What pandemic-ravaged fashion industry has done to the fashion consumers across the world is to limit their spending, at least in the short run. At the same time, the consumers are now keener to give preferences to present trends while expecting more diverse but sustainable offerings from the fashion brands and retailers. This whole disruption (unsurprisingly) is pushing fashion retailers to maintain a balance between demand and supply or, more precisely, produce only those products which will be in demand! Until a few years ago, this ‘futuristic’ approach didn’t take off quite well on the runway of fashion retail industry but now, with the help of AI/ML and the rise of social media, it has become a viable concept to predict what a consumer is going to wear in future.
Amidst all this, one should not forget that the inventory issues and overstocking in the fashion industry have been discussed aggressively by the industry’s stakeholders lately but the developments are taking place at a slow pace and precise fashion trend forecasting to tackle inventory challenges is not at all going to be a piece of cake. Team Apparel Resources gets in touch with Mélanie Mollard, Fashion Editor and PR Officer of leading France-based AI-driven fashion trend forecasting company Heuritech who shares her opinion about the present glitches in the fashion retail supply chain and how AI-based trend forecasting can fix it.
AR: What could be the reason that the majority of the fashion retail are still not able to find and implement the solutions for inventory woes, despite a lot of talks in this regard over the years?
Mélanie: Inventory issues have plagued the fashion industry for years, even before the pandemic. Managing inventory involves a lot of moving parts, from store and warehouse geography, to different technologies, to supply chain sourcing, so there’s much to optimise. According to Coresight Research, apparel retailers in 2018 had a 60 per cent full-price sell-through rate – only few other industries have a margin so low. So why is that?
The first main issue is the over complexity of supply chain management. Often in mass-market retail and fast fashion, the cost of goods is low, so brands and retailers purchase large quantities with more lead time. These high volumes of stock mostly come from offshore countries, as mass-market retailers have their supply chains diffused around the globe. One hiccup in the supply chain (say, a global pandemic), and retailers and wholesalers are behind on schedule.
Another major issue is overbuying and overproduction in the first place. Brands and retailers often purchase too much inventory pre-season, despite the fact that trends and consumer desires change rapidly. It’s not uncommon for brands to find themselves with large quantities of excess stock that have gone out of style.
Additionally, brands often rely too heavily on past sales to make decisions for the future. For instance, if a brand sells out of a certain product one season, it now has unreliable sales data for the following year, as it can’t have a true reading of the product’s demand.
AR: How will the pandemic affect the quantities of the garments sold worldwide? Are we looking at more high-end products in years to come or is it fast fashion that’s going to dominate the consumers’ choice?
Mélanie: As we are still in the throes of the pandemic, it’s difficult to tell in which direction the fashion industry is headed in terms of consumer leanings. Over the past year, we’ve seen spikes in luxury spending in China, and we’ve also seen upticks in online fast fashion purchases – but we’ve also seen lulls in consumer spending, too.
We do know that in recent quarters, fast fashion giants in the likes of Forever 21 and H&M have been lagging behind: the former filed for bankruptcy, and the latter plans to close 250 stores globally. It makes sense. Fast fashion is based on seasonal trends and occasion-driven purchases, so with many quarantined at home, these motivations have become less present.
But simultaneously, Boohoo’s sales rose by 45 per cent during the Spring and Summer of 2020, Missguided’s loungewear sales spiked 700 per cent and internet searches for ‘cheap clothes’ rose by 46 per cent. When a leading media house interviewed Gen Zers to explore the fast fashion paradox this year, one answer from a respondent summarised the general consumer sentiment for younger generations at the moment: “I disagree with fast fashion and try to be environmentally conscious for the rest of my life. I use reusable water bottles and sanitary products, I don’t drive, and I avoid plastic where I can, but I still do it even though it’s not a financial necessity. It comes down to choice. I want to be able to browse 500 skirts in one place and buy and try heaps at once.”
On the luxury side, the average market capitalisation of apparel, fashion and luxury dropped nearly 40 per cent between January and March 2020. But even then, 97 per cent of economic profits for the entire fashion industry are earned by just 20 companies, the majority of which are luxury brands.
With numbers like these, the answer is this: while fast fashion will continue to thrive, the rising sustainability movement will push some consumers to purchase less, and from ethical brands. Luxury will always have its following, but luxury brands must catch up with their consumers’ changing values regarding sustainability and transparency if they want to compete with emerging brands.
AR: How can technology/digitalisation help improve the scenario and make both retailers and manufacturers prepared to cater to the fluctuating MOQs?
Mélanie: High demand volatility, shifting consumer behaviour and more have been some of the major symptoms of the pandemic in collection planning over the past year. Excess inventory due to store closings has gravely impacted brands’ and retailers’ supply chains and sales.
Luckily, the industry has managed to adapt in many ways through digital transformation. The move to online is not only perhaps the most digitally-demanding process, but also the most strategic during the pandemic. Digital showrooms, pre-season purchasing, on-demand manufacturing, RFID chips to track sales, drop shipping marketplaces, native mobile applications for shopping…the list goes on. But I haven’t even mentioned trend forecasting yet.
AR: What role is Heuritech playing to upgrade fashion retail post-COVID using its AI-driven trend forecasting??
Mélanie: As stated, one of the main challenges in the entire fashion supply chain is to manage inventory. These issues can be largely curbed with Heuritech’s AI-based trend forecasting solution, which serves to improve fashion brands’ collection planning process, and in turn, to avoid under- and overstock. To do this, we offer data-driven trend forecasts to brands in the fashion, luxury and sportswear industries, including Louis Vuitton, adidas and Havaianas.
How does it work? Our image recognition technology analyses millions of shared images and videos on social media each day to pinpoint over 2,000 attributes, from silhouettes, to colours, to textures. This data is then collected to provide an inside-look on a number of useful insights for our clients, such as trend growth between particular seasons, optimal launch times, consumer segmentation, apparel category and geography.
With these insights, brands can integrate trend forecasting within the entire collection planning process, limiting under-performing products (or those predicted to do so, thus reducing overstock), accelerating markdowns, transferring inventory, improving cross-team communication, reducing time-to-market speed and more.
AR: Share a recent case study of an apparel brand (preferably post-COVID) which has used Heuritech’s solution and rightly managed the SKUs.
Mélanie: One of Heuritech’s clients (an apparel and accessory brand whose name we cannot disclose) wanted to know how combat boots would behave amongst women in Europe for their Winter 2021 collection. Heuritech’s trend forecasting technology found the following:
- Combat boots will rise in visibility by +19 per cent in Winter 2021, marking a strong growth compared to Winter 2020.
- Combat boots will appeal most to consumers who adopt trends seasons ahead of the mass-market (i.e. edgy consumers). Our data says these boots will see a rise of +0.70 per cent in market share in Spring 2021.
- The brand should push combat boots during its high season of February ’21.
Ultimately, the conclusions were the following: an increase of +20 per cent in buying quantities with SKUs allocated to the shoe model with variations in both materials and colours.