The COVID-19 pandemic is simultaneously an extraordinary health crisis and an international economic shock.
Although no one in the market anticipated the strength of this crisis, some fashion companies are finding that they are much better geared up than others– largely because of their digital know-how.
A deepening digital divide
Our consumer-sentiment surveys, conducted in April, reveal decreases in purchase intent of 70 to.
E-commerce is clearly not offsetting the sales decreases in stores. In China, the return of offline traffic has been gradual, with 74 percent of Chinese customers saying they avoided shopping malls in the two weeks after stores resumed.
This suggests that some percentage of offline sales could permanently move to e-commerce.
Digital is not only a significantly essential sales channel; it can also help business adjust cost structures and make each action of the value chain better, much faster, and more affordable.
This all hints a deepening digital divide. Even before the crisis, companies that were digitally and analytically mature outshined rivals that had not developed robust digital and analytics abilities (Exhibition 1). The COVID-19 crisis has actually only broadened the gap in between market leaders and laggards. For leaders with the ability and willingness to invest, the pandemic has actually plainly been an accelerator. As a top executive of a leading clothing gamer just recently declared, “We have actually achieved two years of digital change in two months.”
Thus, for executives in the AF&L sector and all associated subsectors (such as charm products and sporting items), the necessary is clear: make digital and analytics a core element of your business’s method.
A variety of patterns in the post-COVID-19 world– the “ next normal“– might make digital and analytics play an even more crucial function. Physical distancing could continue, making consumers less most likely to go to brick-and-mortar stores, and a contact-free economy might emerge– raising e-commerce and automation to a brand-new level.
The ramifications of these trends will vary for each company, depending on its digital starting point and strategic orientation.
That stated, digitization won’t be a remedy.
Navigate the now: Immediate priorities
The health and wellness of workers and customers, of course, has actually been– and remains– the outright top priority. By now, AF&L companies have closed shops, introduced new hygiene and security processes in storage facilities and warehouse, and set up digital tools for remote working and cooperation.
Although the situation remains unsure and is evolving daily, there is a clear set of actions involving digital and analytics that AF&L gamers must implement now to keep the business going, stem sales losses, and plan the comeback
Engage with consumers in a genuine method
Email, social media, and other digital channels have actually seen considerable spikes in use throughout the crisis (Exhibit 2).
Whether it’s a personalized offer or outreach from an individual stylist, the best brands are keeping customer relationships even while stores are closed.
Fine-tune and scale up your online operation
We anticipate the online share of fashion and garments in Europe and The United States And Canada to increase by 20 to 40 percent throughout the next 6 to 12 months. In April, traffic to the top 100 style brands’ owned sites rose by 45 percent in Europe.
A few of the larger players have actually even reduced their promotion intensity to be able to deal with the volume of orders.
Providing an excellent client experience online is crucial, so reallocate your resources and shift management attention from offline to online. Scale up capabilities in both need generation and fulfillment (Display 3). Look for to remove points of friction in every part of the online consumer journey– for example, by enhancing your site’s search function and expanding your online variety. Some merchants have actually redeployed store workers from closed shops to support online fulfillment or to help customers via digital call.
While the majority of AF&L gamers currently have an e-commerce existence, some still don’t.
Focus on digital-marketing levers as demand rebounds
In anticipation of a shift toward online sales, allocate more of your marketing budget to digital channels. Develop or improve your digital-marketing “war space” and increase its presence in the company– for instance, by developing a C-level digital-performance control panel that offers a cross-channel view of e-commerce, client relationship management, and social media, thus allowing fast recognition of chances for performance optimization or development.
Re-train your look-alike models to capture value from the brand-new customer segments and habits that have emerged during the crisis. Upgrade your digital-marketing activity to be best-in-class– for example, by adding sophisticated imagery to your social-media posts and carrying out “social listening” to notify the development of new services and offers.
Use granular information and advanced analytical tools to handle stock
The value of excess stock from spring/summer 2020 collections is approximated at EUR140 billion to EUR160 billion around the world (between EUR45 billion and EUR60 billion in Europe alone)– more than double the normal levels for the sector. Cleaning this excess stock, both to ensure liquidity and to include new collections, will become a leading priority.
At the best-performing business, an “inventory war room” uses huge data and advanced analytics to first mimic dynamic need situations specific to locations (channel, country, shop) and SKUs,.
To synthesize the resulting inventory risk– thus enhancing choice making. The war space decides, for example, whether to redistribute SKUs, transfer stock to future seasons, or speed up markdowns (Exhibition 5). A business’s investments in developing advanced analytical tools to guide markdowns during the crisis will pay off almost immediately.
Optimize expenses utilizing a zero-based method
In light of crisis-related sales decreases, cutting expenses is an apparent imperative for many business.
Identify 2 categories of tasks: important tasks connected to core digital and analytics top priorities that need to continue as prepared or at a slightly lower speed (for example, developing a brand-new information lake to enable personalized marketing) and core projects that can be delayed (such as those that don’t make it possible for emergency situation response). Continue only the projects that fall into those 2 classifications; stop all others. A range of cost savings levers– such as supplier renegotiations and tactical relocate to the cloud– can assist drastically lower your operating expense. Reset your digital and analytics priorities and budget plan and adjust them to a post-coronavirus world.
Forming the next regular: Longer-term strategic actions
Although time frames stay unpredictable for now, AF&L players need to begin preparing how they’ll complete in– and possibly even influence– the market’s next regular.
Set an enthusiastic goal and specify a clear plan
A digital and analytics improvement is normally an 18- to 24- month journey, requiring an enthusiastic goal, a clear plan, and concrete turning points. In our experience, effective digital and analytics improvements have the following aspects in common:
- Strong support (or even direct sponsorship) from the CEO throughout the whole journey.
