Panalpina has been closely involved in the evolution of the fashion industry for decades. Time to pause and take a look back over the last twenty years to highlight some of the major changes that have taken place, not just for nostalgia’s sake but to see what the trends are for the future. This is the first part of a three-part blog post series with Mattias Praetorius, global head of the Consumer, Retail and Fashion industry vertical at Panalpina.
I recently came across an article about a former mail-order customer, which was published in 1999 in Panalpina’s customer magazine connect. It made me pause – and think; think about what has changed in fashion retail and logistics since the turn of the millennium. The rise of the internet and e-commerce have led to profound changes in consumers’ expectations in terms of choice, cost and speed of delivery, leading to new pressures for the fashion retailers and the logistics industry.
Here are ten developments that stand out in my view:
- Ordering – does anyone remember the catalog? In the past, many companies relied on a printed mail order catalog that was issued on a regular basis, usually once or twice a year, with a fixed number of items that could be ordered. Today, ordering, to a great extent, has moved online and the type and number of items is constantly changing. In fact, multiple channels have evolved for easily buying clothes, shoes and accessories from anywhere and at any time: physical stores, web shops--and, yes, even the catalog is still around. Customers increasingly want a seamless integration between these different channels for what we call the omnichannel experience. While this brings more freedom and greater choice to consumers, it adds complexity and demands more flexibility from fashion retailers and their logistics providers.
- Fashion seasons – two does not cut it anymore: In the past, there were two main fashion seasons: spring/summer and fall/winter, and orders and deliveries were based around this schedule. Several companies—Inditex brand Zara, for example— for some time now, have been offering new clothing choices several times per season, which again increases the pressure on logistics.
- Delivery – the expectancy of immediacy: Twenty years ago, when consumers placed an order via a catalog, they expected to wait days or weeks for delivery. Today, consumers expect the goods they see online to be delivered immediately. Panalpina’s global head of Logistics and Manufacturing, Mike Wilson, calls this phenomenon the “expectancy of immediacy.”
- Warehouses – made for moving, not storing products: One of the things that struck me about the old article was a photo (see above) that showed garments on hangers in a massive five-story warehouse rack. In the past, most companies kept a large amount of stock over longer periods of time in their warehouses to ensure that their items were available when the order came. Today, thanks to different manufacturing and supply chain set-ups, electronic communications and warehouse management software, inventory moves much more quickly and efficiently. It’s all about moving products fast, not storing them. You will have a hard time finding a warehouse that stocks clothes and accessories from floor to ceiling over several months.
- Inventory – management “on the go”: In the past, companies managed their inventory from fixed locations – directly from the warehouses. It is now possible to manage inventory “on the go” from any location using a smartphone or other handheld device.
- Sourcing and manufacturing – closer to consumer markets: At the turn of the millennium, sourcing from countries such as China, Taiwan, Vietnam and Bangladesh was already developed. Since then, sourcing and manufacturing has expanded to many more countries and has become more diversified; for example, Chinese suppliers who used to produce most of their goods in China have become global companies with presence in many Asian and African countries. With the increased “need for speed,” sourcing and manufacturing, in many cases, have moved closer to the consumer markets; this has been enabled by technologies such as 3D printing and distributed manufacturing where production is carried out near the end user.
- Air freight – part of the mix: Panalpina and companies such as these were some of the forerunners in 1999 in using air freight as a competitive advantage and strategic transport method. Air freight has now become an essential part of the business model and transportation mix for companies such as Inditex, GAP and H&M, allowing them to provide multiple seasons, unique fashions and quick delivery when the market demands it.
- Brand awareness – desires fueled by social media: Fashion consumers have, of course, always been interested in status, but today brand awareness is heightened by the immediacy of the internet and; new trends and desirable products are communicated quickly over social media, and consumers define their identity through specific brands. And while companies in the past usually promoted their own brand, large e-commerce players such as Zalando and Amazon offer multiple brands on their online platforms.
- Fashion hierarchy – competing on cost, uniqueness or status: The fashion industry has become more segmented due to the increased number of brands and luxury items. Today, brands such as Primark and Dollar Tree compete on cost, fast fashion companies compete on clothing uniqueness and luxury companies compete on status.
- Sustainability – because it matters: Concern for sustainable supply chains, from sourcing to disposal, was not an important topic in 1999. However, fast fashion and luxury fashion brands now pay attention to sustainability because it increasingly matters for their customers.
In part two and three of this series, I will be looking into what the generational shift in the consumer base means for fashion logistics and what it will take to succeed in the future. Stay tuned!