London College of Fashion
BIG DATA — Managing the disruptive forces of the fashion industry
-
FASHION ADVISORY COUNCIL University Of Arts London, London College Of Fashion
London College of Fashion, UAL is a world leader in fashion design, media and business education. We have been nurturing creative talent for over a century, offering courses in all things fashion. With over 70 undergraduate and postgraduate degrees, and 165 short courses across every subject, we encourage our students to examine the past and challenge the present. To have inventive, assertive ideas that challenge social and political agendas. We give them the skills, opportunities – and above all, the freedom – to put those ideas into practice.
Populus
Established in 2003, the aim of Populus has been to equip companies and individuals with a sophisticated understanding of their markets, audiences and brands. We believe this Critical Knowledge has the power to shape a healthy political, social and economic environment. In a market saturated with research agencies that simply deliver data, Populus stands out as a consultancy capable of delivering Critical Knowledge through expertise across political, reputation, corporate and consumer research and a leading edge suite of products and services.
Silver Seas
Silver Sea Consulting are a boutique consultancy for the arts, charity and visitor attraction sectors, helping organisations of all sizes put their customers at the heart of their business. We specialise in CRM, data and market research projects, working with our clients to get more out of their data, better understand their audiences, and increase visitor engagement.
Contents Executive Summary About the Fashion Advisory Council 3. 2017 in Review 4. Business temperature check 4.1. Fashion industry as a whole 4.1.1 Key findings 4.1.2 Attitudes about the future of the fashion industry 4.1.3 Challenges to the fashion and retail industry 4.2. China 4.2.1 Key findings 4.3. Unethical business practices 4.3.1 Key findings 5. Continuous discounting 5.1 Key findings 6. Brexit 6.1 Key findings 6.2 Attitudes towards Brexit 7. Big Data current usage 7.1 Key findings 7.2 Attitudes to Big Data 7.3 Opportunities for Big Data 7.4. Threats of Big Data 7.4.1 Affordability 7.4.2 Privacy 7.4.3 Job losses 8. Emergent research themes Appendix 1 – Methodology 1. 2.
© University of the Arts London 2017 While University of the Arts London (“UAL”) has taken every effort and care to ensure the information (including recommendations, statistics, appendices) contained in this report is correct, UAL disclaims to the fullest extent permitted by law all warranties, express or implied as to the accuracy of the information contained in this report. Any reliance that you may place on the information contained in this report is at your own risk. To the fullest extent permitted by law, UAL will not be liable by reason of breach of contract, negligence or otherwise for any loss or damage (whether direct, indirect or consequential) occasioned by any person or company acting or omitting to act or refraining from acting upon any information contained (or referred to) within this report.
2017
04 - 05 06 06 - 08 09 09 09 10 - 11 11 - 14 15 15 16 16 17 17 - 20 20 21 21 - 23 24 24 25 26 - 29 30 31 - 32 32 - 33 34 35 36
Executive Summary 1
The research presented in this report identifies that:
This first report by the Fashion Advisory Council considers the evolution of Big Data within the fashion industry at a time of immense change and uncertainty. As the twenty first century moves toward its third decade, disruption appears to be all consuming. The disruption of innovative business models and the omni-channel experience are setting new service standards in B2B and B2C relationships. This in turn has changed the balance of power within the fashion value system. The consumer is now emerging as an empowered force within fashion industry stakeholders. The continued move by consumers to invest their disposable income in experience and technology has instigated demand pressure
• The industry is generally positive for the future, unlike others such as the banking or travel industries; • This positivity was not uniform however. Early career professionals have less confidence in the future than their senior counterparts; • Ten key challenges facing the industry were identified by the Council. Unethical manufacturing processes and price discounting were highlighted as the most serious threats to the future; • With greater transparency of the value system expected, ethical and sustainable
supply chains were deemed to be at odds with the fast fashion models of operation that now proliferate; • Discounting is a significant current threat to the sustainability of the industry and a change to the status quo is necessary to diminish its prevalence; • Attitudes towards Big Data and its use are mixed with a disparity in awareness and potential is apparent; • Big Data is seen as a natural progression and thought needs to be given to potential scope; • There is a need to educate current and future professionals to embed Big Data into value system activities.
in the fashion industry often evidenced in the form of discounting. And of course, the June 2016 referendum signaling Brexit has multiplied the complexities of business in the space of just eighteen months. As a leading fashion educator, the London College of Fashion created the Fashion Advisory Council to research with, and on behalf of, industry to understand current business priorities. Big Data and its usage emerged as a strong research theme, with the overarching need to understand its evolution to date and its potential application within industry. To research the aspects of this theme, the Council created a mixed method research approach. First, quantitative surveys asked industry professionals to relate their thoughts on discounting and big data analytics. This was supplemented by questions around the context of overall industry sentiment and its immediate prospects. Second, the results were discussed by a smaller number of Council members to explore the qualitative meaning behind the survey answers.
04
FASHION ADVISORY COUNCIL
Whilst the challenges facing the industry are very real and have salience now and into the future, there appears a deviation in the operational capabilities to best tackle them. With positive sentiment running through the industry, disparity in experience, awareness and application runs throughout the findings. This is a significant element within our research findings. A further concern is that the industry still reflects a silo thinking mentality. The current application of Big Data appears to have an imbalance in operational use. This offers an opportunity for industry stakeholders to provide support to achieve long term industry sustainability. The report findings suggest that industry stakeholders from educators, executives through to industry bodies and other relevant stakeholders collaborate to create an industry Big Data focus. Technology and large data sets are here now, as are the challenges facing the industry. A truly collaborative discussion will help to bring together the disparate strands of a large and complex industry to create a new best practice fit for the future.
