definitely die out”.
“I have a different outlook on this article and would like to use the platform to share it.
I think designers should always have a free hand to try whatever they put them on, because the inception of an idea comes to life through their creativity. Designers are storytellers, the world is their playground. They should be allowed to explore and create magic out of it. They are the ones who identify and connect with the mood of the world. Someone mentioned to me once - “Camo print came into fashion when the mood of the world was war”. I honestly don’t know if that was true, but it felt right, likewise even when the most glamorous looking women around the world, who wore bling at some point, switched their moods to becoming lazy & comfortable, we saw a paradigmatic shift to sneakers and sweatpants.
Expecting designers to understand the economics of the business may not be the right thing to do. In my opinion, it would limit their creativity”.
“Designing digitally is the need of the hour. But somehow, I am not convinced at using a designer’s creative time in doing clerical work as 3D rendering solves cataloging and physical roadshow problems especially in this COVID era, but it in no way solves a creative problem except better visualisation.
In my experience, India and the Indian brand & retail industry have a long way to go and learn how to use designers effectively. Designs are still being done in a very rudimentary manner in most of the companies. I guess we are yet to learn to look at design as a process and a problem-solving tool”.
“Perhaps fashion/design institutes should also connect with industry experts and understand how different businesses function and role of design in different business models. It’s time design internships and industrial training programmes with companies are structured in a meaningful and relevant manner by the fashion institutes. This will help students and future design professionals understand the role of design which is beyond mood board, good aesthetics, colours and tech-packs”.
“In my view, there are several points that are important while discussing buying.
• Channels
• Sourcing lead times
• MOQ
• Flexibility of management
Channels: today brands are present in various channels. Each channel expects different kinds of merchandise, sales price and margins. If all the stores are owned by the brand, then many things can be controlled”.
“This brings me to an interesting success story of my customer. This is a large French retailer with shops/stores across the globe. The designer herself was the buyer and sourcing person. She managed her product line (men’s tee shirts). In, so many years of sourcing for this customer, I never heard even once a word of high inventory, hence less buying.
Her style of working was incredibly unique. She would send the complete techpacks with her confirmed buying price and a tentative qty. She never wanted the samples. All she required was the yarn dips for colour approval. Once the yarn dips were approved, she would give a go ahead to start the process of production. Then she would ask us to produce about 1500 pieces per colourway and ship them to a few selected locations across the globe.
It is interesting to note that she would then come back to us within 10 days, whether to continue the production or drop the style. If continue, nothing wrong. She would get the delivery in her fixed delivery period. But the problem was if she asked us to stop the production. In such a case, she would then send the fresh style (using the same colours). Her take from this way of functioning were many folds.
1. She got to test the market.
2. If style did not move, the discounting was only on few hundred pieces and no blocked inventory.
3. She could always have freshness in the stores.
4. The vendor always remained loyal and was willing to experiment.
5. The product cost remained fixed.
6. Even a men’s tee shirt category became a fast fashion instead of a boring product line.
To successfully merchandise a fashion retailer, whether it’s a small boutique or major departmental store, it requires a proactive fashion representative, who is always up-to-date on the latest fashion trends, to understand what consumers want to buy”.
“This would require a complete overhaul of the structure of the buying and sourcing teams, and how they are incentivised. For example, can buying be incentivised on ROS? Also, how does a brand maintain its TRUE essence? For example, is FRESHNESS a desired outcome? Like Zara. Should retailers create artificial scarcity? Is that a good strategy?”
“While I fully subscribe to the digitisation in the Supply Chain and companies investing heavily into the software, it is left to be seen how the vendor will adopt the same. How the vendor will sync with the retailer. It is also true that every retailer will be careful of not exposing or sharing the data with vendors. On the other hand, there will be a risk of data theft, hacking, virus attacks from third party system, forcing the retailers to invest heavily in protection. This means the cost of the digitisation goes up for the vendor.
Retailer will be foolish to think that after passing the digitisation he will have a monopoly on the vendor. Sourcing knows vendor cannot survive on one customer and manufacturer for number of other retailers. This translates that the vendor will need similar digitisation with other customers, resulting into the cost increase for the vendor. Is it financially viable for the vendor?”
