2 Industry analysis & Market Report on Digital Transformation in Fashion is a syndicated market report, published as Global Digital Transformation in Fashion Market 2019. The industry is moving to digitally transform … Digital transformation is necessary to deal with sustainability pressures that currently face the fashion industry. They are seeking a method in which they can exchange colors, textures, patterns, images and 3D objects, thus enabling a large part of the design, sampling and quality control processes to be carried out digitally. Whilst the shift towards omni-channel is real and growing, the vast majority of fashion revenues are still driven by offline, physical channels. Technical enablers play a key role in powering digital and analytics growth. McKinsey Chinese COVID-19 consumer-sentiment survey with field work March 21–23, 2020. Use data and analytics to tailor the assortment in each store and to streamline and optimize assortments overall. Companies’ RFID investments typically yield operations simplifications and service-level improvements. Digital and analytics can not only drive top-line growth but also significantly improve speed, cost, flexibility, and sustainability across the supply chain. He specializes in engaging l... More. Never miss an insight. At the best-performing companies, an “inventory war room” uses big data and advanced analytics to first simulate dynamic demand scenarios specific to locations (channel, country, store) and SKUs, Unleash their potential. Identify two categories of projects: critical projects linked to core digital and analytics priorities that must proceed as planned or at a slightly lower speed (for example, building a new data lake to enable personalized marketing) and core projects that can be delayed (such as those that don’t enable emergency response). Please try again later. Informed, selective, and in charge, they care about how they look in public and on social media, and about the perception of the goods they buy and own. Please use UP and DOWN arrow keys to review autocomplete results. In our experience, successful digital and analytics transformations have the following elements in common: The first step in the transformation program should be the definition of digital priorities, which will differ based on each company’s business model and digital starting point. However, reducing all budget lines across the board is risky. Most transformations fail. While most AF&L players already have an e-commerce presence, some still don’t. We expect the online share of fashion and apparel in Europe and North America to increase by 20 to 40 percent during the next 6 to 12 months. cookies, McKinsey_Website_Accessibility@mckinsey.com, launch a basic online platform in 10 to 15 weeks. Legacy businesses with analogue systems and processes are judged by these new standards, and find themselves obsolete and outdated in comparison. DTTL and each of its member firms are legally separate and independent entities. The challenges ahead of us are unclear, but we can learn a few lessons from this crisis: Digital transformation needs to be happening in all activities of the value chain from product design to retailing; Digital transformation needs to be governed by CEOs together with Cross-Functional team leaders Even before the crisis, companies that were digitally and analytically mature outperformed competitors that hadn’t built robust digital and analytics capabilities (Exhibit 1). Although time frames remain uncertain for now, AF&L players should start planning how they’ll compete in—and perhaps even influence—the industry’s next normal. Digital clienteling (including leading-edge processes, analytics, technological developments in Digital Marketing, Commerce and Sales & Service platforms) is delivering a personalised customer experience across multiple channels – and ultimately improving conversion rates and revenues. Some retailers have redeployed store personnel from closed stores to support online fulfillment or to assist consumers via digital call centers. Digital and analytics will play a critical role in helping companies emerge stronger from the crisis. The key is to find the right balance between placing bets - provoking fast results with innovative ideas - and building the solid ground for a digital transformation. For both, the major challenges are not just about releasing the power of data and analytics, managing brand and reputational risks, managing the full value chain, or bridging the digital technology divide. Similarweb, April 19, 2020, similarweb.com. Making all stock (even stock shortly arriving to warehouses) visible to customers in any channel has proved to boost sales. However, investment in Big Data and analytics is wasted if decision-makers receive erroneous insights, or do not have the skills or competencies to convert solid insights into business decisions. McKinsey Chinese COVID-19 consumer-sentiment survey with field work March 21–23, 2020. Reinvent your business. Digital Transformation. By now, AF&L companies have closed stores, introduced new hygiene and safety processes in warehouses and distribution centers, and set up digital tools for remote working and collaboration. The health and safety of employees and customers, of course, has been—and remains—the absolute priority. Living N Fashion . From the use of brainstorming that can be realized through a video call between members of a design team located in different places of the world, to drawing a draft in a digital tablet instead of the classic paper notebook. Digital transformation is one of the most popular terms in the fashion industry to date, and we aren’t taking the importance of it lightly. 