Digital Transformation Guide for the Fashion Industry
This article will cover: when ecommerce becomes essential; 5 things your website needs – and VTEX can provide; the beauty of omnichannel; marketplaces, the trend that is here to stay; the runway is collaborative.
The coronavirus pandemic has plagued the world since the beginning of 2020, affecting both people and businesses. Most importantly, however, the pandemic shows no signs of stopping any time soon. Implicitly, an “improvise, adapt, overcome” mindset is crucial for the survival of businesses.
Specifically for the fashion industry, a segment already in hot waters due to slowing growth, tariff disputes, and recession risks, the implications are numerous and worrisome. Nationwide lockdowns have forced physical stores to temporarily shut their doors, leaving those without online sales channels completely unprotected. The uncertain fate of struggling giants like Debenhams, Oasis, J.C. Penney and Neiman Marcus has signaled perhaps another “retail apocalypse”, threatening the future of high street retail unlike ever before. In the US alone, over 25,000 stores are expected to close in 2020.
The health crisis has caused disruptions in the fashion supply chain, with many manufacturing hubs and fulfillment centres ceasing or slowing down operations. Thus, a vicious cycle has emerged: last season’s stock is piling up, whereas the next season’s inventory is suffering delays.
To top it all off, the macroeconomic environment does not look promising: the World Bank expects the global economy to plunge into the worst recession since WW2. Coupled with a myriad of redundancies, salary cuts, and the rise of furlough, people have become less inclined to spend their money on clothing. According to the official US census (May 2020), demand for clothing has plummeted by 62.4% in the US and by 50.5% in the UK compared to 2019 figures. A so-called “quarantine for consumption” has materialised and, if Vogue editor-in-chief Anna Wintour’s forecasts are correct, this phenomenon is bound to trigger long-term shifts in consumer behaviour.
These are only some of the factors burdening the industry that in 2019 generated $2.5 trillion USD in global annual revenues. While the situation might look like doom and gloom, digitalization and innovation in a timely manner can pave the way forward. Industry experts have stated that “in troubled times, fortune favours the bold” and we, as visionary platform-providers, could not agree more. Read on for an overview of current and future challenges of the fashion industry and the solutions VTEX proposes. Be bold with us, safely navigate these unprecedented times, and then soar to new heights.
When ecommerce becomes essential
Fashion retailers without a digital channel were completely caught off-guard when governments imposed social distancing rules at the height of the pandemic. The age of coronavirus has highlighted pre-existing hazards, such as the catastrophic combination of high rents and low foot traffic, leaving traditional retailers without an emergency exit – namely, an alternate revenue stream. Studies show that only two months of closure will leave 80% of fashion companies in financial distress, forecasting how the record-high 2019 figures of permanent store closures will be dwarfed by those of 2020. Thus, much like an investor diversifies their portfolio, having an additional sales channel can provide a cushion against this sort of risk. And with limited physical shopping experiences, what other way to go than online?
Advances in technology, coupled with the shift in consumer behaviour, have led to the growth of online channels for retailers. The global spread of the Internet has gradually introduced ecommerce to the masses, whereas Millennials and Generation Z have hyped up online shopping due to its accessibility, diversity, and convenience. Last but not least, the rise of mobile websites and apps has propelled ecommerce maturity to new levels thanks to the new sales channels that appeared on the horizon: more than one third of ecommerce sales have been driven by the use of smartphones in 2019.
According to Statista, total market revenue originating in online sales grew with 5% in a 2-year period, from 2017 to 2019. The gamechanger year of 2020 has only accelerated the positive trend: customers have been stuck indoors with no other option than to order online. For instance, 13% of European consumers have browsed online retailers for the first time. Consequently, digital players have benefited tremendously. In the second week of July, online spending was up 68% YoY. What is more, they will continue to reap the rewards until the health crisis is managed, for ecommerce presents itself as the safer option to do shopping even if brick-and-mortar stores are open.
However, we are not suggesting you should invest in ecommerce and forget about traditional retail. After all, 80% of fashion industry sales usually happen inside the physical store, as nothing beats the customer experience: trying clothes on, getting personalized advice from sales associates, perusing the aisles to the rhythm of carefully-curated playlists. Shopping for clothes and accessories is not only about acquiring a commodity, it’s about fulfilling a desire to be part of a tribe while simultaneously expressing your individuality. The tactile experience of trying on clothes and immersing yourself in the brand will ensure the survival of the physical store. Even pure play digital fashion retailers and marketplaces open showrooms, whether pop-up or permanent. Despite projected growth rates of ecommerce, the bulk of the sales will remain inside the store.
