Online retail can involve very long processes leading to the customer, but what if the supply chain could be shorter, and the process leaner?
This article examines how disintermediation — the process of removing intermediaries from the supply chain — can impact online retail.
Fashion retail is one of the most fast moving, innovative and therefore interesting industries that we work with, by virtue of its diversity and potential. Aspirations range from monetising social sentiment and co-curating products with customers, to brands wanting to turn bricks and mortar stores into showrooms. Where some of our clients carry hundreds of lines retailing at less than £5, others craft coats that make fashion headlines.
In an in-depth look at the sector via conversations with experienced industry technologists, we uncovered the real trends affecting online and bricks-and-mortar retailers today.
Our contributors came from across the sector with experience including luxury goods, high-volume high street and online flash-retailing. Between them, they have used technology to address challenges both strategic and tactical – from building omnichannel capability to reducing theft.
One of the most significant trends identified for online retailers is the move to disintermediation by several key brands. Read on to find out more about this trend and how it is impacting the sector.
Disintermediation is a term that is was defined in reference to financial service disruption in the 1970s rather than online fashion retail. However, since the introduction of ecommerce, manufacturers have been increasingly cutting out aspects of the retail process they do not own.
The multi-step supply chain of supplier, manufacturer, wholesaler, retailer, customer has begun to vanish, and in the past few years the growth of large online portals such as Alibaba which connect customers directly to wholesalers has radically changed the online landscape.
In the online space, retail is becoming a service in which price, availability and delivery are king. Customers are looking for lower than high street pricing, low or no cost delivery and an easy returns process.
This is where Amazon leads the market. The sheer scale of its operation makes it possible for customers to receive goods faster via Amazon than they can from an online department store. The returns process is game-changing too. It’s possible to receive a refund before faulty or unwanted goods are back at the distribution centre.
This convenience and the guarantee of swift problem resolution makes Amazon well trusted by shoppers — the fact that in some instances the product does not need to be returned for the refund also provides an indicator as to the magnitude of its operation and the threat this standard poses to other fashion retailers as it expands its footprint in this segment.
For premium, heritage or niche brands, retail has become about building a direct, authentic-feeling relationship with the customer that encompasses more than just the selling of clothes. Jack Wills is a prime example in this space with its #jwseasonnaires strategy of hosting exclusive events that are then shared via social media to attract and engage its target audience, reinforcing its status as an aspirational lifestyle brand for university students.
One interesting outcome from this focus on direct customer connection is an upsurge in the number of content creation roles – for fashion retailers today, content experts are as valuable to the business as supply chain experts.
In January 2018, Nike’s shares jumped nearly 5% when it announced plans to ‘go direct’, electing to cut out wholesalers in favour of selling via its own stores and selected retailers including Amazon. With direct-to-consumer (DTC) margin reported at 62% vs 38% achieved via wholesale sales, it makes financial sense to cut out the middleman.
As we discussed this trend, our contributors were in agreement that disintermediation is good news for the likes of eBay, ASOS and Amazon. Equally, fashion houses with strong brand equity and the skills to handle direct retail in a way that doesn’t damage that equity can also thrive.
For wholesalers on the other hand, and the brands who rely on them, the climate is looking very challenging.
But all is not lost.
For organisations that want to continue to carry a wholesale and retail model, data mastery can help to maintain margins.
For example, a well-known heritage fashion brand working across online, its own stores and department store concessions was frequently presented with stock issues across all channels that were caused by cancelled orders.
Historically, information on the cancelled stock would be emailed to the other retail partners in the supply chain on a two-weekly basis, a manual, slow and risky process necessary to make sure that each retailer got a report containing the right buy price. By moving to an automated dashboard-based reporting system, this process became web-based, self-service and real-time.
The brand was able to move faster, monetise cancelled orders and reduce the cost associated with holding surplus stock. What was once an unpredictable exercise has been transformed, with the new system saving administration time as well as generating the business an additional £2million per year.
Other online-only and catalogue retailers are delving deep into data, both theirs and others, looking at spend patterns in area but also incorporating information on property prices and household incomes to inform decisions about whether to make the leap and invest in stores as a marketing asset. A well-documented example is Bonobo's “guideshops” where customers browse products with a dedicated assistant before placing an order to be shipped direct to their home. The physical store becomes more of a showroom, as personalised as possible to the local demographic to generate more sales through the online channel.
This post takes just one of the seven online retail trends we identified in our research and gathered into a whitepaper to help inform the fashion industry. The other key trends were:
(this blog post originally appeared on the IMRG blog)