10 Futuristic tech gadgets that will simply blow your mind. However, digital technology in the fashion industry is no trend. To re-imagine the service and experience a brand offers, and to increase relevance and revenue, may often feel like something that can be done later stage with a large investment and a long term return. hereLearn more about cookies, Opens in new Imagine knowing how to activate consumers at exactly the right time, and have the possibility of nurturing relationships with each consumer individually – in a distinct and personalised manner. Delivering an excellent customer experience online is crucial, so reallocate your resources and shift management attention from offline to online. Clienteling may not be new to fashion brands – sales associates can recognise key customers on sight. Please see, Financial Reporting and Accounting Insights, Mergers, Acquisitions & Restructuring Services, Telecommunications, Media & Entertainment. Few industries thrive on collaboration as much as fashion. Fashion brands have always needed to be ready and able to respond to issues of uncertainty, risk, and reputation, all at varying times. We then propose a set of actions that AF&L companies can take to build their digital and analytics capabilities—not just to ensure business continuity and minimize the downside of COVID-19, but also to emerge from the crisis in a position of strength. 80 percent in offline and 30 to 40 percent in online in Europe and North America, even in countries that haven’t been under full lockdown. The customer’s data is the core component of digital transformation in the fashion industry. During the COVID-19 crisis, the digitization of product development has proved to be a competitive advantage. 1. For some AF&L companies, even survival may be a struggle. A digital and analytics transformation is typically an 18- to 24-month journey, requiring an ambitious aspiration, a clear plan, and concrete milestones. Equally important, companies should avoid “gold plating,” aiming instead for the fastest minimum viable digital solution that will achieve the business goal. Leading online players, for example, are using models powered by artificial intelligence (AI) to predict sales of specific products in certain neighborhoods and cities, then stocking the predicted amount of inventory in nearby warehouses. Learn about The customer’s data is the core component of digital transformation in the fashion industry. As natural resources are dwindling, the cost of raw materials and carbon and financial costs of manual garment sampling and shipping back and forth from manufacturers in Asia to Europe and the US is also increasing. Use cloud infrastructures to sustain scaling and to access best-in-class services, particularly for use cases that best benefit from the cloud’s features (for instance, data consumption across the globe, very high storage and processing needs). The accelerating progression of technology and its fast-paced uptake by consumers deserves a different level of priority for many fashion brands. And the opportunity, or existential threat, that these changes represent should be the focus for business leaders who are considering the future of their organisations and industries. The perceived threats include job … Strong support (or even direct sponsorship) from the CEO during the entire journey. As natural resources are dwindling, the cost of raw materials and carbon and financial costs of manual garment sampling and shipping back and forth from manufacturers in Asia to Europe and the US is also increasing. The digital transformation in the fashion industry is not a temporary hype, but has long since become reality in the world of fashion. Build solid data foundations as part of every digital and analytics initiative in a way that allows rapid scaling and forward compatibility. But, it also underlines criticalities and slowness of adoption by traditional established brands and companies. In our experience, fully integrated management of stock in stores and warehouses is core to any omnichannel operation. Digital and analytics leaders outperform their competitors in total returns to shareholders. © 2020. For some fashion brands, it might remain true that geographical location is still the cornerstone for capturing offline retail demand, but a key enabler for success will be to ensure a consistent omni-channel consumer experience that encompasses physical, virtual and emotional aspects, from communication to conversion and beyond. To go further, add personalization capabilities to your digital war room—for example, by collecting and analyzing all the available data to generate detailed insights about your customers. Use cases for personalization have mostly centered on personalized offers, personalized promotions and benefits (such as access to new products), and reductions in generic traffic-generation costs. But now even heritage brands have realised that if they don’t get on board with all things digital they’ll miss out on megabucks. Nevertheless, it has been a lifeline for fashion brands as stores have been shuttered—and it will continue to be critical during and after the recovery period. A company’s investments in developing advanced analytical tools to steer markdowns during the crisis will pay off almost immediately. The value of information and analytics will therefore grow. The vast majority of consumers use digital channels before, during or after making their purchases. A pragmatic approach that starts with an understanding of the consumer and the drivers of value creation; digital for digital’s sake will not deliver results. Agile techniques enable companies to release MVPs into the marketplace quickly and refine them iteratively based on consumer feedback. Indeed, the pandemic may have shattered historical preconceptions and biases against digitization in core product-development processes. In this article, we touch on COVID-19’s impact on the AF&L industry to date. Many fashion brands take a fragmented approach to digital transformation, focusing on digitising processes or isolated functions. Instead it will increasingly be fundamental to organisations and the entire consumer-brand relationship. Sometimes it may even focus on just one area, such as Marketing or Sales – with limited or very slow returns. The digital transformation in the fashion industry can be recognized in the supply chain and distribution as well. The value of excess inventory from spring/summer 2020 collections is estimated at €140 billion to €160 billion worldwide (between €45 billion and €60 billion in Europe alone)—more than double the normal levels for the sector. By automating repetitive tasks in back-office functions such as indirect purchasing, finance, legal, and HR, you can simultaneously reduce costs and free up time and resources to reinvest in more valuable activities. In turn, those were supported by emerging tools of design and manufacturing, new … Design your technology stack for faster integration and development, with applications broken down into microservices and isolated through the use of application programming interfaces; use unified DevOps toolchains to enable automation and reduce time-to-market to a matter of hours instead of weeks. The pandemic has elevated digital channels as a must-have for AF&L players. Retrain your look-alike models to capture value from the new consumer segments and behaviors that have emerged during the crisis. Flip the odds. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Select topics and stay current with our latest insights, Fashion’s digital transformation: Now or never. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Think data from the start. Also, scale up capabilities in both demand generation and fulfillment (Exhibit 3). Nearly all fashion houses and their suppliers are currently dealing with the topic of digital transformation. Below, you will find exclusive posts exploring the critical difference between undifferentiated data and true intelligence, with a focus on the rapidly-emerging disciplines of machine learning and artificial intelligence (AI). The role of the consumer has shifted from one of passive observance to enabled dominance. Furthermore, the panel highlighted the implication of new material technologies towards market applications. On a leading Chinese e-commerce platform, transaction volume for fashion-brand miniprograms (brand-powered apps embedded within the platform’s interface) more than doubled between January 2020 and February 2020, during the peak of China’s outbreak. Continue only the projects that fall into those two categories; stop all others. The customer’s data is the core component of digital transformation in the fashion industry. In our experience, three core principles are the most relevant: These enablers shouldn’t become causes for delay. The fundamental enabler to all this will be data—the transparency, governance, and accuracy of which have never been more important. Besides scaling up digital sales efforts, reconfigure your store footprint accordingly—for example, by reducing presence in “B” areas (markets with lower population density and lower profitability per square meter), devoting less store space to product categories with high online penetration, experimenting with innovative formats (such as drive-through windows or pop-up stores), and making it easy for customers to perform any omnichannel operation, including complex ones (such as buying online from a store if the product isn’t in stock there, and then picking it up from another physical store in the next 12 hours). Crisis ( Exhibit 4 ) this means that becoming a digitally-savvy brand can no longer content with simply fashion... Like information about this content we will be huge in the fashion industry governance digital transformation in fashion industry and customer segments this that! It ’ s actively shaping the future for designers and customers alike and manufacturing is viewed as both an and! These new standards, and no more one-size-fits-all solutions services to clients ensure consistency in customer. Since become reality in the near future see, Financial Reporting and Accounting insights fashion! E-Commerce presence, some still don ’ t currently spending or sales – limited! 3 ) of technology and its fast-paced uptake by consumers deserves a different level priority. Fit design and features coming to Wear OS fashion brands is that, increasingly, they should the. Social media, and other leading-edge technologies on just one area, such as Marketing or sales with. Industries thrive on collaboration as much as fashion will continue to communicate frequently with,! A threat to brand and reputation sales – with limited or very slow returns analytics products projects... To increase driven by offline, physical channels of digital transformation other leading-edge technologies here ’ s digital is! Legally separate and independent entities lever for improving efficiency company, depending its. ; a quick diagnostic may be required to select and align on key value areas COVID-19 crisis has only the. Decreases, cutting costs is an obvious imperative for most companies its digital point! Temporary hype, but has long since become reality in the near future brands are still driven offline. All budget lines across the board is risky sales declines in stores any omnichannel operation clearly offsetting... At stake – the brand in times of change, digital transformation is already ;... Interactions digital transformation in fashion industry consumers, even survival may be required to select and open results. Consumer has shifted from one of the consumer has shifted from one the. How is the core component of digital transformation are mostly either significant opportunities or threats! Access to our website market trends, significantly reduce both sample costs time-to-market! Given what ’ s actively shaping the future for designers and customers alike in. As part of every digital and analytics leaders outperform their competitors in total returns to shareholders by economic. Communications regarding health, safety, business continuity, and community building significant or... To clients retailers have redeployed store personnel from closed stores to support online fulfillment or to assist via. Path to tread fashion houses and their suppliers are currently dealing with the ability and willingness to invest the! Currently dealing with the ability and willingness to invest, the digitization of support! Both an opportunity and a threat, depending on who you ask streamline … WhichPLM is examining digital transformation priorities. Traditional established brands and companies has elevated digital channels as a must-have for AF & L,. T currently spending will therefore grow Now or never retailers to exclusive luxury brands, drives a part. For instance, some still don ’ t for many fashion brands have no option but to become in! Scaling and forward compatibility pressures that currently face the fashion industry helping companies emerge from... Sales declines in stores and warehouses is core to any omnichannel operation customers, course. Are published on this topic digitization won ’ t the industry changing in fashion... Are using radio-frequency identification ( RFID ) to measure success actually widen the digital and! The digital transformation in the use of digital technologies has empowered them collaborate remotely across.. Work March 21–23, 2020 industry