2017
05
About the Fashion Advisory Council 2 In 2016, London College of Fashion piloted a project (in conjunction with Silver Sea Consulting and Populus) that saw the development of an international advisory panel of senior managers across the different sectors of the fashion industry. The vision of the Council is to conduct research on an annual basis with this group examining current issues facing the industry. The research methodology for this first project utilised a mixed method of first, the completion of online surveys by a panel of fashion industry professionals. The first year of the project saw 102 online surveys completed, with an
emphasis on discounting. In 2017, the second year of the project, we completed an additional 113 online surveys (this time focusing on Big Data and Brexit). Second, the results of the quantitative survey research were interrogated in a series of in-depth Delphi interviews with senior industry professionals. This report summarises the key findings from our research to July 2017. The Fashion Advisory Council would like to thank the fashion industry professionals who have contributed to the creation of this inaugural report.
2017 in Review 3 There can be no doubt that the fashion industry is experiencing structural change of unprecedented nature. The rise of consumerism, technological development and the opening of free trade in the twentieth century created great opportunities. The environment in which fashion businesses operate today appears very different; uncertain, daunting and at times totally unpredictable.
06
The supply of product and sourcing strategies are changing, ever greater supply chain visibility is expected and significant cost head winds have chilled the industry. Demand patterns have changed too. With fast fashion developing toward see now, buy now initiatives and online global consumers making use of omni-channel retailing the need for nimble but accurate trading is vital.
FASHION ADVISORY COUNCIL
The industry like all others is not immune to the effects of the geo-political environment. The sudden fall in exchange rates post the Brexit vote and the lack of clarity in business prospects over the longer term are a cause for concern. Two things are clear. First, some fashion businesses are in distress and seemingly unable to find their way through the challenges of today. Second, others appear to be
finding routes to success and evidencing sales growth and new capital expenditure plans to position for the future. To set the scene for the detail to come, it is appropriate to remind ourselves of just what is at stake should the industry fail to look ahead and acknowledge and respond to the challenges of today.
Bad News More than 5,500 clothing retailers are estimated to be at risk of becoming insolvent, as business rates and Brexit negotiations continue to add pressure on the industry. — Drapers, 2017 Upscale UK fashion brand Jaeger is understood to have begun administration proceedings, putting around 700 jobs at risk. — Just-style, 2017 What Should Burberry Do Next? The iconic British brand needs a refresh. Here’s what Christopher Bailey and Marco Gobbetti must do to get the business back on track. — Business of Fashion, 2017 The fashion industry is now at a crossroads: it cannot ignore the environmental trend any longer. One-off sustainable campaigns and collections won’t be effective unless they’re part of
2017
a broader strategy: brands have to think of the full life cycle of their products; more consumers need to change their habits; non-fashion corporations need to shift their conventions; politicians need to address climate change headon; and a socially-conscious mindset needs to be applied across the board to create a truly sustainable industry. — Business of Fashion Basically business is bloody hard. Brexit has destroyed confidence in our economy and devalued our currency. — Management Today, 2017 Retailers will need to ensure they get the balance right between keeping cost increases to a minimum, driving footfall with promotions, and looking for further productivity gains as the sector faces possibly its "worst run of health for five years", a leading think-tank has warned. — Just-style, 2017
07
Good News
Business Temperature Check 4
Asos sales surge 29 percent thanks to Brexit battered pound. — Independent, 2017
Amazon, in the business of everything, launches private-label shoe and purse brand 'The Fix'. For now, The Fix is only available to Amazon Prime members. Its merchandise will reportedly change on a monthly basis. Amazon is also working on rolling out Prime Wardrobe, a platform for shoppers to pick and choose from more than 1 million fashion items on Amazon.com. — CNBC, 2017
BoF can exclusively reveal that billion-dollar fashion ‘unicorn’ Farfetch, a marketplace that connects consumers with a global network of boutiques, will begin powering e-commerce sites for brands. — Business of Fashion, 2017
Going forward, we’re looking to expand to other areas such as travel from a family vacation perspective. This would involve expanding our clothing and accessories offering, as well as form new partnerships, in the travel arena. — Colin Porter, Drapers, 2017
With a history in shoemaking that goes back almost 200 years, footwear giant Clarks is about to take a step into the future with a new model to bring innovative shoe manufacturing back to the UK. — Just-style, 2017
I personally find it very interesting – you can get very analytical with e-commerce. It really throws an intellectual challenge at you in the way that having a bricks-and-mortar store doesn’t. — Marc Granditer, Drapers, 2017
08
Prior to the online survey of core topics all Council members were asked a series of temperature check questions to understand business sentiment. These temperature checks will form the starting point of all future reports and are useful to set the context around which questions are answered.
The fashion industry as a whole 4.1 Key Findings 4.1.1
The panel is generally very optimistic – unique as other industries (financial, banking, pharmaceutical, media and travel industries) are pessimistic and concerned about what the future holds, particularly in terms of Brexit. Younger members and those in more junior positions in the industry were less optimistic than senior members, likely because they have not experienced multiple business cycles.
FASHION ADVISORY COUNCIL
2017
There was a perception of a lack of ‘voice’ across the industry, without clear leadership or priority-setting for the sector. A silo mentality still exists – members are often only focused on their specialism and its priorities and not the bigger macro environment. Most of the panel have a ‘shortterm’ view; the fast pace of the industry means most members are very reactionary and unable to think longer term than five years in the future.
09
Attitudes about the future of the fashion industry 4.1.2 The Council were asked how optimistic or pessimistic they felt about the future of the fashion industry and generally they were more optimistic than not, with those working in design being the least optimistic. Those who had worked in the industry longer tended to be more optimistic than those who were relatively new to the industry.
