What would Elon do?

The next transformative waves in the fashion industry

Photo: Karina Tess

I fundamentally believe that massive, transformative waves like the current shift from fuel to electric cars will happen to other industries, and one of them is the fashion industry. Elon Musk is very busy with his cars and with space travel. So let’s imagine what he would do if he started to look into the fashion industry:

1. Elon Musk would only spend his time and energy on this industry if he believed that it was large enough to hold significant future value for challengers that could gain a market share with a “future-made-reality product”.
2. He would then look out for massive problems that are inherent in how the industry operates to date and the problems it causes collaterally to people and the planet.
3. Musk would then try to identify shifts that are likely to happen in the industry. He would particularly look for shifts everyone says will come in the future, but that no large company has yet dared to make happen at scale.
4. If all of that made sense to him, he would go out loudly with his daring vision, create a science-heavy team blended with visionary growth-minded business leaders, and attract massive amounts of cash from investors to create exactly that visionary breakthrough solution that he started selling in the first place.
5. Finally, he would give himself and the team the task of bringing the future to life as fast as possible. By acting as fast as possible Musk enables himself and his team to learn and innovate very quickly.

Sound interesting? Let’s play this out for the fashion industry.

Future-made-reality product

Is fashion a large industry that holds significant enough future value for challengers that succeed to gain market share with a future-made-reality product?

It certainly is.

The fashion industry is one of the largest global industries with more than 1.7 trillion USD in retail sales. Creating a company that reaches a mere 1% of market share means creating a company with more than 17 billion USD in revenues. So it is realistic to think that with a compelling, future-made-reality offer one can create a huge company and gigantic financial returns for investors and the team that dares to build it.

Massive problems

Are there problems within the fashion industry and problems that the industry causes?

On the surface, the fashion industry probably looks more polished, innovative, and attractive than many others. At the very least fashion seems to be always up to date, always en vogue. Yet taking a look beneath the flashy surface reveals a somewhat backwards and old-fashioned way of doing things.

The fashion industry has massive problems in all areas, and it creates massive problems for the well being of humanity and the planet.

Brands and retailers alike incur tremendous costs for overstock, lower priced offers, and discounting, season after season. Most of them have yet to find a good way to forecast what people will actually buy. Instead of spending heavily to solve this problem, companies spend heavily on marketing, rents, and discounts to attract enough customers so that they can sell the goods that they have already produced.

Hardly any company in the fashion industry spends money on R&D. On average, fashion companies spend only 0.3% of their revenues in true innovation and finding new solutions. The automotive industry spends 16 times more, aerospace 23 times, pharma 120 times, and consumer electronics a whopping 130 times more on R&D than the fashion industry. Fashion is last in R&D, ranking only slightly better than the pulp and paper industry. The likes of Adidas and Nike seem to be the only companies currently investing in innovation.

Consumers feel overwhelmed by the hyper-competitive, overloaded market. They feel pressured by the “you have to look like this” marketing and discount screaming messages communicated across all channels. And unfortunately, despite the seemingly endless choice and enormous advertising pressure, consumers still return often more than 50% of what they buy. This is because it either doesn’t fit their bodies or their taste. And despite all the billions spent in brand marketing, consumers are not loyal to brands or retailers for extended periods of time.

Producers and suppliers also have their issues. Walk into any factory in China, Vietnam, India, Romania, Portugal, Spain or Italy, and you will see many people with the newest mobile phones. However what you won’t see is any big scale technical innovation in how work is organized and how core processes like cutting and sewing fabric are being done.

Suppliers are constantly pressured by brands and retailers to give them products which are produced quickly and cheaply. So far, most suppliers solved this through shifting orders to even lower cost countries instead of investing in new technology. This explains why fashion suppliers from China and other sourcing countries now own and operate factories in places like Myanmar, Vietnam and Ethiopia.

And finally, looking into the environmental cost of fashion reveals disastrous results. We know about massive over-consumption of water in dry areas to plant and grow the cotton needed for production. We see massive pollution and resulting illnesses from tanning and dyeing caused by harmful chemicals used in those processes to make fashion colorful. We see significant abuse of humans that work in factories to create items that retail cheaply. We see landfills and oceans filling up with non-biodegradable fashion products, because we do not have to pay for the waste we create as fashion consumers.

Fashion is a massive industry, and one laden with problems.

Photo: Héctor J. Rivas

Shifts in the industry

The next question is if there are shifts that everyone says will happen in the future, but that no large company has yet dared to make happen at scale.

Any of those shifts would enable new brands and retail formats to flourish, new infrastructure players to come into the game, and new technology solutions to arise.

