What: Alix Partners and Sourcing Journal have released a 2022 survey report covering the main 4 paradigm shifts and new norms for fashion.

Why it is important: Retailers are already bracing for a recession making it an ideal time to improve inventory planning and production efficiency while embracing consumer-focused initiatives around ESG, CSR, and digital.

Consumers post-pandemic have adjusted to greater free time and convenience leading to shifting expectations as life returns to a new ‘normal’. Consumers are more tech-enabled and discerning with increased concerns surrounding geopolitical unrest, climate change, spiking inflation and rising interest rates. While these issues may have replaced the pandemic, retailers are still dealing with the recently exposed vulnerabilities within fashion’s supply chain, product development, distribution, marketing, inventory and HR structures.

Some companies responded to disruptions and shifting consumer behaviour by investigating digital tools and capabilities (50%), differentiating through the product (49%), investing in talent and team building (43%), investing in supply chain networks and logistics (42%), forging stronger supplier/factory relationships (41%), and conserving cash (38%). Despite this, only 53% of respondents felt their business was ready for greater disruptions and 62% were concerned about a recession in the next 6-12 months. These responses align with the identified paradigm shifts: 1. Digital First, 2. Focused Product Assortment, 3. Productivity Mindset, 4. Sustainability and Social Stewardship.

To address consumers’ new norms around online discovery and purchasing, many businesses have shifted their operating model with a greater focus on digital. Social media remains the most used digital tool to engage with consumers (69%). Surprisingly, only 31% of respondents are using in-store digital solutions for personalized selling which has been proven to enhance the consumer experience. Customers still want in-person events and activations which provide the best opportunity to build community and increase basket size.

To tackle the increased discernment of customers, some retailers are focusing on data science. The report cites Fabletics which has incorporated data science technologies leading to a 5-6% return rating, beating the average 40-50% rate for other retailers. Data allows brands and retailers to stay on top of inventory, predict sizing, build loyalty and manage both warehouse and membership systems. Inventory remains a key headache for many fashion retailers. 51% of respondents said that the size and breadth of their product lines have increased compared to 2 years ago. Reasons varied, however, 65% reported the increase is due to more categories, 64% due to more colours per SKU and 51% due to a wider size range per SKU. AlixPartners highlights Shein’s ability to be agile through its owned production chain and gamified purchase offers. This allows them to escape the inventory glut many brands are currently facing due to over-purchasing, high return rates and bad prediction.

One method for getting ahead of disruption is through the productivity mindset which involves incorporating focused practices along the value chain to protect margins and invest in quality and service. This can be achieved through greater collaboration and efficiency by using virtual design tools (48%) for example. Data surrounding cost, lead times, capacity, risk, and defect rate for example can help with decision-making speed and accuracy.

Finally, leaning into sustainability and being faithful to social values has become ever more important in the eyes of the consumer. Despite this, 35% of companies reported being behind target relative to their sustainability goals. The majority of companies that responded to the survey are not tracking or measuring their carbon footprint. Only 19% reported tracking and actively utilizing these figures. Others reported that they had plans or were in the process of setting up tracking (38%), had no plans for tracking (20%), or had something in place but weren’t using it (15%).

Resale and rental, while buzzwords for sustainability, are not as important to retailers as expected with only 13% of respondents reporting caring about offering either service. With fast-fashion brands entering the resale market, the legitimacy of resale as a sustainable offer declines.

AlixPartners 2022 survey report on fashion’s paradigm shifts