Fashion: the opportunities of digitization and verticalization

The fashion trade is the largest and fastest-growing segment in online retailing. In recent years, it has undergone fundamental structural change worldwide. Intense verticalization and the inexorable advance of online retailing have radically changed the competitive landscape. 

Companies in the sector grow primarily by expanding their own store space and ousting competitors. Margins are under pressure, both for manufacturers and wholesalers. And the influx of international chains into the European markets continues unabated. Other challenges include rising procurement costs due to increases in cotton prices and wages in the manufacturing countries, falling capacities in China and the resulting relocation of manufacturing activities to other countries, as well as the growing importance of sustainability. Collection cycles are being adapted to the purchasing behavior of the customer groups and are becoming ever shorter. In addition, verticalization is transforming cooperation between retailers and manufacturers: suppliers and customers are becoming competitors while manufacturers continue to step up their direct sales activities, not only by expanding their retail outlets but also through online channels.

But the strategy of store expansion is not effective for the long term. The prime locations have all been taken; there are fewer and fewer empty spaces on the map; and, most importantly, consumers’ purchasing behavior is changing radically. Another factor is the sharp growth in the online segment: new offerings, such as customized shoes that customers can design online or made-to-measure shirts and suits on the Internet are successful new business models that resonate with the younger generations in particular.

This raises the question of new sales opportunities, especially in the online segment. How can omnichannel business function successfully? What are the technological requirements for providing digital customers with outstanding levels of service while ensuring meticulous handling of online processes in the background? What new solutions can be deployed to secure customer loyalty, and what role can apps and smartphones play? What will the store of the future look like?

Fashion companies have to strategically assess and hone their core competencies and implement innovative concepts:

  • The strengths of brick-and-mortar retailing must be realigned and leveraged.
  • All sales channels must be integrated into the omnichannel.
  • The focus must be on the customer’s brand experience and personal shopping experience across all channels.
  • Operational processes must be optimized.

If companies are to integrate and leverage the options offered by all sales channels and engage personally with customers, they have to holistically consider the three levels of strategy, process, and technology. Operational excellence is another area that can be examined and achieved only in this context. The key to successfully implementing innovative new omnichannel concepts lies in understanding the complexity of the processes and dependent technologies – and in the ability to rapidly translate this understanding into action.

KPS is the preferred consulting partner of leading companies in the sector. KPS Rapid-Transformation® is built on the expertise of KPS consultants and on a rigorous and proven transformation methodology. It takes expert knowledge to understand the complex issues in the fashion sector – from business product development to inventory management in retailing – and the complex interdependencies between organization, processes, and IT infrastructure that these give rise to. KPS has more than 200 fashion specialists who tackle these tasks every day to deliver benefits to their customers.