It is of interest that design professionals were more prone to pessimism. The operational and sourcing impact on the design role coupled with high competition and a potential fashion ‘long tail’ suggests that this is a topic that should be further explored.
Scaling from 0-100, how optimistic do you feel about the future of the fashion industry? Position
Retail & Store
75%
IT/Finance/HR
75%
Design
67%
Comms
71%
Other
68% 65%
5-10 years
73%
11+ years
77%
Sample
Panel
73%
LCF Contacts
70%
Total
2017
72%
2016
68%
Experience
Up to 4 years
10
This was further supported when explored in the Delphi: “I just think because we’ve been doing it for so long. It’s not going anywhere, is it? It’s like art or media. There’s doom and gloom in parts of it, like the prints area. I think print is totally going to be dead soon…So, that part, the editorial part is definitely reshuffling and changing, but it’s all becoming digital so¬ it’s not going away, it’s changing format. I think it’s exciting and I think fashion is probably the last industry to be affected. We’re so slow. We’re so behind when it comes to online. Most industries went through this change about ten, 20 years ago and we’re just going through it now.” — Luxury Fashion & Retail Consultant
“I think it’s got more to do with experience and perspective. If you have been in the industry, you have seen it going through ups and downs. Really the industry rises out of something. So, it’s a peak or it’s a trough. It comes and goes. It’s got to do with experience.” — Creative Industry Business Consultant “They’ve probably seen the industry change already. It’s gone through lots of change and it’s survived, come through and been better for the change. So, they’re probably more confident and more comfortable with change.” — Business Development Manager at Major Retailer
Challenges to the fashion and retail industry 4.1.3 The Council were asked their perception of the greatest threat to the future UK fashion and retail industry. The questions were asked in both the 2016 and 2017 projects. The table below gives a breakdown of the threats and their importance.
FASHION ADVISORY COUNCIL
2017
11
Threat
2017
2016
Unethical manufacturing processes
60
65
Continuous discounting
58
62
China as a fashion / creative hub
56
52
Leaving the EU on WTO terms
52
—
Britain leaving the European Union
49
54
Increased 'disposable' nature of clothing
47
49
Fashion fatigue causing customer disillusionment
44
51
Promotion of a healthy body image
32
36
Increased appetite for local sourcing and providence
27
31
27
—
1 2 3 4 5 6 7 8 9
Big data
10
In both surveys, unethical manufacturing processes and continuous discounting were considered the greatest threats. Whilst the threat level for both had decreased slightly from 2016, both remain high profile discussion topics within the industry. A couple of additional threats were introduced (Leaving the EU on WTO terms and Big Data) by panel members in the 2017 survey. Leaving the EU featured highly as a new threat; Big Data on the other hand is not perceived by Council members as a significantly threatening. This helped prompt the decision to probe Big Data further in the interview process. This assessed its prevalence a threat as perceived or if instead there was a knowledge gap around the implications and opportunities surrounding it.
12
A further point to note was that only China as a fashion / creative hub was considered a greater threat in 2017 than the previous year. This is interesting as whilst Chinese brands mature and look for expansion opportunities, as a sourcing location it is under attack from lower cost producing economies such as Cambodia or Bangladesh. Again, whilst the change in sentiment was marginal, it is of interest as the potential of this threat is significant. As such it should be noted as “on the rise”. During the Delphi interviews, a small number of common subjects came up that had not been included as part of the survey or set interview questions to explore. These are highlighted below. The first has salience with the big data focus of this report. The second, education, offers further insights into emerging themes from the research conducted.
FASHION ADVISORY COUNCIL
Online platforms and the rise of social media
One of the key future challenges and opportunities that were referenced was the development of technology and the resultant impact of online platforms and social media on the fashion industry. The Delphi participants noted how the industry will have to adapt to keep pace with technological advances: “There’ll be a lot of crossover, more so into the tech and digital industries, and they’ll have a lot more synergies with other types of industries, rather than what we’ve ever done before.” — Business Development Manager at Major Retailer The retail experience is changing for customers with people buying online as well as instore: “I think that shopping from a retail perspective is an experience rather than a necessity, especially in the UK. The vast majority of people who spend money on fashion are getting used to buying online as well. So, I just opened my second shop, but I love retail and it’s an art form. It’s something you have to do really well otherwise people are just going to go elsewhere. So, from a fashion industry perspective the whole market has changed such a lot in the last – even two years.” — Founder and Design Director
2017
There was some concern that social media was only benefitting the larger brands and smaller companies are no longer able to utilise social media in the way they had in the past: “At the beginning when social media first came along it was easy for small brands to grow, but now again we [Independents] have become second class citizens, because you have to spend a lot of money on social media or they’re not interested in products anymore. They changed the algorithms, which means that brands cannot be seen any longer, unless you pay more money to Facebook and Instagram in order to have your post promoted and be seen by your followers. So, things are changing especially in the last couple of years for new, emerging, independent brands. It’s becoming more and more difficult.” — Sales & Marketing Manager
13
Education
China 4.2
Key Findings 4.2.1
The role of educators as also raised by Delphi participants as an area that needed review. The call for guidance to be provided across the industry to ensure that essential skills were not lost was significant. “I think the main issue I have with some of my interns is that some of them can’t even sew a button on. That’s the issue I have. I mean, they’re doing design degrees. I find that unbelievable. I personally think they still need some basic skills. I know when I did my fashion degree, we spent the whole of the first week sewing, so that at least by the time we got to the end of the week we could all [sew]. We spent about 35 hours just sewing. It was the best thing they could ever have done for us, even though we hated it at the time. I know that a lot of students outsource their sewing to other people. It’s a waste of time. They should just do it themselves if they can.” - Founder and Design Director There was also a call for educational institutions to better prepare their graduates for life after their degree and offer direction and business education to be able to build a successful career in the industry:
14
“The business education aspect of fashion in the UK. America is much more ahead in that respect, because basically the whole industry is much more commercial. We need to discuss education and how it reflects the changes in the industry, whether it be the curriculum or just emphasising business education. We need education that enables the young talent to thrive. Set them for success.” - Creative Industry Business Consultant “I think it’s about talent. I do think that there’s going to be a lot around. As I’ve talked about, in terms of what roles are going to be out there in the future that graduates can be qualified in doing. Because the traditional roles, there won’t be the same number of people doing those. Educational institutions need to start preparing people to have a bit of a direction when they come out of doing their degree; what they can actually do; and how they can apply their skills.” - Business Development Manager at Major Retailer
FASHION ADVISORY COUNCIL
56
up from 52
China as a fashion or creative hub 2016—2017 Section 4.1.2
China was considered a threat by the Council members but less so by those interviewed, who thought that quirky startups were interesting and welcomed. Although China was viewed as the third biggest threat by the Council in the survey (and the only issue seen to be more threatening than in 2016), those interviewed saw it as more of an interesting trend than a threat or opportunity.
