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FAST FORWARDING : SKILLS FOR THE FUTURE DRIVEN TRANSFORMATION of retailers who believe the following trends will significantly change how they operate 2% % % % 9% of to year olds report appetite for Rise of Customer Competitors Rise of directly Social Media Convenience Agility Online from social media ADDITIONAL CENTRAL ROLES REQUIRED additional roles in these areas Analytics k Digital & ech k k Buying k Supply Chain k SKILL SHORTAGES of retailers struggling to recruit the following skills 5% % 5% 2% 0%

echnical Analytical Business Creative Interpersonal I Skills Skills conomics Skills Skills Skills TRAINING REQUIRED of retailers who believe external training reuired pre or post recruitment % 5% % % Interpersonal Skills echnical Skills

Analytical Business Skills Skills

01 An OC&C Insight Fast Forwarding Fashion EXECUTIVE SUMMARY

Technology is at the root of seismic WHAT IS CAUSING THE CHANGE? WHAT IMPACT WILL THIS HAVE? shifts in the landscape. Some of the most successful fashion retailers are Technology has increased the number of The shift that is coming has led to now using data as well as intuition and channels through which customers interact, headlines such as the recent prediction experience to react to ever increasing hastened the pace of customer demands, of 1m jobs in retail lost by 20251. This and dynamic customer expectations; in swollen the amount of data available, would equate to a net loss of c. 160,000 many ways they are increasingly similar amplified the potential use of international jobs in fashion were it evenly distributed. to technology companies rather than resources and increased the intensity of However the impact on the number and traditional retailers. To succeed in this the competitive environment. These trends type of resources required has been less environment organisations will need to are not one-offs; their impact will only considered. This change poses a new recruit and foster new skills and create accelerate as greater change occurs. type of challenge; , developing and retaining the right people. new central roles, while not shying away At the same time, internationalisation from the need to reform staffing at store continues to impact the retailers’ At a store and it is clear level. role growth of >50% will operations. The increasing complexity in that while the number of pure roles be seen in the functions most impacted global sourcing (currency volatility and will decrease, retailers will need to employ such as analytics, while nearly all central an ever broader portfolio of markets for c.15,000-20,000 operatives in order functions will see some increase in the direct sourcing models) is begging for fulfilment to address the speed of delivery number of roles. Overall there will be an specific skills to adapt to an ever-changing and click and collect demands. Many increase of c.20-30% increase in central environment. Internationalisation is also of these may be taken from the pool of employees excluding the supply chain. a challenge from a -line perspective. A current sales staff. Including changes to the central supply strong vector of growth for many retailers, The largest challenge for retailers will not chain management, and the need to it is not as simple as transposing the home be at store or warehouse level, but will replace employees who leave the , business in a different country be the shift in central roles; in particular retailers will need to recruit 50,000- and requires the different teams to adapt the number of analytical and technical 60,000 new central employees over the to local consumer preferences, manage resources required. OC&C estimate that next five years. local partners to achieve a common set analytical roles will grow by more than of objectives while maintaining group This new army of staff will need analytical 50% and technical roles will grow by profitability levels. It is quite a complex and technological skills. Without these 30-40%. Additionally the intensification alchemy which will often lead to failure if skills companies will be stymied in their in pace will increase demand for some not properly thought-through at every level efforts to attract or retain customers in more traditional roles. We expect to see of the organisation. an increasingly competitive environment. the number of merchandising roles grow Today 48% of companies report struggling As a result of these changes it is widely by 2000-3000. Including the number of to find sufficient analytical candidates: acknowledged that the successful retailer new employees required to replace staff Retailers who do not take an early step of tomorrow will not look the same as the leaving the industry this equates to 4,000- forward to recruit these individuals risk average retailer today. Instead they will 5,000 new employees required in the next being left uncompetitive as they lose 5 years. However this additional need for Develop acute customer insight; the fight for talent. Success will require • merchandisers may only be short term; which requires analytical prowess and improved recruitment and training in the longer run this role is expected to expertise in data collection programmes, alongside collaboration with change as automation enables computers educational institutions to ensure that the • Innovate by channel, customer segment to fulfill the most rudimentary , One emerging skills gaps can be filled. At the and market to maintain customer leading retailer suggested that this could same time government has a role to play interest; this also demands analytical lead to the buying and merchandising ensuring that relevant qualifications and ability and technological expertise functions to change beyond recognition: information are available to young people. “We probably have 5-10 years of continued • Become an expert in content creation to Buying & Merchandising jobs – because drive more engagement with the of companies that will ultimately fail. But and the commercialisation of social entry level roles will increasingly disappear media due to both off-shoring and automation.” • Automate where possible; decreasing The number of roles is not the only change; the number of “low skilled” roles skills required are also evolving. Successful • Increase the pace of operations to meet businesses will increasingly emphasise the consumer demands; requiring more importance of cross functional awareness, focus on the supply chain flexibility, speed of decision making and communication skills as they push their • Create lean operations to compete with organisations to be faster, leaner and more an increasingly competitive market complex while maintaining or improving • Skilfully manage financial product flow customer centricity. This will push retailers and investment in product through to towards recruiting more graduates whilst the end user also poaching experienced individuals from other firms, including those outside of retail.

