How digital is disrupting and transforming the fashion industry

Digitization is disrupting and transforming the fashion industry. This episode of Magnolia’s DX Talk podcast series uncovers the trends with Carlo Terreni, general director of NetComm Suisse, the Swiss industry association for e-commerce.

Some 80 global fashion brands are based in the Swiss Canton of Ticino. Five years ago, when the big topic was e-commerce, most of these companies turned to outsourcing, as they didn’t have the in-house digital capabilities. Today, there are brands where 10% to 30% of turnover is through e-commerce, notes Carlo Terreni, general director of NetComm Suisse.

Transforming standard processes

Digital technology is revolutionizing processes in design, planning and customer care management - processes that have long been the same in an established industry for over 50 years. For example, designers are using 3D software to co-create with their customers. Luxury goods companies such as Richemont are becoming almost completely e-commerce driven. They use startups to create very personalized and unique branded products.

AI for personalized products and service

Companies are also using artificial intelligence (AI) to discern major fashion trends that are popular with customers on channels such as Instagram or Google sources. Terreni says: “Thanks to image recognition by AI, companies are producing new products at the same time as customers are searching, exactly in the color, pattern, shape and dimensions they are looking for. Voice commerce is also something that’s being used in customer care for fashion.”

Merging online and offline businesses

Digital mixes conventional boundaries between online and offline. The term “retail apocalypse” surfaced towards the end of 2017, referring to the closing of many large brick-and-mortar retail stores in the US, a pattern that also emerged in the European countries. However, pure e-commerce players like Amazon are also chasing offline businesses and building up their physical presence. There will be combinations of the two different models, in varying degrees and formats.

The value of data

New business models will come up. Terreni cites the example of sportswear companies purchasing fitness apps from technology companies for millions. On the one hand, it’s about basic digital marketing and having access to the millions of customers active there. On the other hand, it’s about accessing data and information about customers, so that you can personalize products or start new ventures.

Terreni explains: “If I add a T-shirt with wearable technology that starts tracking my data, maybe I could do a partnership with an insurance company that actually charges health insurance according to real data, e.g. how much sports I do, thanks to the T-shirt and wearable technology. There could come a moment where a fashion company sells you a T-shirt at 50% of the price it should be, because they would make more money from the exchange of data with an insurance company or a bank in the future.”

Blockchain for tracking and trust

Blockchain technology could help address two major drivers in the fashion industry: promoting sustainability and combating fake products. In the first case, blockchain technology helps to track products better, from the start of production right through to sales, certifying where products came from and what happens on the lifecycle. In the second case, blockchain can help in the campaign against fake and imitation products, by building trust and credibility around brands and products.

The push to omnichannel, experience-driven commerce is going on at different levels. At the moment, most companies are struggling to get to the omnichannel level that users already expect. A few brands are able to top that and introduce new business models and ideas that really get them value.

What’s clear is that opportunities abound. There is product customization, where you know your customers better and build those relationships. There are new business models such as subscriptions for renting fashion clothes. Brands are inventing new things to stay on top.