The globalized digital world has given birth to a new breed of consumers.
With an unlimited variety of choices at their fingertips, today’s fashion consumers are informed, impatient and fickle. Their purchases often result from thorough online research on current trends, product quality and company’s production ethic. Finally yet importantly, they also expect the goods to be delivered to their doorstep in a matter of hours.
As a result, consumers now lead the production line, making the marketplace more complex, competitive, and fast-paced. This new behavior paved the way for fast fashion, where production is based on consumer response to trends, and fashion houses release up to 18 collections a year. Fashion manufacturers, retailers and brands hence have to rethink, re-angle and adjust their production schema in order to stay responsive to market trends.
This change in consumer behavior presents a double-edged sword for the fashion industry.
Today’s target shoppers, the famous millennials and Generation Z, want their 18 collections a year but at the same time, they also expect complete transparency from fashion companies. Although price is still a major factor in their purchase decisions, these conscientious consumers pay equal attention to product provenance. Nielsen data reveals that more than 70% of young consumers are willing to pay a premium to buy from ethical and eco-friendly brands. Their exacting requirements and revolutionary buying behavior have left industry insiders reeling. How then, can fashion brands, retailers and manufacturers answer to these new consumer needs? On the supply side of fashion, lower prices and environmental sustainability do not usually go hand in hand.
It is a known fact that supply chain digitization helps companies make significant products and productivity gains through improved organization and production agility. But companies often neglect the fact that this very practice also enables them to achieve efficiency savings and meet customer expectations by operating in a more transparent manner. As multinational consultancy agency Accenture declares, “every high performing supply chain is a digital supply chain.” It is little wonder, then, that the BoF and McKinsey research referenced “end-to-end transparency”, as a key theme for the digital reinvention of the supply chain. Brands and retailers who invest in obtaining this level of insight will be able to build and advertise codes of conduct for social compliance and sustainability, confident that there are no blind spots in their design, development and manufacturing processes.
Beyond the abstract, there is already evidence to suggest that this approach to transparency sells. Other businesses may have turned it into a talking point, but one brand in particular has used supply chain digitization to benefit both its production processes and its public image. This company commits to building sustainable relationships with its suppliers by telling their stories to shoppers. More significantly, it discloses to the public what it calls the “true cost” of most of its styles. The brand provides consumers with an accurate breakdown of the final price in categories such as materials, labor, logistics, and duties, before revealing its own markup and comparing it those of more traditional retail companies. While design and material quality standards remain high (thanks to more organized digital supply chain processes and partnerships), these price differences can be significant.
This level of total transparency would be difficult – if not impossible – to achieve without more accessible channels of communication and collaboration with suppliers and partners. By using digital tools and processes to work differently, this brand has differentiated itself in a competitive market, and captivated millennials who share the same ethical stance.
But developing better, fairer relationships with factory workers is only one of the many advantages of digitalization.
The planet’s best-known sports brands have already begun to transform parts of their manufacturing and distribution processes, using industrial robots to create products according to digitally communicated instructions, and to lay the foundations for cost-effective personalization. Similarly, a well-known luxury brand is currently embedding small IoT-enabled sensors into its products to ensure quality and authenticity during production and distribution, while a luxury shirt-maker is using a similar embedded sensor system to coordinate supply chain processes, perform quality assurance, and to remain in contact with their customers as they actually wear the products.
It is also important to consider that the retailer-manufacturer dynamic has changed over the last forty years. Before, factories were perpetually at the mercy of their contractors, who fought them for the lowest FOB (free on board) prices. This new generation of retailers, however, has begun to look at the other side of the balance sheet. Identifying FOB prices and labor costs as minor cost factors, they have started to focus on extrinsic costs instead. This means reducing their expenditure on external factors and indirect costs, particularly on product development and markdowns. In response, retailers have started to require that factories undertake some of their product development activities.
Suppliers now have to function as product makers and service providers as well.
Retailers have started to collaborate with them by sending over engineers and specialists to share their expertise. A cooperative garment strategy was thus born and served as an impetus for manufacturers and retailers to form a more cohesive, integrated supply chain through digitization. By bringing brands, retailers and suppliers together – this new paradigm has incited collective action on a global scale to combat arising global issues related to the garment industry such as sustainability and fair labor.
This goes without saying – that supply chain digitization is vital to improving sustainability. In the world where fast fashion is only going to get faster and consumer demands are only going to get more stringent, the only way to be both profitable and sustainable is to achieve end-to-end transparency. By being holding themselves accountable for their business practices, and at the same time improving operational efficiency, fashion companies can then deliver collections that are reasonably priced, high in material quality and last but not least, eco-friendly as well.