Fashion Retail: Weathering the COVID-19 storm through Innovation
As the world shifts its stance from denial a few weeks ago to now wartime strategies of minimizing losses, one thing has become clear- the near future is going to be challenging (euphemistically). Although COVID-19 is a major healthcare pandemic, it is turning into a cataclysmic economic apocalypse. While its epicenter revolves around the industries like Travel & Tourism, the resulting tsunami is sure to cause unprecedented wreckage across the non-essential retail industries.
However, let’s not be prognostic but pragmatic about what lies ahead of us. As evident from the recent data, this virus is especially geronto-centric and can be lethal to those with a weak immune system, while remaining mildly symptomatic or harmless to younger hosts. We can use the same analogy to determine the plight of current organizations.
Every firm will reach its strategic inflection point soon and those lacking agility to transform with the fast-changing context are bound to perish.
Based on my decade long experience of managing & expanding retail brands across different geographies, the thoughts presented in this article are centered around Fashion and footwear retail. With the use of the 4Ps framework of innovation, we will evaluate the ammunitions available with Fashion retail players to weather this storm.
With markets and malls closed, people restricted to their homes and uncertain about the next paycheque, buying a new pair of denim is the last thing bothering them. This crisis is bound to re-classify the discretionary spend from the essentials. What could possibly justify buying 64 pieces of clothing by an average American in a year in this “work from home” society, unless of course, you are a Tiktok sensation?
In the short run, the revenue is 60–80% off budgets and there is a huge pile of seasonal stocks getting older by the day, which will require to be burnt down. And then there are rents to be paid, salaries to be given and worse, the interests on past investments. Most companies with deep pockets will be able to absorb these shocks by rationalizing resources, shutting a few stores, maintaining lean operations and halting all the capital expenditure until “normal” times arrive.
However, the normalcy seems a distant dream and we will rather witness the much talked about “new normal”.
The economic activities might resume their present stage, but the distribution of consumer spending might be altered permanently. This calls for an urgent sitting down of CXOs with the drawing board. Targeting Innovation is no more a desired intervention but a survival prerequisite. This innovation can be targeted in 4 main ways:
P1- innovation to define or redefine the dominant paradigm of the firm;
P2- innovation to introduce new or improve existing product & services;
P3- innovation to introduce or improve processes;
P4- innovation to define/redefine the positioning of the firms or products;
Innovation of Paradigm -
It is the collective mindset of the organization and the present change in the context necessitates a new paradigm. It involves self-reflection and discourse at the level which is deep and potentially trans-mutational. The innovation can be inner-directed like rearranging organization values or people management policies. It’s high time that we move from a product-centric model to customer-centric which will further require restructuring and multi-tasking at all levels.
Few examples in fashion retail context are:
1. Reorganizing the brand team based on customer types rather than product categories making the organization less bureaucratic and coherent to customer
2. Changing the KPIs to include customer-centric variables and not just sales and margins. The buying team should equally be responsible for the LTV and churn rate as the operations team.
3. Digital transformation- It’s not just about upgrading some software but a whole new way of doing things. Every step, every process and every resource in the existing supply chain should be critically examined and reinvented for the future. Thus, setting up a central information system will get rid of duplication and remove all the data custodians. Upskilling existing managers in program management and data science will further add to the overall agility.
Talking about the outward approach, the discussion should be around the efficacy of the existing business model to provide and sustain a competitive advantage in the future. Simply put, a fashion retailer is in the business of making merchandise available that its customer wants for which it charges a price. Earlier we had no clue as to what customer wants but with the advent of advance data sciences, firms know more and more about their customers, and there is a race to capture every penny coming out of their pocket.
This brings us to another debate — online vs offline. Industry experts now say it is a thing of the past. Customers don’t differentiate a brand as an online or offline, and neither should firms. They should always know what they are good at — be it the price, assortment, fashion or reach and for which customers. Any single firm cannot be good at all things, but once they are better than their competitors, that element should become the core of their business model. Thus, companies should identify the core and get rid of the extra fat.
Innovation in Product-
Just as FMCG, fashion retail has been around for centuries and has witnessed continuous product development in the material used, fits, styles, inspirations, and themes. The customer is literally spoilt for choice. However not everyone sits on a sewing machine, in fact, a minuscule number of retailers actually have designers and do product R&D. Everyone else has buyers who are assigned the task of gauging the upcoming trends and procure the merchandise from agents/suppliers/manufacturers located in China, India, Bangladesh, etc. accordingly. Thus, any upcoming trend, be it a choker, onesie or yoga-pants quickly become available everywhere in a matter of few months if not weeks.
One of the narratives which is likely emerging after this pandemic is the fall of fast fashion.
This follows the growing awareness as more and more people are getting sensationalized by the kind of environmental damage being done by the fast- fashion industry. Customers will be inclined towards brands and products which are more responsible, comfortable and versatile in use. These trends we can conclude from the rise of sneakers, joggers, and new-age workplace filled with employees and founders wearing shorts and Tees.
“RaaS-Retail as a service” as a business model is also likely to rise where the firm takes responsibility for its client’s clothing needs. Rental service, 3-d stitching, sensor fitted clothing, etc. are some of the latest advancements in products, however, the key is to first finalize the business model and check the product fit.
Innovation in Process -
Today’s retail operation needs a complete overhaul. Most of the processes are at least a decade old and product-centric. Hence, it becomes a million-dollar investment for a big company to offer “click and collect” service while the same service is by far a norm in any “garage-startups”. The term “digitally native” is the key to understand here. Not every company has an appetite or capability to undergo a complete digital transformation. However, efforts in this direction can be a matter of survival. Especially with startups swarming up in the market and willing to lose millions per day, providing superior customer service and at a better price it is key each organization undergo process transformation.
And not just that, with the process becoming complex confluence of men and machine; new age managers need to be more of a program manager rather than the manager of hierarchies.
Another area to look at is the amount of outsourcing that happens in terms of customer insights, data analytics, digital marketing, IT support, etc. While these are necessary, holistic redesigning of these processes could cut down costs drastically.
Innovation in Positioning -
Retailers have aced the field of marketing and remain the champions of brand management. However, conventionally the positioning was mostly broad and product-centric.
In the age of social media, the customer segment has reduced to an individual.
Thus, every retailer should position itself uniquely to its customers. For example, the brand could market itself as a go-to place for all new-born clothes for customer A by sending a congratulations message to the new parent and giving a 10% discount on their childbirth. And the same brand can aspire to become a formal clothing destination for customer B by engaging her on Linkedin.
It is said that when the going gets tough, the tough get going. Let’s get that Vitamin C booster shot and crank up the immunity-innovation capabilities of the retail industry. Storms teach trees to be flexible and rooted. This storm of COVID-19 too shall pass, but it is up to us as to how we come out on the other side. Innovation can no longer be outsourced but should be practiced by each of the professional every single day. It is now or never and industrious application 4Ps of innovation is the need of the hour.
Let us rethink, reload and rekindle our organizations.