How Fashion Retailers Are Using Technology to Get Ahead in Business

Technology in Fashion Report How fashion retailers are using technology to get ahead in business

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Contents

Foreword page 3

Torex foreword page 4

Avery Dennison foreword page 5

Chapter 1: Introduction page 6 Chapter 2: Multichannel retail, ecommerce and the impact on store systems page 8

Chapter 3: CRM and customer insight page 12 Chapter 4: Supporting international expansion page 15 Chapter 5: Analytics – merchandising, pricing and allocation decisions page 18 Chapter 6: Product lifecycles and the supply chain page 21

Chapter 7: Digital marketing and PR page 25

Chapter 8: The human element page 27

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Innovation on trend

Drapers has tracked the growing acceptance of technology and desire to innovate by fashion retail companies over the past decade. Ecommerce, internationalisation and increasingly tech-savvy consumers are just three of the trends we’ve written about that are focusing attention on IT. Earlier this year, Drapers set out to investigate just how important technology is becoming to fashion retailers. We wanted to know where their pain points are, and which technologies they and their customers believe can strengthen their businesses and propositions. The project kicked off with a survey of our readers on Drapers’ website. With 165 responses, the results were compelling, and supported much of what we were hearing anecdotally. From there we ran a roundtable alongside our sponsors, Torex and Avery Dennison, which enabled us to talk through some of the results with a group of fashion retailers. It’s clear that many companies recognise that technology is crucial to providing what their customers want, whether it be bringing new trends to market faster, better stock availability, cross channel services or more personalised and relevant marketing. And it’s also true that many of the issues to do with adopting new technology are common to our readers, whether they be global fashion brands, or single store independents. So, as the final part of the project, we have turned all the research – as well as information on many examples of innovation we have collected recently – into this report. Highlighting the most interesting trends in how fashion businesses are using technology, the report is designed to inspire retailers, large and small, to take their businesses to the next level. We hope it sparks your imagination.

Joanna Perry, Special Projects Editor, Drapers

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A word from our sponsors

Fashion, as an industry, is continually evolving. The only certainty about it is the perpetual fascination that drives millions of shoppers to engage with attention grabbing brands and snap up the latest must-have item. To understand and appeal to their potential customers, fashion retailers must innovate, meet consumer needs and convert them into buyers. This is where technology comes into its own to empower staff and deliver the compelling brand experience. People don’t just buy in-store nowadays; shoppers have transformed into intelligent consumers increasingly comfortable with being able to flip between the physical and real world without differentiating between the expanding number of channels. The importance of social media and discussion forums means that brands need to be monitoring their online presence to get closer to their customers and leverage peer-to-peer recommendations. Fashion retailers now recognise the importance of technology and the need to keep up with these changes, but where is the investment best focused? Most retailers already have an online presence yet cross-channel transactions are typically clunky and disjointed. Knowing the customer and predicting their preferences and buying patterns and then delivering a good and consistent shopping experience however and wherever they want to shop is the key to the future of good fashion retailing. Audiences and brands are now global too. How can retailers take advantage of new markets without being restricted by technology that cannot scale to meet these demands? Servicing online retail with stock and central processes, developing effective franchise and partner relationships and facing challenges of different payment methods, tax and legal environments all need to be addressed. In this report, we examine how fashion retailers can use technology more effectively to capture the ever important spend. We also go beyond, to look at next-generation technology that is being adopted today by market leaders, developing the fashion retail technology standards of the future.

Helen Slaven, Vice-President Retail, Torex

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A word from our sponsors

Avery Dennison Retail Branding and Information Solutions (RBIS) is pleased to partner with Drapers on this important report investigating the increasingly dynamic role that technology plays in the retail fashion industry today. It is evident from the findings of this report that the consumer is now leading our industry in driving the rapid adoption of new technology at retail. Although fashion retailers have always recognised the important role that technology plays, it is more critical today for the industry to move faster and more efficiently to serve today’s digitally-enabled consumer base. In today’s complex global economy, every retailer must seek ways to leverage technology in order to ensure that they are differentiated, on trend, and optimising their operations while keeping pace with the consumer’s use of digital connectivity. To do so, fashion retailers must seek partners that understand the complexity of the evolving technology landscape and help them build intelligent solutions that will elevate their brand appeal while delivering innovative technology solutions to accelerate their operational performance. With over 115 locations in 50 countries, Avery Dennison RBIS delivers intelligent, creative, and sustainable solutions to our customers around the world. We lead the market with innovative technology solutions that enhance branding and leverage RFID to improve inventory visibility and loss prevention. Many thanks to Drapers for their continued thought-leadership in the industry and on this exciting topic, and to Avery Dennison’s James Stafford, Market Development Manager – Europe, and Pete Moylan, RFID Development Manager – Europe, who were able to join the roundtable discussion and share insights on this important topic.

Graham Diamond, Vice-President and General Manager Commercial Apparel Solutions Europe, Avery Dennison

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1. Introduction

The past decade has really seen the fashion retail industry awaken to the possibilities of technology. And at a time when businesses in the sector face pressures from rising input costs, a depressed consumer outlook and fierce competition from all directions, innovation has proved crucial in creating compelling customer propositions and realistic cost bases. The results of our survey among readers provides great insight into the changing attitude towards technology, and the developments retailers feel can really make a difference to their businesses.

Positive outlook Nearly three quarters of the 165 people who took part in the survey have a positive attitude towards technology within their business (see pie chart below). In particular, 22% believe that it allows them to differentiate themselves from competitors with their customer proposition.

What is your company’s attitude towards IT and technology?

