How should Chinese retail industry embrace change?

2017 is the 40th year of Edward Gribbin, the president of clothing strategy consulting firm Alvanon, who is the most confusing moment in the industry. In March, Richard Hayn, CEO of American chain fashion brand UrbanOutfitter, pessimistically stated that his industry is in the same crisis as the 2008 real estate market. Thousands of stores are facing the fate of being shut down, and rents are falling. The sales performance in the 2016 holiday season has been unusually ups and downs. The way to clean up inventory by promotion has failed. Consumers demand that the apparel industry continue to come up with new and interesting Something, not the discounted goods at the bottom of the box.

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During the new manufacturing, new retail, new eco 2017 Technology Innovation Summit (Shanghai) on April 12, Glibin came to the same conclusion as the UrbanOutfitter head: “Everyone has heard of the real estate bubble, now welcome The era of the bubble in the clothing industry." He pointed out that the old order of clothing and retail has collapsed. The new international political and economic environment, the increasingly subdivided consumer market and technological innovation require manufacturers and retailers to quickly subvert themselves, or they will face the fate of being out. The following content is based on the speeches and presentations of Gribbin at the summit.

How to summarize the changes in the retail industry in the past year or two?

I have worked in this industry for 40 years and have witnessed a lot of things, but I have never seen such a dramatic industry collapse as I have seen in the past year. What we are seeing now is an unprecedented era. Technology, innovation, consumers and even global politics are changing the way the industry thinks.

Most people think that fashion itself is about change, but the secret behind it is that we are the most resistant industry in the world. The way we do things, including design, procurement, sales, and production, is the same as 30 years ago, 40 years ago, 50 years ago, or even 100 years ago. But now we have to change, the industry can not bear the consequences of obeying the way of doing things in the past.

The retail industry has had consumers for more than 100 years. If you want to buy a piece of clothing, you have to go to the store when the store is open, find what you like from the series of buyers, and have the right size and fit. But starting with the first iPhone in 2007, consumers now own retailers. Consumers can decide to get what they want at any time they want, in whatever way they want, and even decide how much to pay for it. Retailing no longer has the same control as before, which puts the industry at a high level of collapse.

There are still some changes that we have not faced in the past. We have always had a relatively stable global political environment, and this has changed. We have to face the European retreat and the new president of the United States with a different trade policy concept from the predecessors. The situation has become very, very unpredictable. When the old trade policy came to an end, the traditional way of doing business changed. Influencing factors include exchange rates, inflation, and border taxes, including the US – which are opposed by almost all retailers. 98% of the clothes and shoes circulating in the US market are imported, most of which are from China. If the new rulers impose high border taxes, people may consume less, and the store will lay off employees. In the worst case, consumers will not be able to afford the goods they need.

What are the specific manifestations of the so-called collapse?

I attended the World Retail Conference in 2016. A study published by Accenture showed that 70% to 80% of retailers claim to be “all-channel”, but in fact, only about 10% of retailers do. This number is quite shocking. Only 24% of brands have real-time traceable inventory information, and even 18% of shopkeepers have access to real-time inventory data. Only 2% of brands that support consumers sharing purchase information on social media. Another shocking piece of data is that if you want to buy something online with your mobile phone, you need to enter new information or click 21 times on average, and only 14% of the brands that offer mobile shopping services. The store supports only 1% of mobile online payment brands. Do you know who is in that 1%? Apple, Apple lets consumers pay for products in their stores with mobile phones instead of Macy's, Wal-Mart or Ralph Lauren.

Since 2017, the number of US retail companies has gone bankrupt, and there are already 12, and we expect more companies to go bankrupt, exceeding the figures during the 2008 economic crisis. Bloomberg expects that 8,600 retail stores in the US will close this year. Now is a very worrying moment for the retail industry. Why is there such a situation? Because we already have too many stores and too many shopping centers, the visibility or control of the retail industry's own inventory is extremely low, and we don't know where the inventory is. In the past three years, the traffic of the mall has dropped by 57%. Amazon may become the largest apparel retailer in the US by June of this year. It is a subversion in itself, and every brand is thinking, either joining Amazon or being cleared by Amazon.

How does the retail industry embrace change?