2017
“Go for it, China. I think they should just do what they need to do. Currently, it’s mainly cultural copying in China, but I think as they get more confident in themselves they will certainly be producing some good design. There is some good design there anyway, but they still probably are looking to the West and to Korea and Japan for their inspiration. I’ve noticed actually in the vintage markets recently there are quite a lot of Chinese vintage furniture and textiles, which is really interesting. So, I think we’re going to see Chinese influences coming through in the next few seasons. As they mature, they’ll start to like their heritage and draw inspiration from it.” — Founder and Design Director
15
Continuous Discounting 5
Unethical Business Practices 4.3 Key Findings
4.3.1
Key Findings 5.1
60
down from 65
Unethical manufacturing processes 2016—2017 Section 4.1.2
- Acting in an ethical and sustainable manner was considered an increasingly important issue for stakeholders, with increased transparency expected in the future for large, discount retailers. - The panel considered there to be a link between unethical manufacturing and fast fashion. - Unethical manufacturing processes were not linked with concerns about China. Unethical manufacturing processes was considered by the Council to be the greatest threat to the industry and the Delphi participants also thought this was an increasingly important issue. “I’m an ethical brand. I try to be as ethical as possible. I’m conscious of the fact that there’s a lot of cheap, semi-disposable fashion out there and a culture of using items once or twice.” - Founder and Design Director All Delphi participants noted a trend towards social conscientiousness among both retailers and customers, 16
meaning ethical product lines were more widely available and in demand. However, it was noted that this trend was not linear across all demographics: “Definitely the ethical fashion industry has changed and there’s much better education about it. So, a lot of people are more aware of the issues. But some people don’t care. And it’s often a money issue. Especially with young people. They just want the new thing. They want to feel good, going and it’s really important how they look – it’s much more important to them than for people who are slightly older.” - Founder and Design Director FASHION ADVISORY COUNCIL
- Considered a key threat and most immediate for the industry. - The practice has become unsustainable. - It will put companies out of business if it’s not addressed – but at present no one stakeholder group is seen to be taking responsibility or changing the status quo. The prevalence of continuous discounting was considered the second greatest threat to the fashion industry by the Council but the biggest threat by Delphi participants. When surveyed in 2016, only 18% of the Council thought that continuous discounting was a temporary fad that would last only a few years:
58 When surveyed last year, only 18% of the Council thought that continuous discounting was a temporary fad that would last only a few years:
down from 62
Continuous discounting 2016—2017 Section 4.1.2
18% 21%
This is only a temporary 'fad' that will cease to exist after a few years The amount of discounting will remain the same This pattern will continue, but slow down over time
31%
31%
This pattern will accelerate
2017
17
Three in five of the participants in the 2016 survey believed that the ‘cycle of discounting’ would become unsustainable for many retailers, a view shared by Delphi participants who felt this was an immediate threat and had a real impact on margins: — It will become unsustainable for many retailers
31%
— It will contribute to the trend for 'disposable' fashion
28%
28%
— It will lead to more unethically sourced products
27%
29%
— It will lead to lower quality products
27%
— It will make fashion more accessible for all
10%
— It will mean consumers get a fairer deal
10%
“Yes, continuous discounting it is a threat. It’s about competitiveness and what market you are targeting. In a way the big data thing could really solve this problem by targeting customers better which would maintain margins. Continuous discounting is a threat from the perspective of how low your margin can go.” — Creative Industry Business Consultant “It has become an expectation of the market. It is actually bad, because it erodes your margins. The cost of discounting is actually killing the stores and the brands, because customers believe ‘what’s the point of buying a full price item’.” — Sales & Marketing Manager 18
21%
2%
29%
2% 10%
33%
34%
3%
32% 37%
2% 2%
12%
2%
5% 8% 2%
29%
29%
23%
2% 10% 4%
27%
27%
19%
The Council believed that action needed to be taken to curb the cycle of discounting, with fashion industry bodies creating a code of practice and major firms and retailers taking the lead: — Customers should be encouraged to buy quality and not quantity
31%
— It will lead to a 'race to the bottom'
Don't know Somewhat disagree Strongly disagree
Strongly agree Somewhat agree Neither agree/disagree
13%
19%
13%
4% 3% 9% 9%
