Is retail changing faster than fast fashion?
As 2017 gets fully into swing, there’s a general agreement that it’s going to be a tough year, given the multiple evils of wage costs, inflation, higher buying costs and compliance.
It appears not everyone had a great Christmas after fashion retailer New Look reported a fall in pre-tax profits of 37.6% in the three-month Christmas quarter. As 2017 gets fully into swing, there’s a general agreement that it’s going to be a tough year, given the multiple evils of wage costs, inflation, higher buying costs and compliance. Not mention the final indignity, re-rating, which punishes everyone except online retailers fulfilling from warehouses.
For fashion retailers, there are additional shocks; Kantar Worldpanel just announced that the UK fashion sector lost nearly £750 million of its total value in the 52 weeks ending 18 December 2016. It blames retailers’ rigid adherence to seasons that are no longer respected by consumers, forcing them to overbuy and then discount at exactly the times they most need near or full margin.
My media interviews last Christmas all came back to the simple truth that consumers are setting their own agenda in terms of seasons and spend, for which there is really only one solution – retailers need to know who their customers are, how, when and where they shop, and what their buying behaviours and patterns are, so they can base stock, allocation and price on better forecasts.
This has all been on the agenda for five or more years now, so I am saying nothing new, but it is clear that this is not easy to do – it involves lots of different people, many of who don’t really work together, it depends on a wide range of disconnected software and data sets, and ultimately, even if this were all possible – the processes required to work differently don’t exist yet.
Now, recognising these problems may at least get you in the door with retailers to have the conversation, but how on earth are all these components going to come together to deliver a solution?
Some retailers are avoiding the problem by fixing just the front end, which means they are building mobile apps and new-generation loyalty schemes that attempt to get a better insight into customer behaviour, but then they lack the supply chain processes and tools to capitalise on it. I can think of no better analogy than the one involving lipstick and pigs, but I think that always sounds a bit insulting to retailers whose instincts about their customers have enabled them to build incredibly successful businesses.
So this blog is really about winners and losers. Everyone in fashion needs to fix the customer insight challenge because essentially this sector needs to be highly competitive to thrive. Without this key driver, the whole sector will continue to grow at much lower margins – and that is not sustainable unless someone can fix the rising cost problem.
Navigating 2017 will be tough indeed, so all roads of investment must lead both from and to the customer.