Millennials are changing the way we do things in the past, and the latest technology will change the apparel industry forever. All of this will start with big data, not even a huge amount of data, and a little bit of data that can be used for analysis can create a comparative advantage and better connect consumers. Do you know what is the number one position in the retail and fashion industry today? It's a data scientist, not a design, sales, operations or purchasing talent. 60% of the working time of data scientists is used to clean up and organize data, and many data mining and data collection work is likely to be done by machines in the future. A survey of retail executives by McKinsey and Fashion Business Review shows that digitalization and e-commerce are the most important opportunities for retail industry change. Others include see-and-buy, seize new opportunities brought about by the economic downturn, and reduce sales. And unified global price strategy, omnichannel integration, shaping consumers (especially to cater to millennials).

Paul Sharon, CEO of LizClaiborne, said in February: “Retailers should sell 25% of their stores and invest in flagship locations. We have too many battlefields and too few resorts.” The money to open stores should be Investing in the digital and flagship store experience, consumers, especially millennials, cherish the experience more than the product itself. Therefore, the new winner is the one who can use technology and digital means to better connect consumers. This is the only way to retail.

What are the specific examples of using digital means to change the way of doing business?

From McKinsey's global sales forecast for the fashion industry, the luxury goods have no way to go, the market is saturated, where did the consumers spend their money? Sportswear. The market share of brands such as Nike and Adidas is still growing. Adidas announced that it will open 2,000 new stores in China. They have innovated 3D printed sneakers to provide customized services to consumers. Now they have already opened their stores in Germany, and there is also an experience store in the US in June. Opening. Adidas uses technology to change the way consumers respond.

Next I will talk about customization. San Francisco has an amazing company, StitchFix, which is doing very well in terms of digitization. Their business began with analyzing data. They used artificial intelligence and machine learning to understand what style and style of clothing they wanted without the consumer's own clarity. People don't need a lot of clothes, you have something to make them excited. The StitchFix model is a subscription that receives a parcel every month, and the clothes in each parcel are customized, and the consumer doesn't even know what to send. Some goods are even the first to contact, and consumers themselves will not go to the store to buy.

Chicago's clothing startup TrunkClub is also an interesting example. They know that men's body shape is strange, I am not trying to make anyone embarrassed, but look at the men around us, shoulder width, stomach size is not the same. TrunkClub has built 99 models so that almost all body types can find the right size, they use the data to find what I want, and based on this, the garments are produced and delivered to the door within three days after the consumer places the order.

What do you need to pay attention to in the transformation of traditional retailers?

speed. The changes in the world are faster than us. If we can't keep up, we will go bankrupt. Some retailers are still thinking about shipping only in spring, summer, autumn and winter, and this era is over. Companies like Zara have realized how to keep consumers fresh, they come out about every two weeks, and they have more than 20 series every year. The loyal consumers average Gap4 times a year, while Zara is 17 times. Gap used to be the world's largest retailer, Zara surpassed it in 2005 and its market value is increasing because Zara is fast enough. A year ago, the hot word in the fashion industry was to buy it right now. Now it’s not just a look-and-see, but a show-and-sell, instantly giving consumers what they want. You can't show something in the spring, but expect consumers to buy it in the fall. This phenomenon also emphasizes the importance of speed in connecting consumers.

Speed ​​is also critical to consumer loyalty and engagement. If you can't continue to excite consumers, they will spend money on travel, eating out, and experiencing everything that is more fun than buying clothes. Most retailers can get other benefits from quick response, such as getting better pricing, reducing discount promotions, faster inventory turnover, and higher return on working capital.

The supply chain should be short enough to tie speed to customization. The supply chain of the apparel industry is spread across the world map. It took eight to 12 weeks for an American company to wait for Chinese-made clothes to be transported across the sea, so they bought several Boeing 747s for transportation. You may find it too expensive, but such an investment is worthwhile, and it allows the product to reach consumers faster.

3D technology is the future of product development. After five years, someone may come back and express regret: Why didn't I use 3D technology at the time? 3D design and printing make product data more accurate, consistent, and faster. UnderArmour's UALighthouse incubator in Baltimore is another good example. There are very few people inside, but there are many devices such as human body scanning, 3D printing, and remote cutting. It allows designers, fabricators and manufacturers around the world to develop newer fabrics and produce them quickly and sell them globally. Customized clothing from UALighthouse is now available for sale.