Apparel and fashion retailers need to think fast to do the same. Consumer spending dropped 8.7% in the month of March, nearly triple the previous worst month on record back in 2008. Painfully, clothing and accessory brands have been particularly hard hit, with sales plummeting by just over 50% their normal level according to the Census Bureau.
Waning consumer confidence and their inability to leave home has led to a lack of demand and lost sales, followed by warehouses full of excess inventory, shrinking margins in order to move what they can, and an uncertain future regarding people’s willingness to step foot in crowded stores. This has been especially apparent for luxury and fashion retailers who have traditionally relied heavily on the physical experience in stores to move merchandise. This comes at a time when apparel sellers had already been struggling with debt, differentiation and disruption from digital brands.
Store-Based Retail Will Struggle
McKinsey recently put out a great guide (link to pdf) for fashion sellers in their The State of Fashion 2020 report. The immediate impact of sheltering in place and store closures is clear. What is much less clear, is the role of stores as we move past this initial phase and start to deal with how consumer psychology changes for the long term. Even in China, where more than 90% of stores have been reopened, foot traffic is down 50-60%. Clearly just because stores are open doesn’t mean consumers are running back to them. Sentiment for staying at home remains high in the minds of all consumers. In response and to continue to drive sales despite closed stores, the McKinsey report notes that there has been a 700% increase in brands livestreaming their offerings via Chinese e-commerce website Taobao since the outbreak of Covid-19.
While the footprint of physical retail will change -- some stores will reopen, others will close or shift to “dark stores” for pickup only -- these businesses will only survive with a digital-first mindset. The goal? Communication with customers in a way that gives them the personal experience they had in the store, but without having to leave their home. Virtual private shoppers may be a route to go for high end consumers that are shopping from their vacation homes, but for the majority of shoppers, the experience must combine scale and the ability to understand each consumer as an individual.
Innovation Is The Way to Ensure Our Future
According to McKinsey and our own conversations with retailers paving a path forward, innovation needs to impact the entire fashion value chain, from virtual design and sampling to nearshoring to remote shopping interactions. On the customer-facing side of things, here are the three most critical digital experience related focus areas:
Use detailed product data to get to know your customer. As long ago as 2013, Amazon was estimated to drive 35% of retail sales from recommendations on their pages. Despite having the ability to capture and interpret data of all kinds, eCommerce companies do not make good use of the data about the products they’re selling. How do you identify real-time interests of your customers if your product data is insufficient and inconsistent? Without a full understanding of what a customer may specifically like or dislike about a product on each visit, it is still a stab in the dark. Deep product data can super charge on-site search and product recommendations among other things. Consumers using on-site search spend 3-4x more with a given brand, yet more than 61% of sites require their users to search by the exact same product type jargon the site uses, giving them zero results for “blow dryer” if “hair dryer” is used on the site, or “multifunction printer” vs “all-in-one printer”, etc. Requiring customers to know your lingo is a shame, since 80% of consumers are more likely to spend if they’re served a personalized experience.
Rethink segmentation as a relationship with individuals. Segmentation is helpful when you don’t have full information. It allows you to drive decisions based on assumptions. But in this new era we are entering, you need to stop thinking about customer segments and start thinking about each Individual customer you’re looking to serve. What does she want? What are his preferences and why? Aligning your product and customer behavior data to understand 1) who they are, 2) what they are looking at, and 3) why they will buy holds the key to this greater relationship..
Make channels cooperative rather than competitive. The stores that made decisions fastest in the last few months were those that understood how channels work today. The “in-store” customer didn’t go away (at least not completely). They just shifted to a digital experience and maybe for the first time ever. The savior of the brick-and-mortar channel is going to come from what that same customer did online while stores were shut or had limited capacity, and personalizing the experience in both channels to paint one complete picture.
Now is the time to innovate and prepare, not sit and wait. Companies that can and do shift budgets and strategies to get to know their customers regardless of how and where they shop in the future will be the fashion leaders that survive into the future.