Reducing margin pressure with more sustainable fashion

Increased market competition is driving the need for rationalization in manufacturing, distribution and retailing activities.

margin pressure

Unlike business management measures in the past, however, the impact of cost-cutting remains limited in the face of evolving consumer expectations and faster-moving markets.

Although 2017 saw exceptional performance in value creation by listed fashion companies, the most recent McKinsey Global Fashion Index findings revealed that 67% of survey respondents expressed concern over declining margins. 

Fashion Sustainability moves up the agenda

Increasingly, fashion consumers seek to know more about the fiber content of clothing, as well as the country of origin and factory conditions. Although investment in new solutions is necessary to improve transparency and sustainability in Fashion industry, efforts to achieve social and environmental progress may potentially increase price pressure in the coming years.

Opportunities for omnichannel

Declining foot traffic in physical stores and the growing influence of social media are only compounding these difficulties. An omnichannel retailing survey of 3,000 consumers in the United States by tech company BigCommerce found that consumers from all demographics shopped across all channels. Amazon, branded ecommerce websites and brick-and-mortar stores topped the places where respondents shopped most frequently.

Turning to the reliability of hard data

Conscious of the need to develop e-commerce and online channels, fashion industry decision-makers are also keenly aware that while costs are higher in web retail, margins tend to be lower.

By turning to digital technologies, fashion manufacturers can lower costs and minimize risks while quickly responding to changes in consumer behavior. Digital solutions enabling a highly diverse range of products and services to be delivered to consumers in the exact quantity, variety and quality, and at the right time, place and price as dictated by real-time demand.

Production efficiency can improve in leaps and bounds by transforming the industrial model with digital technology. Markdown pressure can be minimized using analytics. And turnaround times can be shortened substantially through automaed processes.

Long-term profitability and value creation

Transformational digital innovations and disruptive business models form the foundation to build future success in the new sustainable fashion retail landscape, where consumers seek deeper engagement with brands, exercise discernment in relation to sourcing and production conditions, all with increasing immediacy.

To remain competitve, fashion brands, retailers and manufacturers must disrupt existing business models and practices. Technology will help to drive this transformation across the fashion industry as a whole, enhancing overall performance and creating value.

Read our e-guide 'Disrupting the retail fashion model' to learn more about regaining profitability through digital disruption

Top-performing apparel companies are already reaping the rewards of digital disruption. If you want to know more, click to read our latest e-guide ‘Disrupting the retail fashion model’.