An OC&C Insight Fast Forwarding Fashion 02 Finally there is a strong alignment SO WHAT MUST BE DONE? Finally government has a number of amongst retailers that new roles will be potential roles. It must support educational created, especially in Social Media (eg There are roles for retailers, educational institutions to improve the perception Vlog curator, Virtual Reality Marketer), and institutions, and government in ensuring of retail as a potential career path for Analytics to benefit from the amount of that the change in requirements does not graduates, and help develop experiences data and technology now available (eg roles result in issues for the fashion industry. and qualifications which will be valuable, in for data scientists and builders). The first step for retailers will be particular for non-graduates. One example In parallel, some roles might become recognising which issues will beset their which could help the industry would be the obsolete in their current form (eg traditional organisation. Although retailers typically creation of a higher apprenticeship - with merchandising roles, visual merchandisers recruit outside of the fashion industry to frameworks designed by retailers – so that or shop floor sales assistants). fill the gaps, many of them report that it the influx of people into retail through the could lead to sub-optimal decisions. Instead apprenticeship channel is at an appropriate WHAT ARE THE RISKS? retailers will need to invest increasing level to successfully address the developing Fashion retailers will increasingly amounts of time and money in rigorous skills gaps. compete for the same limited pool of training and developmental programmes. viable candidates who have analytical Educational institutions are critical in and technical skills, alongside those with driving applicants into fashion, and creative skills. Unless there is a change developing those already in the industry. in the number of individuals entering Institutions with a fashion focus will need the market it seems inevitable that some to ensure they provide courses which will companies will fail to recruit the right staff, fill skills gaps in the industry, particularly and as a result risk being left behind by at the post-graduate level for people more agile or attractive competitors. This with non-fashion backgrounds. For non could lead to an unbalanced competitive graduate education the crucial components environment and ultimately a slowdown in will be providing serious, relevant as the pressure to create new experience for fashion students alongside propositions diminishes. analytical and interpersonal skills, and providing the relevant information on further education options as demand continues to grow in those areas.

METHODOLOGY

The Fashion Retail Academy and OC&C Interviews were conducted with individuals All Saints Isabella Oliver have undertaken this study to establish spanning CEOs, Directors of HR, Directors Alshaya JD Williams how the change in the industry will impact of Commercial, Directors of Customer and Arcadia Jigsaw the resource requirements, what the key Heads of Departments. We would like to Asos Liberty risks to retailers are and how educational thank all those who gave their time either Banana Republic Lipsy boohoo.com M&S institutions, retailers and government through interviews or through completing Brand Stable Michael Kors can work together to ensure the industry the online survey. Miss Sixty remains as innovative and forward OC&C and the FRA ‘s views are represented Coach Moss Bros focussed as ever. in this paper; it does not represent the Converse Mothercare OC&C has spoken to over c.£20bn of the specific views of any one individual who Primark Diesel Primark value of the UK fashion industry – c.30%, inputted to the project. Dune Group River Island through a series of interviews and an Particular thanks are extended to Estee Lauder Sainsbury's online survey. In doing this we have taken individuals from each of the following F&F The White Company the views of more than 50 retailers, organisations who dedicated time to GANT TM Lewin covering the trends impacting the fashion Hallet Retail Urban Outfitters discussing the concepts: industry today, the skill gaps that are Harrods Warehouse emerging and how these skill gaps could be Heals White Stuff addressed. Hobbs Zalando Holi 03 An OC&C Insight Fast Forwarding Fashion THE UK RETAILER OF THE FUTURE