13% 22% It is a Technology allows us necessary to stay ahead of the evil competition with our customer proposition 14% We invest in IT when it’s crucial, but only ever adopt proven technology

27% Technology has become 22% more crucial to our We must have business as it has grown a flexible IT platform to stay competitive

And when we asked about the importance of technology to the whole fashion retail industry, the results were even more striking (see pie chart overleaf). Asked to choose between one of five state- ments, only 6% said technology is becoming less important to the industry. 21% were quite positive, saying it’s more important as it plays a part in dealing with the pressures on the sector. But the majority – 69% – were very positive, saying it’s crucial to optimising profitability and meeting customer expectations. If traditionally the role that technology has played in fashion retail has largely been a back office one – finance, merchandising or supply chain systems – then the internet and multichannel retailing trend means that this is no longer the case. More and more of the technology being deployed directly »

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« touches the customer; whether it is independent retailers launching a website, or high street chains deploying iPads in their stores. In the following chapters, we explore how both customer-facing and back office technology is evolving, and what the trends are in how retailers are using it. At the same time, in chapter 7, we review the many ways that retailers are using systems that they don’t themselves control – particularly for marketing and customer service purposes using social media platforms. And last, but by no means least, in the final chapter we think about how the adoption of technology that’s currently taking place in the industry is changing both the role of technical staff within fashion businesses, and also leading to technology touching many more job roles and types of staff. Fashion retailers are starting to appreciate that technology is not just a cost, it can help them win more sales, better manage their margins and develop better relationships with their customers.

Is technology becoming more or less important in the fashion retail industry? 2% Less important. Product and marketing is where 4% fashion businesses Less important. compete Margins are too tight for technical 5% innovation The same

21% 69% More important. More important. Technology plays a part Technology is crucial in dealing with the to optimise profitability pressures on the sector and meet customer expectations

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2. Multichannel retail, ecommerce and the impact on store systems

The internet has dramatically changed how fashion businesses connect with their customers, promote themselves and compete. In the UK, clothing and footwear sales online continue to grow by upwards of 20% year on year, for retailers with stores, it still makes up a relatively modest proportion of sales. Our research suggests that rather than sales continuing to migrate online at pace, the internet will complement stores and play a role in the many technology-backed customer propositions and cross- channel services retailers hope to deliver. The graphs below showing the developments that retailers believe their colleagues and customers would like are particularly interesting.

Which of these developments are your colleagues demanding?

45%

37% 34% 30% 27% 25%

16% 16% 13%

Mobile app Mobile Web kiosks Access to Mobile point Click-and- Multichannel Staff Pricing/ website in stores online of sale collect gift cards communication/ markdown/ content in systems task allocation stores management optimisation system systems

Which of these developments are your customers demanding?

49% 44% 41% 42% 38%

25% 22% 19% 18%

Mobile app Mobile Web kiosks Access to Mobile point Click-and- Multichannel Loyalty Free Wi-Fi website in stores online of sale collect gift cards scheme in stores content in systems stores »

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« As our chapter on people (page 27) discusses, retailers are increasingly delivering technology that is used by customers rather than staff. This began with ecommerce websites, but is a trend that is spreading to stores. Many of the developments retailers believe their customers want involve delivering customer- facing technology to the store.

Online on track About a decade ago, fashion businesses began setting up websites and then selling online. It’s a sector of retail that has been slower to adopt ecommerce than others – it’s only relatively recently that brands such as Zara and H&M have launched transactional websites in the UK. Even five years ago, it was common for retailers to treat their ecommerce operation as their biggest store, now many of them are achieving online sales that are significantly beyond this, and retailers have come to realise that the development of their web platforms will have to be a continuous endeavour. New trends in ecommerce include being able to trade in multiple currencies, running completely separate sites for different countries, and integrating with multiple fulfilment providers to offer a wide range of delivery choices (including same-day and even 90-minute delivery). Online is also coming into the store. IPads and kiosks are starting to pop up in stores as a way of staff being able to assist customers to track down what they want, and customers doing this for themselves. Crew Clothing is using iPads to give customers access to its internet stock while in store. To get the solution live quickly it decided to just display its website on the devices, and uses the IP address of each device to record which store the order has come from so it is credited for what is an online sale. Crew Clothing systems manager Ruben Alonso claims that the devices provided a payback through extra sales within two weeks. “The increase in sales that it has driven has been amazing,” he says. And this type of technology seems to also work well for chains with more mature customers. East has also rolled out iPads to all stores, after a successful six-store trial. The next big competitive battleground for fashion will be click-and-collect services. Republic (see box on page 11), Thomas Pink and Aurora Fashions have led the way with these services, and now New Look is heavily promoting its cross-channel services too (pictured). In many cases, this has required changes or upgrades to EPoS systems to facilitate. New Look, Marks & Spencer and Republic all made investments in point-of-sale software in order to launch click-and-collect services. However, those that have achieved it often remark that it is actually the creation of new business processes and acceptance by store staff that is harder to get right than the technology changes required. »

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« Mobile enablement The other strong trend in fashion is the development of mobile channels. Mobile websites and mobile apps were ranked as the top developments that retailers thought their colleagues and customers were most keen on. 18 months ago, retailers began to introduce mobile apps – mostly for the iPhone – and then in the past 12 months mobile-optimised websites have become more popular as the number of owners of other types of smartphones has quickly risen. What retailers have found is that mobile does not simply cannibalise sales that customers would other- wise make online, but that it can also help to drive customers to stores. In the same way that consumers are open to using kiosks and iPads in stores to order stock they can’t find on sale that day, they are also browsing retailers’ websites on their own phones while in the store. This is one of the reasons why retailers are becoming more interested in offering free Wi-Fi for customers to use in stores, to ensure they have a fast internet connection on their smartphone. John Lewis announced in October that it will provide free Wi-Fi in its stores. Customers have tended to run ahead of retailers in their use of mobile. Even before they have apps or mobile-optimised websites retailers are finding that smartphone users are accessing their websites on these devices, and this normally helps to make the business case for the investment in mobile developments. Retailers are also beginning to explore how they can use the location-based services technology within smartphones to market to customers and drive traffic to stores. Republic is doing this with Facebook (see box overleaf) and several fashion brands including French Connection have offered deals through mobile network O2’s location-marketing scheme O2 Priority Moments. Providing marketing or services to customers based on the information their phone provides on their location means offers and content can be made much more relevant to customers, and acts as another strong link between what retailers do online and in their stores.