“But it means that it’s driving behaviour that the customer is buying at a lower margin for retailers, because they’re expecting that things are going to be discounted. So, you see people like Debenhams, who’ve really struggled to shake off that blue cross sale image, focus on driving sales, not driving profit. That’s quite alarming, because you should always be trying to drive your profit, obviously. They’ve discovered that the sales mechanic that they’ve implemented in the past has not been driving the bottom line, which is worrying because it doesn’t produce a sustainable business. So, continuous discounting is absolutely a threat to the sustainability of fashion businesses.” — Business Development Manager at Major Retailer FASHION ADVISORY COUNCIL
30%
— Fashion industry bodies should create a code of practice to stop price gouging — It is the responsibility of leading firms/retailers themselves to take the lead to limit discounting — The 'cycle of discounting' needs to be stopped — I don't think the 'cycle of discounting' needs to be halted — Government should regulate the way discounting is used
27%
23%
35%
13%
10%
22%
33%
21%
6%
Strongly agree Somewhat agree Neither agree/disagree
29% 28% 23%
27%
8%
4% 10% 4%
27%
2% 13% 2% 2% 13%
3% 3%
3% 10%
25%
33% 31%
Don't know Somewhat disagree Strongly disagree
19%
19%
10% 13% 18%
Lack of leadership and responsibility regarding discounting was picked up in the Delphi participants with one interviewee stating that they didn’t believe any one stakeholder would take the risk as being the one to curb discounting first: “The whole system is messed up. It needs to be readjusted, but with everything happening so fast I don't know who’s going to do that. Who’s going to take the risk and do it first and stand strong and say, we’re not going on sale, we’re actually going to continue to sell the products throughout the winter and go on sale when it gets warm. I don't know who’s going to take that risk.” - Luxury Fashion & Retail Consultant The difficulty in getting the right products to the customer at the right time was considered an important part of the issue with continuous discounting:
2017
“Linked to discounting is this aseasonality. What are the right seasons? How do you get the right type of product in front of the customer at the right time? Because people don’t want to be buying summer clothes in February when, traditionally, it launches. Likewise, our autumn/winter stock is going to start hitting down in July. People are not in the frame of mind to buy winter clothes then. So, it’s all sort of out of sync, because, in the past, the influences came from the catwalk, which works on a different cycle. This cycle has sort of trickled down to the high street, but that’s just no longer relevant.” - Business Development Manager at Major Retailer 19
Although one participant thought that shrewd retailers could take advantage of this clash with aseasonality within product ranges and collection launch timings:
“Also, if you’re a retailer and you’re on the ball, you can take advantage aseasonality. Last August, when most of the High Street stores had got in a full selection of winter clothes, we sold so much swimwear because no-one else was selling it. Most people go on holiday in August. They don’t go on holiday in June and July. The vast majority go in August, so if you’ve still got nice product left in August that’s quite summery, you can sell it at decent prices. So, it’s all a bit skewed in that respect for sure.” - Founder and Design Director
Brexit 6
Key Findings 6.1 - Council members appeared calm about Brexit – there wasn’t a sense that policy needed to be changed and that people would manage with whatever Brexit dealt them. - There are some already harmful effects caused by Brexit – increasing prices through the supply chain, although the weak pound has been attractive for some foreign purchasers. - 55% of the Council said they were very or somewhat prepared for Brexit, not a view necessarily shared by those interviewed
Attitudes towards Brexit 6.2 Generally, those on the panel felt positive around Brexit, and this increased slightly depending on the number of years members has worked within the industry.
The vote on 23rd June 2016 by the United Kingdom to withdraw from the European Union created a sudden and significant macro shock to the country, its citizens and businesses. The scale of its potential influence on commerce is so significant that the Advisory Council wanted to capture a snapshot of feelings with a series of distinct questions.
Scaling from 0-100, how optimistic is your attitude towards Brexit?
Already our industry has seen exchange rate volatility and resultant inflationary pressures that are eating into margins. This has also seen a reverse effect with the lower pound encouraging the tourist spend and for those businesses able to export opportunities presented via a newly competitive pricing policy.
Panel LCF Contacts Up to 4 years in industry Over 11 years in industry Total
61%
59%
50% 54%
20
FASHION ADVISORY COUNCIL
2017
62%
21
When asked how prepared they and their business were for the impact of Brexit, over half of the Council said they were very or somewhat prepared for Brexit.