Everyone agrees the fashion retail % OF RETAILERS WHO BELIEVE THE FOLLOWING TRENDS WILL landscape is changing. Already consumers now expect a constant flow of new options, SIGNIFICANTLY IMPACT THE WAY THEY OPERATE, OR CHANGE THEIR FUTURE faster, through more channels. Competitors BUSINESS MODEL are increasingly agile; able to react to increasingly volatile customer preferences. Furthermore technology is starting to pave the way to automation of certain roles and processes. Given the change afoot, it % % % 9% is widely acknowledged that the retailer of tomorrow will not look the same as the average retailer today. The following Rise of Customer Competitors Rise of attributes will be core components of Social Media Convenience Agility Online tomorrow’s success stories. ACUTE CUSTOMER INSIGHT AUTOMATION LEAN OPERATIONS From loyalty schemes, social media and Fashion pureplays may allow us a glimpse Margins will increasingly be squeezed by ecommerce, retailers have increasing into the future of fashion retail as a whole; ever growing competitive intensity. As a access to an abundance of rich data on these companies already view themselves result running a lean operating model with customer behaviour and company costs. primarily as technology companies, a tight management of cost will be critical Today few retailers are fully leveraging mostly recruiting data scientists, with to win. This requires cross departmental this information; most still lack the their business success being reliant on awareness and understanding to operate ability to connect purchase data from , digital technology, and user efficiently; already an area where retailers different channels to give them a ‘single experience. Indeed for some pureplay report skill gaps. customer view’ let alone then use it to businesses, “’tech’ is a way of working, "Employees usually have a basic make strategic decisions in , which refers not just to the methods understanding of their part of the value improve product development and enhance used, but also a cultural ‘radical agility’”. chain, but don't really consider the impact customer experience. The retailers we There is an opportunity to automate on the other elements of the value chain". spoke to agreed that “data provides a certain roles, allowing computers to make The retailer of the future will have slim and huge opportunity but we haven’t even decisions based on data where humans flexible teams which will work together, started to maximise the value out of it have traditionally made decisions based investing in systems improving efficiencies yet.” The concept has already been proven; on instinct. This both has the potential to and accelerating the innovation of an a few innovators have started to gain improve results and cut costs; reducing the organisation. There will be cuts in staff some benefits. For example one retailer number of low skilled jobs in the long run. numbers as organisations seek to decrease recently reported that they “reduced costs. These will principally be driven at surplus stock by 20% by partnering with INNOVATION & SPEED store staff level; as already spoken of by a predictive analytics software provider, In order to stay ahead of the curve, the BRC and Deloitte this year, however in to use its customer data for trend retailers need to take innovative leaps of the longer run this is likely to also impact recognition, planning, forecasting and faith to engage consumers. This will come traditional central support office roles. sales optimisation”. Making these changes in the form of content creation, such as will increase demand for analytical and Burberry’s recent launch of a Snapchat technical specialists. Discover channel and raw product development. Winning retailers will develop OPTIMISED OFFERINGS an innovative , changing company Optimising product offerings and marketing practice to celebrate failure and in across multiple channels, including social risk based rewards. media, is a challenge even perceived Agility is key to enabling innovation leaders in this field reported struggling based success – fast implementation of with. Several reported that “The biggest innovation, and reaction to changes in challenge facing us and the industry is consumer preferences and competitor how to integrate both online and offline behaviour will provide the upside edge. - no-one has understanding on both The development of products at speed will channels as it stands”. The retailer of the be as important as the speed of delivery future will optimise assortment and visual today: “The speed that we need to react merchandising in reaction to consumer at is so much faster than it was 5 years preferences and behaviour both across ago and its only getting faster – if we don’t channels, but also for individuals; different move quickly our competitors have already consumers will view different products maximised value off the trends.” Ensuring when they browse, creating a personalised the attributes of innovation and flexibility experience. Development of these offerings are valued within the organisation will be will require increasingly skilled technical core to driving success in this area. specialists, capable of writing algorithms and conducting detailed analysis.

An OC&C Insight Fast Forwarding Fashion 04 SHIFTING THE HEADCOUNT BALANCE

STORE LEVEL SHRINKAGE Digital Roles Merchandising and Buying Roles It is well-documented that the number of Digital roles includes the management Merchandising positions have always jobs in the fashion industry is decreasing: of online and social media channels, the been difficult to fill, traditionally due to a the BRC recently predicted that there could provision of connections between online shortage of suitably trained or experienced be 900,000 fewer jobs in retail by 2025, and bricks and stores and the use applicants. In part this has been driven by driven by ‘structural change, an accelerated of digital marketing. The rise of ecommerce a lack of appetite from fashion applicants, rate of store closures and productivity in fashion has irreversibly impacted retail who are largely unaware of the role, or improvements.’ It is clear that ecommerce organisations, changing the organisational unexcited by the opportunity – as they has thrived at the expense of the high street. structure and adding multiple job titles. currently understand it. Those roles are This will lead to some growth; 15,00-20,000 Increasingly content creation is as now becoming increasingly complex and roles in order fulfilment will be created in important as product creation. Retailers technical. Furthermore the increased fashion over the next 5 years; these roles must hire new roles such as ‘Bloggosphere number of updates to ranges per season is will predominantly be based in stores but Managers’ and ‘Vlog Curators’, to ensure increasing demand for merchandisers, and focussed purely on fulfilment eg providing they are keeping up with the latest ways of to a lesser extent, buyers. This is likely to click and collect services, as opposed to engaging their customers. be a short term effect, but in the next few direct customer sales. This is a significant years we expect that c.2,000-3,000 further This area is likely to see rapid growth; rise in employment of a small subsection of merchandising roles and a similar number we estimate c.3,000-5,000 additional staff today. However with 20% of fashion of buying roles will be created driving overall resources focussed on digital will and stores forecast to close demand for 8,000-10,000 new entrants into be required in the next five years, between 2012 and 2018 leading retailers buying and merchandising over the next 5 resulting in a requirement for 6,000- predict that the number of sales staff roles years given replacement demand. 9,000 new employees. These will be in stores will decrease up to c.25% by 2020; focussed on managing a multi channel In the medium term, therefore, there putting at risk c.160,000 roles in fashion network, content creation and consumer is a clear need to more people retail currently held by store sales staff. engagement initiatives. with the numerical skills required for merchandising and buying. In the longer CENTRAL SUPPORT OFFICE GROWTH Analytical Roles run however it appears likely that a Despite negative headlines, staffing levels Analytical roles will drive intelligent proportion of analytical roles, and are not falling unilaterally. The increasing decision making which will be critical numerical functions will be automated, and complexity and pace of change will drive to optimisation of costs and revenues. completed using algorithms. Pureplays growth in central support office roles; Collecting and analysing the available allow us a glimpse into the future of which are increasingly critical to the success data, and creating algorithms to drive fashion retail, as they identify primarily as or failure of the company. Over the next results as a result of this data are all tech companies; using a smaller number five years we believe that the UK fashion new, or evolving processes. Optimising of exceptionally highly educated people. industry will require an additional c.14,000- these processes requires data scientists Areas such as merchandising are likely 21,000 central office roles; an increase of c. and software engineers. These are to be significantly affected. However, 20-30% excluding supply chain roles. When currently nascent roles in the fashion the technology to push this change is we consider the number of employees who industry but we expect the number of nascent; a decrease in the number of will also need replacing during this time the individuals required to grow significantly; merchandisers will not occur in the next industry will need to recruit 50,000-60,000 a further 6,000-8,000 roles in the next five years. Despite this retailers may need new employees in central roles. 5 years, including replacement this will to prepare themselves for a future where Central functions with particularly require 9,000-12,000 new employees. an increasing number of functions are significant growth in the next five years Furthermore, continued growth expected automated; investment in technology include digital and technical roles, after this unless significant technological to start this process is likely to give an analytical roles (especially customer development replaces the need for this upside. In the long run the retailers which insight), merchandising and buying roles. technical expertise. resist any form of automation are likely to fall behind the competition both in terms NEW CENTRAL ROLES CREATED ACROSS THE INDUSTRY of innovation and efficiency. OBSOLETE ROLES Analytics k In addition to the creation of new roles it seems increasingly likely that some roles will become obsolete as the roles are automated Digital & ech k or moved offshore to cut costs. Staff in these areas will need to use their current Merchandising k skills, perhaps with additional training to work elsewhere within the business or move outside of fashion. Roles retailers regularly Buying k identified as becoming obsolete were Supply Chain primarily those with a pure offline focus (eg Management k head of offline marketing), and junior roles which they envisage becoming automated

