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. In our experience, three core principles are the most relevant: These enablers shouldn’t become causes for delay. The value of information and analytics will therefore grow. Digital transformation is the means by which companies effect organisational change, manage reputational risks and close the gaps between customers’ expectations and the service and experience they receive. A misaligned or generic digital offering may actually widen the digital divide and even pose a threat to brand and reputation. Furthermore, the panel highlighted the implication of new material technologies towards market applications. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. hereLearn more about cookies, Opens in new 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. Deloitte AG is an affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). Please try again later. Today, dressing rooms enhanced with augmented reality and social media features have … 1 Press enter to select and open the results on a new page. Digital and analytics can not only drive top-line growth but also significantly improve speed, cost, flexibility, and sustainability across the supply chain. Rather, they should follow the same agile timelines and sprints as the core initiatives. The disruption in textile and apparel industry triggered by digital transformation or industry 4.0, it is very likely that the RMG industry will undergo profound changes over the next few years. A clear road map and prioritization of initiatives, combining actions that help set up the enablers for the organization with the implementation of use cases that generate quick wins. This is an ongoing, ever … DTTL and Deloitte NSE LLP do not provide services to clients. For instance, entice the highest spenders with special incentives (such as triple loyalty points for purchases of at least $1,000), target customers These are all essential ingredients of the ultimate digital challenge for fashion companies – an entire change in organisational culture that puts the consumer at its head. Equally important, companies should avoid “gold plating,” aiming instead for the fastest minimum viable digital solution that will achieve the business goal. Create a prioritized use-case road map and a technology-investment plan. 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). Digitization of support functions is another key lever for improving efficiency. The COVID-19 pandemic is simultaneously an unprecedented health crisis and a global economic shock. Reinvent your business. However, if they lead with empathy and undertake bold actions in digital and analytics—particularly around e-commerce, data-driven stock management, and digitization of key functions—we believe they can not only endure the crisis but also build competitive advantage and strengthen their business for an omnichannel, digital-centered next normal. Explore how with our latest insights. Amid the pandemic, the apparel, fashion, and luxury (AF&L) industry has moved quickly to address urgent public-health needs—closing stores, manufacturing much-needed items such as face masks and hand sanitizer, and making donations to healthcare and community organizations. 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. 2 We recommend a zero-based budgeting approach instead. Use digital channels to launch genuine, purpose-driven communications regarding health, safety, business continuity, and community building. Deloitte AG is an affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). 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. Flip the odds. Agile techniques enable companies to release MVPs into the marketplace quickly and refine them iteratively based on consumer feedback. We use cookies essential for this site to function well. Digital is not only an increasingly important sales channel; it can also help companies adapt cost structures and make each step of the value chain better, faster, and cheaper. Many fashion brands take a fragmented approach to digital transformation, focusing on digitising processes or isolated functions. In China, the return of offline traffic has been gradual, with 74 percent of Chinese consumers saying they avoided shopping malls in the two weeks after stores reopened. However, reducing all budget lines across the board is risky. Any digital manifestation of the brand – from social platforms to third party distributors – needs to go hand in hand with redefined brand values and must be tailored to the needs of the consumer. 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 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. Our consumer-sentiment surveys, conducted in April, show declines in purchase intent of 70 to The past several weeks have shown that it’s possible to do much more on this front than some in the industry initially thought. 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. Legacy businesses with analogue systems and processes are judged by these new standards, and find themselves obsolete and outdated in comparison. They are no longer content with simply buying fashion products; exponential growth in the use of digital technologies has empowered them. Exhibit 6 shows high-impact use cases in each of these three areas. Digital upends old models. Many fashion brands take a fragmented approach to digital transformation, focusing on digitising processes or isolated functions. 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. tab. Although no one in the industry foresaw the intensity of this crisis, some fashion companies are finding that they are better equipped than others—largely because of their digital know-how. 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. It can take many years to build a successful brand, but only a short time to destroy it. 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). 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. E-commerce is clearly not offsetting the sales declines in stores. 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. 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. WhatsApp Disappearing Messages feature now available in India . Digital and analytics leaders (companies in which online sales account for 30 to 40 percent of total sales, parts of the value chain are significantly digitized, and online and offline channels are integrated to some degree) have an advantage today but could quickly lose it if other players accelerate their transformation. Companies’ RFID investments typically yield operations simplifications and service-level improvements. Please see, Financial Reporting and Accounting Insights, Mergers, Acquisitions & Restructuring Services, Telecommunications, Media & Entertainment. 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, Today, dressing rooms enhanced with  augmented reality  and social media features have … WhichPLM is examining digital transformation in the fashion industry. In this industry, a main difficulty is that products go out of … Physical distancing could continue, making consumers less likely to visit brick-and-mortar stores, and a contact-free economy could emerge—raising e-commerce and automation to a new level. Whilst the shift towards omni-channel is real and growing, the vast majority of fashion revenues are still driven by offline, physical channels. 