This year, while Gucci continues to build its virtual world, there’s another, less flashy tech project, with parent company Kering just as excited about its crown jewel.
The company has been investing in artificial intelligence to better predict how much inventory to produce and allocate to Gucci stores and distribution centers around the world. It said the technology was delivering continuously improving results. Its inventory forecasts are now more than 20% more accurate than previous methods. Kering also uses algorithms across its brands for tasks such as recommending products to shoppers and even optimizing boxes for shipping.
While NFTs and Roblox activations have generated more hype, Kering spends the majority of its technology investments each year on such projects, it said. While it doesn’t follow explicitly, it leans in the direction of a 70-20-10 model, where 70% of investments go to innovations in the core business, 20% to adjacent opportunities, and 10% to disruptive technologies.
By 2023, this will not change. In fashion more broadly, a more practical and less hype-driven agenda is taking shape as companies prepare for future economic uncertainty. With interest rates and inflation stubbornly high and an expected economic slowdown in China, the U.S. and Europe, businesses are facing tougher times, consumers tend to spend less and money will tighten. Many brands and retailers are wary of repeating last year’s inventory miscalculations that left them bloated with excess inventory. The luster in the NFT market also faded as cryptocurrency values remained depressed and the industry reeled from the stunning collapse of cryptocurrency exchange FTX.
At this moment, many businesses are under pressure to highlight projects that are more likely to strengthen their foundations, especially if they are not yet profitable. Tools to better forecast demand or connected platforms that let brands and their suppliers share data may not turn heads as much as virtual worlds, but they are a technology investment that can help brands weather a downturn and emerge in another. One end becomes stronger.
“There’s hype in the front and anachronisms in the back,” said Karamatti, who leads fashion and apparel at Deloitte. There’s also a lot of anachronisms in the back-end, such as building more efficient supply chains and meshing online and online-store systems, Martin believes many brands are still grappling with this issue.
Bigger, better data
Jonathan Kutner, an analyst at consulting firm Gartner, expects technology that allows companies to better customize product assortments to be a priority this year. Gartner predicts that retailers have an overall goal of reducing inventory by 30% by the end of 2024.
“Essentially what they’re doing is using classification tools to improve and make [their] Categorization is much more precise and targeted, so you can lose the periphery, lose the things that you have the lowest sell-through rate,” he said.
Advanced analytics, such as the use of artificial intelligence to make pricing and markdown decisions, may prove to be a huge differentiator in the coming months. In Kutner’s view, it goes hand in hand with more curated assortments, allowing retailers to crunch more data to draw better conclusions. Companies like Levi’s are already using AI to do the job.
“Otherwise, you’re going to be doing things on a spreadsheet and saying, ‘Well, last year I marked a similar style for 30 percent off and it sold out during that time.’ If you think you’re going to do that this year, then You’re just guessing,” Kuttner said.
Apparel margins in China, the world’s largest apparel producer, could shrink by about 10% due to inflation, labor shortages and supply chain disruptions, Kuttner said. To remain profitable in this environment, companies need to sell as much as possible at full price.
However, a big hurdle for many fashion companies to use data more wisely is that they don’t yet have the infrastructure in place to capture, clean and analyze it. They may lean toward remediation this year.
in a december. Cowen analysts issued 28 notes on key themes for 2023, noting that effective customer data platforms “will help inform promotional and pricing actions, creative and emotional direction, and faster marketing decisions.” Cowen analyst Oliver Loyalty programs are a foundational step in capturing customer data and are critical, Chen says — with the caveat that brands need a quality product or service that customers want to join in the first place.
“Also, with mobile privacy changing, first-party data is more important than ever, so brands must have a way of collecting it,” Chen said.
A better way to design, manufacture and sell clothing
Companies are not only forced to make better and faster decisions. They have to enforce on them.
3D software, which lets brands design and prototype products digitally, is gaining momentum with companies like Timberland and Hugo Boss. While integrating these tools can take a lot of time and training, they allow brands to save time and reduce waste by reducing physical samples. Kering, for example, says it’s still in the early stages of scaling up its use of 3D design, but intends to do so this year. It said its brand now uses it in products such as bags, shoes, small leather goods and carry-on styles.
“Everyone we’re talking to now really thinks that’s going to be the way of the future,” Deloitte’s Martin said. They’re also seeing manufacturers retooling facilities to go directly from digital samples to production runs, she noted.
Connected platforms that let brands and their suppliers share data are also proliferating, according to Martin. After the disruption caused by the new crown epidemic in recent years, companies want to ensure that they have more understanding of their supply chains and can adjust with the needs of customers.
At the same time, many are still working to create a unified commerce system that spans their online and in-store operations in order to improve the shopping experience for customers. For example, it makes it easy for shoppers to pick up or return an item in store. It also lets salespeople see a customer’s complete purchase history, no matter which channel they shopped through, allowing for more personalized recommendations and better service.
Even if practicality becomes more important to many businesses in the short term, big brands won’t stop experimenting with technologies they think may be important in the future.
H&M has already launched a Roblox space called “Looptopia” in 2023, and said in a press release that it will “continue to explore this fast-growing field of virtual reality and augmented reality.”
“I think we have to watch augmented reality. We already have good use cases for AR like beauty,” Cowen’s Chen said. “As processing power improves, there will be more to come.”
Tech watchers widely expect Apple to release its first mixed reality headset this year. If that happens — and it meets consumer expectations, which won’t be easy — it could mark a big step for AR into the mainstream.
Lisa Yong, director of consumer technology at forecasting firm WGSN, said NFTs may face a challenging path as they are still finding ways to become more meaningful to the average shopper.
Likewise, “I don’t think I can write [them] Get out right away,” Yong says. Some fashion brands find them a useful way to build deeper relationships with their most engaged customers.
Getting operations in order may be the number one goal for many fashion businesses in the coming months, but those with the resources aren’t giving up trying to predict the years ahead.