Source: OC&C Survey 2016, OC&C analysis over the next 10-15 years .

05 An OC&C Insight Fast Forwarding Fashion TYPE OF SKILLS REQUIRED WITHIN COUNTRY WITHIN REGION1 OUTSIDE REGION REVENUES FOR CROSS FUNCTIONAL AWARENESS SKILLS THAT WILL GROW IN IMPORTANCE OVER THE NEXT 5 YEARS1 COMPANIES 35% 34% 31% In an increasingly complex environment, HQ’ED IN EUROPE: all employees must understand the Respondents Created Recently Create in ext 5 ears end-to-end activities of the business. It ype of Jobs xample Jobs is critical that departmentsie European do not work firms get Social Media 11% 28% Vlog Curator, Bloggosphere Manager as silos, but instead considerc.17% ofthe revenues impact from of their decisions on the restNorth of the America nalysis 10% 28% Data Scientist, lgorithm Builder ie Wipro, who are HQ’ed in business. This is relevant for every aspect India has c.29% of revenues of the firm, for example shop floor staff, Online Marketing 12% 25% Virtual Reality Marketer, Digital Marketing Manager from operations in Europe both in sales and fulfilments increasingly 17% Developers 6% 27% Software Engineer, User Interface Engineer need to be trained to see sales online 7% as equally important to sales in store. Ecommerce 9% 17% Digital Merchandiser, Digital Content Executive However cross functional awareness is most important for different central Customer 7% 15% In-store technical support, Online sales assistant support office departments to enable 5% them to work collectively to control costs Operations 13% 10Pick%ers Packers for Click Collect, 3D Print and maximise profit in an increasingly 1. Q15). “Which of the following skill groups will grow in importance in the next 5 years - in each of the following areas of the business?” (n=28) margin-squeezedREVENUES FO environment:R “Every Source: OC&C Survey 2016, OC&C analysis team is now working with each other, if staffCOMP don’tANIES understand HQ’ED their IN impact on SOCIAL MEDIA SKILLS FLEXIBILITY AND CREATIVITY departmentsNORTH AMERICA: other than their own we Survey respondents rate the rise of social Given the pace of change, the ultimate can’tWITHIN optimise COUNTR ourY processes.” Retailers media amongst the three most impactful skills10% required in central support office REVENUES FOR WITHIN COUNTRY are seeking people with these skills during trends which will affect their business in level resources will be professional 3% COMPANIES the recruitment process, but also need the next 5 to 10 years. 28% stated that flexibility and ability to innovate. to build 56%career plans around rotations in it will significantly change their business Prioritisation and development of these HQ’ED IN ASIA: 60% the business, highlighting the importance model. Content creation is becoming as skills will both ensure the company stays of a transversal view to progress in the important as traditional retailing; having competitive and xxxx flexible – enabling 7% 4% organisationWITHIN REGIO – oneN1 pureplayer stating “To good products to advertise is not enough. companies to react to future changes. HR WITHIN REGION1 ensure the value chain works together, "It is not just about having a Facebook should increasingly see these as key skills you need people who have worked across page and ‘fans’,” according to one or attributes both to develop and recruit. different23% functions, who have done retailer: “The social media team need to 31% rotations and internships”. constantly create content to make sure INTERPERSONAL2% SKILLS 1% the consumers regularly engage with the The increased pace of fashion has rendered ANAOUTSIDELYTICS REGIO SKILLSN FOR ALL brand and eventually drive sales.” ASOS interpersonal skills more important, OUTSIDE REGION It is not just the data scientists and interacts with its 4 million Facebook both at shop floor level to provide strong software engineers who will require followers multiple times each day by , and at central level as analytical21% skills. As retailers move to fully its and referring them to cross-departmental work is more common 9% reap the rewards of the amount of data other content, but this is unusual - one UK and imperative to keeping costs down. available, and optimise their processes supermarket frankly said “we are unclear "Building relationships with marketing, PR, 1% and offerings as a result, every level on how to leverage social media; we don’t1% and buying is vital due to the speed we will will require greater analytic capability have anyone currently that understands have to work at". Communication, including to understand and react to increasingly this.” Retailers need to recruit people good listening, is also necessary to foster a complex management information. This who combine an understanding of social holistic view of the P&L across departments, will be particularly important at senior media with a commercial mindset, who so that employees can help reduce overall levels within the firm and will be critical if can create and adopt innovative ways to costs in an environment where margin monetise this channel. retailers are to understand and map their squeeze is ever more important. WITHIN COUNTRY WITHIN REGION1 OUTSIDE REGION products to consumer preferences. The social media skill set will only become In addition many retailers reported that more important – 58% of 18 to 24 year olds supplier relationshipsREVENUES are FOincreasinglyR SOCIAL MEDIA SPENDING – have purchased clothing based on seeing driven by longerCOMP term,ANIES flexible, contracts;64 % 29% 7% peers wearing an item on social media, and Arrow direction represents the provision of based on goodHQ’ED relationships. IN ROW: One retailer service from home region to adjacent region ESTIMATED TO GO FROM 9% it is estimated that £15bn of online retail stated that, “what we want is a smaller TO 22% OF OVERALL BUDGET revenue was from social referrals in 2015. number of suppliers with whom we have The potential competitive uplift through an understanding – enabling us to flex the IN NEXT 5 YEARS social media enabled shopping is clear; contracts. That requires a strong and skilled 61% of 18 to 24 year olds follow fashion person on our side negotiating with them”. on social media sites today, and 72% of 18 to 24 year olds report appetite for shopping directly from social media. SHOPPING NOW 50% OF TIME SPENT SHOPPING BY ANY OTHER DIGITAL CHANNEL An OC&C Insight Fast Forwarding Fashion 06 IMPACT OF INTERNATIONALISATION

