The fashion industry as a whole is in a state of flux. In a recent article dubbed “The Death of Clothing”, Bloomberg outlined how Western consumers are spending less on clothing, with e-commerce taking an increasingly greater chunk of the market share. H&M reported a 33% drop in fourth quarter profit in 2017, and last year they closed the most brick and mortar stores in two decades. The two American retail giants Abercrombie & Fitch and Gap are also struggling — the former has closed 20% of its stores since 2013, and the latter announced in September 2017 that it will be closing 200 stores. The big retailers are suffering, and companies with a greater understanding of the digital age are taking their place.
Amazon is obviously one of these companies. After having swallowed massive markets such as books and consumer electronics, Amazon is now turning its gaze to the world of fashion. In 2017, they hired both the former chief executive of Victoria’s Secret and the former head of PR for Vogue, and by the end of the year they had eight fashion brands under their name. The launch of Amazon’s Prime Wardrobe Service (allowing customers to try on clothes at home before purchasing them), immediately led to a decrease in the share prices of department stores like Macy’s and Nordstrom. The efficiency of Amazon’s distribution and delivery service is one of the factors that is giving them the edge over traditional retailers. Offering frictionless fulfilment is key, and on Amazon Prime, customers are guaranteed free next day delivery.
But Amazon do not only want to help you get your perfect weekend outfit in time. With the new Echo Look, they want to help you style it as well. The Echo Look turns the Alexa voice assistant into your personal stylist, featuring a voice-activated camera that snaps photos of you posing in your favourite outfits. The accompanying app has a “Style Check” feature that uses Artificial Intelligence to pick an outfit that both suits your “unique look” and is in tune with the latest trends. With a catalogue of data on what its users are wearing on a daily basis, one can imagine that the Echo Look soon will be able to recommend that perfect summer jacket you have been looking all over for…
Fashion retailers wanting to stay afloat in the post-Amazon world of fashion retailing will either have to join Amazon’s e-commerce platform or innovate. Big brands like Nike, Adidas and Tommy Hilfiger have opted for the former and have started selling their clothing on the Amazon website. But there are some innovators in the sector as well — ASOS and Zara offer inspiring examples.
For ASOS UK, 80% of traffic and 70% of conversions happen on mobile — their CEO Nick Beyton has admitted that it’s a space where they need to innovate. The company targets young millennials through a wide range of digital advertising, from pushing personalised ads based on past behaviour to employing an army of influencers on Instagram. ASOS have also taken advantage of the latest advances in AI and image recognition to allow customers to easily find the exact item they want on their e-commerce site. Customers can upload photos (their own, or screenshots of their favorite Instagram fashionista), and the ASOS image recognition algorithm will return with similar items to the ones in said photos (video). ASOS reported a 145% increase in profits in 2017 and with initiatives like visual search, this could increase further. Data from BloomReach shows that visual search users view 48% more products, are 75% more likely to make a return visit and place 9% more valuable orders.
Smartphones have changed the way we behave in retail outlets. According to research on Millenials by Accenture, 85% use their phones in store for assistance on a purchase. “Showrooming” — looking at items in at a nearby store and then buying them online on your smartphone — has increased 41% over the last year. High Street fashion brand Zara has reacted to this behaviour in a number of ways. Its latest concept store in London is an “online only” showroom, where customers can try on clothing, and immediately shop it online using their phone. In addition, the clothing pieces in the store feature RFID technology, which when taken to a changing room will send matching items to the shopper’s smartphone. Zara have leveraged the same RFID technology to create self-checkout counters where shoppers don’t even have to take the items out of their basket. In a previous edition of H! Lites, we have written about how Zara has been using the latest advancements in Augmented Reality to create a truly unique shopping experience for in-store smartphone users. With initiatives like these, consumer expectations for immersive and frictionless in-store experiences will rise. Zara is upping the ante and it is up to other retailers to respond.
To finish off, let’s turn our heads to China, to see what fashion retail looks like in a country that has truly embraced the digital age.
The prevalence of e-commerce in China has meant that shopping has gone from a trip to the mall with friends, to a somewhat lonely interaction with your phone. The Chinese startup Pinduoduo have managed bridge this gap, by making shopping on your smartphone hyper-social. Fashion items on Pinduoduo feature group-buying bargains — the more friends you can convince to buy the same item as you, the cheaper it will become for all of you. For example, a pair of jeans on Pinduoduo will cost you 50 RMB ($8) if you buy them alone, but if you convince your friend to buy them too, the price goes down 30 RMB ($4.7). To achieve frictionless viral growth, Pinduoduo allow users to send invitations via WeChat — an app with 80% penetration in the country. The invited user can download the Pinduoduo mini-app inside the WeChat application, and take part in the deal almost immediately. The startup, founded by a former Google Engineer, has a rapidly growing active user base of 114 million — a true testament the the power of frictionless referral schemes.
Farfetch, a British luxury e-tailer, are also treating the Chinese market as an important source of inspiration. Last year, Farfetch signed a $400m deal to partner up with JD.com, the Chinese equivalent of Amazon, to develop new methods for reaching out to the luxury fashion market. Insights from one of China’s leaders in AI research (JD.com just announced a $4.5bn research facility), will definitely help Farfetch in their endeavour to create what they have dubbed “The Store of the Future”. CEO Jose Neves describes this concept as “an operating system for a shop” — a platform that would drastically improve retail productivity by analysing live customer data and enhancing the interaction between shoppers and sales assistants. E-commerce platforms are becoming increasingly tailored to the shopper’s personal preferences and purchases, and the “The Store of The Future” aims to replicate this in physical stores.
Fashion retailers need to have a digital strategy that focuses both on frictionless e-commerce and provides users with an enhanced and more engaging in-store experience. The tools are there for anyone to use: Amazon’s Alexa Skills Kit allow third party developers to create skills for their voice assistant; Apple’s ARkit enables the creation of stunning Augmented Reality apps; and with Google’s ML Kit, we can leverage Google’s Machine Learning expertise to build ‘AI’ into our apps.
Retailers, the opportunities are there for anyone to build the future of fashion retail. If you won’t, someone else will.