In the auto industry we have witnessed the following shifts in beliefs and rise of new players: “People will favor clean cars over fossil-fuel powered cars–as long as they look fancy, are powerful and fun to drive, and are socially favorable to own.”

• New brands and product lines: The Tesla team believed strongly in this shift and made it a reality in 2008 with the Tesla Roadster. Now there are numerous new electric car brands out there, especially in China with the likes of SAIC, FAW, Dongfeng, Chery and Geely to name a few. All major car manufacturers are now offering new lines.
• New infrastructure: Huge factories for batteries are being built around the globe, and public charging stations and service providers in large cities and along main traffic routes are becoming more commonplace.
• New tech solutions: New technology focused on increasing battery power and reach, battery recycling, autonomous driving and lightweight materials are coming to life.

It is worth understanding likely shifts, because they will create waves in existing competitive landscapes, infrastructure, and technology solutions. Billions, if not trillions of USD will be redistributed when this happens.

In fashion, two transformative shifts seem very likely to happen:

1. People will prefer truly harmless fashion products over harmful products
2. People will wear clothing and shoes that are made for them

Let’s go deeper into them.

People will prefer truly harmless fashion products over harmful products.

This shift seems to be well under way.

• New brands and product lines have emerged: Young companies like Everlane, EcoAlf and Organic Basics are built around a fashionable look and feel combined with fair labor and clean, organic or recycled materials. Such companies are growing fast. Sportswear companies like Adidas offer items made from recycled ocean plastic and giant retailers like H&M offer organic cotton as an alternative to conventional cotton.
• New infrastructure is being created: On the production side, orders from non-certified factories with obscure to unfair working conditions are increasingly distributed to better factories which pay fair wages and are safer in terms of building and fire safety. On the sales side, new retailers that focus on sustainable fashion like Buho are starting to gain traction. Online and offline retailers alike are creating special areas and filters for sustainable product choices for consumers. Clothing rental is also increasingly popular and available through companies like Rent the Runway and Le Tote.
• New technologies are surfacing: New material players have started to emerge, e.g. Modern Meadow, which is creating a lab-grown version of leather to reduce the need for breeding and feeding cattle for leather production. At scale this would save significant amounts of CO2 and methane, and would likely reduce the need for harmful tanning processes. We are also witnessing the fast growth of companies like Lenzig, which has found a way to create beautifully soft and functional materials for use in apparel like Modal and Lyocell. Lenzig uses a chemical process which generates minimal waste and emissions. Finally, Blockchain companies like Provenance are testing the waters in the field of fashion for material tracing.

If I were to stop here it would be easy enough to think: “Great! Good things are happening. This job will be done soon.” However this is not the case.

The impact of the phrase “truly harmless” makes a huge difference.

Let’s start with materials. A good example is organic cotton. It is great, because it does not use herbicides and pesticides that would otherwise harm the environment. However, the water consumption of organic cotton is typically significantly higher than for conventional cotton. So with the growing use of organic cotton, the problem of water shortage in dry areas gets worse, not better. And while Adidas uses “recycled from ocean plastic” for a few products, it only represents a micro-fraction of their entire product range. The reality is that most materials used in fashion are still produced in harmful ways, are not biodegradable and require vast amounts of water.

Let’s continue with processes and ways of working: The way fashion products are forecasted, designed, and bought in fashion and retail companies is still low-tech. The way garments, shoes, and accessories are designed and made in factories still closely resembles the way it was done 50 years ago. As a result, enormous amounts of waste are created through missing the mark for in demand trends and over-production. Furthermore, the frustration caused by under-production of best sellers, of sizes and whole styles being out of stock is one yet to be solved.

And lastly, the rise of fast fashion from the 1990s to today has educated generations of consumers that changing their looks is cheap and a “must-do” to stay up-to-date. Despite the often cited “end of fast fashion”, the desire to look great, change often, and be on trend is even more pronounced now, because it is rewarded by visual social media platforms like Instagram and TikTok. Unless something significant changes, consumers will continue to stay hungry for what’s new, and will continue creating huge amounts of waste

The job is far from being done.

All of this creates tremendous opportunities for new companies to gain significant scale. From truly harmless and closed-loop brands and retailers, to rental and recycling infrastructure, to truly harmless materials, and technology solutions in forecasting and production that will help avoid waste in the first place: the space is yet to be conquered. For those who can market “truly harmless” as the superior, alternative way of life vs. “seemingly harmless” for consumers, the possibilities are endless. Only then, a strong enough wave with strong enough impact will happen, that in turn will create important new players, infrastructure, and technology who will not be playing on the sidelines, but in the center.

People will wear clothing and shoes that are made for them.

This second shift has the potential to create an even more profound wave.

