The Inherent Tension Driving the Future of Fashion
Will we subscribe to a rotating wardrobe or own a closet of hyper-personalized items?
Fashion is ultimately a game of influence, and the source of influences have shifted considerably in recent years, thanks to the advance of social media and digital culture. The old fashion gatekeepers are losing their grip on dictating the trends from the top down. Instead, the latest fashion trends, be it Euphoria makeup or VSCO girls, are largely driven by the collective hive-mind on digital and social channels, which also drives the growing drop culture among the streetwear and sneakerhead communities. Fashion brands have been taking notes and finding new ways to apply these bottom-up trends, such as cross-category collaborations or embracing the “see now, buy now” model, to regain a certain degree of control.
Today, the fashion industry is at an interesting crossroads. On one hand, the prevalence of subscription services has infiltrated the fashion industry and, coupled with budding anti-consumerism tendencies among younger generations that prioritize new experiences over material possessions, led to a growing trend of experimenting with the Clothing-as-a-Service (CaaS) model. On the other, the impending innovations in logistics and manufacturing will make bespoke fashion a viable option at scale, thus providing hyper-personalized fashion products that are made for each individual customer. The inherent tension between the two models, with the former emphasizing access and constant updates while the latter mandating personal ownership, will become the driving force for the future of fashion.
Clothing as a (Subscription) Service
Fashion, by its very definition, is a strong indicator of culture, reflecting the larger social and economic trends of the times we live in. When the economy goes down, so do the hemlines. As technology becomes an integral part of our culture and social conventions, it is no surprise that they have also triggered a chain reaction that is reshaping how the fashion industry operates.
The fashion industry has reached an inflection point, spurred by the spread of on-demand delivery and social media. Fashion cycles have sped up and shoppers have come to expect instant access to a constant stream of new products. This shift also creates new pain points, which requires new business models to solve. For example, returning online purchases remains a major pain point for ecommerce brands across categories, but especially so for fashion. A study has shown that nearly half of online clothing purchases get returned, usually due to poor fit. By adopting the subscription model, fashion brands are able to factor the cost of returns into their services while providing a more seamless customer experience.
Subscription is not an inherently digital model, but the low distribution cost enabled by digital channels have made subscriptions a popular business model across categories. Just as streaming services changed how we consume video and audio content, new subscription services in food, transportation, and CPG categories, usually led by D2C brands, are further pushing this model into mainstream consciousness.
In fashion, D2C brands such as Stitch Fix and Rent the Runway has been pioneering the subscription model, but the nuance between the two is worth delineating. Stitch Fix uses subscription as a sampling opportunity for subscribers to try out new items on a regular basis, hoping that some of those will be kept. Members have to send back the items they do not wish to keep within three days. Rent the Runway, in contrast, operates more like a collective closet full of stylish, upscale items that members subscribe to borrow from. Even though members can choose to purchase the items they like from Rent the Runway at a discount, the rental model born out of the sharing economy is built into the company’s DNA.
As subscription mania continues to infiltrate the market, more fashion brands are starting to experiment with subscription services. You can now rent clothing from fast fashion brands like H&M and Urban Outfitters for a monthly subscription fee. Uniqlo is reportedly close to launching a service that allows subscribers to sample different products each week. On the fashion retailer side, Walmart recently launched a clothing rental services for kids and Bloomingdale’s has also started to roll out its own version of Rent the Runway service in select cities. Subscription services allow fashion brands to build a recurring revenue model as many try to fend off digital-native competitors.
At first glance, the subscription model would seem to be at odds with the economics of mass fashion, which relies on high volumes and quick turn-arounds. One of the main value propositions of renting clothing via subscription services is the lower prices that allow consumers to access upmarket items that are usually outside of their price range of purchasing. After all, why buy only one expensive fancy dress that you only wear occasionally when you can access five different fancy dresses for roughly the same cost? This benefit, however, does not exist for fast fashion brands, whose low pricing does not pose a barrier to entry. Often, the fast fashion products are seen as “disposable”, and the low pricing makes it so that consumers aren’t trying to amortize the purchase price over many wears. For fast fashion brands, the Stitch Fix model of subscription-as-sampling makes more sense than the Rent the Runway model to improve on sustainability without losing its main selling point — a constantly updated “newness”.
In addition, the ongoing “lean closet” movement, born out of Millennials’ preference for fewer possessions and sustainable fashion, works perfectly in tandem with the Clothing as a Service (CaaS) model. When one has access to a rotating wardrobe of the latest fashion, the need for ownership significantly decreases. Fashion brands and retailers, then, would simply become a curator, picking out the right items for each subscriber. Adopting this model would allow fashion brands to build long-term customer relationships, increase loyalty and wallet share, but it would require new approaches to logistics, pricing, and marketing. For example, CaaS requires reverse logistics infrastructure, AI-powered algorithms that can anticipate inventory patterns, and a system for cleaning and repairing garments.
