Sustainability and digitization are reshaping the fashion retail industry. Let’s have a closer look at both transformational forces—and their implications for fashion brands.
Closed-loop recycling, resale and digital passports
To become a more sustainable industry, according to McKinsey’s State of Fashion 2022
, “one of the most important levers that the fashion industry can pull to reduce its environmental impact is closed-loop recycling.” Sixty percent of fashion executives have already invested or plan to invest in closed-loop recycling this year. Closed-loop recycling should reduce the production of virgin raw materials and decrease textile waste. It is a system which is now starting to be rolled out at scale; Uniqlo pledged to make its clothes of 50% recycled materials
Fashion retailers are also jumping into the resale market. The secondhand fashion retail market is expected to double in size and reach $77 billion in revenue by 2025. Already, a number of high-profile brands, including lululemon and Nike
, have opened their own re-commerce marketplaces for consumers to send in used items for credit on their next purchase. Others, like fashion house Prada
, are considering entering the resale market as well. Consumers can shop the secondhand items, enabling brands to recoup some of the resale demand for their products while also meeting sustainability goals.
Another aspect of building a ‘sustainable brand’ is being fully transparent about product origins, by offering ‘back to its roots’ traceable product information. Fashion brands are investing in technologies to share this kind of product information with both consumers and partners. This should lead to digital ‘product passports’ which, according to McKinsey,
can help fashion retailers “tackle counterfeiting, differentiate themselves and build loyalty by enhancing consumer trust.” McKinsey indicates that two out of five fashion executives have plans to adopt product passports in 2022, or have already done so.
Diving into virtual worlds
According to Statista’s Digital Market Outlook
, the online channel share for 2021 amounted to 22%, and about half of all fashion brands have an eCommerce presence. For the next three years, the online fashion industry is projected to grow by 26% to nearly $1 trillion in market worth.
Digital commerce is experiencing a surge in engagement from fashion brands, consumers and investors alike. This channel opens up new opportunities for seamless shopping experiences from discovery to checkout; think tailored in-app purchase journeys and test opportunities using livestreaming and augmented reality try-on. In that McKinsey study I referenced earlier, 37% of fashion executives cited digital commerce as one of the top initiatives that will impact their business in 2022.
Besides the hard cash that online and digital channels bring to fashion retailers today, some brands are already getting involved in the ‘next level of digital.’ For example, Nike announced
the acquisition of metaverse fashion brand RTFKT that uses ’cutting edge innovation to deliver next generation collectibles that merge culture and gaming’ and should accelerate Nike’s digital transformation. The brand is dead-serious about going virtual, as it also teams up with Roblox to build its own virtual world called Nikeland. In Nikeland, users will be able to dress up their avatars in Nike-branded sneakers and apparel. This virtual shopping world will be free for now, but could be a place to try out new products and gauge consumers’ interests. And Nike is not alone. Multiple fashion brands
, like Italy’s OTB, –owner of (among others) Viktor&Rolf, Balenciaga from Spain, and Adidas Originals—are investing in their own virtual reality shopping journeys as part of their digital strategy.
Implications for fashion retailers
These examples highlight only a few of the many initiatives fashion retailers are taking to build a more sustainable and digital-savvy brand. But what does this all imply for their business strategy?
First and foremost, fashion retailers need to connect easily with consumers and business partners alike. Digital commerce, re-commerce marketplaces and virtual reality worlds all require enhanced ways to connect and communicate with consumers across a multitude of channels, touchpoints and (virtual) locations. It also means collaborating and hence connecting more closely with business partners. For example, introducing a digital product passport requires tight cooperation with business partners: The entire supply chain has to agree upon common standards about how to store and exchange product and production data, and must have access to the same tools to do so accordingly so they can document and share the origins of raw materials and the processes used to harvest, process, package and ship these materials. A connected workflow and deep integration to efficiently exchange data on these and other parts of the production process are an absolute must.
At the same time, virtualization of the customer experience requires a lot of business agility. Offering an end-to-end digital commerce experience is already a challenge in itself, let alone becoming an active player in the metaverse. Often it may feel a bit like building an airplane while flying it, as technologies used are evolving rapidly themselves, too. Retailers not only need to adapt their technical infrastructure, but also their retail processes. And the role of the ‘store as an asset’, which in some cases may now become much more of an experience hub rather than a place to simply buy and pay for goods, also demands lots of flexibility, from the way stores are set up, to how retailers are keeping them up-to-date.
In the end, what’s needed is a highly flexible ‘experience platform’
that lets retailers, business partners, consumers, software developers and technology providers effectively work together. This software platform, which should be characterized by openness, flexibility and efficiency, can offer a way to align consumer journeys with physical and virtual touchpoints and with the underlying retail processes. It should be open to working with current and future technologies, channels and touchpoints. It should be extremely flexible so retailers can configure new consumer journeys and business workflows on-the-fly whenever and wherever they are. And of course it should be deployed and managed as lean and as efficient as possible to make it worthwhile for the retailer.
Learn how we’re working with retailers around the globe
to implement their own experience platforms. Watch the video here