The following article expands upon my contributions to two recent Retail Wire discussions.
At a recent annual Goldman Sachs retail conference, Gap CEO Art Peck told analysts, “There are no compelling fashion trends driving the business.” I was glad to hear Mr. Peck mention this, because I’ve been saying it for a while.
Of course trends exist at any given time, and retailers still chase them. But the key question is whether consumers feel as compelled as they once did to act upon those trends. Are shoppers identifying and purchasing must-have items on a consequential scale and on a regular/seasonal basis? The answer is “sometimes,” and this is where fast-fashion retailers such as Zara have the edge. These days, fashion trends are driven primarily by social media, not by the dictates of retailers. A designer might publish a video showcasing a new collection or runway show on social media, lots of sharing and commenting follows and then Zara clicks its fast-fashion supply chain into high gear and gets facsimiles into its stores within days at a crazy-great price. Boom!
This process stands in stark contrast to the ways retailers used to dictate fashion, deciding months ahead what will be “in,” planning inventory accordingly, stocking shelves chain-wide, advertising the new arrivals and then watching sales roll in (or not – yikes!). Of course, many retailers still find themselves parked in this model, because it’s simply too resource-intensive for them to completely retool their supply chains to meet modern demand dynamics. In March 2015, Gap’s Mr. Peck said in a magazine article that the company was taking up to three times as long as competitors such as Zara and H&M to get product ideas into the store.
Apparel retailers tend to blame the weather, economic trends and other scapegoats when business is down. These excuses are often justified, but they overlook the fact that trends as we once knew them are not driving the business – at least not in the same way they used to. Mr. Peck was right about that, and he should know. Gap was a trend-dictating hold-out, as it continued to advertise which item would be essential for each upcoming season long after consumers began to go online to define their personal style.
A few more dynamics are challenging Gap and other traditional apparel retailers:
- Consumers are trading dollars between apparel and personal electronics rather than investing in upgrades to both.
- “Category killers” of all stripes are at risk as Amazon attacks categories one by one (and sets its sights on apparel).
- Self-branded retailers have even less wiggle room. If your brand isn’t on the hot list, there is nowhere to hide (or hedge). Everything in the store bears your label.
- Designer brands such as Burberry are making runway collections available hours (rather than months) after runway shows and adopting other see-now, buy-now strategies.
- Designers who once built their fortunes through wholesale distribution are creating collaborative direct-to-consumer models that bypass retail and speed up reaction times.
- Social media encourages consumer passivity. Designer-director, Tom Ford, recently lamented that fashion has become a “spectator sport” – heavy on commentary, light on purchases.
Combined, these dynamics generate some mighty headwinds for apparel retailers. Fast-basics retailer Uniqlo is arguably Gap’s most formidable competitor, and its plans for world domination are well underway. Uniqlo hasn’t been pleased with its current U.S. performance, but it does have a more compelling premise than its established counterpart. Instead of focusing on selling blah basics or attempting to weave in and out of trend cycles, Uniqlo spices things up with technical fabrics and periodic designer partnerships, and it encourages multiple purchases by offering vast variety in key seasonal items at a clear value. Uniqlo’s flagship-style stores are also much more exciting to shop than the average Gap store.
For apparel retailers, speed is now the table stakes, and trends are a moving target. Retailers will have to capitalize on these changes in order to have the upper hand.