Fashion retail is a multi billion euro industry with women’s clothing accounting for over fifty percent of total revenue. Once upon a time, fashion was strictly a seasonal business with most sales made in the run up to holidays or the start of school terms. Now the fashion retailing has become an year long booming industry with a constant and unyielding consumer turnover.
Now fashion retail is at a cross roads, facing certain challenges as well as many opportunities as it tries to negotiate the modern age. This week’s blog post will offer a brief look at some of these challenges and opportunities in the hope that we as members of the Galway Designers Network will be able adapt as we operate within the industry.
1. Data Protection
The biggest challenge facing the retail sector today is protecting point of sale and customer data from security breaches. As stores interact with their customers online, data is being acquired by stores to ensure they meet their target market’s needs. This included vital personal information which must remain secure from hacking. In addition to this, retailers face the dilemma regarding the ethical consequences of selling this data to third parties for monetary gain.
2. Customer Acquisition
Retailers are struggling to continually drive traffic to their stores and keep returning customers. Now virtually all growth in consumer spending is being captured by e-commerce via online sales. Retailers need to stand out from not only their competitors but also from the online versions of their stores so as to ensure the store’s function in customer acquisition and retainment is relevant and successful.
3. Evolving Customer Profile
The contemporary consumer is highly informed, enabled by new technologies to access unprecedented amounts of information such as pricing, product reviews, newest trends etc. This means that retailers are finding it difficult to acquire loyalty or new customers altogether. Consumers expectations are higher than ever before; they want the best of everything – high quality merchandise, 100% availability, next-day delivery, free returns, excellent customer service – and they expect the best of everything.
Added to this, consumer class structure is evolving constantly as even the most affluent consumers find it strange to pay full price for most things, while lower and middle class consumers will push themselves into debt to afford faux luxury goods and services. This results in a difficult balancing act for retailers to stimulate purchases without being aggressive on price or delivering exceptional value.
1. Omnichannel System
The omnichannel system offers several opportunities for retailers. It gives customers the chance to experience effortlessness in their shopping experience and enables them to be in constant contact with a company through multiple avenues at the same time: by visiting the brick and mortar store, going online via the website or the app. They can research products and compare prices, which will ensure a company has to stay competitive to stay relevant. By completing purchases online and paying for in-store purchases via click-and-collect services, companies can also draw online consumers into their stores. An omnichannel system also gives retailers the flexibility to make near-real-time decisions to reroute products and streamline transportation to get the right products to the right locations at the right time, ensuring customer satisfaction.
2. Market Segmentation
Market segmentation enables retailers to identify the specific needs and wants of customer groups and using these insights to provide products and services which meet customer needs. Retailers can use market segmentation to ensure they do not find themselves facing a downturn in sales by creating and exploiting opportunities directed at the top and bottom consumer classes. The current rising income inequality gap has resulted in an ‘hourglass’ economy, which has placed a lot of pressure on the middle classes and an intriguing opportunity for retailers to attract the attention of the upper and lower income groups.
The top strata of consumers often account for a disproportionate amount of consumer expenditure and given they have the means to spend, it has resulted in more retailers coming out with faux luxury products or experiences and aiming them at this market. e.g. the personal shopping experience with complimentary champagne. On the other end of the consumer scale are the bottom strata consumers, who are more conscious about how and when they spend.
ZARA provide a perfect example of how they use market segmentation in their company to ensure strong sales in all three consumer strata. ZARA will often have a ‘studio’ or ‘premium’ collection, with a slightly higher price point and higher quality merchandise aimed at the top consumer class. Then for the squeezed middle classes, the ‘special’ prices section offers consumers a chance to purchase merchandise at a slightly discounted price point, and the stock available changes week to week as new stock drops. Finally for the bottom consumer class, ZARA’s biannual sale will enable consumers to become a ZARA customer through the heavily discounted seasonal merchandise.
3. Optimizing The Offline Sales Process
One of the biggest opportunities for growth in the retail sector is the proficiency of the offline sales experience. More customers are choosing to shop online, and while they may be loyal and recurring customers, they may never darken the door of the store front. The retail sector has the opportunity to convert more customers and increase sales by creating an efficient and inviting experience for customers in store. This can be achieved in several ways: the use of promotional events will drive incremental visits; click-and-collect/buy online and pick-up in store services must be executed flawlessly; a proficient, engaging and friendly staff dedicated to good customer service.
4. Inventory Management Processes
The retail sector now have the opportunity for to greatly improve and shorten inventory management processes thanks to developments in technology and the changing pace of the fashion cycle. Buying and selling seasons are no longer mutually exclusive and stock outs result in a loss of sales for retailers. Retailers have the opportunity now to choose the right inventory for their store/channel at the exact time it is required, not six months prior as was the tradition. This not only ensures the most up to date trends and styles are supplied by retailers, but also that stock replenishment can be accomplished efficiently. Now retailers must focus on flexibility and speed to market rather than cost cutting measures.
The future of fashion retailers is standing at a precipice, and how an individual retailer chooses to navigate the various challenges and opportunities will dictate the success of the industry as a whole.
If you are a young designer looking to make your mark in the retail sector and start your own fashion business, check out last week’s blog post for a strategy in negotiating the various challenges of going from a hobby-designer to a successful fashion business.
The Galway Designers Network are looking to make our own mark in the fashion retail sector. Our current project the Galway Designers Studio House has been established by Ann Petrov of Cozy Handmade Designs, Gayle Poppers of Kizmet Clothing and Virtue Shine of Emerald & Wax, but they need your help to make their dream a reality. Follow the link to read all about the project and how you can take part.
The Galway Designers Network are always looking for new and exciting designers or anyone who feels they would love to be involved in the Network. Get in touch by commenting below, via Facebook @galwaydesignersnetwork, via Instagram @galway_designersnetwork or email firstname.lastname@example.org.