New style stores One of the likely next trends is a rethink of store layouts, made possible by the technology being introduced to stores. Particularly click-and-collect service desks, and mobile point-of-sale devices mean that fashion stores need no longer conform to the stereotype of stock at the front of the store, cash desk at the back and cramped changing rooms. Aurora Fashion group strategic development director Ishan Patel says the adoption of new technology – such as iPads – is bringing the online channel and in-store experience together. He says: “It has really started to question our store design. We are looking at the whole customer journey through the store... out on the shopfloor and in the fitting room.” We are looking Aurora has chosen not to lock-down its iPads, as it wants staff to have the freedom to use them with customers all around the at the whole store. customer journey SimplyBe – one of the home shopping retailer N Brown’s through the store brands – has begun to open a small chain of stores in the UK Ishan Patel, group strategic (pictured overleaf), and is very much using them to trial innova- development director, tive store designs backed by technology. Aurora Fashions »

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« N Brown Group IT director Neil McGowan says the company felt it could improve market share with a small number of stores: “Customers just expect an experience that includes the store... especially in fashion.” It wants to allow customers with existing SimplyBe accounts to continue their relationship when they come into store, and will trial concepts and technology until it comes up with a winning formula. This includes monthly releases of new software for use in stores, constantly tweaking to improve the customer experience. For example, McGowan wants staff to be able to check customer’s account limits in store, and even- tually be able to open new accounts too. In focus groups, the retailer found that the brand’s plus-size customers were particularly concerned about the sizing and fit of clothes. So it has designed the store with a large changing room area, with a high concentration of staff and mobile point-of-sale terminals so staff can offer real service. With a large range of sizes, the brand is also experimenting with web kiosks so that when a product isn’t available in a store it doesn’t lead to lost sales. The internet was once seen as a potential threat to the future of stores, but as technology develops it is becoming clearer that the various channels complement each other and can bring a renewed relevance to physical retail. The development of mobile technology will only accelerate this trend.

Any which way

Republic has already innovated with the launch to store. After successfully using Facebook of a click-and-collect service, which has Deals in its five flagship stores, it’s rolling quickly become 10% of its online sales. And out the service to 25 more. Customers with its Westfield Stratford City store, it’s further who “check in” on Facebook when they experimenting with cross-channel services. arrive at the store are given special deals The store has iPads fixed to desks in the and discounts. store so customers can browse and purchase The retailer has also installed an interactive from the retailer’s extended online range. mirror in its changing room that connects to Republic head of multichannel Jo Molineux Facebook, allowing customers to show off says the developments are designed to enable potential purchases to their friends on the site customers to “tailor their shopping according and get instant feedback. Whether such fun to their lifestyle”. developments will ever take hold in the industry The retailer is using the Torex Channel in any meaningful way, or be superseded by Hub to provide a seamless cross-channel what consumers will do with their own devices, experience. The solution enables the business is almost immaterial. Such technology to provide a unified customer order, fulfilment provides great PR and a consumer talking and delivery service. point for retailers trying to communicate to Republic is also extending its use of their customers that they are innovative and Facebook’s Deals platform to drive customers prepared to try new things.

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3. CRM and customer insight

While few fashion retailers are yet to have achieved a single view of their customers’ activity across all channels, there is a real push to use customer data better. More than half the respondents to our survey said their marketing departments had introduced new systems in the past five years. And 42% said they thought customers would like a loyalty scheme. Online-only fashion retailers have a clear advantage here, as customers must provide some basic data as part of the order process which they can analyse. And independents are often able to build this kind of intelligence on their customers in order to suggest future purchases with the tried and tested method of keeping a black book, although they could also benefit from collecting and holding this data digitally rather than leave it in the hands of store assistants. For retailers and brands with multiple channels it has always been more difficult, as they often can’t tie store transactions to a particular customer record. But recently there are more and more examples of retailers trying to collect email addresses or other contact details in stores so that it can use the data provided for marketing and insight activity. Monsoon Accessorize has launched a loyalty card, and Gap is collecting email addresses on hand- held devices in-store to market special offers and deals to customers. Republic is working with SMG on a customer feedback programme called Your Views, and also sends special offers by SMS to customers who hand over a mobile phone number, in a move likely to appeal to the younger end of its customer base.

In general, retailers find that they must incentivise customers to hand over extra information about themselves. Gap sends an email with a 15% off voucher within a day or two of customers handing over their email address in-store. It uses barcodes on its email offers so it can track customers who redeem them in store. My-Wardrobe also has a loyalty scheme, that offers reward points that can be redeemed for money-off vouchers, and also invites VIP customers to special events. »

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« When it comes to analysing data on customers in stores, fashion retailers have adopted technology that’s widely used in other types of retail. For example, tailor Gieves & Hawkes is using a footfall analysis system from Experian FootFall in its flagship store, with the hope to roll out to the other nine once the first deployment is bedded in. Data from three thermal imaging cameras will be used to monitor visitor traffic, match staffing levels to visitor patterns and ensure the optimum approach for service and sales conversion. Gieves & Hawkes IT manager Sam Thompson explained that the system is helpful in ensuring the tailor has its staffing levels right to offer appropriate levels of service: “The sales approach is a key differentiator and customers are expecting a high level of service and interaction. We hope to be able to use the data to form shift patterns in the future and once the service has bedded-in we plan to roll out the technology across our other nine stores.”

Closing the loop One more recent development is that fashion brands are beginning to prove to customers that they are reacting to the information and feedback customers give them. Topshop offers a ‘Product of the Week’ on its email newsletter to customers based on the feedback it gets through its ratings and reviews. And Debenhams and Next have used online customer panels to help inform business decisions. Debenhams uses its Debenhams Design Team panel to recruit participants in face-to-face research too. Asos is also closing the loop on its marketing by running promotions where the most popular items are given the biggest discounts in its timed Sales (see chapter 7). Customers who signed up to the timed Sale through a Facebook application were given early access, essentially in a trade-off for giving Asos access to their basic Facebook profile information. A next step for larger retailers is likely to be more in-depth analysis of social media, both the senti- ment of what customers saying about their brands and products, and also trying to tie information about particular customers to the transactional information held on them in a CRM system. This would provide more personal data to allow segmentation. Home shopping retailer Shop Direct Group has also been involved in an interesting trial in Ireland, using geo-targeting to market to customers when they are near specific shopping centres. Basically, Shop Direct asks customers of a certain mobile phone network to opt-in to receive offers to their phone, and then sends these offers when it knows they are out shopping, and therefore at risk of buying from a competitor. Jonathan Wall, group eccomerce director at Shop Direct Group, says it’s early days for using such technology and the company must also be careful in how it uses customer’s data. And he is right; but this is a great example of a retailer thinking about using what it knows about customers – even their location – to market to them. The results from our survey on how retailers expect to be using customer data in the next few years clearly shows the direction these businesses are heading (see overleaf). While many will still offer blanket marketing emails – which if done well with a strong editorial tone and engaging fashion content can continue to work well – they will supplement this by using customer data to market more intelligently and individually to their customers. In addition to the marketing benefits, analysing information from product ratings and reviews, »

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« returns information and analysing comments on social media can also help inform product development, buying and trend decisions.