16%
17%
13%
29% Very unprepared Somewhat unprepared Neither Somewhat prepared Very prepared
39%
42%
30%
27%
8%
10%
4%
4%
42%
6%
However, with both the panel and the LCF Contacts, there were a lot of people who said ‘neither’ which could suggest that there hasn’t been much thought given towards the impact in their organisations, or just the many unknown variables surrounding Brexit makes it difficult to prepare for fully. When this was explored further in the Delphi interviews, it was clear that there had already been an impact on Brexit on companies, but this impact was mixed, both positive and negative. The most obvious negative impact was the exchange rate:
“It’s massively affecting the currency and the exchange rate and we’re all getting completely screwed by it. Any British brand that’s based here and sells primarily in Pounds is having a really hard time at the moment. So, margins are being massively squeezed and we’re looking at pricing things higher. We’ve had two or three price increases over the last six months. It’s really affecting things, and it obviously affects anyone that wants to make or produce in England. I think that’s going to really impact our ability to work with brands outside of the UK.” - Luxury Fashion & Retail Consultant However, the fall in the exchange rate wasn’t viewed negatively by some, with the fall being beneficial to some retailers: “For the time being the biggest impact is the [fall] of the pound, which is very good for existing stock because obviously the pound is almost one to one to the euro, it’s 1.2 to the dollar, so it’s cheap at the moment which makes it good for foreign buyers shopping in the UK. Brexit is great for the stock you have, but then you don’t realise that very few items are manufactured in the UK.” - Sales & Marketing Manager For many, there were too many undecided variables to be able to plan fully for the impact of Brexit. Many stated that the need to be flexible and agile would remain key to being able to cope with unexpected change:
22
FASHION ADVISORY COUNCIL
2017
“From a retail perspective it’s the uncertainty of the political and economic arrangement of Brexit. That’s something that obviously we can prepare for to a certain extent. However, at this stage it’s very difficult, unless you’re going to take everything out of the UK. It’s about being ready to change and watch this space.” - Creative Industry Business Consultant “At the moment it’s too early to say, because the main thing about Brexit is it’s just provided a huge amount of uncertainty. And actually, no one is in a position to predict what the final impact’s going to be. So, in a way, there isn’t that much that people can be prepared for. I think it’s just being aware that businesses need to be agile, and need to be able to react to what is going to happen.” - Business Development Manager at Major Retailer In contrast to the Council where 55% of those surveyed said they were prepared for Brexit, just one participant from the Delphi stated that they’d had conversations with their suppliers: “We’ve started to have a few conversations with our suppliers about how we’re going to manage our costs if tariffs are imposed, but it’s all so speculative at the moment. We haven’t really been able to put many actions in place.” - Business Development Manager at Major Retailer 23
Big Data 7
Attitudes to Big Data 7.2
Big Data refers to data sets that are so large or complex that traditional data processing methods are inadequate to process and analyse the data under review. Big Data is perhaps a revolutionary opportunity, the hottest new capability to access vast quantities of information, analyse at an instant and so understand new levels of business complexity.
The Council were asked the extent to which they agreed or disagreed about the impact of Big Data on the fashion industry in the future:
Big Data does potentially offer a lifeline to business. Data does not need to be static or retrospective. It can be a newly invigorated ingredient within the recipe of value creation for both consumer and business alike. This lifeline comes with risk. The use of all available data is potentially error prone. In simple terms; the likelihood of error rates increase as more data points are added.
In addition, there are questions about Big Data and its relevance within business. First, is it the preserve of those who can afford such big capital investment? Second, is there a moral question to be answered around the potential access business could have to individual purchasing habits? This final section of the report considers Big Data, its current use and understanding to assess its potential role in supporting the fashion industry through a period of great change.
Key Findings 7.1
- Of those in the Council surveyed who said that Big Data offered opportunities for them, between 26-39% of those said that their company was also using Big Data to take advantage of those opportunities. - There was disparity across the industry to the extent businesses are aware, understand and use Big Data. - Of those interviewed, Big Data was thought to be a natural evolution, with new jobs developing in new areas to replace the old ones. - Uncertainty about how to educate professionals in the new jobs that Big Data might provide without losing basic creative skillsets.
24
FASHION ADVISORY COUNCIL
— In the future, Big Data will drive a lot of decisions in the fashion industry — Big Data offers more positives than negatives
24% 15%
— I am excited by the opportunities presented by Big Data — For good or bad, Big Data will disrupt how the industry currently operates
38%
19%
33%
15%
— The fashion industry is too emotional and ephemeral to be controlled through Big Data
10%
— Big Data will result in lots of job losses in the industry
11%
— Big Data offers more negatives than positives
31%
8%
9% 3%
37%
6% 4%
37%
34%
6% 6%
34%
31%
13%
38%
25% 19%
33%
14%
44% 42%
Strongly agree Somewhat agree Neither agree/disagree
4% 7%
16% 16%
4%
15%
Somewhat disagree Strongly disagree
The results show that Big Data offered more business positive aspects to businesses than negatives but prevalent throughout was a sense of neutrality. This could be due to a lack of understanding surrounding Big Data, its true meaning and potential broadest application, something that was borne out in the Delphi: “I think we’re just at the very beginning. Our new person was actually at Uniqlo and Nike before. She’s got a really, really good idea of what’s going on in [the Big Data] area. I think those are two brands that are doing it well, but Big Data is a fairly new thing for a lot of fashion brands anyway. Maybe other industries have been using it for longer”. - Luxury Fashion & Retail Consultant
2017
“No, definitely not. I don’t think [fashion organisations have full understanding of the capabilities of Big Data]. Again, it will take some time. Unfortunately for the larger companies it is really looking at your whole business proposition and internal processes. It is about looking at the positions, because the systems and processes are not geared to the data. Basically, you either stand still and lose, or you progress and adjust.” - Creative Industry Business Consultant 25
Opportunities for Big Data 7.3 Big Data was seen by the Council as creating a range of opportunities for the fashion industry, particularly in the areas of marketing communications and informing product offers. The ultimate business aim of improved profitability and shareholder value was
surprisingly low in the ranking. Not only that there was a significant discrepancy between business function, with 44% of designers seeing improved profit potential compared to a mere 13% of finance and HR Council members.
There is a big gap between those in the Council who see Big Data as an opportunity and those that are currently using it, although it is their perception that the gap is closing.
Big Data offers an opportunity to... My company is using Big Data to... 35%
35%
... better target marketing communications
Big Data would help companies to...