5 digital trends transforming the fashion industry Fashion’s a fast-paced industry — but some brands have been slow to embrace the power of digital technology. Design and build out pragmatic data governance focused on enabling business value by helping to ensure data breadth, depth, and quality. For instance, some leading companies are using radio-frequency identification (RFID) to track products more precisely and reduce in-store merchandising manipulation. The accelerating progression of technology and its fast-paced uptake by consumers deserves a different level of priority for many fashion brands. 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. 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. Making all stock (even stock shortly arriving to warehouses) visible to customers in any channel has proved to boost sales. Here are five examples of how it’s actively shaping the future for designers and customers alike. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. Digital transformation is often restricted to individual programmes or projects that affect only a small number of departments. There’s no denying that the COVID-19 pandemic will make for a difficult 2020. 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. Build actionable microclusters based on customer behavior. At the same time, AF&L companies are grappling with COVID-19’s business ramifications, including widespread job losses in an industry that provides livelihoods for millions of people worldwide. DTTL and Deloitte NSE LLP do not provide services to clients. A focus on getting to a minimum viable product (MVP) within two to three months—a rapid timeline that allows the company to iterate while generating value, avoiding large up-front investments. In this article, we touch on COVID-19’s impact on the AF&L industry to date. Please click "Accept" to help us improve its usefulness with additional cookies. our use of cookies, and Digitalisation has changed shopping habits, which in turn forces suppliers to adjust to constantly changing criteria. In the coming years, digital transformation innovations will help drive the next phase of advancements for the fashion, apparel, textile, and footwear industries. Retrain your look-alike models to capture value from the new consumer segments and behaviors that have emerged during the crisis. That said, digitization won’t be a panacea. DTTL and each of its member firms are legally separate and independent entities. Home; Clothing; Gadgets; Groceries; Living; Subscribe Us; Gadgets That All Music Lovers Should Consider Investing In. 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. 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. The fashion industry, ranging from global discount retailers to exclusive luxury brands, drives a significant part of the global economy. The customer’s data is the core component of digital transformation in the fashion industry. 10 Futuristic tech gadgets that will simply blow your mind. But in a world of increasing complexity and volatility, brands will need to balance growth aspirations and operational plans with the strategic risks they face. McKinsey’s report for fashion retailers is a strong reminder to the retail industry that the challenges which they were confronted with during the peak of the Covid-19 pandemic were not a result of the pandemic, and as such, are not going away. Think data from the start. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. The next steps in fashion digital transformation. Implementation should be pragmatic and clearly linked to value generation. 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. Retaining these kinds of employees will require AF&L companies to develop new talent processes—with tailored initiatives in recruiting, career growth, learning and development, and performance management—specifically for engineering and digital talent, similar to what many fashion players already do for designers and creative directors. However the rise of the global customer, operating across geographies and multiple channels, makes it harder for brands to understand their consumer base fully. 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. Strong support (or even direct sponsorship) from the CEO during the entire journey. The customer’s data is the core component of digital transformation in the fashion industry. The picture drafted clearly shows how digital transformation, properly driven, could reshape the fashion industry into a more sustainable and truly customer-driven business. This may be the impossible dream, but advances in clienteling – establishing long term relationships with customers based on their habits - are bringing the dream closer. The primary drivers for digital transformation are mostly either significant opportunities or existential threats. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. However, digital technology in the fashion industry is no trend. This means that becoming a digitally-savvy brand can no longer be considered a separate business. Several factors are contributing to this environment, such as: It is therefore essential that companies increase their vigilance – with brand and reputation being the most important commodities to protect. We strive to provide individuals with disabilities equal access to our website. Digital transformation is often restricted to individual programmes or projects that affect only a small number of departments. Continue only the projects that fall into those two categories; stop all others. Here’s the new Google Fit design and features coming to Wear OS. Digital transformation of fashion design and manufacturing is viewed as both an opportunity and a threat, depending on who you ask. The vast majority of consumers use digital channels before, during or after making their purchases. Companies without one can launch a basic online platform in 10 to 15 weeks. Learn more about cookies, Opens in new Subscribed to {PRACTICE_NAME} email alerts. Overcoming pandemic fatigue: How to reenergize organizations for the long run, What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries. Similarweb, April 19, 2020, similarweb.com. 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. 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). Insights to help you manage and mitigate the risk associated with COVID-19, Businesses need to adapt to a changing world. A range of savings levers—such as vendor renegotiations and tactical moves to the cloud—can help dramatically reduce your operating costs. This team also helps build the road map by scanning opportunities, allocating budgets, and coordinating implementation, ensuring that all efforts are focused on delivering tangible impact rather than gold plating. Whether it’s a personalized offer or outreach from a personal stylist, the best brands are maintaining customer relationships even while stores are closed. There are no more typical consumer segments, no more geographies, and no more one-size-fits-all solutions. 