Therefore, it should come as no surprise that some retailers are struggling to figure out subscription services given the reverse logistics complexities. For example, earlier this year, JCPenney pulled the plug on the men’s apparel subscription service it tested in partnership with subscription startup Bombfell. Even Rent the Runway, a leader in the CaaS space, hasn’t been immune to logistical challenges. Luckily, they don’t have to build the rental service from scratch. In this case of Urban Outfitters, for instance, their rental service Nuuly is powered by CaaStle, a startup that allows retailers to offer CaaS services to fashion brands.
Hyper-Personalization at Scale
If streaming media and on-demand delivery are what triggered the trend of “access over ownership” that gave rise to the CaaS model, then our increasingly algorithmic social feed and targeted offers are both responding to and, in turn, fueling our ever-rising demand for personalization. This trend is especially evident in fashion, as it serves as an outlet for self-expression and self-actualization.
While personalized fashion products remain somewhat of a novelty category today, personalized service has already become a key conversion driver. According to Mary Meeker’s 2019 Internet Trend deck, 91% of customers prefer brands that provide personalized offers and recommendations. As service becomes more and more personalized, so too will the demand for personalized products. Therefore, how to successfully translate the level of data-driven personalization from services to products will be a key growth opportunity for fashion brands to reinvent their businesses.
Although bespoke fashion has long existed, new innovations in logistics and manufacturing like 3D printing and quick laser tailoring are helping scale operations and reduce costs. Beloved denim brand Levi’s released a new app this summer that streamlines the way consumers can personalize their Levi’s purchases at select stores, with a wide range of options spanning embroidery, monogramming, distressing, paneling, and more. Last year, the company also launched a Customization Studio in Downtown Los Angeles, which leverages the latest advances in laser-powered technology to digitize the design and development of denim finishing, enabling denim lovers to create their own custom jeans from start to finish.
Micro-sizing is also an interesting way for fashion brands to explore hyper-personalization at scale. Fashion startup Laws of Motion boldly overhauled traditional apparel sizing to offer 99 micro-sizes to better fit each body. Responding to the ongoing movement toward inclusive sizing over the past few years, the company also takes into account smaller variations in body shapes, including waist and bust measurements, on top of being size-inclusive. In this model, everything feels tailor-fit and made-to-order, but since there are only 99 sizes to choose from, turnaround time and cost in manufacturing is also significantly reduced.
To make micro-sizing work, apparel and footwear brands have been actively exploring various ways to enable at-home self-measurement. AR try-on and virtual fittings are popular experiments, as brands like Nike and Gucci have done recently, but are still far from being totally reliable due to restraints in mobile AR today. Apps such as DressingRoom are using AR to enable shoppers to try outfits on a digital avatar, customized to the correct measurements, before making a purchase. For an analog approach, there is Margaux, a footwear startup, which offers an at-home sizing kit for customers to find their perfect fit. Interestingly, the sizing kit also contains suede swatches of various colors to inspire purchases.
Of course, scaling fully customized production would require innovations in supply chain management built for speed and efficiency. Take Nike for example. The global leader in sportswear has been investing in digital printing to enable custom artwork at the last stage of the manufacturing process. In 2017, Nike also created the Nike Direct program, which unites Nike.com, direct-to-consumer retail stores, and Nike+ digital products, thus bringing together the various consumer touchpoints to enhance the company’s ability to plan for and personalize the shopping experience. The goal is “to cut product creation cycle times in half.”
Not to be outdone, Nike’s archrival Adidas has also been experimenting with customization at scale. Four years ago, Adidas opened a futuristic Speedfactory powered by robotics in Ansbach, Germany, testing different ideas as it works to make its operations faster and more flexible to meet the demands of this new era. The company also opened a second Speedfactory in Atlanta, U.S., which entered full production last year. Last month, however, the company announced it is relocating the two Speedfactories to an unspecified country in Asia where most of its production currently lives, presumably to be closer to material sources and cut down the overhead cost. This move points to a necessary compromise of testing a hyper-customized manufacturing operation on top of the existing supply chain infrastructure. In addition to the Speedfactories, Adidas has also partnered with Carbon to create 3D-printed sneakers and shoe parts.
Fashion startups are also exploring 3D printing to scale their customized production. Performance professional apparel brand Ministry of Supply unveiled an in-store 3D printer that creates customized knitwear, and it can produce a customized blazer in just 90 minutes. Better yet, printing the garments reduces fabric waste in production by about 35%, according to the brand, which further feeds into the eco-friendly fashion narrative that many D2C fashion brands are trading on. The revolutionary idea of employing 3D-printing is to integrate manufacturing even closer to the consumer touchpoints, which is also a necessary step to ensure the customers can request and receive hyper-personalized products in a relatively frictionless manner.