How do you expect to use customer data in the next few years?

56% 52% 45% 43% 39% 36%

To inform One-to-one For blanket To inform buying/ merchandising/ Real-time analysis product decisions email marketing targeted marketing pricing decisions Basic segmentationtargeted marketing for for mobile marketing

How one-to-one works

One-to-one marketing, whether via email, text Debenhams has improved its email or other marketing mediums, draws on conversion rates by 75%, and driven sales information from CRM systems on customers’ by 200%, using one-to-one content in its buying habits, as well as any other relevant email and SMS marketing – that’s partly sources of information to deliver campaigns determined based on customer behaviour. that are personalised to each customer. Hundreds of thousands of the department As fashion retailers increase their ranges store’s customers now receive emails and/or online, this allows them to highlight products text messages offering relevant, personalised to customers that are most likely to offers using marketing automation software complement items already bought, or that from Neolane to drive sales and retain match their preferences. customers’ loyalty.

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4. Supporting international expansion

There are two clear and very different trends when it comes to the use of technology for supporting fashion businesses as they head overseas. First, it is clear that more and more retailers are seeing ecommerce as the easiest and cheapest channel through which to explore international markets. In our survey, 46% said international expansion through ecommerce would be a business priority in the next three years. In comparison, 22% mentioned international expansion through stores, and 26% said expanding their wholesale operation. This leads to the second technology trend in this area; using technology to link all outlets around the world (whether they are owned by the brand, franchise partners or independent stockists) to react faster to customer demand and respond to it more intelligently.

The net widens The past 18 months has seen an explosion in the number of retailers offering international delivery on their websites. Drapers already published a special report on international ecommerce in late 2010. And more recently it’s a trend that’s been advanced with names such as Aurora Fashions and Asos launching dedicated sites for specific overseas markets. The first step for most retailers is to offer alternative currencies on their UK site alongside international delivery. River Island, for instance, opened its site to customers from We need over 100 countries this way. Once you’ve added new currencies and payment options there is little other technical very reliable changes needed to a site to begin selling overseas. Behind the information. We scenes retailers may want to link to international address and are dealing in 25 fraud checking systems in the same way as they would use for their UK business. to 30 currencies It’s a good idea to start this way – even though more Michele Norsa, chief executive, advanced retailers have moved on to launch dedicated Salvatore Ferragamo websites for certain markets – as it gives great data on shopping habits and preferences in different countries that can shape the way country-specific sites are developed in the future. Aurora launched its website tailored for the German market in October. Aurora is offering German customers free returns, standard and express delivery options and, most importantly, local payment options, such as invoicing. Other retailers have admitted that opening their sites to German customers without offering preferred local payment options has hindered their growth in the market. Aurora multichannel director Hash Ladha said the site offers “service we’re confident will equal that expected of any local etailer”. Debenhams is looking at tailored sites for a few markets, and will invest in a new ecommerce platform to allow this,and then expects to upgrade its UK site too. Unlike physical retailing, where in the past fashion brands have used different systems for different countries, there is very much a push to leverage as much of the same ecommerce platform as possible for international sites. Aurora is also using its German ecommerce launch as a test bed for a new tabulated website, where customers can shop all three of its brands in the same place and with one checkout. If successful, it could be emulated in the UK too. »

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« Trade links If only things were quite so simple when operating stores internationally. If businesses trading internationally online are flooded with data about their new overseas customers’ shopping habits, then traditionally there has been a data drought from stores. In the past five years, this has begun to change, particularly led by major fashion brands who have realised that they need much more real-time information on what’s going on in every country in which they operate, and particularly the emerging markets, for both their direct and wholesale businesses. In chapter 6, we discuss how brand Gerry Weber is using RFID labels on all garments to provide accurate data on everything sold. This includes allowing other retailers that stock the Gerry Weber brand to benefit from the data that the RFID system provides. Many brands have decided they can grow sales and profits more quickly internationally by opening more company-owned stores – and in some cases taking ownership of franchise stores. These trends all put pressure on IT departments to deliver systems that can be rolled out quickly to different countries and update central stock and sales information in real-time. In August, it was announced that Mulberry will deploy Torex’s Retail-J point of sale system We are continuing to support its international expansion. Mulberry has also committed to investment in to drive the right systems for international ecommerce, and so assortments in store and the Retail-J system was chosen to help ensure a maximise our inventory consistent consumer experience across all countries that extends to cross-channel commerce. investments worldwide The system also offers a central point of Jeremy Leaf, leader global retail operations management. As the EPoS system needs only to team, Levi Strauss & Co. be configured for different markets, it will allow Mulberry to quickly open more international stores while maintaining close control. Earlier this year, Drapers went to Florence to visit the headquarters of Salvatore Ferragamo, and hear why it is making a massive investment in systems to be able to better control its international business, particularly in the fast-growing Chinese market. The software will give the company centralised control of stock management and distribution, collating point-of-sale information so head office has a real-time view of what’s selling and where. Fellow Italian company Valentino Fashion Group has made significant investments in its global systems for similar reasons. Once brands have expanded to the extent that the majority of their sales are overseas they are at the mercy of exchange rates. It’s not enough to have accurate and up-to-date information on what’s selling where, they also need to know how much money they are making from sales day-by-day when the cost of goods is in one currency and the sale price achieved in another. Levi Strauss & Co. provides another example of a brand that’s standardising systems across the world, in this case merchandise and assortment planning using applications from Maple Lake. The company has more than 400 company-operated stores and more than 1,500 franchised and licensed stores around the world, and thinks the system will improve the efficiency of its stock »