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. In response to the pressure for growth and cost efficiency, many brands have started a series of initiatives to improve their speed to market and to implement sustainable innovation in their core product design, manufacturing and supply chain processes. A fundamental challenge for many fashion brands is that, increasingly, they lag behind consumers’ expectations. Some of the larger players have even reduced their promotion intensity to be able to handle the volume of orders. Antonio Gonzalo is a partner in McKinsey’s Frankfurt office, Holger Harreis is a senior partner in the Düsseldorf office, Carlos Sanchez Altable is an associate partner in the Madrid office, and Cyrielle Villepelet is an associate partner in the Paris office. Reputational risk - protecting the brand in times of change, Digital transformation - getting it right. Digital and analytics leaders outperform their competitors in total returns to shareholders. Industry analysis & Market Report on Digital Transformation in Fashion is a syndicated market report, published as Global Digital Transformation in Fashion Market 2019. On the other hand, laggards (companies with less than 20 percent of total sales coming from the online channel, low digitization levels across the value chain, and siloed online and offline operating models) have an opportunity to make an “all in” bet on digital and analytics—and perhaps gain market share with smaller capital-expenditure investments, which used to be a limiting factor for many brands. 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. Thus, for executives in the AF&L sector and all related subsectors (such as beauty products and sporting goods), the imperative is clear: make digital and analytics a core element of your company’s strategy. The digital transformation is already underway; are you ready? Roger Lay is a digital strategy, transformation and marketing expert located in Switzerland with over 15 years of experience working in various industries and geographies. Establish a strong data culture and ethics. Although the situation remains uncertain and is evolving daily, there is a clear set of actions involving digital and analytics that AF&L players should implement now to keep the business going, stem sales losses, and plan the comeback. During the COVID-19 crisis, the digitization of product development has proved to be a competitive advantage. Some retailers have redeployed store personnel from closed stores to support online fulfillment or to assist consumers via digital call centers. For some AF&L companies, even survival may be a struggle. Roger leads the Marketing practice within Deloitte Digital in Switzerland. A company’s investments in developing advanced analytical tools to steer markdowns during the crisis will pay off almost immediately. For example, digitization can enable new logistics and sales-fulfillment options (such as click-and-collect and drive-through), fuel innovative ways of customer acquisition, and help predict and manage inventory to create a more resilient supply chain. After the crisis, financially stable companies may be able to attract top-notch digital talent, including in-demand profiles such as digital-marketing specialists, data scientists, data engineers, user-experience and user-interface designers, and software and data architects. 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. Something went wrong. So, hyper-personalization of mobile retail experiences will be huge in the near future. A central team to monitor value capture. The health and safety of employees and customers, of course, has been—and remains—the absolute priority. People create and sustain change. Build solid data foundations as part of every digital and analytics initiative in a way that allows rapid scaling and forward compatibility. Use minimal essential Digital transformation - getting it right. AF&L brands must therefore continue to communicate frequently with consumers, even if most consumers aren’t currently spending. Digital transformation is necessary to deal with sustainability pressures that currently face the fashion industry. So, hyper-personalization of mobile retail experiences will be huge in the near future. The industry is moving to digitally transform … Speed up the digitization of all support functions through robotic process automation and other leading-edge technologies. Select topics and stay current with our latest insights, Fashion’s digital transformation: Now or never. Typically, digital and analytics priorities can be categorized according to their place in the value chain: customer experience (front), distribution and supply chain (middle), and product development and support functions (back). It is now fundamental for fashion brands to redesign the entire consumer-brand relationship because there are no more standard consumer segments, no more geographic restrictions, and no more one-size-fits-all solutions. The fundamental enabler to all this will be data—the transparency, governance, and accuracy of which have never been more important. cookies, McKinsey_Website_Accessibility@mckinsey.com, launch a basic online platform in 10 to 15 weeks. With over 15 years of experience working mainly with global brands in the fashion and luxury industry, he specialises in helping large organisations drive innovation and in the definition and implementation of digital strategies. Fashion is one of the most challenging fields, highly impacted by global economic uncertainty as well as distinct trends and industrial changes. Seek to eliminate points of friction in every part of the online customer journey—for example, by improving your website’s search function and expanding your online assortment. Our flagship business publication has been defining and informing the senior-management agenda since 1964. They want to interact, belong, influence and be the brands from which they buy. 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. Digitisation in fashion - how is the industry changing? Fashion brands have no option but to become digitally-savvy in order to adapt to this digital transformation. Along with their impact on socio-economic models. McKinsey Chinese COVID-19 consumer-sentiment survey with field work March 21–23, 2020. The digital transformation in the fashion industry can be recognized in the supply chain and distribution as well. The customer’s data is the core component of digital transformation in the fashion industry. Sometimes it may even focus on just one area, such as Marketing or Sales – with limited or very slow returns. Staying in touch with your most loyal customers doesn’t just keep your brand on top of mind but also helps to boost sales. Today, dressing rooms enhanced with augmented reality and social media features have … Companies that have automated their finance processes—such as claims collection and financial reconciliation—have found that they’ve also increased the agility and accuracy of these processes while capturing significant synergies. If you decide to send consumers relevant content, be sure to do so in an appropriate and empathetic tone (for example, a global sports-apparel player now offers yoga lessons on Instagram). 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