INTERNATIONAL SELLING INTERNATIONAL SOURCING MUTUALLY BENEFICIAL RELATIONSHIPS In parallel to the multiplication of sales International sourcing is not a new trend. Some retailers reported that they are now channels, many fashion retailers are also However, it is becoming more complicated going further than finding savings from trying to address more geographies. ASOS and faster-paced, as retailers buy products expansion to sourcing from new countries. for example derived nearly 60% of revenue from a growing number of source markets: Instead they are looking to create better, from international sales in 20153, This “Globalisation has resulted in more longer term contracts which provide trend has been boosted by the growth of complex sourcing arrangements”. The greater flexibility. Developing these ecommerce which facilitates easier, lower mass of clothing imports to the UK from increases the requirements on buyers;WITHIN COUNTRY WITHIN REGION1 OUTSIDE REGION risk entry into international markets. has grown at 8.0% a year between they must understand the economics of 2010 and 2015, whereas imports from suppliers toREVENUES negotiate deals FO whichR provide Internationalisation adds further complexity Myanmar have increased at 24.8% a year, positive outcomes for both parties, grasp35 % 34% 31% to the fashion value chain; it is not the same COMPANIES from Cambodia at 27.7%, and 188.4% the macroeconomic influences and build as out the stores and products. One HQ’ED IN EUROPE: from Ethiopia4. Retailers are also more strong interpersonal relationships to high street retailer remarked, “Whenever often sourcing direct rather than via deftly negotiate deals on the back of their we enter a new market we need to create intermediaries: “5 years ago we didn’t do knowledge. a new proposition - customersie European want firms get much direct sourcing, now it’s at least 50% different things…. We didn’tc.17% grasp of revenues that from and we are trying to increase that further.” ie Wipro, who are HQ’ed in first time around”. InternationalNorth expansion America Buyers therefore need to have the skills to India has c.29% of revenues also adds complexity to retail operations manage an increasingly diverse portfolio from operations in Europe - for example, many retailers which have of source markets and also understand17% opened international stores via a franchise the impact of freight costs, duties and 7% model are now facing challenges over currency effects. Retailers which do not issues such as which party should run hire people who have these skills are the international or how pricing taking significant risks; one high street across channels should be decided and retailer claimed “We are going to miss our 5% harmonised. Franchisees report some limited 10% budget because we did not properly hedge understanding of how to optimise investment against the exchange rate fluctuations.” for the product lifecycle; where investment inREVENUES resource or capital FOR will enable further It is vital for fashion retailers that their expansion.COMPANIES This requires HQ’ED a delicate IN balance employees understand the global value betweenNORTH the AMERICA: optimisation of chain and its impacts. International growth,WITHIN COUNTR Yinvestment, margin expansion adds complexity across multiple 10% REVENUES FOR WITHIN COUNTRY realisation, and brand-building, which is not business functions, and this is only 3% easy to get right – especially where partners exacerbated as the number of geographies COMPANIES may have56% different incentives. a business is exposed to increases. HQ’ED IN ASIA: 60% Retailers therefore need to recruit people who understand not only how to 7% 4% marketWITHIN and REGIO sell productsN1 to international WITHIN REGION1 customers, but also how to work within more complex business models; again interpersonal23% skills, analytical skills and 2% 1% 31% numerical skills are important.