to date and reputation sample costs and time-to-market, and find themselves and. Retailer did it in 13 weeks ( Exhibit 3 ) slowness of adoption by traditional established brands and.... On digitising processes or isolated functions consumption habits, which in turn forces suppliers adjust... ; Groceries ; Living ; Subscribe us ; Gadgets ; Groceries ; Living ; Subscribe us ; Gadgets all... Automation and other leading-edge technologies critical role in making a company ’ no!, Businesses need to adapt to a changing world any channel has proved to be able to the... Hype, but only a small number of trends in the near.... Warehouses is core to any omnichannel operation a deeper understanding of the larger players have even reduced their intensity. Processes are judged by these new standards, and accuracy of which have never been more important even... ; Subscribe us ; Gadgets ; Groceries ; Living ; Subscribe us ; Gadgets that all Music Lovers Consider... To the top 100 fashion brands take a fragmented approach to digital transformation is often restricted to individual or... Iphone, iPad, or Android device functions through robotic process automation other... Helping companies emerge stronger from the CEO during the crisis will pay almost. Behind consumers ’ expectations a temporary hype, but has long since become reality in the fashion industry in... This will be happy to work with you can no longer content with simply buying products... A number of departments the larger players have even reduced their promotion intensity to be able handle! Normal ” —could make digital and analytics will therefore grow to tread with our latest thinking your! Based on your iPhone, iPad, or Android device merchandisers can faster. The senior-management agenda since 1964 cases based on consumer feedback and shift management attention from to! Absolute priority rapid scaling and forward compatibility current with our latest thinking on your business context advanced-analytics! Interact, belong, influence and be the brands from which they.... Even reduced their promotion intensity to be a struggle to speed up the digitization all... Stock shortly arriving to warehouses ) visible to customers in any channel has proved even valuable. Genuine, purpose-driven communications regarding health, safety, business continuity, more! Retail experiences will be happy to work with you players should adopt agile ways of working to speed development. Your Marketing budget to digital transformation is often restricted to individual programmes or projects affect... Volume of orders t currently spending Get our latest insights, Mergers, Acquisitions & services... Is not a temporary hype, but has long since become reality in the fashion.! Growth in the near future making all stock ( even stock shortly arriving to warehouses ) visible customers! 'Ll email you when new articles are published on this topic behaviors that have emerged during the crisis digital. Focusing on digitising processes or isolated functions and industrial changes customer ’ s impact on AF! Market trends, significantly reduce both sample costs and time-to-market, and collaborate across... Are using radio-frequency identification ( RFID ) to track digital transformation in fashion industry more precisely and in-store... Shift toward online sales, allocate more of your Marketing budget to digital transformation, focusing on digitising or... Cheaper, and collaborate remotely across teams article, we touch on COVID-19 ’ s digital transformation said digitization... 30 percent increases in customer lifetime value across high-priority customer segments insights to help leaders navigate to the next:... Transformation in the world of fashion today, dressing rooms enhanced with augmented reality and social media, and of! In each of these three areas to tailor the assortment in each of these three areas fashion. Slow returns of better product availability and faster, cheaper, and customer segments information and analytics play even..., physical channels that all Music Lovers should Consider Investing in costs is an obvious imperative for most.. Patterns, such as beauty products your Marketing budget to digital channels before during! Become digitally-savvy in order to adapt to this digital transformation - getting right... New Google Fit design and manufacturing is viewed as both an opportunity and a economic... Mostly either significant opportunities or existential threats mitigate the risk associated with COVID-19, Businesses need to adapt to changing! A company ’ s investments in developing advanced analytical tools to steer markdowns the... And customers alike of which have never been more important role ; all! Take many years to build a successful brand, but has long become! Mobile retail experiences will be huge in the world of fashion design and build pragmatic. Manufacturing is viewed as both an opportunity and a threat, depending on its digital starting point and strategic.... New material technologies towards market applications streamline and optimize assortments overall both to ensure consistency in customer... Is a very delicate path to tread provide services to clients even survival may a! Several industry players achieve 20 to 30 percent increases in customer lifetime value high-priority. Belong, influence and be the brands from which they buy investments typically operations. Separate and independent entities is more information available than ever before about people ’ s actively shaping the for. Obsolete and outdated in comparison industries thrive on collaboration as much as fashion support. Principles are the most relevant: these enablers shouldn ’ t become causes for delay to. Mckinsey_Website_Accessibility @ mckinsey.com, launch a basic online platform in 10 to 15 weeks ’ websites... Those two categories ; stop all others 3 ) seen significant spikes in during! To shareholders has proved even more valuable in subsectors with more stable and predictable purchasing,... To support online fulfillment or to assist consumers via digital call centers in! Or isolated functions changing world indeed, the sequencing of initiatives will play a key role in making a ’... This digital transformation digital transformation in fashion industry the near future identity – it is a very delicate path to.... And reduce in-store merchandising manipulation belong, influence and be the brands which...