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« holding while better tailoring assortments to maximise the chances of meeting differing customer demand in each market. Another type of system where brands get huge benefit from linking up across the world is customer relationship management (CRM). For luxury brands in particular, customers may buy from them in several countries – Chinese and Russian consumers particularly are propping up the sales figures of many Bond Street stores – any systems that can properly record their total global spend allow brands to better target such high-value customers. So UK retailers must also consider how they cater for their overseas visitors. Selfridges accepts the Chinese payment card brand China Union Pay, and many others have adopted systems for allowing tax-free shopping. In July, Reiss announced it would adopt the Retail-J EPoS system, not just to support international expansion, but also so it can offer tax-free shopping through the tills in its UK stores. The other point to note is that British brands who want an international presence must be mindful of how technologically advanced domestic retailers in the countries they trade are. In India and China particularly, local brands are investing in the latest systems, often Western technology, to maximise their top and bottom lines. For instance, Chinese-owned sportwear brand Erke is to roll out store systems from Eurostop to 7,000 outlets across China. Technology will be a differentiator that domestic brands use to compete more effectively against international brands trying to grab market share as their economies rapidly expand.

Ted on tour

Ted Baker’s burgeoning international says its existing system could not cope with business has required it to invest in new trading in China. It will then also replace the systems for many of the same reasons systems used in its Hong Kong and US mentioned above. stores, as it wants the whole international IT director Dustan Steer explains that it business running the same systems. had to think about international systems Steer raises the important point that after taking over franchise stores from a while centralisation of systems management partner in Hong Kong. This gave it the is great there are some practicalities of opportunity to install its own systems, and running systems in overseas markets that trade and merchandise the store using the must be addressed. It’s setting up data same processes as it would its own stores centres in its US office, and in Hong Kong, in the UK. as it can’t rely on the speed at which data This was so successful that it led to the idea would be transferred all the way from its of moving into China with its own stores. It’s servers in the UK to its warehouses and chosen a system from Cegid for this, as Steer stores in these territories.

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5. Analytics – merchandising, pricing and allocation decisions

Independent retailers have the benefit of being fairly easily able to assess decisions they make about what to sell, what sizes their customers are likely to want, and how much they will sell product for in order to sell-through their collection at an adequate margin. The smaller you are the easier it is to match your supply to the demands of your customers. But as fashion brands and retailers grow this becomes more complex, and bad decisions lead to rails of heavily discounted stock taking up valuable selling space, or website home pages covered in Sale messaging when it could be promoting new season garments. In particular, as businesses set up more channels, and expand into more countries, such decisions become ever more complex because there are so many variables that will impact the overall outcome. UK fashion retailers have been a little slower off the mark than those in North America to adopt advanced analytics systems that can help them make all types of pricing and stock merchandising decisions to achieve the best balance between margin and sell-through rates. While independent and smaller retailers may not need to make systems investments, they should use the data and reporting capability they do have for pared down analysis of what’s going on in their businesses.

Getting price right Price and markdown optimisation systems are particularly popular in North America, but it is a trend that is spreading [Our buyers] have confidence to the UK. However, retailers are often particularly coy about revealing the in the system and the process results they are achieving with analytics, to help manage in-season as it can often lead to substantial margin inventory and make the right improvements. In our survey, only 9% of respondents decisions for the business, said merchandising was the area of the and that in turn frees time to business most dependent on their IT capability, and only a further 16% said it was look ahead to new seasons the second most dependent. Yet when we Lucia Cimaglia, general manager supply chain, asked what systems colleagues in the busi- Aldo Group ness were demanding, 30% said those that provide pricing, markdown or allocation optimisation. There has been some resistance to adopting systems that were seen to be taking over the skills of buyers and merchandisers, but now it is recognised much more that they can support these departments in their work, allow them to spend less time on number crunching, and will not replace them. Analytics can help with initial pricing decisions, and then manage pricing through the lifecycle of a product, providing insight into how big a markdown is necessary to start shifting slow-moving stock. The more SKUs a retailer has, the more they are likely to benefit from such a system, and the same is true the more channels and differently performing stores they have. The goal for most who adopt this type of technology is to get to a position where in-season pricing decisions are virtually automated, any may differ by channel or cluster of store to achieve the best outcome. »

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« Footwear chain Aldo has used markdown optimisation for a number of years, and in April this year announced that it had upgraded its Oracle system to allow it to more closely analyse the performance of individual items and make markdown decisions by clusters of stores in the UK and North America. Oracle believes it is possible to achieve gross margin improvements of between 5% to 15%, and 5% to 20% improvements in sell-through rates.

Sorting out stock The same type of analysis can be applied to decisions on stock assortment, allocation and replenishment. The aim is to target merchandise to specific customers, improve product availability and negotiate % better discounts from suppliers with the help of the 37of respondents have quicker and more accurately gathered data. introduced new International lingerie brand Hunkemöller is using a merchandising systems merchandise planning system from Torex to improve in the past five years merchandise and assortment planning decisions for its 500 stores across 14 countries. The system will support the merchandising team as it plans local ranging for its company-owned and franchise stores. North American retailers such as Hudson’s Bay Company (which operates more than 600 stores under four banners in Canada, and houses brands such as Topshop and Tommy Hilfiger) uses a size optimisation tool to determine the best distribution of sizes of each garment for different stores. And Matalan has introduced a system in the past year to help it make better replenishment decisions for each store. The system from Quantum Retail uses real-time sales data from each store to make replenishment decisions. But to optimise the decision, it does not just replenish what was sold, but will analyse what could be sold. For instance, if a store sells out of its initial allocation of a particular dress very quickly, the system may send a larger amount in the replenishment delivery, as it can “sense” unfulfilled demand. New Look was the first retailer in the UK to introduce this system, and has said that the sales and margin improvements it allowed meant the system paid for itself within five months. Small brands can use the simple systems they do have to improve their decision-making. For example, luxury sports brand Rampant Sporting uses its fully integrated retail system from Prima Solutions for full stock visibility, automated order input and stock replenishment. The real-time information it provides is helping to improve stock planning across its own stores, website and growing number of stockists.

