In this guest piece, PTC offers their guidance for retail transformation, using research from a number of industry analysts. This piece delves into a number of areas, including digitization, 3D, PLM, VR, AR and AI. PTC provides technology solutions that transform how products are created and serviced.
Fashion and consumer products retail is undergoing a revolution, and companies are compelled to transform if they are to thrive. Omnichannel demand and ‘see-now, buy-now’ realities are reshaping how retailers bring new products to market and engage with their consumers.
In fact, speed to market has become the top market pressure for retailers, according to the latest edition of Deloitte’s Private Label Sourcing Survey. Additionally, a recent joint study conducted by Apparel Magazine and Gartner found tightly controlling product costs in the supply chain and improving customer relationships to be among the most important business initiatives for retail and apparel executives in 2017.
Applying the right technology solutions can help retailers address these changing dynamics and compete more effectively in today’s global marketplace. “Placing big bets on technology in 2017 increases a company’s chances of being a future winner,” reported The Business of Fashion (BoF) and McKinsey & Co. in their report, “10 Trends That Will Define the Fashion Agenda in 2017.”
“Technology investments will have two rationales. First, the clear market trends — cycle acceleration, omnichannel, localization and sustainability — pull in different directions: they cannot all be delivered simultaneously without a technological enhancement across the whole value chain. Second, technology will also be seen as the solution to addressing sourcing and supply-chain challenges in an effort to improve margins. Together, these pressures will likely make automation, robotics and the digital supply chain become more prevalent in the fashion industry.”
Here we explore three steps to remain relevant and prosper through this retail revolution.
Step #1: Increasing Speed to Market
Speed to market has always been important for fashion and consumer products brands and retailers. Results from the annual Global Fashion Survey, conducted in September 2016 by BoF and McKinsey, bear out how speed is a top concern among fashion executives as they respond to omnichannel demand and higher consumer expectations. “Speed of changing consumer preferences” and “speed to market and the fashion cycle” ranked among the top six challenges cited by respondents for 2016 and 2017. At the same time, the “see-now, buy-now” trend ranked among the top six opportunities both years. For 2017, respondents also said “digitalization of the value chain” was a top opportunity.
Many companies are juggling compressed cycles for season-less fashion, plus traditional cycles for more basic products. The fast-fashion model continues to prove lucrative for those who excel at it. The Inditex Group – parent of the popular Zara brand – delivered a stellar performance in fiscal 2016. Net sales grew 12 percent to €23.3 billion, profit increased 10 percent to €3.2 billion, and same-store sales rose 10 percent. The Internet of Things (IoT), by way of RFID sensor technology, helps Zara immediately see what is selling. Inditex is aggressively rolling out RFID across its different store chains by summer 2020. All Zara stores brought RFID online in 2016.
Use of 3D digital design tools can significantly accelerate time to market. Advances in 3D CAD software enable fashion and consumer products retailers to create highly accurate virtual prototypes of new styles and items, eliminating the need for multiple rounds of physical samples. Designers can see their concepts come to life on screen, making changes instantly. Product development teams can evaluate garment fit on the fly, digitally, rather than wait weeks for samples to be made for testing on fit models. In its 2016 “Winning at the Speed of Fashion” presentation, Accenture said “3D product design facilitates coherent communication of concepts across the entire fast-fashion value stream.” 3D design enables brands to not only “design for what is possible through advanced manufacturing” but also to use 3D renderings for marketing, packaging and channel commerce before product commercialization.
VR (Virtual Reality) for prototyping/sampling and augmented reality (AR) for quality inspections also are critical tools in speeding cycle time. These methods will be increasingly important as companies deliver more see-now, buy-now products. Some leading brands, such as Tommy Hilfiger and Burberry, reported phenomenal success in fall 2016 with such collections, selling out of styles quickly after runway shows. Immediacy appears to be a winning strategy. However, it will require supply chain changes. “There are questions surrounding the impact of this new model on production and manufacturing processes, and the investment required to get there,” reported BoF.
Connected product lifecycle management (PLM) is an approach and technology platform enabling better collaboration between planning, design, development and sourcing. With tighter, earlier and sustained digital engagement between these functions, companies can respond more quickly to trends. A connected PLM platform can leverage machine learning to quickly pick up on the voice of the consumer through social media trends and other feeds. These insights can then be infused into collections. In fact, with a new breed of digital concept management apps, designers and product development teams have a completely digital way to create idea boards and capture what’s trending on social media and then aggregate those ideas and trends and share new concepts quickly across the enterprise.
Step #2: Managing Complex, Socially Responsible Supply Chains
Fashion and consumer products supply chains have long been complex and highly globalized, with myriad handoffs. Now retailers and brands need new levels of visibility and agility as they navigate products through their value chains. This need is driven by cycle time pressures and heightened consumer awareness of corporate social responsibility (CSR), including environmental sustainability. “Ethical innovation offers a way forward: consumers and brands have prioritized sustainable fashion, which is transforming product design and manufacturing,” BoF reported.
Consumers Actively Seeking Sustainable Fashion:
65% = emerging markets
32% = mature markets
*Source: The Business of Fashion, McKinsey
According to Mark Harrop, Founder & Managing Director of WhichPLM, “Consumers want to know where products come from. We couldn’t tell them that story before, but now they can point their mobile device at a product, even if it’s behind a shop window, and the product will start to ‘talk back’ to them, sharing how it was made, what materials were used and how the company treats workers.”
