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What is happening to the fashion industry?
2018 has been a rough year for many companies in the fashion industry in Scandinavia. Well-established clothing chains have in recent years got it tougher. This applies not least to Gothenburg-related companies such as Kappahl and MQ which have been treated stiffly by the stock market. Many will remember the newspaper headlines that painted grim prospects for fashion companies. One of the most notorious economic declines of the past year was that of H&M who saw its share price decrease dramatically during 2018 due to unmet growth expectations. The company has reported a profit before tax of SEK 1.263 million for the period December-February, the first quarter of the company's gross fiscal year. During the corresponding period in 2017 the company saw a profit of SEK 3.212 million . H&M’s share price has improved since then, but the shaking market has shown that the fashion industry is going through some turbulent times. In fact, the fashion market is no longer growing in the West with the same pace it has in the past. This is leading to a fierce competition among companies resulting in reduced profit margins for those who are less able to pick on new trends and swiftly adapt their offering.
How digital is overlapping physical
A development that has certainly not escaped your attention is that the fashion world is increasingly moving online. In Sweden, clothes and shoes are the most popular items to shop online and the online fashion-trade had a good 2018. The year’s growth amounted to 13 percent, which was in line with last year’s result. This means that the industry grew with SEK 1.3 billion online for a total e-commerce sale of SEK 11.6 billion in 2018 which corresponds to an e-commerce share of 18 percent .
In the past year the amount of Swedish digital consumers buying clothes, shoes and bags has increased to 68% and women are the most assiduous shoppers . 71% of women shop online at least once a month. Women aged between 18 and 49 years are in fact the identikit of the busiest web surfers in search of the best opportunities. Therefore, companies in the fashion industry have realized the importance of having a mature digital presence. In Scandinavia, customers acquired the habit of looking for information and shopping online earlier than in many other countries. For most companies the digitization journey has gone relatively well and proves the importance of the digital channel since a growing part of sales is now made online. What a few years ago was an exciting virgin space and at the same time an expensive logistical concern, is seen today as an obvious reality. It is crucial that marketing and sales can take place digitally.
What are the main challenges?
Although the transition to the digital world has worked well so far, it has not been - and still isn’t - painless. To maintain profitability, cope with competition and remain updated in the digital arena is the fashion companies’ greatest challenge. To maintain the interest of consumers, who can have a fast and fleeting purchasing behavior, companies must stay constantly on the alert and pick-up on whatever are the hottest ongoing trends. Companies must, therefore, make sure to have efficient business processes, which in turn places high demands for outstanding business systems.
A major transformation of an industry is said to have taken place when digital commerce reaches 15 percent. In Sweden, this took place in the fashion industry in 2017 . With big players such as Zalando in the e-market and new even bigger ones such as Amazon imminently entering the game, fashion brands need to be focused on what can give them a sustainable future. When competition gets harder, the classic market forces hit and those that are not able to sustain them will be screened out. The keywords for the challenged management teams are and will remain for the unforeseeable future: brand loyalty and customer retention. Companies should be weary of the fact that they need to do their utmost best to create devotion to their brand, sustain their sales as well as create all the reasons they can to attract new customers to their stores.
Can experiential save the physical?
It’s no longer enough to succeed by establishing a store online, many more parameters must fall into place. One of the most important ingredients to success is providing a good customer experience which has of course always been essential. But nowadays, it is even more vital to excel in creating outstanding experiences from the website right up to the moment of the final delivery. Part of the solution to this quest can still be those very physical stores that are now seeing declines in sales. Indeed, digitalization and e-commerce will not completely knock out the physical stores. Consumers are still interested in the physical shopping experience, but companies must at the same time have stable digitalized shopping channels that are attractive. Showrooms in various forms will probably always be needed, but they need not be cast in the same shape as today's traditional store-concept. Hence, companies also need to choose business systems that are designed to handle both trade in physical stores and e-commerce in different markets. The stores that are designed as real experiences and which offer excellent service, according to many in the industry, will have a good future.
