Sagging Clothing Sales Show 'Retail-On-Demand' Is Disrupting Even High-End Fashion
It was a tough year for fashion sales in 2015, and everyone felt the crunch from high-fashion designers to fast fashion chains. During an earnings call Monday, Urban Outfitters CEO Richard Hayne blamed the lack of newness in the fashion industry as the reason why consumers have been slow to purchase.
“The last major fashion shift was 10 years ago when the skinny bottom returned to popularity,” said Hayne. “We’ve been with ‘big over little’ now for the better part of 10 years, and I think it’s nearing the end of its life cycle. How long it’s going to take to get through that cycle, I really can’t tell you.”
In contrast, home goods and accessories have been flying off the shelves for the Urban Outfitters brand, which is also the umbrella company for Anthropologie and Free People.
“Obviously all these categories faced the same headwinds, so why then was apparel the outlier?” Hayne asked. “To me, the answer is simple. Fashion, or more accurately, the lack thereof.”
Hayne isn’t alone in expressing these concerns. Gap and American Apparel also had fashion sale slumps in 2015 –– as did high-fashion retailers. In fact, the quickly altering consumer purchasing funnel so alerted the high-end fashion industry that the Council of Fashion Designs of America and The Boston Consulting Group began conducting a study on the future of fashion week last year. The examination into the issue included formal interviews with 50 fashion industry leaders, and the consensus was clear: something needs to change, and quick.
The much anticipated results of that study were released last week, finding these issues the most disruptive for designers and the high-end fashion market:
Perceived “early” deliveries and markdowns hurting full-price sales.
The race to earlier deliveries and therefore markdowns is leading to merchandise at retail that is seen as increasingly out of sync with the physical season, while our consumers are looking to buy clothes closer to when they need it. This results in retailers and brands failing to capitalize on “see now, wear now” consumer trends as well as in-season clothes’ being on markdowns during relevant time / season, hurting full-price sales potential.
A decreasing perception of newness.
Technology and social media have rewired the fashion system as everyone knows it. Shows no longer just reach retail, industry insiders and press. Images and live streams from shows are accessible worldwide in real time, exposing consumers to designs months before they are available for purchase and providing sufficient time for so-called Fast Fashion brands to manufacture and deliver such trends. Even for industry segments and brands not directly challenged by Fast Fashion interpretations, this contributes to the ubiquity of trends and designs. As a result – as our interviewees saw it – trends and designs can seem out-of-date or stale by the time they reach stores, causing general consumer confusion and fatigue and ultimately hurting designer full-price retail.
The danger of designer creative burnout.
The confusion of the fashion cycle, coupled with the increased importance and complexity of pre-collections, leaves less time for the creative process and artisanship and puts immense pressure on critical design and creative talent. Our interviewees expressed a desire for a future system that creates more structural, predictable downtime for design and creative talent.
The Fashion Industry’s Fast Fashion Problem
The CFDA offered only two solutions to these issues, though a handful of designers have already taken taken matters into their own hands.
This last New York Fashion Week saw a quick shift in how some designers are reorganizing their production schedules. LaQuan Smith, Burberry and Tom Ford, to name only a few, were some of the first to participate in what has been dubbed the “see now, buy now” trend, also referred to as a consumer-facing show. In this model, rather than showcasing lines that will be available for purchase for the next season, these designers and brands have chosen instead to showcase new collections available for immediate purchase.
The idea of such a show has been a hot topic of conversation in the fashion industry for the last year, another reason why the CFDA and Boston Consulting Group began their evaluation of the shift to begin with. Traditionally, fashion shows presented in the fall reflect the next spring’s styles, and shows in the spring reflect the following collections for the fall. There are ready-to-wear pieces released in the following months and designer items can often be seen on celebrities leading up to the season the pieces were originally created for.
Fast fashion, though, has thrown a wrench in this model. Companies like H&M, Forever 21, Zara and, yes, Urban Outfitters take ideas and styles from these presentations, recreate the items in a more season-appropriate cut and lower the price.
Typically, while not an admired business model by the high-fashion industry, this practice has been seen as a market opportunity. After all, many of those buying from these fast fashion brands likely wouldn’t ever buy from the high-end brands due to price alone. But, consumers of all ages and budget thresholds have changed their tune when it comes to shopping: they want it now, not next season.
Retailers outside of the high-fashion industry have for years been feeling this crunch. The need to update sites to mobile-responsiveness, and 2015’s Google algorithm update which essentially forced all retailers to make the change, has been only one bump in the road to catching up to new consumer habits. But, the high-end fashion industry is notoriously slow to change. And this can be credited at least in part to the need for these brands to remain exclusive.
