The Atlas of Fashion

How should a product, which is made by a Spanish brand, adapt to a market like the Scandinavian one? How should the team of a subsidiary in Hong Kong be created? Can you remotely manage a business in Mexico? These are some of the questions that Spanish companies have had to ask themselves over the last years and, of course, are continually doing so.

 

However, nowadays to these questions many others have followed. The internet, mobile phones, virtual reality, big data ... but also international instability, emerging markets or sustainability are also concerns on the table. These are present and future challenges that will irrevocably define the success of Spanish fashion in the coming decades. If one lesson can be learnt from the recent global financial crisis that has shaken the economies of advanced countries, it is interconnectivity. What happens in a market like the United States has a direct or indirect impact on the future of other countries, owing to the fact that investments and capital is borderless and without nationality and has been so for a long time. The future of a State is not limited solely by its own actions, but also that the errors or achievements of all other States can affect the direction of our economy.

 

Now, with the recession behind us and a growth outlook of 2.4% in 2018, according to the International Monetary Fund, Spain will be the developed economy that will grow the most this year. However, the promising forecasts for the country should not lead to slackening. Geopolitical instability and the volatility of economic development in many regions of the planet pose a threat that can cause a significant impact, in a matter of days or weeks, on the financial direction of the world.

 

Forecasts depict a more uncertain future, full of challenges. Therefore, it is difficult to imagine a period of prosperity for the Spanish market as long as the one that ended a decade ago. According to many experts, the expansive and recessive phases of the economic cycle will tend to happen more quickly, requiring the fashion industry to be prepared at any time for sudden fluctuations in consumption. Likewise, excessive levels of debt on the part of companies must be kept in check.

 

 

 

 

 

Consumer: 'ultra-speed' in changing tastes and spending decreases

 

The acceleration companies face nowadays is a not simply limited to economic cycles. Consumer tastes and preferences in fashion are changing faster than ever. A trend today, will probably not be tomorrow.

Presented with a huge volume of information, consumers in our digital society voraciously consume images through social networks. In this context, brand loyalty decreases and keeping consumers will require high doses of creativity in design, good digital marketing and of course, competitive prices adjusted to the quality offered.

 

The Internet, has also brought with it, a greater need for immediacy on the part of the consumer, who wants to see their purchase wishes satisfied as soon as possible. It is no wonder, then, that the same-day delivery services continue to proliferate more and more in the online arena. Companies such as Amazon, Zara and El Corte Inglés have already begun offering same day deliveries on orders in Madrid and surely, this service will be extended to more cities in the future.

In addition the need to satisfy their demands at an ever quicker pace, the current consumer spends less money on fashion. In 2016, the average annual expenditure of Spanish households to buy clothing and footwear was 1,429 euros, according to data from the National Institute of Statistics. This piece of data is much lower than the average in 2007, when the figure amounted to 2,071 euros.

 

 

Internet and new technologies: the disruption goes on

 

In the current scenario, where more and more companies are competing for a lower payment, having all the sales channels is essential. Ecommerce is already taken as a given, and it will increasingly become the norm to offer an integrated response between the different formats, online and offline, through the aforementioned omnichannel. This process requires an important transformation in time, structures, and basically the procedures of the entire fashion value chain, from procurement to logistics. It also supposes large investments in technology and processes.

 

In the field of communication, social networks have already transformed the relationship between brands and customers. The use of accounts on social networks like Instagram or Facebook is the best tool that companies can use to maintain direct communication with their customers and potential consumers. The feedback that users give to campaign photos and products instantly (and free), as well as the articles they visit and the browsing time in their online stores, contain invaluable information in defining the direction of the business.

 

The analysis of this constant flow of information is already a reality for the largest Spanish fashion groups, such as Inditex, Mango or Cortefiel. The demand for professional profiles linked to these tasks are booming, and will continue to be in the future. The digital revolution has come to stay and, little by little, must also permeate small and medium-sized companies of the longest-lived sector, which had been somewhat reluctant to change.

