Top 4 Trends Disrupting the Fashion Industry

How digital is disrupting the fashion industry — Top 4 trends

Fashion is one of the key industries that is currently being redefined by digital disruption. This phase of digital disruption has not been good news for traditional players in the industry. According to retail think-tank Fung Global Retail & Technology, 6,985 retail stores across the US were closed in 2017 alone. That marks a 200% year-over-year increase in store closures. The same think tank also points to an alarming fact that during the 2008 financial crisis, 6,163 stores were closed across the US. That means that more stores were closed last year (a year during which the economy was booming) than during the defining year of the financial crisis. As acknowledged by H&M management, this store-closing trend will only continue to grow across the globe, not just in the US.

Traditional fashion companies and brands — including H&M, American Apparel, Gap, Guess, and Abercrombie & Fitch — have been slow to adapt to this new shift and are feeling the heat. They have already have seen a drop in their top and bottom lines in 2017. H&M alone saw a 4% decrease in sales in its fourth fiscal quarter in 2017. According to its management, this sharp drop in sales is caused by H&M’s failure to react to the shift from offline to online sales, which innovative digital technologies accelerated.

The impact of this disruption can be seen everywhere in the fashion industry: from production and supply chain to marketing and sales. Digital devices, platforms, and technologies such as smartphones, social media, advanced data analytics, artificial intelligence, and e-commerce are re-shuffling the market dynamics. Below are the 4 trends redefining how business is done in the fashion industry.

Trend 1: Online-only retailers are winning

Since traditional fashion companies have been slow to capture the online market for fashion, this gap has been filled by online-only retailers such as Amazon, Zalando, Boohoo, and ASOS. Manchester-based online fashion retailer Boohoo, founded in 2006, saw a 100% increase in its 2017 sales, to $316.6 million. Amazon, which captured 5% of the American fashion market in 2015, is projected to increase its market share to 14% by 2020. Its apparel sales are estimated to soar from $18.5 billion in 2017 to $85 billion by 2020. German fashion retailer Zalando saw a 23.4% increase in sales in 2017, and is expected to to grow 20–25% in 2018. British online retailer ASOS is also estimated to grow its sales at the rate of 25–30% this year.

Online-only retailers are not only providing an online platform for selling fashion products, but they are also offering a great customer experience. They are efficient in listening and understanding what the consumers want using different means, such as social media, advanced data analytics tools, and artificial intelligence. They quickly react to consumer insights gathered through digital technologies and incorporate them into their decision-making process. Therefore, without embracing digital technologies and providing what customer want, fashion brands and retailers will continue to lose their share of the fashion market, which is estimated to reach $1.8 trillion by 2020.

Trend 2: Changing consumer behavior is reshaping the fashion industry

Digital technologies are reshaping the expectations, behaviors, and habits of fashion consumers. Now consumers are much more empowered and play a central role in deciding when and what should be produced. Instead of going to physical stores, consumers are spending more time shopping online. Particularly millennials are shifting from offline to online, to such an extent that 2 out of 3 millennials prefer to shop for fashion online. A McKinsey report about fashion consumers’ online-shopping habits shows that a whopping 74% of online consumers make purchasing decisions influenced by social media.

The consumer trend to use digital tools and platforms to buy fashion products does not show signs of slowing down. According to McKinsey’s state of fashion report 2018, online sales for fashion, particularly for apparel and footwear, will continue to increase rapidly over the coming years.

If traditional fashion players want to survive, they will have to integrate new technologies, invest in adopting innovative business models, and engage consumers through different digital channels to provide an excellent shopping experience online.

Trend 3: Artificial intelligence is coming to get fashion

2017 has seen increased usage of artificial intelligence in the fashion industry. This trend is likely to rapidly accelerate in the coming years. AI can predict fashion trends, and help fashion players in deciding when and what to sell. Advanced AI programs are capable of learning individual consumer’s fashion preferences and designing items that fit the consumer’s individual style. Many fashion retailers and brands, including Amazon and Walmart, are already using AI in their operations. Customer service chatbots are becoming a norm. Currently, Amazon alone has 100,000 robots around the world for its packaging and shipping operations. Walmart, on the other, hand is using AI to monitor product usage, replacement, and expiry. Other fashion brands and retailers such as Dior, VF Corporation, and Nike are using mainly chatbots and AI virtual assistants for a better customer service experience. This year will see an increase in the use of AI in functions ranging from production to supply chain management to customer service. Fashion players, who don’t incorporate AI into their operations, stand to lose.

Trend 4: One size DOESN’T fit all

With digital data and trend analysis tools fashion retailers can personalize their offerings. Since consumers are interacting with digital tools and platforms more and more, they are also giving away a lot more data about themselves. A clever use of this data is through advanced data and analytic tools. Those sophisticated tools can help fashion retailers appeal directly to the tastes of individual consumers. Instead of relying on focus groups and customer surveys, fashion retailers can collect personal data and reach out to them effectively. They can predict consumer demand through digital data collection and analysis tools. Application of advanced data tools can also help them modernize their supply chain and cut waste.

Summary: What to do

Digital innovations and technologies are quickly changing the fashion industry landscape. Consumers are expecting personalized shopping experiences. Online-only retailers have understood this trend, and are continuously adjusting their business models and offerings. If traditional fashion retailers want to survive, they will have to adapt a consumer-centric business model by leveraging new technologies.

The lesson for traditional fashion retailers and brands is to innovate continuously or die!

Originally published at on April 4, 2018.

Martin Bell

Written by

Global Startup Advisor | Investor | Ex-Rocket Internet (50 Startups incl. Zalando & Delivery Hero) | Keynote Speaker

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