33%
38%
31% 35%
... better target marketing communications
... improve stock management efficiency ... improve their profitability ... predict consumer response to emerging fashion trends
40%
8%
... inform their product offers
24%
6%
28%
26%
43%
... personalise their product offerings to customers 26%
43%
24%
6%
36%
30%
25% 25%
44%
22%
9%
44%
... improve stock management efficiency 26%
21%
21%
47%
42%
25%
28%
8%
47%
... improve their profitability 39%
9% 21%
28%
A Small opportunity Not an opportunity
FASHION ADVISORY COUNCIL
36%
21%
... predict consumer response to emerging fashion trends A great opportunity A considerable opportunity
26
22%
35% 31%
... inform their product offers ... personalise their product offerings to customers
35%
40%
33% 42%
30% A great opportunity A considerable opportunity
2017
Using Big Data Planning to use Big Data in next 12 months
27
Those in the Council that worked in organisations that use Big Data are much more likely to see the benefits it offers than those with no plans to use it. A further point of interest emerges from the data. Stock management and its flow through the value system appears not to be a current Big Data focus. This points to a significant opportunity for business to better manage global forward and reverse logistics.
The company I work at currently has...
32% of Comms and 23% of Retail/Store vs. 8% of Design and 10% of Finance/HR
At least one use for big data At least three uses for big data No use for big data
58% 35% 19%
Big Data would help companies to... ... inform their product offers
75% 84% 52%
... to better target marketing communications
73% 86% 52%
... to personalise their product offerings to customers
76% 88% 44%
... improve stock management efficiency
76% 86% 44%
... improve their profitability
76% 84% 41%
... predict consumer responses to emerging fashion trends
65% 78% 44%
28
At least one use for big data At least three uses for big data No use for big data
FASHION ADVISORY COUNCIL
Of those surveyed from the Council, 35% said their company used Big Data to inform their product offers. This was backed up from the Delphi participants: “We use search firms as a way of understanding what people are looking for on our website. We look at that weekly and there’s things on there that they’re searching for that we’re not producing in our collection. So obviously we put them into the collection after that… I think [Big Data] can help us become more sophisticated in how we offer things to people and when we offer them.” - Luxury Fashion & Retail Consultant
“Big data is a massive opportunity because it’s enabling us to gain information about our customers and better serve them with a better customer service experience and better products, at the right time and the place that they want. I think that’s quite an opportunity.” - Luxury Fashion & Retail Consultant
“But actually, now you see consumers are influencing businesses. That makes it a really interesting time, because it makes it harder to predict and forecast your bottom like and control your business numbers. But actually, it means that there’s huge opportunity in terms of the scope of what you can do for your customers, and how you can meet their needs. Agility is going to be key.” - Business Development Manager at Major Retailer
2017
29
Threats of Big Data 7.4
Affordability 7.4.1
Most of the Council perceived that Big Data offered a threat at some level, although only small numbers thought that it was a ‘great threat’ for the fashion industry. A great threat A considerable threat 18%
39%
31%
A small threat No threat at all 13%
Both the Council and Delphi participants thought that the greatest threat that Big Data posed on the future of the fashion industry was its affordability and that only those companies that could afford to invest and develop its use would realise its
full potential. This raises interesting questions around small and medium sized enterprises (SME) and incubation of emerging businesses to weather the on-going uncertainty that surrounds them. A great threat A considerable threat
... only help companies that can afford to invest and develop it
10%
38%
35%
17%
... compromise the privacy of consumers
13%
33%
40%
15%
... cause job losses in the sector as some jobs become irrelevant
... undermine sector creativity if big data influences decision making
... increase the cost to serve and last mile logistics
... encourage consumers to make impulse decisions they regret and inhibit brand loyalty
34%
11%
32%
44%
37%
13%
20%
... undermine sector creativity if big data influences decision making ... increase the cost to serve and last mile logistics ... encourage consumers to make impulse decisions they regret and inhibit brand loyalty
7%
This was backed up by one Delphi participant who thought that more traditional businesses were especially at risk:
30
... compromise the privacy of consumers ... cause job losses in the sector as some jobs become irrelevant
9%
25%
50%
18%
“Yes, a huge threat. There’s a threat to the businesses which were not born in this era, and not set up to use customer data to drive their business. The risk and threat is that traditional businesses continue to work in the same way that they’ve always done.” - Business Development Manager at Major Retailer
FASHION ADVISORY COUNCIL
18%
... only help companies that can afford to invest and develop it
10%
13%
9%
7%
“I think it’s quite scary that some brands will have more access to it than others, like Amazon and Google and people like that. They could become dominant and quite powerful and scary, like a monopoly, if you like.” - Luxury Fashion & Retail Consultant
31%
38%
35%
33%
40%
34%
11%
“For the smaller companies it’s easier, because they can react more quickly, but there’s that element of not having enough funds.” - Creative Industry Business Consultant
2017
39%
32%
25%
44%
37%
50%
A small threat No threat at all 13%
17%
15%
13%
20%
18%
However, there was some who thought that smaller companies could be more successful utilising Big Data, even with a smaller budget than the large companies: “It is a problem that it is expensive, but for a small to medium business, I think it’s about being clear on what you want to use the data for and what the purpose is. You don’t need to buy every type of data that you can get access to. Actually, if you have to be economical in how you buy, it’s probably forcing you to think 31
more carefully about what you want and why you want it. Whereas big companies, where they’ve just got an influx of data, you could argue that they’ve got too much and you haven’t got a clue what to do with it.” - Business Development Manager at Major Retailer
“No, it’s not difficult at all. With a small budget you can still get in touch. No, small and big companies just have to be really smart how they use data and who you target.” - Sales & Marketing Manager
Privacy 7.4.2 Another perceived key threat from the Council and the Delphi participants surrounded the privacy of consumers:
A great threat A considerable threat
18%
... only help companies that can afford to invest and develop it
... compromise the privacy of consumers
