NEW YORK, United States — The fashion industry is about design. It’s about creation. It’s about the delight we feel when we see something for the first time ever. It’s about unique and it’s about special. We’ve forgotten this because the people who have made this industry so magical, the creators whose imaginations birth the unimaginable, are being crushed by massive, data-driven global supply chain companies that rob them of their creations and exploit the markets and trends they created. The fashion industry playing field is so badly tilted against them it’s little wonder it feels like every day another promising small designer closes shop.
Fashion trends originate from different places and move through society along what sociologists call a diffusion curve (Figure 1). Trends typically originate with the “Cool Kids,” the trendsetters who are always ahead of the market. They latch onto something amazing and new. The “Fashionistas” follow quickly and the trend begins to appear in media and on celebrities, embraced by the “Fashionable” crowd. At this point, the trend begins to hit its peak. The Cool Kids have long moved on to the next thing and Fashionistas are beginning to yawn, but roaring into the market come the Fashion Followers. Finally, the trend begins to die out. It’s picked up by the “Dad/Mum Jeans” crowd on its way to its final resting place, where the “Crocs With Cargo Pants” crew adopts the look. As a particular product moves through the trend cycle, it is cheapened, simplified and any sense of craftsmanship is ripped from it.
Before instant global communication, a trend would last a few years, giving everyone in the industry time to make money. Those creating the trend would enjoy the fruits of their labour with premium prices and exclusivity, moving on as knock-offs began to appear in the market (Figure 2).
But, as the world sped up and data was made more readily available, what was cool was identified by big companies earlier and earlier in the cycle, meaning that those creating the trends were copied almost instantly. Data-driven products thus began to replace creator-driven products in the wardrobes of discerning consumers.
It’s simple economics. Given the finite size and finite life of a market, the sooner you can participate, the more of it you can own. This helps to explain the brilliance of Inditex and its Zara brand, which doesn’t create trends, but identifies them first and gets them to a broad market at a low price before anyone else can.
Wonderful for Inditex, now the largest apparel company in the world. Wonderful for consumers who get cheap, formerly Cool Kids-only styles. Terrible for the creators who had the vision to make the products that started the trend but who can’t compete with their six-to-nine month design-and-production cycle. They are crushed by those who can bring products to market in 25 days (figure 3). Creator-led brands are shutting down because they have neither the resources nor the capabilities to compete in a world where supply chains are being re-orientated toward faster cycles and larger, low-cost production runs.
The critical problem for fashion designers is that the cost of creation is too high (design, sample, refine, execute) and the time to capture value is too short (Cool-Kids phase) before they are knocked off. For small brands who face material and factory minimums, the cost just to show up in the market has skyrocketed. Perhaps most damaging, these minimums force gut-wrenching editing decisions in collections that limit the most creative and innovative designs.
Retailers aren’t helping, either. For years, designers were dependent on retailers to connect them to their customers. But retailers are becoming more risk-averse every day as they look through their rear-view mirror at self-biased market data. They won’t take a chance on anything that is not what they view as “on trend” because they are perpetually one season away from shutting down themselves. As their business declines, retailers focus more on trade deals that offer downside protection for sell-throughs and margin guarantees. Retail as a showcase for innovative, unproven designs that challenge and delight is all but gone.
The critical problem for fashion designers is that the cost of creation is too high and the time to capture value is too short.
But the biggest problem is that these creators compete against companies that don’t have to spend any time or money on the creation process. Today, product cost and speed-to-market define success, not design.
How can you create fashion without design? By “borrowing” from people who actually design (do a quick Google search of any of the large fast-fashion brand names followed by the phrase “copies designer” if you would like evidence). Ethics aside, this approach makes sense and the financial results for these design-less companies prove it. Why spend money on design when someone else is willing to do it for you for free?
Driving the stake further into the hearts of designers are venture-backed companies like StitchFix, which have taken this to the next level; the company’s 80 plus data scientists produce algorithms that (with human assistance) create designs that obviate the traditional design process and, instead, are driven by predictions of what customers want. Driverless cars first, designer-less fashion next!