Obviously, it is nice to have things that are tailor-made for us, but the natural result of a scaled personalized production is ownership. It is unlikely to find someone else at the exact same micro-size as you who also happens to share the same fashion style and taste. If the CaaS model seeks to commodify fashion and making individual ownership obsolete, then the move towards customization at scale is a callback to fashion’s distant past, when nearly all apparel and shoes were made on-demand by local tailors before the industrial revolution made mass fashion a possibility. Therein lies an inherent tension between these two distinct business models that appear to be pulling the future of fashion towards opposite directions. But could this be a false dilemma? What if there’s a way to reconcile the fundamental tension between “ownership vs. access”?
Why Not Both — The Promise of Digital Fashion
Technology is slowly but surely overtaking fashion as the ultimate status symbol of our times. iPhones have long been a status symbol in developing markets, and the growing sales of smartwatches have put the Swiss watchmakers on notice. It’s not just the expensive shiny gadgets like AirPods or Peloton bikes; it’s also the services like the $30/month email service Superhuman or the $13/month meditation app Headspace that promise to boost your digital productivity and wellness, as long as you pay up every month.
In fear of losing its greatest source of influence as a status symbol, it is no wonder that the fashion industry has been proactively incorporating technology into the design of their products and striking up partnerships with tech companies. Levi’s smart jacket designed with Google allows wearers to control mobile devices by tapping and swiping on their sleeves. Another example of smart fabrics would be the NADI X yoga pants, which are equipped with built-in sensors that guide users into correct alignment by vibrating as they move through various yoga poses. Nike has created a pair of auto-lacing sneakers that will tie itself at the push of a button in the accompanying app.
Outside these functional integrations, some decorative examples of tech-fashion fusion are also popping up. In 2016, IBM and Marchesa worked together on a cognitive dress that continually changed color with the help of IBM’s analytical technology Waston. Louis Vuitton recently unveiled a line of handbags that come with flexible displays embedded so that owners can customize them with any image they wish to show off. Whether it’s functional or decorative, the eventual convergence of fashion and technology seems inevitable.
As more and more aspects of our daily lives become digitized, our increasingly digital culture also presents a great opportunity for fashion brands to extend its influence into the digital realm. This is already happening in video games. For instance, the “Kim Kardashian: Hollywood” game, which allows users to dress an avatar in clothing from Roberto Cavalli, Balmain and Karl Lagerfeld, has generated more than $240 million in sales since its launch in 2014, and popular online games like Fortnite earn a fortune selling custom outfits for digital avatars. Similarly, WAX, an online marketplace which facilitates the trading of virtual items on the blockchain, has unveiled special virtual trainers that can only be “worn” in AR at this year’s E3 gaming conference in partnership with RTFKT, which claims to be the world’s first “AR ecommerce trainer brand.” Virtual fashion is an easy way for people to stand out in the digital realm and define their digital identity, so it makes total sense that it is being co-opted as a status symbol.
Fashion brands have been taking notes of the rise of virtual fashion as well. Louis Vuitton recently dropped a virtual product line designed for popular esports title League of Legends. Last November, Scandinavian multi-brand retailer Carlings released its first digital clothing collection, which can only be “worn” in photos. They hired several influencers to promote the collection on Instagram and it sold out in a week.
And as the line between our physical and digital worlds blur, virtual fashion goods will also see further extension into the real world. Looking ahead, if the much-prophesied metaverse future powered by immersive technologies like AR and VR comes true, then the corporal aspects of fashion products will likely evaporate, thus eliminating the entire manufacturing process from the value chain. The latest designs will be instantly deployed into the distribution and sales channels. Thanks to their digital nature, this is perfect for the CaaS model since it costs nothing to distribute and recycle, and is also inherently made for customization at scale, since all it changes is a few lines of code. And it is not difficult to imagine how virtual clothing made for social media could morph into something mainstream once AR glasses take off.
That being said, digital fashion will eventually need to reconcile with the physical and functional elements of fashion products. Beyond the aesthetic for self-expression or status signaling, the things we wear and carry ultimately serve functional purposes too, and the best fashion brands in the future will need to account for both. Just like how Apple excels in creating the best smartphone experience by virtue of owning both the hardware and software design and deeply integrating the two layers, fashion brands of the future will likely need to design both the basic items we wear for comfort and warmth as well as the virtual fashion items to be layered on top of them. There will no doubt be open-sourced designs, ready for anyone to customize and resell, but the best digital fashion experience will likely come from a deep integration of what we physically wear and what we choose to superimpose and project to others.
Want to Learn More?
The future of fashion is exciting and dynamic, with two distinct business models competing against each other while both incorporating emerging technologies throughout its value chain to meet shifting consumer demand. The Lab is closely monitoring disruptions in the fashion industry and charting the development of digital fashion. If you wish to start a conversation around the key trends shaping the future of fashion, and discuss how your brand can leverage these opportunities, please reach out to our Group Director Josh Mallalieu at josh@ipglab.com.
