Let's Dance

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Let's Dance

Thursday, 13. September 2018
By Marcus Sewtz

Customers have asked brand retailers to dance and are insisting on quicker tempo and rhythm. “See now, buy now” is just the beginning when a retail brand learns the steps toward greater agility and customer orientation. And whatever the next dance craze turns out to be, it’s high time to learn it.

Verticalisation is proceeding at a breakneck pace. The successes of the Inditex and H&M brands and the more recent players Primark and Uniqlo have not just changed the market structures, but shaped consumer expectations as well. And that’s not all: supported by the emotional currency of likes and the resulting desire for instant gratification and recognition in social networks, generations Y and Z have learned they don’t have to wait. Or to put it another way: I want to have it when I see it. Whereas decades ago, fashion was avant-garde and the creative process preceding it required a season, millennials and younger consumers are more interested today in what influencers, “it” girls or pop stars are wearing. Accordingly, marketing budgets have shifted massively to the digital world, and in 2017 exceeded the amount spent on conventional communication channels for the first time. This has exponentially increased the diversity and velocity of new trends. Just look at the frequency of new sneaker releases from Adidas or Puma, which are “placed” at target-group-relevant events via social media by superstars such as Jay-Z and Rihanna. When we consider that Gigi Hadid increased her Instagram following from two and a half to over 30 million within just one year with Tommy Hilfiger, it comes as no surprise that the garments Gigi wore on the runway at the last Tommy show in Santa Barbara sold out within minutes.

In multibrand retail, brands such as Opus, Someday and S.Oliver are driving the changes. They assume responsibility for controlling their retail partners’ space – to constantly offer customers something new through short collection cycles. The advantages for the retailers are obvious: less risk, greater accuracy, higher LUG and fewer write-offs = greater gross profits. This requires high planning quality and performance transparency, or in other words: trust and true partnerships.

Doing nothing and hoping it would go away didn’t work for digitalisation either. Amazon, Zalando, Net-A-Porter, Farfetch and the like proved this to even the last doubters. Stale and largely complacent brands and multibrand retailers cannot simply hope that the demand for immediate consumption is just a feature of younger consumers. Because the millennials are showing the baby boomers how it works. And seventy-year-old grandmothers now have smartphones and have learned how simple, fast and generally safe online shopping can be.

It is becoming increasingly clear: direct-to-consumer (DTC) will win – sooner or later. Regardless of whether it is via online platforms or webshops, own or partner retail outlets or multibrand space. That’s also the reason for the increasing number of hybrid business models, i.e. brand (retailers) with see-now-buy-now collections. The successes to date have been mixed. Whereas Burberry is considered a pioneer of digital marketing in the premium segment and Tommy Hilfiger is at least celebrating huge communication successes with Gigi Hadid, the experiences of others, such as S.Oliver, are rather modest.

In a first report from the field, Avery Baker, Chief Brand Officer for Tommy Hilfiger, explains quite clearly what it means to synchronise wholesale and DTC processes across all functions in a globally active enterprise (see YouTube: How Can Fashion Immediacy Really Work? https://youtu.be/spuPcyHoIMA | see also QR code). She reports on the importance of customer-oriented, cross-function communication and gives an idea of how challenging change in general and the organisation of “see now, buy now” in particular is.

What to do when the music keeps getting louder and faster? Those who can’t dance need to hire a dance instructor right away.

What’s important when it comes to dancing? First, it makes sense to choose the right song for the audience, which means that brand retailers need to understand or learn the demands of their target customers in detail. They must decide if they want to dance to Rock’n’roll or the Blues: the demands on fashion and responsiveness of brand-disloyal fashion victims as a target group, for example, differ greatly from those of a shirt brand with a loyal, conservative customer group. Just as a dancing instructor teaches the group rhythm and choreography, an enterprise requires someone to guide its verticalisation in its entirety: someone outside the day-to-day operational business who develops the concept and assumes responsibility for communication across all functions, from product development to marketing and sales. If the organisation gets out of step, disappointments follow quickly, as has been reported, for instance, about Tom Ford: the merchandise was not delivered to the retail partners on time, which led to such cynical comments as, “Buy now – deliver later”.

Doing nothing and hoping it would go away didn’t work for digitalisation either

The demands on the supply chain are enormous. Those wishing to be more flexible and on-target in the market not only need excellent cross-function communication, but also have to differentiate and shorten their lead times. This is the only way that “read & react” can work, i.e. responding rapidly to fast-selling articles or trends with quick replenishment or capsules. As a consequence, this means that, like the vertical players, selected capacities in Europe need to be kept in reserve in addition to the main procurement markets in Asia. That makes sense when it comes to making up for the resulting gross profit margin losses through a greater accuracy and faster inventory turnover.

Just as in dancing, the normally independently acting sales channels and functions must find a common rhythm. What sounds so simple in theory proves to be a Herculean task in practice, and one that demands a great deal of courage. It entails nothing less than uncompromising customer orientation of the processes and organisation, and the dissolution of conventional function and sales-channel logic. The conventional organisational structures such as brand/wholesale, retail, online, marketing, procurement/logistics are no longer managed and overseen separately; in their place is a single end-to-end, customer-centred process to which all functions are subordinated regardless of channel. Ultimately, this also means that there is only one regional profit and loss accounting, and only that is correspondingly incentivised. This is the only way to avoid friction losses due to competing sales channels and create customer value.

Although this will initially sound impossible to many, in the medium term there is no alternative. Ultimately, the customers are only interested in one thing: they want to buy the product they’ve just seen either physically or digitally – and they want it right now, via their preferred channel. The customers want to dance, and those who can’t or won’t dance with them will eventually find they’re no longer invited to the party.

Marcus Sewtz is a corporate developer at Team Retail Excellence.
His mission is to enable people and organisations to find their vision and the path to reach it.

 

 

Kategorie: 
Veränderungsmanagement
Tags: 
Brand Retail
Change Management
Customer Service