After all, outside of Net-a-Porter and Shopbop, many higher end fashion brands refused to get online, forcing their shoppers into brick-and-mortar locations. And that worked well for a while –– but the game is changing. As millennials, the first digital-native generation, age and begin pulling in higher income, the high-fashion industry needs to cater to their shopping preferences, or risk losing that clientele for the long-haul.
Consumers drive channel-less commerce.
All of this is part of a larger trend: commerce channels are no longer silo-ed. Shoppers want immediate access to product, price comparison and one-click checkouts. Convenience is important, but so is experience and aesthetics. Impulse purchases are on the rise. Big ticket buys have plateaued. We are no longer catering to generation X. Millennials won’t even eat cereal because they have to clean the bowl. If they search your name on Google, or Facebook, or Pinterest, or, yes, even Twitter, and don’t find you –– what makes you think they’ll ever look again?
For brands these days wanting to scale, your product needs to be anywhere the consumer could conceivably be looking for it. And then some. Surprise and delight is a mainstay of the generation that made cat gifs popular. And though they are aging and maturing, their digital habits aren’t waning.
In a sort of reverse trickle down phenomenon, the higher end fashion brands are the last to catch up to these changes. Likely because doing so causes a massive disruption in production schedules. And while the Urban Outfitters of the world seem to be pointing fingers at the high-fashion industry for a lack of new trend ingenuity –– there’s a lot more going on under the surface and the lack of perceived newness is one of the most pressing causes of concern across the baord.
The CFDA and The Boston Consulting Group did offer two potential business models for the fashion industry at large.
Solution one: More intimate retail / press appointments or presentations 4-6 months before deliveries, with an option to then have in-season activations when collections are delivered to stores and available online for sale.
In this model, fashion presentations themselves become consumer-facing events exclusively, with industry insiders getting previews of collections 4-6 months in advance. This addresses the perceived lack of newness from consumers and enables insiders to earn exclusive press coverage, partnerships and placements for collections.
This model follows a cadence similar to technology industry marketing plans, in which there is a selective beta program for new solutions and then larger events and promotions once the product is ready for market. This gives events and PR teams ample time to earn press, gain beta tester input and ultimately ensure that the product launch goes well.
While the fashion industry likely won’t be taking any feedback from early viewers, this will give their brands time to plan, execute and promote collections in line with consumer expectations.
According to the CFDA, here are the benefits of this idea for brands, retailers and press:
Brands: Boost full-price selling and increase return on investment; free up more time for designers to focus on creativity, inspiration and developing products between the two Fashion Weeks; limit the ability of Fast Fashion to imitate original designs
Retailers: Increase the perceived newness as deliveries will be timed closer to consumer need (see ‘shift in delivery timing’) and marketed to the public at the same time; provide the ability to leverage New York Fashion Week to increase traffic, develop special experiences for top customers; explore opportunities for collaboration with designers, especially emerging designers
Press: Create timely and relevant content for readers; increase relevance of advertising and ability to measure return on marketing spend for both traditional and new media
This model does not imply any compression or compromise in the manufacturing lead time or additional inventory risks, according to the report. However, it has implications that each brand would need to assess to make a decision:
Brands would have to think about the right format of retail / press appointments and in-season events to be more consumer-relevant, while protecting designer creativity.
They would have to adjust their logistics and resource allocation during New York Fashion Week to manage the in-season activation as well as the retail / press appointments or presentation for the next collection.
Brands also need to rethink their press strategy around both retail and press appointments and in-season activations.
Solution two: a hybrid model also emerged, that maintains the current timing but includes ‘capsule collections’ available immediately for increased “shoppability.”
This solution is currently how most high-end brands are addressing shifting consumer preferences, and is what is known as “see now, buy now.” The issues with this model, however, is the lack of lead time for publications and press coverage as well a inventory risk.
Here is how the report suggested this model would work:
Main show would still be the culmination of the design / creative process but include a capsule collection available for sale immediately with brands taking appropriate inventory risk.
This idea was particularly preferred by luxury and select accessible luxury participants.
Benefits: addressing the demand for more immediacy with the capsule while keeping the show at the culmination of the design process and still building excitement for the future collections. This would avoid the potential complexity of decoupling the trade event from the consumer-relevant event.
Ultimately, the decline in fashion sales in 2015 likely has little to do with a lack of creativity or innovation in the fashion industry. Consumers have completely altered the way they shop, and they’ve done so much more quickly than brands have been able to pivot their strategies. Today, fashion brands must address the consumer's desire for retail immediacy. But these sames brands need balance this real-time shoppability with a new marketing strategy that helps solve for the consumer’s perceived lack of newness.
As the CFDA report suggested, no one answer is right for all brands but there is one thing everyone can agree on: “The unanimous consensus among our interviewees: the time is ripe for change in our market.”