... cause job losses in the sector as some jobs become irrelevant ... undermine sector creativity if big data influences decision making
... increase the cost to serve and last mile logistics
... encourage consumers to make impulse decisions they regret and inhibit brand loyalty
32
39%
10%
13%
38%
35%
33%
40%
34%
9%
32%
11%
7%
31%
25%
44%
37%
50%
A small threat No threat at all
13%
17%
15%
“Yes, I think it’s a scary one, isn’t it? I feel that Google and Facebook and all those guys have all our information anyway. We give it away really easily. I give my email out on a daily basis and I feel like people are tracking everything I do online.” - Luxury Fashion & Retail Consultant “Data privacy is not just a fashion industry specific topic. It’s a general thing that runs across all industries, and to be honest big companies, insurance companies, banking sector, they’ve been collecting data for the past ten years. There’s a huge directive coming in about data protection next year which larger companies in particular need to be aware of. So, it is a concern, but it’s already on the radar. I think it’s more like an ethical question really. What do you do with that data? How do you manage that data? What is ethical and what is not?” - Creative Industry Business Consultant
One participant felt that the restrictions on use of data and the privacy of consumers was actually hindering the way that retailers could use Big Data: “We’re not in a position where retailers can use and maximise the benefit of the data by delivering value to customers, because, at the moment, there’s so many restrictions on the use of data. But, I understand the rationale behind that. There needs to be a fine balance; you need to protect the customer, but ultimately you are going to deliver greater value by understanding more.” - Business Development Manager at Major Retailer
13%
20%
18%
FASHION ADVISORY COUNCIL
2017
33
Emergent Themes 8
Job Losses 7.4.3 Job losses caused by Big Data was a concern for the Council: A great threat A considerable threat ...cause job losses in the sector as some jobs become irrelevant
13%
... only help companies that can afford to invest and develop it
18%
... compromise the privacy of consumers
10%
... undermine sector creativity if big data influences decision making
9%
... increase the cost to serve and last mile logistics
11%
... encourage consumers to make impulse decisions they regret and inhibit brand loyalty
7%
But it provoked a mixed response with Delphi participants, with some believing that there would be less roles and so less employees required in future: “We’ve shifted. You have to shift headcount in order to bring on these new teams and these new heads of. So, where would we lose from? You’ve got a lot of people that were financial planners or stock inventory planners, people like that, all of those jobs will become automated, you won’t need as many people doing them, customer service, things like that.” - Luxury Fashion & Retail Consultant Whereas others thought that net employment rates would stay the same: “I think net employment rates will stay the same. I just think the types of role will change. I actually think there’ll be 34
33%
40% 39% 35%
34% 32% 25%
15% 31%
38%
A small threat No threat at all
44% 37% 50%
13% 17% 13% 20% 18%
less product development and buying roles, because those jobs will become more automated. On the other hand, there’ll be a lot more digital, tech, data analyst roles. People entering the fashion industry need to be very adaptable and have a broad skillset; they need to demonstrate that they can deal with change; and that they can learn very quickly.” - Business Development Manager at Major Retailer Or in one case, increase: “Really? I think other jobs will turn up because of it. It’s just what’s happening with the world. Some jobs go, other jobs don’t. It used to be that everybody worked in factories, but those people who lost their jobs in factories are now working in the service sector.” - Founder and Design Director
FASHION ADVISORY COUNCIL
In conclusion to this report the following summary points emerge. There is certainly a business sentiment that significant headwinds face our industry and that parts of the value system to quote one Delphi participant are “messed up”. Despite this there remains optimism, but this does appear fragmented. Differential thoughts emerged within the surveys, which were then amplified by the Delphi panel. The Council suggests that Big Data does indeed offer opportunities for the industry. The optimism and vision of its application is not however fully articulated. Big Data is not uniformly applied across business models or job function. Of great interest is the disagreement of its contribution to profitability, which is a core business objective. Instead there appears to be a focus on consumer trends and their management, as opposed to a 360-degree view of opportunity. Real tangible action points emerge from the research. Educators and talent management emerge as pivotal to support business through this period of change. Their role is not limited to skills training but process change and broader
2017
inclusive perception change. This can contribute to the breaking down of silo thinking. In replicating the Delphi panel comment below, a potential route forward has emerged which is appropriate for further investigation. An aspect which is of significance to the overall sustainable industry in which we all operate. “No, definitely not. I don’t think [fashion organisations have full understanding of the capabilities of Big Data]. Again, it will take some time. Unfortunately for the larger companies it is really looking at your whole business proposition and internal processes. It is about looking at the positions, because the systems and processes are not geared to the data. Basically, you either stand still and lose, or you progress and adjust.” - Creative Industry Business Consultant
Appendix 1 — Methodology
Contact Details
The quantitative research was conducted online using two main sources of data:
Executive MBA (Fashion) Office London College of Fashion University of Arts London 20 John Princes Street London WIG 0BJ
1. Fashion industry professionals, from Populus’ consumer panel of individuals; this group self-identified as working in the fashion industry. 2. LCF contacts, who were emailed a link to the survey and asked to forward on the invitation to relevant colleagues Sample sizes were as follows: • • • •
102 interviews from the consumer panel in year 1 113 interviews from the consumer panel in year 2 31 completes from LCF contacts in year 1 22 completes from LCF contacts in year 2
In general, the respondents from Populus’ panel were more likely to work in retail or store management roles (39%), with the LCF contacts more likely to work in behind-the-scenes roles such as design (32%) or communications (32%). For the Delphi phase, Populus interviewed 5 fashion industry stakeholders by telephone between 6 and 23 June 2017. Interviews followed a topic guide developed by Populus in collaboration with London College of Fashion and Silver Sea Consulting. Where necessary, respondents were re-contacted to discuss issues raised by subsequent respondents.
36
FASHION ADVISORY COUNCIL