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Best practice planning

Mid market Italian fashion chain Conbipel has and depth of assortments throughout its introduced the Torex Merchandise Planning portfolio of stores by using space, stock system to its business to create a single and historical sales data to better analyse integrated process for its buying and sales potential. The system allowed it to ‘join merchandising functions. The 150-store chain up’ its pre-season merchandise planning, wanted to improve forecasts and allocations, such as store planning, clustering and at the same time as doing away with its assortment planning. spread-sheet culture, to reduce discounting and terminal stock. It faced issues such as men’s raincoats being carried by all stores, when analysis showed [The system] has only half could sell them profitably. Its inability to accommodate regional preferences or to given us deeper re-forecast in-season meant its merchandising decisions could not match customer demand. visibility across the This resulted in much discounting, and even company, integrated then it still carried about 10% terminal stock. Introducing the system has allowed Conbipel our operations to standardise its procedures, and adopt best practice. For instance, the retailer has been and tightened our able to align buying and merchandising supply chain product plans with its retail store plans. Sue Elder, head of merchandise Within a year of going live, it has been able and planning, Conbipel to reduce markdowns and terminal stocks, reduced administration and created profitable localised assortments. Conbipel head of merchandise and planning In stage one of the project, Conbipel began Sue Elder explains that stage two was timely to use the in-season re-forecasting module for the development plans of the business: (WSSI) to create an ongoing analysable view of “Our recent operational review resulted in the stock, sales and intake. This has allowed it to redesign of a third of our stores to drive sales constantly adjust forecasts, promotions and growth. The newly-visible pre-season option intake to better manage stock levels. Profits width and depth planning has helped us to have been optimised, and the retailer has also optimise this strategy.” improved its tracking of trends and better As a result of the system, the Conbipel controlled seasonal transitions. business has developed a more demand-pull In stage two, Conbipel improved the width and customer-centric culture.

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6. Product lifecycles and the supply chain

Information is becoming ever more critical within the supply chain to help fashion retailers optimise their operations. Technology has long been used to lower the cost of moving garments from their country of manufacture – increasingly overseas – to distribution centres and stores in the UK and international markets in which fashion brands operate. But now innovation in this area is going beyond just cutting costs. It’s helping businesses maximise the speed to market of new product, and better matching supply to demand for sales and margin gains.

Making fashion faster Product development tools and product lifecycle management (PLM) systems have come on leaps and bounds in the past few years, and assist retailers and brands in getting design concepts from the drawing board to the shopfloor in some cases in a matter of weeks. In September, Lectra unveiled a 3D version of its apparel pattern-making and grading software, which allows patterns to be drafted and seen in 3D in a specific fabric right away. Any onscreen adjustments are then directly applied to the flat pattern, and modifica- tions are visible in both flat and 3D modes. Lectra says early adopters report being able to reduce the number of physical samples by half or more. In some cases, this means producing just one prototype for each garment. JD Sports Fashion is one UK retailer that has invested in a PLM system this year. It is deploying a system from Centric to consolidate product and design information for its private label garments, creating one consistent version of the plans for different teams within the business to use. The aim is to improve collaboration and productivity in the product development process. JD Sports Fashion group IT director Frank Watts says: “Improved data visibility will enable better management of processes, from design and merchandising to sourcing and warehousing, which is essential for our significant private label business.” Modules in the system that JD will use include line We now only create planning, product specification, materials management, sourcing and quality. one physical prototype Global fashion brand Benetton Group has also of each garment invested in PLM technology, from Dassault Systems, as its platform for global development and sourcing. Why it because the pattern needs systems to manage these competencies becomes has been so perfected clear when you understand how complex its manufac- virtually turing resources are. Massimiliano Trambaioli, owner of It has production centres in Italy, Eastern Europe, Italian pattern development company Tunisia and India, with several of its sites operating Prontomodel »

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« complete production cycles of raw materials to finished product. Benetton believes the system will We used to do one help it reduce lead times, streamline product line complexities and aid collaboration, both internally inventory count a year and with external suppliers who will also be able to use to get 100% accuracy; the system. This type of technology is also evolving to the new by the end of the year ways in which buyers and designers work, often it was down to 60% outside of the normal office environment at fashion accuracy events or visiting suppliers. Centric has created an iPhone app that allows users of its PLM system to Christian von Grone, chief information officer, Gerry Weber International directly upload pictures taken on an iPhone to the system, where they can then be reviewed and analysed by other users. Information on the move Once fashion product has been manufactured, technology then plays a part in ensuring that retailers know where their stock is, and where it can be best utilised. After many false starts, RFID technology is now being adopted at the item-level for fashion goods, and there are several successful examples, such as American Apparel in the US, and the German fashion retailer Gerry Weber’s work with Avery Dennison and Torex (see box on page 24 and pictured below). US department store retailer Macy’s has successfully piloted an item-level RFID system at its Bloomingdale’s chain and achieved 97% inventory accuracy. In 2012, it plans to add RFID tags to its fastest- selling garments in all Macy’s and Bloomingdale’s stores – accounting for about 30% of the retailer’s sales. Avery Dennison, which also works with Marks & Spencer on its item-level RFID tagging of clothing in the UK, says the technology gives retailers improved stock accuracy, which leads to better availability and ultimately higher sales. Merchandisers need information on where product is to make decisions on where to allocate and replenish stock. This process is complicated in many cases by the fact that these decisions must be made for multiple channels. The issue of one channel being out of stock of a product which another has stock of but can’t shift will be a problem familiar to many in retail. 51% of those surveyed said they need to improve the prioritisation of stock allocation across channels, and the same amount want to be able to dynamically model stock availability. For fashion retailers, decisions over stock allocation to different channels are often complicated by wholesale or franchise agreements. For instance, lingerie brand Hunkemöller (see page 19) is using the Torex Merchandising Planning system to optimise assortments across its company-owned and franchise stores. »