OUTSIDE REGION OUTSIDE REGION GROWTH IN QUERIES FOR TOP 25 GOOGLED UK FASHION RETAILERS LARGEST APPAREL IMPORTERS TO THE UK

Domestic International m 21% CAR 9% 61% 4.5% 13,604 The Rest -5.9% 0.1% 1% 11,607 1,996 1% Vietnam 13.7% 9.4% 444 1,917 648 Cambodia 20.9% 25.2% 9,152 822 37% 161 236 954 Hong Kong -3.9% -11.4% 1,523 2,440 1,187 Sri Lanka 9.2% 11.1% 568 75 141 1,052 1,449 India 13.0% 1.9% 23% WITHIN COUNTRY WITHIN REGION1 OUTSIDE REGION 1,784 1,353 1,788 0.7% 2.4% 16% 400 644 979 REVENUESBangla dFOeshR13.3% 8.1% 1,317 64% 29% 7% CO4,31MP6 ANIESChina 21.4% 0.9% 595 3,818 HQ’ED IN ROW: Arrow direction represents the provision of 1,755 5 of the top 10 importers to the UK are service from home region to adjacent region experiencing decreased growth rates, at 2011-12 2012-13 2006 2010 2015 the expense of new importers

07 An OC&C Insight Fast Forwarding Fashion LEVEL OF SKILLS SOUGHT

GRADUATES REQUIRED DIFFICULTY TO ATTRACT CERTAIN TYPES Consequently, the next challenge for OF HIGHLY QUALIFIED INDIVIDUALS fashion retailers is to hire well-rounded Directly associated with the increasing people who have both fashion knowledge complexity of retail jobs and the In spite of the abundance of graduates, and digital skills. Recruiting from outside of increasingly complex skill requirements the fashion industry struggles to attract the industry is only a short term solution. is the growing requirement for applicants qualified analytical individuals. Retailers As one high street retailer stated “Those with higher levels of education. The UKCES struggle to find fashion educated, or who don’t have fashion experience tend predicts that the retail sector as a whole experienced recruits for analytical, 1 to leave – the pace in fashion is fast and WITHIN COUNTRY WITHIN REGIOwill faceN aOUTSIDE 25% increase REGION in demand for technical or numerical roles because people aren’t prepared for the pressure”. people with degree level qualifications typical fashion retail applicants are more REVENUES FOR between 2015 and 2020, and the fashion interested in the ‘glossy’ roles, and less COMPANIES 35% 34%industry will likely31% follow this pattern. As aware of more 'complex' roles: “As an NON GRADUATE POTENTIAL HQ’ED IN EUROPE: one said “There are new industry we don’t do a very good job at Being loyal to decades of tradition in roles where you need better education recruiting merchandising… It is not the the retail industry, a small number of – we are increasingly taking people from “sexy” function.” Several fashion retailers retailers remain both willing and keen ie European firms get top , particularly for roles with now try to attract candidate profiles who to take people without degrees, letting c.17% of revenues from an analytical bent”. The rising demand typically go into accounting or finance, but people work up from the shop floor or North America for graduates with analytical capabilities these individuals do not typicallyie considerWipro, who areoffering HQ’ed placementsin to 18 year olds. is already outstripping supply, giving rise fashion as a long term career option.India has As c.29%These of revenues fashion retailers recognise that to companies like Mu Sigma, which is one department store stated, onefrom of theoperations degrees in Europe are less valuable than experience: 17% an ‘analytics solutions’ company which7% biggest problems with addressing the “Often the school leavers are better than explicitly uses maths PhD graduates – skills gap in the fashion industry is that “at graduates, they have a better drive, are offering complex skills to retailers, but the moment there is a bias against retail more keen and more entrepreneurial.” If at significant costs – companies will – people assume it’s not a serious career, these individuals can be trained up with increasingly need to look to build similar we need to re-educate people on that”. the necessary skills, either in house or 10% skills in house. 5%The fashion industry is yet to market itself through sponsored training there is a clear successfully to mathematics and computer case for bringing more non graduates in. LARGER POOL OF GRADUATES science graduates. These individuals may in fact help drive REVENUES FOR AVAILABLE innovation and a social media focus; given FASHION EXPERIENCE their upbringing and more open attitude; COMPANIES HQ’ED IN Even where graduate degrees are these skills should not be dismissed. NORTH AMERICA: necessarily required fashion retailers are The downside of hiring outside of fashion WITHIN COUNTRY 10% already hiring more graduates across roles, is that these recruits lack the retail basics REVENUES FOR WITHIN COUNTRY in part due to the increase in availability3% and a clear understanding of the drivers of degree-qualified individuals nationwide. of success in fashion. One pureplay COMPANIES 56% As one high street retailer stated, “We get interviewed stated that they hired largely HQ’ED IN ASIA: 60% so many applicants with degrees now we from other online companies and tech 7% 4%rarely take those without higher education start-ups, enabling them to produce WITHIN REGION1 outside of the shop floor or warehouse insightful customer behaviour analysis WITHIN REGION1 staff”. Retailers recruit people with degrees and strong discounting algorithms. because they can and there is a perception However, they admitted that their focus on 23% that these individuals will be more able than mathematical analysis may have slowed 31% 2% those without a degree; this is consolidating1% their (nevertheless rapid) growth, in the upward skill requirements trend, particular where they have failed to predict however is not a sensible decision where fashion trends – which experienced human OUTSIDE REGION additional training – provided by retailers would have recognised. OUTSIDE REGION courses – is not required, instead some retailers reported finding non graduate 21% 9% employees, "much more innovative and 1 dedicated given sufficient opportunity, LEVEL OF SPECIFIC TRAINING REQUIRED FOR EACH CORE SKILL they don't think they are owed a job." Res1%ponses 1% Increasing level of education reuired Change in demand for Skill levels 34, and 5 7% 2% 10% 26% 26% 29%