Many examples of this are already taking shape in Scandinavia such as H&M’s new test-store in Fältöversten’s shopping mall in Stockholm. This store is currently being used by the fast-fashion giant to test new concepts . The goal is to achieve a completely new shopping experience for the consumer. Several new digital solutions are being tested that will increase the store's service level. When it comes to the product range, items from H&M’s collection have been chosen to fit the specific tastes of customers in the area. This has been supplemented also by smaller external brands that are relevant and that complement their own offering. The locale has its own coffee shop and it’s also possible to get a manicure as well as makeup there. This means that even a mass consumer brand like H&M now understands the value of experiential marketing, an old tool in the marketeer’s toolbox. In fact, a marketing strategy that directly engages consumers and invites them to participate in a shopping experience may be the best way brands have to ease the development of a customer relationship.
We at Wrapp have looked at the data of H&M’s specific test-store. It showed us that the test-store has performed quite well compared to the old traditional store that used to be in its place. The figures do not show any decrease in customer interest but rather sales seem to have been on par with the previous year and in specific months it has even surpassed it.
How to make sense of the overlap between physical and digital
So if physical stores will still be part of the larger strategy of fashion stores even when e-commerce increases its weight. Fashion brands need to start finding ways to have a holistic view of how their business is going both online and offline.
Wrapp’s Analytics based on transaction data literally revolutionizes the way brands can keep track of their performance by enabling them to make smarter decisions based on real-time transaction data that includes both online and offline purchases. Market shares, competition’s analysis and overall market intelligence is an important component to any business strategy. The more precise is the data, the easier it is to make justified decisions. The best part of Wrapp Analytics is that the validity of the data is resolute and reliable. Due to the ever-growing sample size of Wrapp’s users, the collected data keeps increasing making its analysis more and more impeccable.
How to gratify your customers and build long-term growth
As mentioned above, fashion companies are all about understanding trends and customer’s appeals. The fashion brands that first present the products that are in line with the latest vogue win the most. But product offering sometimes is not enough and companies need that extra engagement to build loyalty to their brand, understand their customers to the fullest and obtain growth that lasts beyond the latest fad. What fashion brands need is a deeper awareness of who their customer is: demographics, buying behavior, brand preferences. But how can a fashion brand obtain such data? Again, this is how the newest data-driven technology of digital marketing comes into the mix. We have been working hard to create a system that can help brands accurately learn about their customers and reward them with little effort for coming back to their stores increasing retainment. We call it Transaction-Driven-Marketing (#TDM).
TDM means marketing based on the customer’s transaction data. Simply put, customers consciously lend their transaction data, which is most often collected through their pay-cards, and in return receive rewards that actually reflect their brand preferences. This is achieved through intelligent algorithms that after being fed enough historical purchasing data can provide statistically validated predictions of brand preferences and upcoming buying behavior. One may confidently say that TDM is the new way companies can build both customer loyalty and brand relevance. TDM is the key to building successful targeting campaigns, as well as empowering data-driven decisions that will improve the performance of marketing departments of both online and offline retailers. A big part of reaping TDM’s potential is based on measuring the performance of ongoing sales and campaigns. Moreover, Wrapp allows its clients a full overview of their clientele’s characteristics, when and how much they are spending as well as highly detailed market intelligence.
All this knowledge and understanding of the factors that are in play when operating as a fashion retailer, allows for useful insights on the steps to take for maintaining a close relationship with your targeted customer. Ultimately, it is time for marketeers to acknowledge that achieving success does not only mean higher profit growths. But in a more profound way, it also means creating engagement with their brand and producing the desired experiences that can only be conceived by understanding their customers and the market they operate in.Join our community of retailers on our platform for free and start viewing your customers’ data. Claim your business today!
 ”Därför rasar H&M på börsen i dag”. SVD Näringsliv. 27 Mar 2018. Retrieved 2019-04-05.
 “E-barometern”. PostNord. 2018 report. Retrieved 2019-04-05.
 ”Svensk modeindustri 2019”. Navipro. 2019. Retrieved 2019-04-05.
 ”H&M i Fältöversten fungerar som testbutik: Utveckla och testa nya lösningar”. Market.se. 23 Nov 2017. Retrieved 2019-04-05.