Disruption is a major buzzword we hear today in business discussions. It is a term we use when an innovation shakes up the market with a better value proposition, eventually disturbing the existing norms, causing a major shift in the business dynamics of the category. This comes from fresh thinking and very often we find that change comes through a thought process that is not affected by legacy issues and challenges within a category. Remember, Uber was not started by any of the big car rental businesses and Airbnb is not a platform from any of the hospitality majors! So when it comes to fashion, where are the big shifts going to be? The key word here is technology- definitely there are going to be tech enabled ‘smart’ garments with amazing features;other that products, where can technology revolutionize the business of fashion? The category is fundamentally about lifestyle and looks with new designs being churned out season after season. Consumers are getting increasingly hooked on to their mobile phones; disruption happens when there is a significant change in behavior across the category and they often come from a sharp reading of consumer habits. In this article let us focus our attention on how fashion business models could evolve in the internet era.
How they buy rather than what they buy
If we look around us, what are the new digitally influenced shopping habits we see? The mobile app that helps you book movie tickets, the platform that helps you discover restaurants online, those two big words that are becoming synonymous with the word cab, all household names right? Are we buying different products or services?Not really, it is after all, the same seat in a movie hall, or groceries from a nearby shop, or a cab that takes you to your destination that we are talking about. The change is not as much about what we consume, as it is about how we consume it. With our handheld devices playing a much bigger role in our lives,there will be a major impact on purchase patterns of fashion products, which in turn, will have a role to play in how brands reach out to consumers.
I am a firm believer in numbers and therefore I feel doubly satisfied if there is data to support arguments that seem perfectly logical. There are many reports on the estimation of the Indian Apparel Market and trends regarding it. While most of them point to the same direction, I liked one particular research that I came across recently- the BCG-Facebook Fashion Forward, 2017. So the numbers I am quoting here have used information from that study along with some reasonable extrapolations.
So what is the change we are talking about?
The fast adoption of mobile phones and better internet connectivity at affordable prices are changing the habits of the young population in our country. We accept change when we find benefit in it. Visionary entrepreneurs have come up with solutions even before we realize that there is a problem. Technology has brought more power to our fingertips, literally.
The pace of change in the recent years have been so immense that as the consumer evolves, technology also comes up with solutions giving way to new business models. We have moved from product orientation to services and now to platforms, which change the way we consume products. In the era of digitally enabled consumers, there are three distinct types of business models that are emerging.
The first, and the most obvious one, is the business of brands that are built online. With the advent of digital technology, we can now get brands to engage as well as transact with consumers online. While this would be an obvious approach for a new brand, often we find that for brands with a legacy, there is heavy dependence on traditional practices and capabilities. For such businesses, the digital shift is easier said than done. However, as their consumers go online, these brands have no option but to be where their consumers go- to get into their mind space as well as in getting them to buy your products. The second model, one that has a lot of relevance in a scattered retail landscape like we have in India, is of a platform, which brings together a buyer and seller of a product or a service. Some of the coolest brands of today, like Uber or Airbnb, belong to this model where the platform owner does not own the inventory. A lot is already being spoken of these models and they are totally revolutionizing consumption patterns the world over. The platforms we hear about are the ones that have truly made it big, and there are a large number of such businesses, which are trying to get established; many of them will fail and as consumers, we will never get to hear of them, for variety of reasons.
Where I would like to dwell a little more into, is a third model which brings the large retail landscape to your mobile phone- one that helps you discover what is available in brick and mortar stores- like Zomato for instance. This form of business, called O2O – Online to Offline – by pundits, is projected to be a huge business driver in India because of the retail spread here. Given the nature of fashion as a category, how big can O2O get in our country? To answer this let us look at what numbers tell us.
The Indian Apparel Market
The table below shows the Indian Apparel market and the level of brand-play and online influence in it. ‘Online Shopping’ indicates e-commerce and ‘Online Influence’ indicates purchases other than online shopping where the internet had played a role, mainly in searching and demand creation. Assuming that most of the online influenced sales will be in the branded space, we can expect around 2/3rdof all branded apparel sales in 2020 to be digitally influenced.
The numbers above indicate market size at overall levels; to understand how the revolution is no longer a restricted phenomenon, let us look at some more numbers. The table below shows how the digital revolution has cut through urban India.
To understand the terms better, here is a quick reckoner.
Digital Footprint: Fashion buyers with Internet access
Digital Influence: Using Internet during any stage of purchase process
Digital Buyers: Buys fashion online
What the numbers indicate is that from a mere 1% of fashion buyers who purchased online in 2013, the number rose to 16% in 2016 and is expected to be 33% in 2020. One-third of all fashion buyers will do their apparel purchases online too, by 2020. The digital footprint goes up from 20% in 2013 to a whopping 87% in 2020; this indicates that a huge proportion of urban fashion shoppers will enjoy quality Internet connection by 2020. The digital influence data indicates that one in two urban shoppers will use the internet at some stage in the purchase process. A look at the changes we see around us is more likely to intuitively corroborate this data than not.
Online Influenced Behavior
While there are pure offline and pure online shopping behaviors, we can expect the digital influence on shopping to happen in certain parts of the purchase process, leading to the involvement of both ‘brick’ and‘click’ in the purchase of a particular garment. Consumers can look for specific styles online, understand trends using the internet, even figure out what sort of products are selling where and then proceed to a shop to buy. This leads to what experts call Webrooming –the practice of searching online and buying in a store. The antithesis of thesis called Showrooming– a term used when a consumer checks out a product in a store and then buys it on the net. Given the nature of the fashion category, where factors like tactile feel, fits and appearance matter a lot, and the variety in the product range is high, the practice of completing the purchase cycle in a store will always be predominant. What could change is the influence of digital browsing involved in the shopping decision. There will be applications that will evoke interest and facilitate online search, before the customer walks out to make a purchase. More evolved brands are already planning to get deeper into the Omni channel way- offering a seamless experience to their customers across online and offline spaces. The table below has divided the brick and click interplay into four types of purchase processes; the data is for the branded apparel segment.
The Indian retail landscape is vast; this along with the highly populated urban agglomerations will help create huge value propositions for online services that help you make more informed and focused offline shopping decisions. While discounting and convenience are driving online fashion shopping in India, there is, however, no doubt that offline selling will be the much larger business. A good part of that will come under the influence of internet usage at different stages of the purchase process. Predicting the future of retail environment is not easy; brands that are agile can keep pace with the changes, while the others will be left behind.
