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SAP FASHION BLOG

The Rules are Changing in the Fashion Industry

Coming to terms with the “new paradigm” is the theme of the SAP Fashion Info Days workshop series in November

According to McKinsey’s State of Fashion 2019 report, “The old rules simply don’t work.” It goes on to say, that the players who succeed will be those who “come to terms with the fact that in the new paradigm that is taking shape around them.”

The trend towards globalization, and multiple sales channels, digital transformation and innovation have become top priorities for most of today’s enterprises, including the fashion vertical.

To survive and thrive in an increasingly tough economic environment, more fashion players – both retailers and manufacturers – are reinventing their business processes to remain competitive and prepare for future challenges.

It’s not only the big names that are impacted. As McKinsey points out, regardless of their size or the segment they are in, today’s fashion businesses have to be agile. That means taking a digital-first approach. Accelerating speed-to-market. And, perhaps above all, investing in solutions that enhance their productivity. It’s the only way to make sure they come out ahead despite the uncertain market conditions.

“Digital technologies have made it easier for small brands to build awareness and sell to customers, helping them capture a disproportionate share of growth.” 

The State of Fashion 2019, McKinsey & Company

Sleep Better with Better Solutions

This is the kind of thing that keeps fashion retail executives up at night. And asking themselves questions like, how can I ensure that the technology I’m investing in will enable me to meet the needs of ever more demanding consumers. Or will it support differentiation in the market. And can it enhance my brand presence?

The fashion industry tends to believe that, while technology is very important, it is also very difficult, time-consuming, expensive and risky. The McKinsey report confirms the former, but it robustly disputes the latter. In fact, it notes that the industry is already, seeing a constant stream of innovation, with technology creating valuable new experiences for customers.

The possibilities for using technology to create a closed-loop experience for consumers – one that helps earn trust and lifetime loyalty and also delivers significant efficiencies along the value chain as well as new business opportunities – are virtually endless. 

Pushing Personalization

Take footwear retail for example. Imagine someone notices their running shoe is wearing out. In a traditional environment, the consumer looks up information about running shoes online, and picks preferred retail store more or less at random. Personalisation is almost non-existent. And, when they visit, a salesperson with no real idea about their background and needs will recommend something they think might be suitable.

The scenario gets worse. When the consumer pays for the purchase, the sales data is imported into the store’s ERP system, but most of the time it is anonymous. So there is no opportunity to maintain consumer contact and build consumer loyalty.

 

 

Now, imagine the same scenario, with an integrated E2E (exchange to exchange) solution. This time the consumer doesn’t have to wait until they notice wear and tear. Integrated sensors in their shoes send an end-of-life signal to the back-end system, and the consumer automatically receives an electronic alert, complete with personalized product recommendations based on consumer history, peer groups, trends, and social media input using machine learning. 

The consumer orders their desired shoes in a web shop, and receives relevant value-add up-sell offers based on customer data and trend signals. The retailer can even offer a 5% discount coupon for store pickup, creating an opportunity for an informed salesperson to make additional smart offers based on the consumer’s profile. Then the cycle starts over again.

That might sound like a lot of ifs and maybes. But, customers using SAP E2E solutions are seeing real value, including:

  • 5% sales increases from real-time promotions and predictive analytics
  • 3% sales increases from cross-sell opportunities based on a single view of the customer
  • 5% –10% reductions in logistics cost

Sorting out Supply Chains 

Supply chains are a perennial problem for the fashion industry, but the pain has been exacerbated markedly by globalization. In the traditional scenario, slow, non-transparent processes, with no real-time insight make things cumbersome and alignment with different players is conducted manually.

However, digital supply chains are a different proposition. E2E delivers visibility and faster response to intelligently connect people, things, and processes for greater efficiency and new levels of responsiveness.

 

Fashion companies that now manage complex supply chain networks and agile logistics networks get real-time insights that provide the possibility to react instantly, including purchase order postponement.

And the results speak for themselves. SAP customers that have implemented E2E solutions in their supply chains report a host of benefits, such as:

  • Up to 20% improvement in inventory turnover
  • 30% reduced markdowns
  • 5%-10% reduction in logistics costs
  • Up to 40% reduction in stock-outs
  • Increased customer loyalty

Seeing is Believing

Getting to grips with what McKinsey calls “new paradigm” is the theme of the upcoming SAP Fashion Info Days workshop series taking place next month (November 2017). 


Highlights of the workshops will include ways to leverage new technology, and developing a superior understanding of customer needs to create new revenue-generating offerings and services. Such as incorporating machine learning into Robotic Process Automation (RPA) for fashion retail.

The events will also explore how SAP’s FVB solutions can help enterprises in this sector to:

  • Establish agile supply with E2E visibilitySupporting core fashion processes end to end, from master data to supply assignment
  • Drive operational and channel flexibilityServing more channels more profitably across business scenarios to maximize reach and customer proximity.
  • Unlock new offers and business modelsLeveraging new technology and a superior understanding of customer needs for new revenue-generating offers and services

Good Timing

The workshops couldn’t come at a better time. According to the McKinsey report, Greater China is expected to overtake the US as the world’s largest fashion market.

The reward won’t be shared equally, because, the top 20 fashion companies make 97% of the profit! That means competition for the other 3% can only intensify. However, the upside for those who adapt the fastest, could be as bright as the spotlights that shine on the catwalks of the world’s most popular fashion shows. 

Click here to register or find out more about the SAP Fashion Info Days.

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