From the new types of store to the new role of the industry or the attention in the sector. The fashion business faces in 2020 a decade even crazier than the former. What must be considered?
If the twenties of the latter century were happy, golden and crazy, those of the current century promise to be at least faster in pace. The world is moving faster and faster and the new decade starts off with an unstable political and economic scenario. And fashion does not dodge this.
In 2020, the global fashion industry must continue with the transformation that has begun in the last decade, marked by a new economic situation (with or without another crisis, consumer confidence suffers), the new reality of distribution, the impact of a technology that, increasingly, is a commodity and the giants becoming more and more giants.
Modaes.es picks nine keys points to understand the evolution of the international fashion industry over the next year. But trends are nothing without someone to execute them, so the tenth trend is none other than ten companies to consider, for the good and the bad, throughout the next year.
Fashion, faced with the threat of a new crisis
It is said that economists have predicted nine of the last five recessions. Are they accurate now when forecasting a new global crisis? For two years now, several analysts have seen black clouds on the horizon and, although the proven data point to a general deceleration worldwide (with few exceptions), nothing resembles a planetary crisis at the moment.
In its latest forecasts, Euromonitor already anticipated a slow growth for the global fashion business for the next few years. However, the fashion sector is highly permeable to the economic situation and the fluctuations in consumer confidence, which in several countries has already been impacted by the slowdown in growth and the negative messages of economists. A protectionist escalation (a threat that at the moment seems a bit more dissipated than a year ago) would also hit a clearly global sector. Could they worsen expectations for the sector worldwide?
Grow or suffer: consolidation is imposed on fashion
The purchase of Tiffany by LVMH is not only the operation of the year (probably of the decade) in the luxury sector, but it is also the strongest example of a process that has taken place and will occur more and more in the Fashion sector at local and global scale: consolidation. Essilor and Luxottica, Yoox and Net-a-Porter, Natura and Avon, Michael Kors and Jimmy Choo (first) and Versace (shortly after)… Gaining size and scale from corporate operations is not new in the fashion sector, but it is a process that has accelerated in recent years. In a flatter world, where barriers to jumping from one country to another are getting lower (with the consent of Donald Trump's protectionist temptations), size and scale are more important than ever. The more reasons for a fashion company to want to be big? An increasingly demanding behavior of consumers, which forces companies to create a bridge in terms of technology, sustainability, communication, brand... The resources, economic and human, of a large corporation, do not hurt anyone.
Stand up to Amazon: Death of the middle-man once again?
Facebook emerges and it seems that relationships between people will never be the same as before. E-commerce is born and it seems as though we will never buy in a physical store again. Amazon becomes the first fashion distributor in the United States and, for some, there is no longer hope for brick & mortar. Or yes?
At a time when Amazon (founded in 1994 as a book selling website) seems almighty, some companies dare to say “no.” It is what Nike has done in 2019, which has proposed to control the distribution of its products more closely, which has led it to even leave Amazon, after only two years of collaboration. The decision of the sports fashion leader could open the door for other operators to abandon the company of Jeff Bezos, who on the other hand is establishing alliances (such as the one signed in 2019 with Puma) to launch own fashion brands. At the moment, it is estimated that the Amazon fashion division represents only between 10% and 20% of the total turnover of the company.
It’s the margins, stupid!
Prêt-à-porter, fast fashion and low cost. There are three phases of the development of the fashion business and three business models that coexist today in the sector; also three expressions that speak above all of people's access to fashion. In recent decades, fashion has become increasingly massive, allowing the middle and lower classes of an increasingly extensive geographical area to access the trend product in clothing, footwear and accessories.
Today, in addition, that access can be made over several channels, from the large warehouse to the multi-brand store, from the mall to the high street store and from offline to e-commerce. For companies, all these changes have led to a business in which the margins are increasingly narrow. Be it for the price of the products or for the operating costs linked to electronic commerce, today the key is in the margin. What is more important today for a global fashion business: grow to double digits or improve your profitability by one percentage point?
When technology loses the 'wow' effect
Launch a web page and send a press release to explain it. Start an online store and write to all your customers so they can find it. Put giant screens in all stores, install a chatbot or digitize the stock through Rfid. All the technological innovations that are introduced in the fashion sector or in any other industry have different moments, and as time goes by the innovative nature of them decreases, as do their costs. Since the emergence of electronic commerce, fashion has been experimenting with the new toy, making many tests and not making just few mistakes, until finally finding a concept that is already on everyone's lips: omnichannel. As disruptive and advanced as it may seem now, the technologies that make omnichannel possible will soon become a commodity sooner rather than later. The brand, the product and the use of technology (and not the technology itself) will then be more important than now.
The industry regains the prominence
After years in which fashion has focused on flagships, omnichannel and customer journey to get closer to the consumer, it now turns around and looks towards the beginning of the value chain. The industry has become a key piece in the change of the decade and regains the prominence in the fashion industry. How will the giants of the sector be faster, more sustainable and have a more personalized offer if it is not based on industrial groups? Throughout 2019, the industrial giants have strengthened their muscle and alliances with the big names of the retail and the establishment of the value chain are becoming more frequent, from Inditex with Lenzing to Adidas with their speed factories. The question is, as always, which companies will be able to adapt to the evolution of the fashion industry and, therefore, to the demands of the sector giants and the million-dollar investments that the changes will require. As it occurs at the end of the fashion value chain, in the beginning a game of giants is also played.