Now, if physical sales are so powerful and you prefer focusing on capturing those, you might wonder why you need a digital channel. Short answer: the customer. The customer appreciates having the option to browse, compare and order items online, despite favouring to shop on premises. In fact, 90% of shoppers start their product search online. The flexibility of multiple channels is the key towards the future of the fashion industry.
So yes, the inescapable truth is that digital commerce is imperative and the longer you go without it, the more you suffer. Thankfully, VTEX, with its stellar time-to-revenue, can get your ecommerce website up-and-running in as little as 10 days. Your shiny new virtual home will be auto-updated and fully-scalable, ensuring a low TCO and readiness for the sale season and big retail events. Our full commitment to support your business is guaranteed by the platform’s multi-tenant architecture: only your success is our success. So let’s be bold.
5 Things Your Website Needs – and VTEX can provide
In the fashion industry, the winning formula is a combination of brand building and sales, with the customer’s experience reigning supreme. Personalization, improved usability, reduced loading time, a stunning front-end, surprise and delight elements – they all matter. But now’s not the time to test and learn strategies, it’s time to act. So here’s a breakdown of 5 things your website definitely needs today, but also tomorrow.
1. A powerful Order Management System
Your online business needs an OMS that is flexible and efficient, supporting the order lifecycle end-to-end. It needs to account for human error, be secure and stable, and provide you valuable insights about consumer behaviour. Oftentimes, the OMS is an add-on to your ecommerce platform, costing you money that you could have spent elsewhere. But not VTEX!
The VTEX OMS is fully integrated into the VTEX Commerce Cloud platform. It centralizes all your data on products, inventory, fulfilment and then allows you to change the order value, replace items, cancel orders, fulfill a partial refund, among many others. Get a clear overview of all your orders and then streamline your operations.
2. A marvelous Site Editor
Channeling the superior physical store experience is no easy feat, so your website needs to offer a top-notch UX. In the wild jungle that is the fashion industry, you also need a differentiator from your competitors.
With the VTEX Site Editor, you can edit your front-end without any coding expertise. Manage all content at the CMS level and easily design different store-fronts in different languages. Also, be able to create a runway experience by developing product pages with movement and sound through dynamic banners – the future is video and the future is now. What’s more, with the possibility of running A/B testing, the world is your oyster.
3. An innovative Checkout
Did you know that 75% of customers do not finalize their purchase? Of course, there are multiple reasons for shopping cart abandonment, including unexpected shipping times and costs, additional taxes or even just buyer remorse, but sometimes the checkout process itself hinders sale completion. For instance, 22% dropped out because they had to create a new user account, 15% because of security concerns, and 9% because the checkout was too long and confusing. What’s more, shopping impulses come and go, and so do the funds needed to place the order, which is why 17% of customers abandon their cart for “later”.
Fight shopping cart abandonment with the VTEX SmartCheckout. It requires no login, decreases checkout time by 50%, and is completely secure. Repurchases will be lightning-fast with only the CVV needed to submit an order. In addition to this, you can allow for payments in installments or deferred payments with our Klarna integration, or offer multiple payment methods in one order – last we heard, gift cards are still in!
4. A Sales Booster
70% of European and US consumers expect to cut back spending on apparel due to the pandemic. On the other hand, last season’s inventory needs to be cleared to make way for the next one. Every loyal customer that continues to shop is a rarity that needs to be maximised. What to do?
Well, you could help your customers search effectively with VTEX Intelligent Search, which uses an AI-powered algorithm to deliver autocomplete, spell-check, synonyms and suggestions. Pick and choose how to define, rename and re-organize facetable attributes so that customers can find items based on size, colour, brand, and more.
Then increase your average order value (AOV) through cross-selling and up-selling: upgrade your merchandising by creating bundles, promoting shoppable lookbooks, offering mix-and-match across different types of products, and empower AI-driven recommendations. Devise inventive and flexible promotions based on your business rules, audiences and objectives, and reduce passive inventory – 56% of consumers in March 2020 said special promotions were a key factor in making a purchase. Persistent carts and wishlists will remind your site visitors about the items they’ve set their eyes on, boosting sales long-term. And guess what: all these features and modules will work even better in the “new normal”, too!