- A practical technique that begins with an understanding of the consumer and the chauffeurs of value production; digital for digital’s sake will not provide outcomes.
- A clear plan and prioritization of initiatives, integrating actions that help set up the enablers for the company with the application of use cases that produce fast wins.
- A concentrate on getting to a minimum feasible item (MVP) within 2 to 3 months– a rapid timeline that enables the business to repeat while producing worth, preventing large up-front financial investments.
- A central group to monitor value capture. This group likewise helps build the plan by scanning chances, assigning spending plans, and coordinating application, guaranteeing that all efforts are focused on providing tangible effect rather than gold plating.
- Well-defined essential efficiency indications (KPIs) to determine success.
The primary step in the improvement program need to be the meaning of digital priorities, which will differ based upon each business’s business design and digital beginning point. Digitization is much more than just selling online; a fast diagnostic might be required to choose and align on crucial worth areas.
Generally, digital and analytics top priorities can be categorized according to their place in the worth chain: client experience (front), distribution and supply chain (middle), and item development and assistance functions (back). Exhibit 6 shows high-impact use cases in each of these 3 areas.
Provide an outstanding omnichannel experience
The pandemic has elevated digital channels as a must-have for AF&L gamers. Take this opportunity to leapfrog into the digital arena by making it the center of your operating design: move your traffic- and engagement-generation engine to digital, and utilize digital channels to drive store traffic and vice versa.
Besides scaling up digital sales efforts, reconfigure your shop footprint accordingly– for instance, by minimizing presence in “B” locations (markets with lower population density and lower profitability per square meter), committing less store space to product categories with high online penetration, experimenting with innovative formats (such as drive-through windows or pop-up shops), and making it easy for consumers to perform any omnichannel operation, consisting of complex ones (such as buying online from a shop if the item isn’t in stock there, and then selecting it up from another physical shop in the next 12 hours). Use information and analytics to tailor the assortment in each shop and to simplify and optimize selections in general.
In our experience, totally incorporated management of stock in stores and warehouses is core to any omnichannel operation. Making all stock (even stock shortly arriving to storage facilities) visible to consumers in any channel has actually shown to increase sales.
Bet on personalization
Personalization has helped numerous industry players achieve 20 to 30 percent increases in consumer lifetime value across high-priority client sectors. It has actually proved a lot more important in subsectors with more stable and predictable acquiring patterns, such as charm products.
Use cases for customization have primarily centered on personalized deals, personalized promotions and advantages (such as access to new products), and reductions in generic traffic-generation expenses. To go even more, add personalization abilities to your digital war space– for instance, by collecting and analyzing all the available information to create detailed insights about your customers. Construct actionable microclusters based upon client habits. Entice the greatest spenders with special incentives (such as triple commitment points for purchases of at least $1,000), target customers.
who tend to purchase in the categories where you have the largest stock accumulation, and provide online customers coupons to redeem in-store once physical stores resume.
Prioritize use cases based upon your company context, advanced-analytics abilities, and client sections. Create a prioritized use-case road map and a technology-investment plan. Integrate personalization into all shipment channels to guarantee consistency in your client communications.
Leverage huge data and analytics to manage the supply chain
Digital and analytics can not just drive top-line development however likewise significantly enhance speed, cost, flexibility, and sustainability throughout the supply chain.
In addition, automating logistics through digital warehouse style and predictive exception management can considerably increase efficiency.
Digitize item development and assistance functions
During the COVID-19 crisis, the digitization of product advancement has actually proved to be a competitive benefit. Companies that were currently using innovative tools such as 3-D item style, virtual tasting, digital material libraries, and AI-supported planning have fared better than their peers during the crisis. Their designers and merchandisers can respond faster to market patterns, substantially decrease both sample costs and time-to-market, and collaborate from another location across teams. The past a number of weeks have actually shown that it’s possible to do a lot more on this front than some in the market at first believed. The pandemic may have shattered historic prejudgments and biases versus digitization in core product-development procedures.
Digitization of assistance functions is another essential lever for improving effectiveness.
Build data and tech enablers to support your transformation
Technical enablers play an essential role in powering digital and analytics growth. In our experience, 3 core concepts are the most pertinent:
- Usage cloud facilities to sustain scaling and to gain access to best-in-class services, especially for usage cases that finest benefit from the cloud’s functions (for example, data usage across the globe, very high storage and processing requirements).
- Style your innovation stack for faster integration and development, with applications broken down into microservices and isolated through using application shows user interfaces; use combined DevOps toolchains to make it possible for automation and decrease time-to-market to a matter of hours instead of weeks.
Build strong information foundations as part of every digital and analytics initiative in a method that permits fast scaling and forward compatibility. Design and build out pragmatic data governance focused on allowing company worth by helping to guarantee data breadth, depth, and quality.
These enablers should not become causes for delay.
Attract and retain leading digital skill
After the crisis, financially stable business may have the ability to attract first-class digital skill, consisting of in-demand profiles such as digital-marketing specialists, information researchers, information engineers, user-experience and user-interface designers, and software application and data designers. Maintaining these type of staff members will require AF&L business to develop brand-new talent processes– with customized initiatives in recruiting, profession growth, discovering and advancement, and efficiency management– particularly for engineering and digital talent, similar to what lots of fashion players currently do for designers and creative directors.
In addition, AF&L players need to embrace agile methods of working to accelerate development of digital and analytics products and tasks. Nimble techniques allow business to release MVPs into the market rapidly and fine-tune them iteratively based on consumer feedback.
There’s no rejecting that the COVID-19 pandemic will make for a hard 2020.