Fashion hit with global uncertainties and heightened customer demands
- Posted on May 3, 2017
The performance of the fashion and apparel industry last year was not very encouraging. Most indicators point to sluggish growth and stagnating profit margins. And many retailers believe that the condition of the fashion and apparel industry has gotten worse over the last year. Compounding all this bad news is the ongoing pressure on retailers and brands in this sector to stay relevant and competitive by offering new and exciting products to their customers.
So, the question is what has driven the fashion industry to such a crisis? A recent whitepaper by Avanade and from EKN, the retail research and advisory firm, points to three important factors:
- The sudden exodus of designer talent from big name houses had a tremendous effect on fashion lines, which percolated even to the ready-to-wear segment.
- There has been a shift in consumer tastes and preferences, and the way they view fashion and luxury items. The line between regular/luxury wear and fitness wear are increasingly becoming blurred. Fitness-conscious consumers preferring to invest in those fashion lines that redefine the traditional fitness wear and combine it with regular wear. Fashion houses such as Dior, Chanel and Louis Vuitton have already ventured into this area, with niche brands such as Moncler’s Grenoble line and Aeance also embracing this trend.
- Modern consumers are more demanding and tech savvy. The combination of these two traits has led to a higher expectation of customized fashion at a lower price. This has led to price wars, with retailers shifting to promotions and discounts to increase their customer counts. Moreover, there is constant pressure to satisfy customer demand for the minimum possible lead time. To learn more about how to engage with today’s digital customers, watch Avanade’s video, Digital Innovations in Retail.
Another recent trend is related to off-price outlets. In a recent study, it was found that 30% of luxury buyers also shop at fast-fashion retailers, while another 23% visit the luxury retailer’s outlet. In fact, luxury retail consumers end up spending a considerable portion of their apparel budget at discount stores. In the same study, it was revealed that 71% of luxury consumers also shop at off-price stores. Luxury fashion brands such as Gucci and Prada have taken note of this and have either opened new off-price stores or have plans to open such stores soon.
These new off-price stores are designed with a new look and feel that appeals to young as well as seasoned shoppers. Luxury retailers are also hoping to battle stagnating growth and fierce competition for customers by using innovative in-store shopping technology. Another strategy is to open stores in emerging markets, such as China and India. These markets offer a considerable number of customers who favor purchasing high-end products after visiting the store.
The whitepaper from EKN and Avanade (see below) also suggests that major economic and political outcomes such as the economic slowdown in China and the Brexit situation in the UK have impacted the fashion and apparel industry. While in the case of former, the major fashion brands would lose out on a major high-growth market, the latter could lead to lower consumer confidence and higher manufacturing costs on the back of currency volatility and a weaker pound. Also, Brexit could lead to trade barriers in the form of restricted movement of imports and act as a deterrent to attracting international talent. All these trends are sure to have an impact on the fashion industry as it will require reassessing business models and pricing strategies.