nalytical skills 2% 22% 3% 34% 36% 3%

Operational skills 14% 43% 5% 38% WITHIN COUNTRY WITHIN REGION1 OUTSIDE REGION Business 7% 22% 44% 4% 22% REVENUES FOR Economics skills COMPANIES 64% 29% 7% o training reuired Level 2 ualification Level 4-5 ualification Arrow direction represents the provision of HQ’ED IN ROW: short course (one week or less) Levelservice 3 ual ifromficati ohon me regiLonev etol 6adjacent ualifi creatgiioonn

1. Q20). “What level of training in each of these skills do you think should be taken prior to applicants seeking employment with you?” (n=20) Source: OC&C Survey 2016, OC&C analysis

An OC&C Insight Fast Forwarding Fashion 08 RISKS FOR RETAILERS

THE FIGHT FOR TALENT % STRUGGLING TO RECRUIT SUFFICIENT PEOPLE WITH THE FOLLOWING SKILLS As a result of increased demand for central support office roles and the small pool of external candidates, fashion retailers will 5% increasingly compete for the same limited TechnicalIT Skills (eg website build, CRM knowledge, web analytic pool of viable candidates. Some have tool use, systems analysis etc) (For most new joiners) already recognised this challenge - “We are all fighting for the same people with tech WITHIN COUNTRY WITHIN REGION1 OUTSIDE REGION skills, and the merry go round is getting bigger.” For experienced staff retailers 9% REVENUES FOR can increase their salaries and packages nalytical Skills (eg trend analysis, dCOataMP manANIESipulatio n, data 35% 34% 31% as a way to poach these skills from other interpretation) (For most new joinerHQ’EDs) IN EUROPE: fashion retailers, but risk paying over the odds at a time when margins are being squeezed. Alternatively,ie European they can firms get recruit from outside of c.17%the fashion of revenues world from 5% to cover the most significantNorth gaps America – in Business Economics Skills (eg Cost Management, Full Company ie Wipro, who are HQ’ed in particular analytical and digital skills but PL understanding, Trading ccumen) (For most new joiners) India has c.29% of revenues many reported this to be suboptimal. from operations in Europe The biggest risk for retailers who fail to 17% recruit is that they lack the resource and 7% skills needed to keep up with more agile 2% competitors - “We’ve struggled to recruit Creative Skills (eg , , social media content for new roles that you want in order to stay development) (For most new joiners) ahead of the game.” 10% 5% INCREASED EXPECTATIONS AsREVENUES the fashion industryFOR becomes 0% Interpersonal Skills (eg communication, customer management, increasinglyCOMPANIES complex, HQ’ED retailers IN have higherNORTH expectations AMERICA: for their staff than stakeholder management, negotiation) (For most new joiners) everWITHIN before. CO UNTRHowever,Y these increased 10% WITHIN COUNTRY expectations bring their own problems. 3% REVENUES FOR One high street retailer commented, “As Retailers can and should adapt their COMPANIES career paths to ensure employees "WE ARE ALL FIGHTING individual56% employees take on increased HQ’ED IN ASIA: 60% responsibilities and expand their roles develop area specific skills, continue to FOR THE SAME PEOPLE over time, it is harder to recruit into be flexible and get a well-rounded view these roles when they leave due to the of different departments. One core way WITH TECH SKILLS, AND 7% 4% WITHIN REGION1 WITHIN REGION1 huge discrepancy between the official job in which this can be done is by rotating THE MERRY GO ROUND IS description and the actual job role.” This through different roles - several retailers spoke of the importance of employees raises the23% risk of decreased retention in an GETTING BIGGER" 31% already unstable millennial workforce. understanding the whole business and having a “global mindset”. This is not 2% 1% CAREER PROGRESSION just about training but is also about OUTSIDE REGION experience; several retailers reported that OUTSIDE REGION All of the retailers we spoke with believed the skills they need, “aren’t all trainable that all skills in digital, marketing, through external training – moving people customer21% insight, merchandising and through more departments and more 9% analytics will evolve, while a significant locations is more important than before.” proportion on top of this stated that the 1% skills required in these areas would be If retailers fail to adapt there is a high entirely new in 5 years time. This reflects risk of falling behind competition. 1% the level of change; technology and Furthermore active damage could be done customer demands will transform how if management and HR do not recognise certain retail tasks are carried out: The the level of change ongoing and instead skills which create optimal results will push people with skills and attributes which transform accordingly. are no longer key into senior roles. WITHIN COUNTRY WITHIN REGION1 OUTSIDE REGION REVENUES FOR COMPANIES 64% 29% 7% Arrow direction represents the provision of HQ’ED IN ROW: service from home region to adjacent region

