Photographer: Buddhika Weerasinghe/Bloomberg
I recently had the opportunity to sit down with Sonia Lapinsky, Managing Director at AlixPartners, a global consulting firm specializing in helping businesses successfully address their most complex and critical challenges. Sonia works across apparel, accessories, footwear and hardlines, with both wholesalers and retailers.
As consumer demand drives urgency within retail to deliver products faster than ever, more and more companies in the industry are trying to move toward a fast fashion model. I’ve written about the importance of fast fashion in previous blogs. Sonia has been at the helm of many of these decisions. My recent conversation with her sheds light on a few of the challenges retailers and brands are facing as they try to make the shift and the important role of technology in increasing speed to market, and offers guidance for retailers and brands on how to get fast fashion right.
Greg: You mention that more frequent assortment changes are rewarded by more visits, better margins and increased revenue. So why then are only 40 percent of retailers actually taking steps to increase the speed of product development? What is holding them back?
Sonia: Retailers understand that consumers increasingly bring a “need it now” mentality when they shop. Plus, the results are proven. We have seen many fast fashion retailers deliver roughly 600 bps in EBITDA margin over peers for years. The challenge is that it is not easy for a traditional retailer to shift their model. In our view, there are three critical obstacles holding retailers back:
First, talking about speed is easy; but action takes courage. Retailers stuck in old habits bring broad product assortments to market seasonally, roughly four to six times per year, and the process can take anywhere from six months to more than a year. Archaic ways of working are high-touch and low-tech, requiring multiple reviews and rework of physical product, loading on expense and time, and giving teams a false sense of security that high-touch means “more right.” Implementing a fast, flexible model takes guts. Leveraging technology to eliminate reliance on sampling, incorporating analytics to better understand the consumer, trusting vendors to execute designs, or ditching the seasonal model altogether for fresh capsules, or mini-launches of new product, requires real action and delivers meaningful results
Second, driving change across functional silos is hard. It may not take a village to make a t-shirt, but it does take designers, merchants, planners, developers, a sourcing team, and others managing the supply chain. Leadership across the organization must be “bought-into”, aligned, and laser-focused on keeping teams motivated and implementing change to drive speed, while keeping “foot to the floor” on the day to day.
Third, often the supply chain hasn’t been adequately adapted to support speed and flexibility. A dynamic, responsive supply chain is just as critical as streamlining product development and often requires a major overhaul. Vendor partnerships need to established, production capacity planned, and raw materials at the ready to chase back into winning styles and test innovation.
Greg: What are the key strategies for getting “fast-fashion” or “fast-any-product” right? What retailers are doing it well?
Sonia: Besides operational and process changes, it takes strategically planning the assortment to fit a customer’s wants. Fast fashion retailers know that the entire assortment isn’t about the latest fashion trend. It’s likely no more than 20-40 percent. A loyal customer expects to find product meeting all her needs – basics at a great price, trend-right fashion, and potentially the latest innovation in fabric. Each segment of the assortment could leverage a different product-to-market model for ultimate flexibility. Retailers who understand customer needs and optimize across models to deliver against those needs consistently are the ones who see results and improved margins.
Greg: What innovative technologies are powering fast-fashion?
Sonia: Retailers have never had better access to innovative tools and technologies to drive speed. But determining which have the fastest return on invested time and resources is key. 3D design, voice-of-consumer analytics, virtual samples, digital fabric libraries and fitting technology eliminate iterations of physical samples, and of cost and shipping time. Many vendors are making life easier by adopting multiple technologies and training up their teams, relieving the retailer of the upfront investment. Digital product testing platforms can give merchants real-time insights to optimize assortment plans before a designer puts pen to paper, eliminating expensive in-store testing and questionable results. Adoption of digital showrooms and samples will eventually drag buyers into the present (possibly kicking and screaming!) as they are weaned off a decades-long addiction to costly physical samples.
Greg: Is fast-fashion right for every retailer? Why or why not?
Sonia: We often work with retailers who dismiss fast fashion with the argument that their consumer is different and not trend-driven. That may well be, but those that fail to recognize the difference between being fast fashion per se and the value of getting the right product fast, or getting back into the right product fast, are destined to lose. In today’s cutthroat retail environment where price pressure is intense across segments and competition from pureplay online is high, every retailer should be driven to a faster, more-flexible, and lower cost product-to-market process. The need to react to customer needs, even if they aren’t reacting to the latest fashion trends, is universal. A dynamic supply chain supports reordering or “chasing” into best-sellers in the current selling season. Plus, let’s go back to where we started – speed is proven to drive margin. What retailer would choose status quo if they knew they were walking away from the potential of gaining 200-600+ points of margin?