5. A Social Quality
If your regular customers are not prioritising shopping right now, you go out there and find the ones who do. In a hyper-connected world, social selling is a gold mine. In fact, engaging in social selling will bring you 45% more sales opportunities. As shopping and virtual socializing are merging, you need to be where the shoppers are – on social media.
Integrate your product catalogue on channels like Instagram and Facebook and drive prospects directly to your website. Leverage each content piece and convert your audience. Stores are closed and your customers rely a lot on sales associates? No problem, do a live-streaming session and allow them to buy products without leaving the video; influencer and hashtag marketing have never been simpler. Alternatively, allow your customers to share your products on social media. Sales reps can create and send an entire order through a shareable cart to the customer, ready for checkout. As the cherry on the top, create a community feel with user-generated reviews and fidelity programs – the ultimate brand-loyalty driver.
You’ve got your ecommerce website, great! But why not aim higher?
The beauty of omnichannel
Omnichannel allows you to seamlessly unify online and in-store experiences for a truly integrated customer experience. All channels – physical store, mobile website, desktop website, apps, IoT and whatever else comes next – are connected with transparency and flexibility, offering consumers different purchase and fulfillment experiences, in addition to bringing you operation-wide intelligence.
Let’s explore some of the benefits.
- An endless aisle.
Never miss a sale by having full inventory visibility, no matter where they are, and providing your store sales reps with integrated information about inventory, the full product catalog and active promotions.
- Mixed-cart transactions.
Combine local inventory orders and endless aisle orders into a single transaction for a seamless checkout experience.
- Diverse fulfilment options.
Your customers can choose to ship to home after buying in the brick-and-mortar store, pick up in-store after ordering online (more cross-selling for you!), get orders through curbside pickup in the event of pandemics, whereas you can cut logistics costs through shipping from the store, smart routing, splitting orders and scheduling delivery.
- A 360º-view of the customer.
Your customer is identified everywhere, with all data connected into a single account: order history, persistent carts, discounts. Sales reps will love the commissions these enable.
With 90% of customers expecting consistent interaction across channels and 83% of customers saying that convenience is more important than it was five years ago, this synergy of all channels is bound to increase the lifetime value of customers and to drive brand loyalty to new heights. Considering that the AOV for an omnichannel regular buyer is 15% higher, we’d say it’s a pretty sweet deal. The customer obtains convenience and a memorable shopping experience, whereas you get the means to streamline your business. Win-win!
With VTEX, you can get them all.
Marketplaces, the trend that is here to stay
A recent Gartner report titled “10 Things COVID-19 Will Change in Digital Commerce” predicts the acceleration of the creation and improvement of marketplaces as supplementary online sales channels. It’s easy to see why. On the one hand, a retailer can find new customers and capture much-needed sales by selling on different marketplaces. On the other hand, retailers can become marketplaces by integrating other sellers. This comes in handy when stock is not diverse enough.
And while it’s true they’ve never been more important for retailers than now, marketplaces have established themselves as definite winners since long ago, with more than 50% of online global sales being captured through online marketplaces in 2019. Amazon, eBay, AliExpress should definitely ring a bell to every online shopper by now.
VTEX has recognised the significance of online marketplaces and, in response, it has become the first fully-integrated commerce-OMS-marketplace platform provider. Through its state-of-the-art architecture, VTEX powers more than 160+ marketplaces worldwide, in more than 28 countries. So whether you desire to integrate on a marketplace or become a marketplace, VTEX can make it happen easily and efficiently.
The runway is collaborative
The latest Business of Fashion report highlights the following:
“This will also be a time for collaboration within the industry — even between competing organisations. No company will get through the pandemic alone, and fashion players need to share data, strategies and insights on how to navigate the storm.”
We could not agree more. At VTEX, we’ve dedicated ourselves to building an ecosystem in which we can learn from one another, no matter who we are. We believe that the future is collaborative and, right now, collaboration is key. So get in touch, request a demo, read some customer success stories from the likes of Iorane and Lion of Porches, and join all our other fashion retailers.
Let’s evolve the fashion industry, together. Let’s fashion change.