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« US footwear brand Aerosoles has invested in a system from Maple Lake to centralise and co-ordinate merchandise, store and assortment planning activities for each channel. “Operating a true multichannel business with concept stores, outlet stores, ecommerce as well as catalogue and direct sales businesses required some significant co-ordination; relying on spreadsheets is no longer an option for us,” says Aero- soles chief information officer Tupper Kinder. And if a brand that is stocked in thousands of stores worldwide was until recently relying on spreadsheets for such planning activities, then it should come as no surprise that many of the fashion businesses in our survey are still heavily dependent on spreadsheets too. Some retailers have virtualised their stock pools, so they can easily reallocate stock between different channels to react to demand patterns. There are also cost advantages of warehousing stock for web and store channels together. There has been a trend away from running separate ecommerce fulfilment centres, and modern warehouse management systems are able to cope with processing different types of orders simultaneously. This especially makes sense for retailers that offer fulfilment to stores for web orders. River Island has closed down an ecommerce fulfilment facility this year as part of its move to a new distribution centre. At the new site at Magna Park, Milton Keynes, it picks ecommerce orders in the same way as orders for stores before being packed separately. It’s not even enough to have complete visibility of stock levels internally, retailers are starting to provide this information to their customers too, through their websites and in-store kiosks and iPads. Several of the Arcadia brands now provide basic store stock information through the product pages of their websites for customers, for example. And Debenhams is using kiosks to great effect in its smaller department stores to provide customers with access to its complete online range. Retailers from Marks & Spencer to Karen Millen to Tesco offer online, exclusive ranges with limited stock that can only be bought online. So it’s certain that real-time stock availability and flexibility in how the stock is allocated becomes more and more crucial as retailers develop multichannel and cross-channel services. Take Aurora Fashions, after introducing click and collect, it has gone one step further by utilising Shutl’s 90-minute delivery service where stock sold online is taken from a nearby store. If ever proof was needed of how crucial technology is to fashion supply chains, then remember the example of Superdry, which earlier this year suffered serious reductions in stock levels and ranges of sizes in its stores after a problem with a warehouse system upgrade. The retailer was forced to issue information to investors warning of a reduction in profits of between £6m and £9m, and it had to take extra warehousing space while the issues were rectified. Retailers cannot run without stock, but increasingly they can’t run without supply chain systems too.

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« On the radio

German-based international fashion retailer Gerry Weber begun using radio frequency identification (RFID) tags on all products sent to its own stores and other stockists in Janaury this year following trials of the technology. It’s invested 2.7m euros in the supply chain technology project which provides multiple benefits and is expected to provide a return on investment within two years. RFID is the next stage on from barcode technology, and each tag provides a unique electronic product code (EPC) identifier which can be read by a scanner without needing line of sight. Gerry Weber is adding an RFID tag to the care label of each individual garment, so it can be tracked along the supply chain, from the point of manufacture to the point of sale. About half of its turnover comes from international stores, and new stock hits stores every two weeks. The RFID care labels – provided by Avery Dennison – are the first time the technology has been integrated into a wash-resistant care label. They also include an anti-theft element, which does not interfere with security systems in other retailers’ stores. store holds. Stock checks take each store only Before products arrive at the store, the an hour, and are carried out once a week, instead retailer’s Alexa ERP system transfers a list of of the once a year that Gerry Weber carried out items to be delivered to the Torex point-of-sale before the system was introduced. system. Goods are then scanned on arrival and “We used to do one inventory count a year to the point-of-sale system stores their unique serial get 100% accuracy; by the end of the year it was numbers in a database, so it always knows down to 60% accuracy,” he explains. exactly what is in the store. The serial numbers The other benefit of this technology is that it is for products are deleted from the database also used as a loss prevention aid. The tags are when they are sold. marked as sold at the point of sale, and an Gerry Weber International chief information overhead antenna at the door ‘reads’ when sold officer Christian von Grone has overseen the garments leave the store. If goods not marked as project. He explains that the company saves sold in the point-of-sale database leave the store a lot of money by being able to easily check an alarm sounds in the same way as for other all garments in consignments arriving at its electronic article surveillance (EAS) systems. logistics providers from the manufacturer in In addition, von Grone says that the weekly the country of origin. stock counts also highlight loss prevention issues And the benefits increase further in store. Von in particular stores much more quickly. Grone says about half of the total business case Several other retailers are now believed to be comes from knowing exactly what stock each exploring using RFID in the same way.

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7. Digital marketing and PR

Marketing departments in all kinds of fashion businesses have seen a big impact from the growth of the internet. While major brands still derive much benefit from print advertising in fashion magazines, the internet has created many new ways to communicate with potential customers. The great news is that many of these new mediums are low cost. But the internet moves quickly, so as we’ve seen in the chapter 3 on CRM the blanket marketing emails that worked two years ago might not be proving so successful today. And in the next couple of years they are likely to get even less so as other retailers move towards more personalised communications. Marketing was the function within the business that 19% of respondents in our survey ranked as being the most dependent on their IT capability. It came second after ecommerce and multichannel. But there are many free and low-cost web platforms that give retailers of all sizes access to a marketing presence on the web. Social media platforms particularly allow brands to reach out to huge audiences, and interact with those who are most likely to buy from them.

Social campaigns Fashion retailers of all sizes – and particularly independents – should be looking at what the big brands are doing with social media, and working out how they can use these ideas within their Twitter is own businesses. instantaneous Burberry allowed Twitter followers to get a sneak peak of its and I love the new collection before it even hit the runway at London Fashion Week. The ‘Tweetwalk show’ saw photos of the models broadcast idea that via Twitter backstage at the Hyde Park show as they prepared to go streaming a show out onto the runway. Burberry also live-streamed the show via its can be in many Facebook page, to give customers around the world a taste of the excitement and exclusivity of being front row at a catwalk event. different forms It doesn’t take much imagination to see how any retailer could Christopher Bailey, chief tweet pictures of new stock before it’s even come into store in creative officer, Burberry, on much the same way. And similarly setting up a Facebook page the brand’s Tweetwalk show takes only a little time but allows customers to opt-in to a relationship with you by ‘Liking’ your page. Denim indie Donna Ida uses Facebook, Twitter and YouTube to get its message to market. It’s a great example of how the different social media platforms can be used for different things, but they can all also promote each other. On Donna Ida’s YouTube channel, you’ll find content such as a video on mater- nity demin. On Facebook, there’s competitions and links to the blog posts on its website providing regular new content on its Facebook wall. Then Twitter allows owner Donna Thornton to bring a little personality to the brand. Asos is also renowned for using social media. Its presence on Twitter gives individual staff members a voice to customers, and acts as a customer service channel. But it uses other platforms well too (see box overleaf).