‘Brick’: and what if it wasn’t about size, after all?
Meters, meters, meters and more meters. Fashion has gone crazy over the last decade in search of growing stores. But, perhaps, the new twenties will not be so crazy and stores will change once again. If in the last decade the stores have gone from being big and black, to small and white and, now, huge and bright, things could start to change.
Over the past twelve months, fashion distribution giants have dared to close the macro stores in streets as emblematic as Fifth Avenue in New York or in markets that are key to fast fashion such as Spain. Sales move progressively to the Network, so that retail numbers no longer add up. Some pioneers begin to try new formats regardless of the square meters: H&M opened in 2019 a store of only 300 square meters, opening the way to other operators, who begin to look at this formula as an option to achieve profitability and proximity with the consumer. The cities adapt to the rhythm of commerce and vice versa: the flagships (which will play the role of showroom) will be located in the streets where we walk; the stores that allow click & collect (which will be used practically as warehouses for the Network), in the streets where we sleep, and the stores that provide experience or added value, in secondary streets.
If others do business with my clothes, why can’t I do it myself?
Marché aux Puces, in Paris; Waterloo, in Amsterdam; Mauerpark, in Berlin; El Rastro, in Madrid, or Les Marolles, in Brussels. Second-hand fashion makes the leap from street stalls to powerful ecommerce platforms where image and data take center stage. Until now, brands had remained outside the circuit of second-hand fashion, but as the phenomenon grows, if others do business with my clothes, why not do it myself? In the United States, the second-hand clothing market generated revenues of $24 billion in 2018 and the volume is expected to reach $51 billion in 2023. The current figure that moves second-hand clothes in the US market is still below that of conventional business, but while the former advances to an average of 16% per year, the latter does so at a weak 3%. These data and the buying behavior of younger generations are making more and more fashion giants take positions and groups like H&M to enter a segment that companies like Rent the Runway have long taken advantage of. At the same time, the rental or subscription formula also begins to be attractive to conventional retailers. Urban Outfitters, Nike or Gap have started testing this business. Anyway, it remains to be seen if, on the one hand, the second hand will end up imposing itself equally throughout the world and, on the other, if it is related only to the precariousness of the economy.
Goodbye to the white, blonde and thin woman
The exaggerated curves of Kim Kardashian. The gender identity of RuPaul. The models Ashley Graham and Tess Holliday. Or the five black women that have been made in 2019 with the crowns of Miss Universe, Miss World, Miss USA, Miss Teen USA and Miss America. The aesthetic and identity canons begin to change in the hands of the younger generations, who reject the strict norms that have marked the previous generations and demand more and more inclusive brands. A look at the pop star Beyoncé's Instagram is enough to see how her curves have accentuated over the years, while Kim Kardashian has superseded Spanx with her Skims girdles, with which she sold more than two million dollars in just seconds of the launch. The cosmetics sector has long opted for that of real beauty (with brands such as Dove as the main exponent) and now fashion takes positions. However, for the moment only the younger brands capitalize on this trend, perhaps because they do not see it as a passing movement, but as the basis of their DNA. From the lingerie of Savage x Fenty promoted by the singer Rihanna to the fashion of Universal Standard, which has seen its model endorsed in financing rounds for more than seven million dollars. And if not, ask Victoria’s Secret.
Ten companies to consider
In a moment of transformation and accelerated change, perhaps the easiest thing is always to look at the leader, even if that probably means being late. Beyond the steps, always safe, given by the Spanish giant Inditex, a large number of companies deserve to be followed closely throughout 2020. For the good and also for the bad. Among the giants of the great fashion distribution, H&M has already been doing several exercises playing trial-error with small exercises in areas ranging from the store to sizes or personalization: better be attentive, in case you finally hit the right key. At the opposite extreme, Gap: the once number one of the great fashion distribution goes through one of the most complex moments in its history, without a captain and without a defined model. It is also at a Victoria’s Secret crossroads, affected by the change in consumption patterns and with its main marketing tool, the parade, questioned: how will the American group recover its wings? Being a giant does not mean standing, rather the opposite. And if not you can ask LVMH, which in 2019 has hit the bell with the purchase of Tiffany, has accelerated in sustainability with the acquisition of Stella McCartney and has dared to even launch a brand from scratch by the hand of Rihanna.
In 2020, will Bernard Arnault be calm or preserve its mobility? Two industrial groups also deserve to be watched closely: on the one hand, Lenzing and all its developments in the field of sustainability, and, on the other, the Asian power of Shandong Ruyi and ambitious acquisitions such as Invista for 2,000 million dollars. And, among the newcomers in the sector, Universal Standard, Boohoo and Rent the Runway. While the first has taken advantage of the inclusivity in the carving and has attracted investors like Natalie Massenet, the second has taken Asos the crown of fashion ecommerce and the third has managed to surpass the billion dollars of valuation with the rent of clothing, seducing more and more public figures. And, of course, Reformation, as a great champion of sustainability, the trend that is and promises to transform a business as historic as fashion.