“Your articles talk about the shifting of responsibilities and ownership between different roles and development of new skills while adopting technology at various levels.
Especially, if we read the last two, between sourcing and vendors, a lot of responsibilities which are currently resting with the sourcing teams will move ‘actively’ to the vendor, with the sourcing team mainly playing a consulting role.
However, the vendor wanting to adopt the changes and digitisation and technological advances - that will help him get there - he will need to invest more not only in setting the processes and technologies, but more importantly getting the right people do run them. Overall, this would mean cost increase for the vendor. However, with the vendor actively taking this role up, the sourcing offices would be able to cut back a lot of their costs. At an overall level, because it’s shifting of responsibilities and getting rid of some amount of duplication and improvement of efficiency, it should lead to overall cost reduction/better margins which can both be divided between the vendor and the brand.
It would however be interesting to see how the costs will shift, as the cost at the vendor’s end is bound to increase with this level of investment, but it should be more than nullified by the savings at the sourcing office’s end”.
“Highlighting the fast changes that the market is witnessing, Anindya has brought out the importance of change in mindset that is required across the supply chain.
1. Transparency between the various parties involved- I will blame both the vendor and the brand for holding their cards too close to their chests. High time you laid them bare
2. Trust – both parties need to work on these over long periods and interactions
3. Need for investment in new technologies and software
4. Need for adapting newer approaches to solving problems
3 and 4 will be futile without 1 and 2. In the book ‘World is Flat’, the author says, ‘when you have information you need not carry inventory’. Something I have cherished reading”.
“We do understand the market was already changing from past 2-3 years but now the responsibility is double for the vendor after covid 19. In fact, most of the vendor do not have sufficient people to handle the brands/design development or capacity to invest on new innovation .. in this case brands also need to come forward and share the investment on vendors as we can see buyers are investing in Bangladesh/Vietnam and also guiding them for technology/designing.
Brands must visualise the strength of vendor/capacity and try to work with limited number of vendors so you can give maximum number of months load to them and get priority from vendor too”.
“The fashion has to have speed to market, a lean production system, designers and 3D design technology with MIS systems built in. It is this fashion that will actually bring the customer to the factory, and the core will be a support system.
Why are we not looking at lean manufacturing? Why are we not investing in 3d Design technology? Why don’t we have an inbuilt MIS system which can have a live production status on the cloud every morning for the customer to simply log in?
In today’s world unless we evolve both at customer and factory level, we are going to find ourselves redundant and out of business”.
“Among all the aspects discussed, I feel one of the important aspects is, the existing labour situation from farm to frontend which is preventing people to think this industry as an option and do any sort of investments - be it expansion, upgradation etc.… If it becomes conducive, may attract more home-grown business houses and global players.
Labour engagement is one of the key factors. We need some holistic approach like, can union govt. scheme MGNREGA get integrated with labour intense industries like us? It will incentive the workforce and entrepreneurs and will also pave the way for global players to explore Greenfield investments.
And without a stable apparel supply chain ecosystem, with no choice, domestic apparel brands and retailers will be forced to look at overseas sources, but govt. policies may not encourage.
It is a catch 22 situation”.
“Unfortunately garment manufacturing is one of the lowest tech industries. And the margins are low. So, when the 1st generation built this and educated their children, the children preferred to venture into newer and advanced industries (tech, services etc.).
I feel for this industry to thrive in India, manufacturing has to shift to the hinterlands, new 1st generation entrepreneurs, who have the hunger and desire to make garments should come up.
Also, vertical integration with the fabric supply chain is also the need of the hour. That is the only way economies of scale will be built and RMG vendors will have the size and scale to invest in technology”.
One thing is clear. Change is inevitable. While most readers agreed with the future of the fashion industry discussed in these chapters, there is a general feeling that indicates we are unprepared to move into the future.
Well, if we don’t change, a new industry with new players will rise like the phoenix and then we will be trying to play catch up.
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