Digitization has also brought down the barriers to entry into the fashion industry. Proof of this is the proliferation of numerous startups in areas as diverse as sportswear (Coolligan) or optics (Hawkers), which have managed to establish themselves in the market with a modest initial investment.

 

In the coming years, the ability to start a business will be increasingly simple in light of the advances. Instagram has already begun introducing the implementation of purchase buttons in photographs that, when clicked, redirect the navigation to the online store of the account administrator. The long-term goal is that the purchase transaction is made directly without having to leave the app at any time and making the payment by digital means.

The potential of such innovations is still difficult to gauge. But if any designer in the world has, at their fingertips, the possibility of placing their creations on the market without the need for intermediaries, partners of any kind, or even programming knowledge of web pages, a scenario of maximum competition and oversupply lies ahead.

 

 

 

 

 

 

Efficiency and maximization of resources and processes were up until a few years ago terms alien to many companies in the sector. However, technological advances and the growing concern of consumers in regards to the environmental impact of the products they acquire are also bringing about more effective management of resources at all stages of the supply chain.

 

At this point in time, it is inevitable not to mention the introduction of radio frequency identification (Rfid), which permits better and greater control of the articles from the moment they leave the factories until they are distributed to the point of sale. The exhaustive control of inventories and the precise knowledge of available quantities of products have brought about a notable improvement in the management of the stocks and as a result, to reduce the ratio of error when making new orders of product in store.

 

Rfid has become a great ally of large fashion distribution, where the combination of the management of high volumes of clothing, along with the long distances between the place of manufacture and the final point of sale make rigorous precision difficult. Medium-sized companies in Spain such as Neck & Neck, with childrenswear, or Brownie, aimed at young people, have implemented this technology.

 

 

Industrial relocation: slow but inevitable

 

Until now, industrial offshoring undertaken by the major Spanish fashion groups in the eighties and nineties of the last century has brought great economic advantages. Labor costs, in countries such as China, India or Bangladesh two decades ago, were extremely low compared to the Spanish ones. In addition, legislations in areas such as the environmental of these countries are much more lax than the laws in force in Europe.

 

However, the competitive advantage of the Asian continent in the supply has begun to show signs of weakness due to a mixture of factors. These include an increase in the prices of raw materials, the poor security of supply a result of the social and political instability of the supplying countries and a gradual increase in wages resulting from the demands of local workers.

 

These facts, along with the digitalization of many industrial processes that were previously labor intensive, have caused that in recent years, big and small fashion companies have once again opted for production in proximity. This phenomenon is also due to that advantages it provides for short production series and the replacement of certain articles, which can then arrive to the point of sale at a higher speed.

 

At the same time, the advances of industry 4.0, have created a scenario of production on demand and suggests that the sector is moving more and more towards a paradigm of zero waste.

 

 

Point of sale: where fiction becomes reality

 

The drop in traffic at physical points of sale due to the ecommerce boom is already latent and has yet to reach its lowest point. Therefore, one of the most pressing tasks facing the Spanish fashion industry is to reconfigure the characteristics of its stores and adapt them to the new incoming consumer. The store can no longer merely be a place for the purchase of merchandise, but must become the nerve center of business strategy, as the intangible links with brands are created there.

 

For this reason, many companies have undertaken a restructuring of their store network, where priority is given to flagship stores at the cost of retail stores of small dimensions.

 

The use of digital experiences at the point of sale is emerging as one of the most effective methods to return to excite consumers in their visit to the store. Foreign groups such as Britain's Topshop have already organized concrete virtual reality marketing actions, while Massimo Dutti lets its customers in physical points of sale make their purchases using the same technology.

 

Spanish companies in the fashion industry should not value their physical retail spaces for their economic performance, but rather for the high added value that can bring in terms of trademarking.

 

In coming years, artificial intelligence, still in an early stage of development, promises to profoundly revolutionize interactions in stores. Humanoid robots have already been presented at sector fairs and even tested for customer service in shopping centers. Faced with such perspectives, Isaac Asimov's novels will soon cease to be considered science fiction.