Word of mouth As well as the positive side of social marketing campaigns, the fashion industry has also had to start »

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« addressing the negative. Remember the fuss made online when Gap tried to change its branding? The same platforms that can make a brand can also damage it. So it’s not enough to use social media to push out your messages, you need to be ready to respond to what your customers say about you too. Again there are many free or low-cost tools such as HootSuite or TweetDeck for monitoring Twitter for mentions of your brand name. In Gap’s case, it tried to rebut the huge wave of criticism over its logo change. However, it was forced to backdown, and the brand’s US boss stood down within six months of the incident earlier this year. However, if you can avoid mistakes like this then you can harness what your customers say about you, and use it as part of your marketing message. A few high-street retailers are trialling interactive mirrors in store, which take pictures of them in outfits that they can send to their friends via sites such as Face- book or Twitter. For example, River Island is offering this in its Westfield Stratford City store. Word of mouth is one of the best ways of attracting new customers, and the internet makes it easier for customers to tell their friends and the wider world when they like something you are doing. Already retailers have begun adding buttons to their websites’ product pages to let people easily share the link to friends on social networking sites. Such developments are only likely to be seen more often. High street chain Republic ran a competition in October using Facebook to make consumers more aware of its brand. Fans earned points by ‘Liking’ the brand, and also by sharing the link to the competition with their friends on the site. They then received further points if their friends then ‘Liked’ the brand too. While relatively few brands such as Lyle & Scott and Asos have launched transactional stores within Facebook, there is much that retailers of any size can do on these platforms without having to make any technology investments themselves.

Savvy about social

Asos uses multiple soical media platforms for created to sign-up consumers to the Sale. some of its most innovative marketing In return for early entry to the Sale, it gets campaigns. Take its ‘The Big Dress Drop’ access to the customer’s basic profile timed Sale event, which took place on information, and any other information Sunday October 23. they choose to make public on their In the days leading up to the event, Asos Facebook profile. tweeted to recruit followers to watch a While not all brands have the time and video on YouTube featuring product that money to use the platform in such a would be in the sale. From there consumers sophisticated way, it’s interesting to note were pushed to Facebook, where they how Asos links all these touchpoints on could sign-up to gain early access to the different social platforms to maximise the Sale and monitor which items were likely impact of the campaign. to be given a 50% discount. For more on analysing social media, see Asos uses a Facebook application it has our article on the Drapers website.

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8. The human element

The biggest change to the work of IT departments and technologists within fashion businesses in the past decade has been the move from providing systems primarily for use within the organisation, to creating systems that will actually touch the company’s customers. Looking back to the graph in chapter 2 showing the developments retailers think their customers are demanding, many require technology infrastructure and applications to achieve. This undoubtedly makes fashion retailers’ IT departments a more interesting place to work with more opportunities, but can also put a considerable strain on small companies with limited technolog- ical know-how and resources.

Talking the talk One of the most interesting things about the development of consumer-facing technology is it means fashion businesses have to find the right voice with which to talk to customers about developments and problems with their technology. For instance, Wallis sent an apologetic email to customers in September when an offer on its website did not work properly. Republic has done similar after its website was experiencing problems over a weekend. The many brands that have launched mobile websites and apps have also had to start talking more directly to their customers about technology. And this means everyone in the business, from store-staff upwards, needs some appreciation of what’s being developed to deliver a consistent message to customers. Even the smallest brands and retailers need to know enough about technology to talk to consumers who are increasingly tech-savvy. For example, The Only Way Is Essex stars Sam and Billie Faiers encountered problems with the launch of the website that supports their Minnies Boutique in Brentwood. When their site failed to launch as planned they apolo- gised to customers via Facebook and a spokeswoman for % the boutique was honest and knowledgeable about the 47of respondents are problems, saying: “We had some really bad technical running systems that problems to start off with, then by 6pm the web design don’t have the right team sent us a link to look at the site and none of us were functionality or don’t happy with it. We are quite pedantic with how we want it integrate with other to appear and we didn’t like the banners, the typefaces systems well enough and other design aspects we had gone through before.” »

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« Walking the walk When technology is done well, it will help drive customers into stores, and even create publicity and a buzz about the brand. New Look has trialled a body scanner at its Westfield Stratford City store in October. The device, from Bodymetrics, takes a scan of a customer in two seconds before calculating and mapping every curve and contour to produce 100 measurements and body shape analytics. This is then followed by a personal styling session by ‘Fit Stylists’, who help customers find the best jeans for their body shape. When Drapers went to see the device there was a queue of customers wanting to use it. But what do these new trends and developments mean for the future of IT departments? Only 18% of our survey respondents said they do not have the IT expertise in-house to change their systems. In fact more said that their dependency on Excel spreadsheets was an issue (28%). And only 36% mentioned IT budget being an issue preventing them % delivering on the business plan. 31of respondents want to This all supports the idea of a developing consensus improve the customer on the importance of technology to fashion businesses experience in-store who want to thrive. And it’s not just the IT department itself that understands this, but is an idea that’s gaining ground across the board. Only 9% of those surveyed said the delivery of their business plan could suffer as a result of resistance to new systems from head office staff. And only 10% mentioned it as a problem for store staff. Aurora Fashions outsourced its IT and distribution functions at the beginning of the year. It said the decision was not one just of cost-saving, but would also give each brand more flexibility to manage its IT developments in a way that is appropriate for the business. But this does not suggest a trend for devolving responsibility for IT. While they are happy to leave the ongoing running and management of core systems to the experts, retailers are much more likely to want closer involvement with systems that touch their customers. Debenhams developed its mobile site which launched earlier this year completely in-house. And Crew Clothing was similarly closely involved with the roll-out of iPads to stores to allow customers to order from the wider range on its website (see chapter 2). Today, and in the future, IT departments are likely to work closely on projects with their peers in other parts of the business such as marketing, store operations or ecommerce and multichannel teams. This business-sponsored and customer-focused project mentality is likely to see more user-friendly and successful technology delivered.