09 An OC&C Insight Fast Forwarding Fashion SOLUTIONS

RETAILER LED TRAINING AND from university or moving from another Currently only level 2 and 3 apprenticeships RECRUITMENT field, so as to provide them with sufficient exist, covering areas such as shop floor commercial knowledge and fashion roles, and business The first step for retailers will be understanding. administration. These do not, therefore, recognising which issues beset their help retailers recruit the higher levels There is also a role for fashion institutions company and how these problems are of skills that we have identified they are to provide more information and publicity likely to evolve given the competitive lacking. A level 4+ apprenticeship offer about the new roles and skills required environment. could be designed to target the skills by retailers, to change perceptions of gaps in merchandising, e-commerce and Many retailers have already recognised the industry: “We should be appealing technical skills, with different frameworks current skills gaps within their to someone who would succeed at designed by leading retailers. Certainly, organisation: 78% of survey respondents accountancy but wants to do something retailers advocate the advantages of in- say that they provide some training for more interesting.” They can act as house training – as it offers an opportunity experienced staff and management. As recruiters at universities and graduate simultaneously to promote brand culture it becomes increasingly necessary for , or even partner with international – as well as the benefits of flexible training employees to continually acquire new universities to find off-shore resource to programmes which can be tailored to their skills, however, retailers will need to invest fill retailers’ skill gaps. more time and money in rigorous training organisation’s specific needs. A higher programmes. It may be advantageous Finally there is an opportunity for apprenticeship could therefore be an for retailers to partner with educational educational institutions to identify effective and agile way for retailers to fill institutions to develop outsourced where the move to increased demands critical skills gaps while also educating new training programmes which cover the for degree-educated employees is recruits on the fashion industry and their specific skills and systems their employees misleading; where the individual drive of brand values. need to learn. less experienced candidates can provide an equal or better base. Here experience OVERALL Retailers can also adapt their career paths focussed training will be key to ensuring Overall it is clear that every party can act to ensure people get a well-rounded view these individuals can play a valuable role. of different departments by circulating to address the challenges for resourcing in through different roles - several retailers the fashion retail industry. Without action spoke of the importance of employees THE ROLE FOR GOVERNMENT not only will some retailers be left behind; understanding the whole business There are a number of actions government increasing the risk of further job losses, and having a “global mindset”. As a can take to address the potential but the industry will innovate less thus major UK retailer stated, international issues. Firstly they can help ensure that decreasing customer satisfaction. educational institutions and careers understanding “requires a different type The largest onus is on retailers, who services provide sufficient information of experience – you need the staff to have may thrive or falter based on their about the breadth and depth of roles in a far wider appreciation – moving them ability to identify and recruit the right retail; an areas seen by most as lacking about the business can help achieve this.” talent, however this is not a one player today. Secondly they can use their power to game. Educational institutions must push educational institutions to provide the EDUCATION AND QUALIFICATION also recognise their role to ensure that right courses. Finally they can try to create sufficiently educated individuals enter the Retailers are not best-placed to provide educational opportunities which fill the market. Increased collaboration between all the training required for the next correct gaps. One such example would be retailers and educational institutions is key; generation of fashion retail employees – developing a higher apprenticeship in retail only together can they start to future proof despite all our interviewees stating that which would provide the skills currently the industry’s talent pool. technical and IT skills are a key part of the sought in university candidates. skill set required in their roles, just 27% of survey respondents trained new joiners in 1 these skills. It is up to fashion schools and NATURE OF TRAINING REQUIRED FOR SKILLS DEVELOPMENT other educational institutions to develop new or updated courses which cover skills Responses Internal External during employment External pre-application gaps, whether these are new skills or specialist areas where more resource is Creative skills 33% 67% needed, such as Supply Chain.

nalytical skills 23% 37% 40% r

One opportunity for education providers o f

g d n

is to develop post-graduate courses for i n n a

Technical skills knowledge 32% 31% 37% i a

analytical and technical skills. The students m e r

D l for these courses are likely to have a a Operational skills 28% 38% 34% g n n i different profile to the typical ‘fashion r s e a t e academy’ applicant, as they will need x

Interpersonal skills 25% 47% 28% c r

to have strong numerate ability and a n strong academic background. Academies I 44% 42% 15% should also construct fashion ‘conversion’ Business Economics skills courses for ‘numbers’ people entering the 1. Q19). Please indicate whether you think these skills would be best built through external training? (n=24) industry, whether they are coming straight Source: OC&C Survey 2016, OC&C analysis

An OC&C Insight Fast Forwarding Fashion 10 www.occstrategy.com

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11 An OC&C Insight Fast Forwarding Fashion