This article appeared first in The State of Fashion 2019, an in-depth report on the global fashion industry, co-published by BoF and McKinsey & Company. To learn more and download a copy of the report, click here.
LONDON, United Kingdom — Fashion companies must come to terms with the fact that a more distrusting consumer expects full transparency across the value chain. Given the need to regain that trust, fashion players cannot afford not to examine long-standing practices across their businesses. The fashion industry suffers from a rising trust deficit. Recent high-profile data breaches at a number of online fashion companies, and in other industries, have left consumers wondering whether they should share information with brands and retailers. As a result, they are demanding to know much more about a range of issues, from where and how items are made to the design provenance and the item’s quality.
As Mike Smith, chief operating officer of Stitch Fix, asserts, “If you don’t have trust, you don’t win the customer over time.” Yet surveys suggest that trust in businesses fell in 40 percent of countries in 2017, with more than two in five consumers saying they didn’t know which brands to trust. It makes sense that as trust has eroded, consumers have become more active in scrutinising the brands they do business with.
Millennials are at the vanguard, with 52 percent agreeing that they always research for background information before buying, compared with 45 percent of Gen Z consumers and 41 percent of baby boomers. Reviews and articles are common sources of information. “Social media has enabled a certain transparency,” says Farfetch chief strategy officer Stephanie Phair. “You can no longer control your luxury messaging within borders.” We expect the critical dimensions in which fashion players will be most scrutinised include: creative integrity, sustainable supply chains, value for money, treatment of workers, data protection and authenticity.
From a creative standpoint, brands need to show they bring something to the table that is based on their own intellectual property. Copycats are increasingly called out on social media. For example, @DietPrada, an Instagram account that boldly names brands that have lifted styles from other designers, has over 830,000 followers at the time of printing. Cases of cultural appropriation — described by The Economist as instances where a “‘dominant culture’ wearing or using things from a ‘minority culture’ is inherently disrespectful because the objects are taken out of their native context” — have gained instant notoriety on social media. Consumers are increasingly demanding that the products produced by fashion brands are original, reflecting their own desire for their fashion choices to be reflections of their sense of style, self-image and values.
Transparency has become an important issue further upstream in the supply chain, with consumers increasingly concerned about issues including fair labour, sustainable resourcing and the environment. Consumers want to support brands that are doing good in the world, with 66 percent willing to pay more for sustainable goods. Some 42 percent of millennials say they want to know what goes into products and how they are made before they buy, compared with 37 percent of Gen Z.
Brands are responding by trying to become more transparent, in many cases specifying costs of materials, labour, transport, duties and mark-up.
In response, several brands have already moved towards “radical transparency” in manufacturing, hoping to regain the trust of disillusioned customers. This might include information about product origins or the environmental impact of manufacturing. One mass market player example is H&M-owned Arket, which lists where each product is made, showing pictures from the manufacturing floor. Designer Martine Jarlgaard, meanwhile, has launched a pilot to track clothing from raw material to consumer using blockchain. The retailer Reformation applies its “RefScale” methodology to measure the environmental impact of every garment it sells, and discloses the results to customers. RefScale tracks pounds of carbon dioxide and gallons of water used in production. Other supply chain tracking technologies include analysing dust samples and using AI to trace the geographic history of a product.
Another increasing concern among consumers is value for money. This reflects increased product saturation, proliferation of product information and reviews and the rising ability to compare prices. Brands are responding by trying to become more transparent, in many cases specifying costs of materials, labour, transport, duties and mark-up. San-Francisco apparel company Everlane offers its customers insight into all these costs, alongside information on the factory that produced the products.
Given consumer demands for greater transparency through the value chain, we see three key dynamics in the coming period. First, players will rigorously audit their business practices to identify potential areas that may erode consumer trust. The lens for this analysis could be, “What would my customers think if this was on the front page of a newspaper?” Brands will invest to address any problem areas. As a result, more players will highlight their best practices to create a competitive edge. Some will use new technologies such as blockchain, in which each node of the network sees the whole history of transactions, to boost transparency in the supply chain. We also expect more rigorous reporting of social and environmental impact. Finally, brands are likely to be more transparent in the event of a crisis. They will respond more quickly, admit when they are at fault more often and be willing to apologise.