In the fashion industry, we love to chase rainbows for the pot of gold. We love to run around the globe in search of the cheap needle; we love to chase cost reductions by removing hundreds of people from employment; we even love to chase consumers until they simply don’t want to hear from us anymore. But, with all our chasing, we never really found that ultimate solution to bring us joy and happiness—or the enhanced profits and revenue growth that were the original goal of the chase.
A couple years ago, I was asked to participate in the annual meeting of the International Apparel Federation (IAF). During one of the sessions, the presenter defined the mission of the fashion industry as to “seduce the consumer and control the supply.” While upon first hearing this, I nodded my head in a positive way, but after a few minutes, I began to wonder if this really was the best way for us to operate.
When my turn to speak arrived, I decided to address my concern. “One of our previous speakers told us that our mission is to ‘seduce the consumer and control the supply chain.’” I continued, “As I thought about it, I recognized that this model is nearly at the end of its useable life. As we look to how modern technology is enabling us to sense demand and respond almost instantaneously—we need to change our mission to ‘listen to the consumer and collaborate across the entire value chain.’”
Of course, some of the audience later told me my presentation was profound, while others in the audience told me I was totally crazy. All things considered, they’re both right.
Let’s analyze this for a minute. The “seduce the consumer” approach was great when it was all about product, demand outstripped supply and consumer expectations were lower. Seducing consumers with great products really was what the industry was all about. However, in the last five years, an environment emerged in which there is much greater product availability and fashion brands are competing for attention.
A consumer can purchase a similar product from a number of different brands and channels. Product differences are nearly irrelevant. Today’s consumer seduction is about price rather than product. When your only basis for differentiation is price, it’s just a race to the bottom to attract the consumer. In that race, margins get squeezed out, no one wins and no one survives. This is the new normal.
As we rolled through the economic downturn of 2008, every organization in the industry started to discount—and discount heavily—in order to ensure that they would come through the end of season without crushing levels of inventory. By clearing inventory out of the value chain, organizations were able (in most cases) to avoid being killed by inventory and cash flow issues. However, in doing so, they set a new framework and set of expectations in the minds of the consumer. As a result, today’s consumers wait before purchasing until discounts begin to mount up.
The average consumer knows that they don’t have to begin looking until they see a 50 percent discount—and don’t have to begin to get serious until they see 70 percent discounts—but they also realize that they don’t have to execute their purchase decision until they see an 80 percent discount. This is not a sustainable business model, especially when costs are rising upstream in the supply chain.
All this is exacerbated by a lack of differentiation between both brands and products, as well as a lack of confidence in the market. As most organizations became obsessed with costs and prices, they lost focus on the consumer’s desires and product uniqueness, creating a vast sea of product sameness
So, here we are—lots of the same or similar products—with little differentiation other than price. How do we keep this from driving us all out of business?
I believe that the answer lies in “listening to the consumer and collaborating with the supply chain.”