Fashion on demand, made to measure and made to fit and taste, at scale, enabled through technology, is not a new story. It has been the object of many articles, conference panels, and strategy documents. But it is a story that no company has yet brought to scale and remains far from mainstream.

If it becomes reality though, if the on-demand wave starts rolling, many of the problems discussed earlier will sharply reduce of even simply vanish. However it will also require the transformation of the entire fashion industry’s thinking, processes, and infrastructure. It’s a very big potential win with plenty of execution risks along the way.

Let’s start with stating that every garment, every shoe, every accessory will be made on demand for 1 person so that it perfectly fits their body and individual taste. Once consumers make a purchase decision and order, they would receive the product as fast as they are used to when ordering mass produced items, the next day, or even on the same day. And they buy them at a price which is easily affordable.

The benefits for consumers will be to buy and wear fashion that fit their bodies, taste, and functional preferences. They will feel more comfortable in their clothing and shoes. This unlocks higher willingness to pay as well as brand loyalty. They will also be less likely to return the product, which is a huge margin opportunity in a world where 1 percentage point of return rate equals 1 percent of profit margin. Producing products on demand also means that much of the forecasting error will vanish, and in return, discount rates for clearance and physical overstock will sharply decrease. This will increase profit margins for the company that makes this happen, and it reduces huge amounts of waste stemming from unloved, overproduced products.

Sounds amazing. But is it too good to be(come) true? Let’s take a closer look at what needs to happen.

Photo: Alexander Andrews

Bringing the future to life

Products will be manufactured to customers’ individual body measurements and designed according to taste and functional preferences. That means that a product cannot be designed following the current 1-design-fits-all approach, using standard measurements and gradings for fit and inputs from tools like WGSN for taste.

Also, designing one product for one customer, by one or more human designers will create extremely high overhead costs per item. Therefore, the whole design and construction process will most likely be driven more than90% by data and software.

Orders of n=1 or orders for micro batches (e.g. n<=50) will be made fast, efficiently and profitably. Sticking to the current process of briefing a factory far away, making a sample, reviewing the sample, and then starting production will be impossible: The overhead costs and duration of the initial steps are simply too high. Material for low quantities will not be available or will cost too much. And the production in traditional factories only runs efficiently and profitably once order batches of more than 500–1000 pieces per color are made in one go.

This means that there won’t be any physical samples, but virtual samples created by software that consumers can experience and likely change before they make a purchase decision. The order will then be transferred to a highly automated factory which is close to where the customer is. Factories that are not adjusting to the new reality will slowly go out of business.

• New brands and product lines? A company called Zozotown tried to bring on-demand, made-to-measure to the masses. They gained traction on the marketing side but failed in delivering products that met customer expectations. Their infrastructure and teams weren’t ready. But I am certain that there will be others who will dare to create new processes and infrastructure and who will succeed in winning not only the interest but long-term trust of consumers.
• New infrastructure? Highly automated micro-factories will come online, which are located only hours away from where customers live. They will be fed with matching materials and components by new fabric and trim distribution networks. They will incorporate new digital cutting, printing, embroidery, treating, sewing, and packaging machines. Customer data either come from new brands or retailers, or from providers that keep and safeguard the personal measurements and preference of customers.
• New technology? Customers will have their personal virtual selves, technically called avatars, which are regularly updated with their latest measurements and fit preferences. These preferences will be input for real time 3D design and construction software which makes virtual samples available in easy and fun UX for even non-sophisticated consumers. Information about materials and production capacities will be available in real time. Routing of orders to factories will be optimized. And material companies will invest in on-demand fabric and material production, and in materials that can adjust to different bodies.

Will all of this happen? I believe that consumers will prefer truly sustainable, clean fashion over the not-so-clean but clean-sounding alternatives. I believe that we all will increasingly wear fashion that is made just for us. And I believe those two things will actually be combined.

The future is already here

Lots of it sounds like science fiction, because, at the moment, it mostly is. But it is highly likely that a few smart teams have started working on this, following the practice of Musk: experts in the field, backed-up with scientific know-how, fusioned with business leaders who are driven by large vision and the willingness to change the world. They will push very hard to make their dreams a reality. And if that happens, it will create extremely high value for the builders, and it will solve massive problems for consumers and the environment along the way.

The big wave of the car industry, the massive shift happening now was fundamentally not new when it started happening: It was already present in many peoples’ minds. Some automotive companies had working prototypes already. Then there were these freaks driving around in their ugly electric DIY cars. The future was already there, present in our minds, present in the media, partially present in our lives. But it was present only on the margins. It was unequally distributed, not yet here at scale.

This has changed.

Why did a man named Elon Musk have to come to make it happen? Because the key to unlock massive change lies in our minds rather than in scientific and monetary limits.

So, why wait?

Photo: Aziz Acharki