EcommerceFashionRetailTechnology

Next-Generation Technology in Fashion eCommerce

By February 18, 2021 No Comments

2020 was a watershed year for most industries. While the overall eCommerce segment witnessed considerable growth as most customers had to drop their preference for visiting the physical stores for everyday purchases, it is worth noting that despite the strong brand equity commanded by several firms in the segment – fashion is still a discretionary purchase. This makes the demand more volatile and in line with the economic growth witnessed by each market segment. 

Whether you are a high-end luxury brand, a mid-market brand, an affordable brand, a niche brand, or a sustainable fashion pioneer – it is critical to start planning for integrating next-generation technology into your operations. Doing so can help the fashion eCommerce brands of the future to have a better command of their margins and growth, even if the demand remains volatile and correlated to factors otherwise out of their control. 

The State of Fashion 2021

McKinsey & Company, along with the Business of Fashion Community, have published the State of Fashion 2021 report, covering the challenges and opportunities faced by the industry. 

Data published in the report throws some light on some troubling issues:

  1. Declining Growth: 2020 witnessed a 93% fall in economic profits across the industry landscape.. This included luxury, affordable luxury, premium, mid-market, value, and discount brands. This is alarming since each segment’s target audience is different with different sets of income level resilience. 
  2. Digital Growth will Dictate Profits: The brands that were able to withstand the pandemic had two things in common – they were focusing on digital growth and emerging markets. The McKinsey team forecasts an annual 20% growth in digital channels  for 2021. This also reflects in the fact that platforms like ASOS, Revolve, and Zalando were trading a premium of over 35% in a year when the segment as a whole was trading at steep discounts.
  3. Focus on Experience for Economic Profit: Since 2016, the fashion industry’s economic profit has grown globally. However, most of this is attributable to the luxury & its ancillary segments. Value and discount brands have faced declining economic growth. This indicates a growing preference for better products and buying experiences, as customers seem ready to pay more for the brands & experiences they perceive to be valuable. 
  4. Your Segment Does Not Dictate Your Growth: While different industry experts focus on different segments for future growth, the top three players by the economic profit generated in the industry are – Nike, Inditex, and LVMH, representing the biggest companies in the athleisure, affordable, fast fashion, and luxury segments. This shows that each segment’s dynamics can be mitigated if the incumbent understands how to generate value. 

Next-Generation Technology: The Economic Growth Denominator

While the three companies Nike, Inditex, and LVMH, are as different as they can be in terms of their operations, they have two common denominators – high economic profit and strategic integration of next generation technology to their operations. 

There are several companies that have tried their hands at bringing Augmented Reality, Virtual Reality, and 3D Printing to the core of their operations. Still, a myriad of challenges has rendered these technologies underappreciated so far. Except, at the hands of the leaders at the earlier three brands, it is visible that there is a playbook for integrating these three technologies to the core operations for generating segment-defying and industry-leading economic profits:

1. Nike and the Curious Case of 3D Printing

Nike has been one of the pioneers in 3D Printing. Most industry observers have missed the company’s increasing adoption of 3D Printing like a ship passing through midnight. Nike began experimenting with additive manufacturing as early as 2013 when most industry incumbents and even researchers were yet to land on the full potential of the technology.

That said and done, the company has not entirely foregone its economies of scale. Nike understood that 3D Printing provides more value in terms of manufacturing precision and hence customization, instead of scaled manufacturing. Hence, the company has integrated its additive manufacturing efforts with its philosophy of putting world-champion athletes at the center of its product development lifecycles. Thanks to this effort, Eliud Kipchoge won the 2018 London Marathon wearing Nike’s very own 3D-printed Flyprint. 

Areas of Application for Fashion Ecommerce Incumbents: To create differentiation in the category, fashion brands can use additive manufacturing early in the product development process. While the process of bringing in a celebrity and optimizing the product with active iterations conducted in line with the available feedback may seem expensive at first – but it fits right into the agile approach. And at the end, the firm can recoup the development investments by providing a better product and charging a premium for customizations. 

Nike Curious Case of 3D Printing _ FlixStock Blog

 

2. Zara and ‘How to Use Customer Intelligence’ with Augmented Reality

As a fast-fashion brand, Zara has to operate each campaign focusing on rapid development and deployment. By the time a campaign becomes ‘stale’ by the end of the year, the company would be already sending out a new collection. 

Hence, Zara’s focus is increasingly on bringing the customer into the ecosystem and then focusing on retention and repeat sales. To achieve that, it has the space to invest more in customer acquisition – even at the retail front. The company deployed an interesting AR campaign in its retail outlets. The campaign focused on an installation at the store windows that invited onlookers to scan it. The resulting image would be a model adorning the recently updated collection. The firm scaled the effort across its stores in the USA. It is noteworthy to observe that between the launch of this campaign in mid-2019 to the end of the year, its stock price witnessed a nearly 30% growth. 

Areas of Application for Fashion Ecommerce Incumbents: Understand the consumer experience journey and provide a surprising experience at a touchpoint that delivers value. For instance, if your brand does not have a retail presence, your target audience might be looking for ways to see how the attire would look on a certain body-type. By giving an AR-based idea of what the attire looks like on different body-types, you can shorten the decision-making process for customers. 

Zara and ‘How to Use Customer Intelligence’ with Augmented Reality

3. LVMH and Virtual Smelling

While the idea has been in its experimental stages, if it reaches fruition, it stands to revolutionize an entire industry that still prides itself on retaining centuries-old practices – the fragrances industry.

The fragrances industry has faced a stiff challenge – it cannot provide virtual trials or try-on. Hence, the brand is left with the product design, packaging, and information to fully communicate its feel. However, for luxury brands, they depend on a customer’s sophistication and ability to perceive a smell based on the provided ingredients and descriptions. This highlights a sensory gap – customers are interpreting visual information for a smell-based product.

LVMH’s portfolio brand Maison Francis Kurdjion works with a startup VAQSO VR to provide a virtual ‘smelling’ experience. The VR device uses some common base nodes to deliver fragrances across a wide range and works well with Oculus Rift and other VR platforms. 

Areas of Application for Fashion Ecommerce Incumbents: The LVMH brand here has tried to achieve what some eyewear brands have already achieved so far – bringing the holistic product experience to customers at scale. By providing virtual try-on and VR experiences, fashion eCommerce brands can provide a more immersive product experience. The more unexpected a VR integration seems to your category, the wider market available for you to scale your holistic product experience. 

LVMH and Virtual SmellingIn Conclusion

Even as more influencers launch private labels, distribution systems become inter-dependent, and the major players take up most of the economic profits. There will be space for upcoming fashion eCommerce brands to scale and grow. With AR, VR, and 3D Printing added to their online presence, such brands can make customer journeys, pre-sales experience, and product development more seamless. 

Flixstock is one of such platforms that are shrinking the customer decision-making process by streamlining the photoshoot process by creating dynamic on-model images that reduce cost per image by over 30%. Click here to learn more!

Arunava Acharjee

Author Arunava Acharjee

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