IoT can help provide real-time visibility onto the factory floor and across the connected supply chain. More and more sensors are being attached to fabric rolls, piecework batches, work in process and individual finished garments. Smart sensors and readers are being installed across factories and the supply chain on machines that process goods and checkpoints through which they pass, from quality inspection through packaging to the loading dock.
Data emitted from these sensors is processed by IoT-enabled systems, such as connected PLM platforms. In addition to helping brands and retailers monitor status and react to issues immediately to ensure on-time delivery, this wealth of information can offer consumers a view into their product origins and fashion’s journey to market.
Connected PLM can be part of a socially responsible sourcing strategy. The technology helps companies efficiently and comprehensively manage compliance with REACH, CPSIA and other regional, national and local sustainability standards. For instance, with a connected PLM approach, key stakeholders along the supply chain receive automatic alerts if a factory receives a warning during a social compliance check, a textile lab dip comes back out of tolerance or if any documentation is missing with regard to a product’s chemical contents.
Fashion brands are clearly planning to ramp up supply chain IT in 2017. In BoF and McKinsey’s Global Fashion Survey, 25 percent of respondents ranked “IT capacity for digitalization of the value chain” among their top three priorities in 2017. And executives participating in McKinsey’s annual sourcing roundtable cited “the potential of the Internet of Things — a network connecting devices, garments with sensors, and advanced analytics — to enable new opportunities to improve planning and processes throughout the apparel value chain,” BoF and McKinsey reported in “The State of Fashion 2017.”
Step #3: Offering Customized Customer Engagement
The customer has always come first, yet now fashion retailers and brand owners are challenged to connect with the consumer in a highly personalized way. Machine learning, artificial intelligence (Ai) and predictive analytics help drill down into Big Data to better understand precisely what assortments should be on the rack by store and how they should be offered online. What are predictive analytics and how does this approach differ from other forecasting methods? SogetiLabs explains it this way: “Predictive analytics … uses data mining and other techniques to predict the future. It differs from forecasting in that the latter applies mathematical relationships directly to historical data to predict future values (demand, for example), while accounting for variation, trends and seasonality. Predictive analytics looks for correlation between past, perhaps disparate events and predicts future events based on current and emerging conditions.”
Predictive analytics can help retailers drill down into specific personas with target groups. For example, not all Millennials think alike, and it’s important to tailor marketing to niches within the generation group. Brands birthed online have benefited from their strong command of analytics about their customers. Slice Intelligence reported that Amazon’s private apparel brands saw a sales upswing in late 2016. Amazon “has a ton of data about what consumers like, what consumers are willing to pay, and has control over a wide array of levers to create awareness of its brands,” said Ken Cassar, Principal Analyst for Slice Intelligence, as reported in Internet Retailer.
Predictive analytics play a big role in providing visibility into global inventory and demand. “Digitized inventory management and predictive analytics — aligned to investments in CRM — have the potential to allow fashion companies to link inventory around the world to a single view for the consumer. This in turn makes it possible to sell a product that could have lingered on a shelf to a consumer who wants it halfway around the world,” reported BoF.
Reaching shoppers in a more personalized manner also promises to involve greater use of AR and VR. For example, the technologies are increasingly popular for helping the consumer envision his/her perfect outfit. As Euromonitor and WWD Retail 20/20 reported in their white paper, there are innovative new apps to aid consumers as they “try on” clothes virtually, including the Klothed mobile style planning app for men and Tmall’s app to help Chinese consumers visualize fit and reduce returns.
VR breaks down geographic barriers, at once making the world smaller (more accessible despite physical distances) and bigger (the endless aisle stretches yet further). With VR, Alibaba enables Chinese consumers to “walk through” Macy’s New York flagship store and browse items, and Tommy Hilfiger can give shoppers a virtual front row experience at its latest runway show, according to Euromonitor and WWD Retail 20/20. And AR promises to take digital shopping to new levels of personalization. “Making use of augmented reality strategies (e.g. mapping bodies and faces for more accurate sizing) to supplement virtual reality stores could create truly personal digital stores that hold more promise than they do today,” said the white paper, “New Concepts in Fashion Retailing.”
At the intersection of digital and physical, smart dressing rooms are part of the move to “retailtainment” and “experiential shopping,” Euromonitor reported. AR and VR in the changing room are closely related to offering personalization and customization. “Many retailers are aiming to develop efficient and personalized in-store services, introducing concepts such as smart and virtual changing rooms, aimed at simplifying the process of trying garments on. Virtual and augmented reality provide immersive brand experience, and technological advancements enable retailers to offer personalization and customization on a much larger scale,” according to the white paper. “Personalization is becoming a key component in the mission to attract and retain consumers’ attention; as consumers seek unique products as a means of self-branding, this strategy is likely to become more widespread both online and offline.”
Indeed, mass customization and personalization are on the rise. Extremely agile, IoT-enabled supply chains will be required to meet this new demand. “This ability to deliver products customized to each consumer’s specifications at near mass production prices is the Holy Grail of retailing. Giving customers the opportunity to have a product any time they want it, anywhere they want it, any way they want it resonates extremely well with consumers. The number of mass customized products is steadily growing as are personalized services, and this is what we call mass personalization,” reported SogetiLabs. “By 2025, retailers must be capable of supporting a highly diverse set of order and distribution channels in keeping with mass customized products and delivery methods. Customers will want to order with their phones, mobile devices and computers, as well as through traditional retail outlets, kiosks and perhaps as-yet-unimagined channels. Delivery modes will be just as diverse from time-definite, long-lead-time delivery to next-day delivery, same-day delivery and even same-hour delivery.”
Are you ready for your retail transformation? [Ask PTC today about how to take the first step.]