As consumers, we’ve enjoyed the bounty of cheap, on-trend goods, but at what cost? We are polluting our world, we are supporting poor work conditions in emerging markets where human rights protections are practically non-existent and we have all but eliminated domestic apparel production jobs.
The most insane aspect of all of this is that we have forgotten about the creators. If you give people of similar intelligence, similar tools and similar data, they will come to similar conclusions. That is why everything in this market looks the same. Real creation cannot be achieved by processing data to identify a trend – it’s a discontinuity that comes out of nowhere to create the thing that nobody predicted. It is the essence of the surprise and delight we feel when we experience the unexpected. Without creators, there is no creation. And, without creation, trend becomes a recycling of the recycled. A curse of living a life where we drink our own bathwater every day for eternity.
A new way forward
Three years ago, I wrote an Op-Ed entitled “The End of the Billion Dollar Brand” that predicted that the future of the fashion industry lies with brands led by incredible creators who focus intensely on their specific customer. By meaning a lot to a very specific (and narrow) target market, they would dominate the fashion industry, I argued. In this era of internet-driven infinite choice, “stuff” would mean less and “meaningful” would mean so much more.
This Op-Ed underpinned a much bigger idea and, in 2015, I left the venture capital firm I founded to start a company with my partner Joe Ferrara and put this idea into action. It's called Resonance. Our goal is simple to articulate but hard to achieve: enable small, creator-driven fashion brands to build businesses that can compete as effectively and precisely as Zara, but faster.
For us, trend data is a commodity, and increased investment in data scientists and tools yield diminishing returns. Real value is created in establishing the trend, not by identifying and exploiting it. But this theory only proves correct if a brand can scale immediately and dynamically to meet demand. The classical industrial construct for companies has been Economies of Scale (the operating advantages a company gains from being big). We believe in Economies of Small (a term first coined by Seth Godin but applied to a different concept).
Real creation cannot be achieved by processing data to identify a trend — it’s a discontinuity.
Today there are technologies and capabilities in the market that enable small companies to compete as effectively as large companies. For example, for $89/month, Shopify provides an e-commerce site that costs a tiny fraction of what it takes to build a site from scratch using more traditional platforms like Demandware. Who needs Zara’s data centre when you have Amazon Web Services? Global supply chain and logistics? Fed Ex, UPS, DHL or others. Analytic engines are appearing daily. AI engines too. What cost millions of dollars to develop only a few years ago is now practically free. If you are a small brand, you now have access to similar tools, infrastructure and capabilities as much larger brands. So, the “law” of Economies of Small is this: given two companies who can execute their businesses at similar levels of precision, the more focused company will win every time.
But enabling creators to build brands with focus means transforming how product is made, allowing small companies to produce one single item at a time as affordably as large companies making huge production runs. With no minimums, a creator can determine immediately if he has connected deeply with his customer and respond accordingly (Figure 4). On the other hand, if you sell nothing, you miss the mark at practically no cost. You only made one, you did not take any inventory, and you did not make any large financial or brand commitment.
We feel it’s time to rewire the basic organisational and operational approach of fashion brands. If you have organised your business into developing seasonal collections, you’re not in a conversation with your customer, you’re delivering a speech where you never listen or react. What if we could eliminate collections? Seasons? What if you could imagine something tonight, sell it tomorrow and have it on your customer’s doorstep in two days? What if you could operate in real time, connecting more deeply by reacting to your customers’ reactions to your inspirations? To world events? To a change in weather?
We call our approach Full Stack Fashion. The core of our philosophy is that to operate in real time, a brand needs to look at its business in its entirety at all times, from raw materials to a customer’s doorstep and everything in between. It is not a supply chain innovation; it’s a reimagining of every aspect of a brand’s operations, driven by machines, software, workflow, organisation, culture and philosophy.
It’s time to eliminate the stovepipes in traditional retail operations where distinct groups (production, design, finance, marketing, etcetera) operate as islands. Design must work with production and sales in continuous collaboration, making decisions to deepen the customer connection in real-time.
Our first application of our approach is based on digital printing technology and a proprietary process and workflow where we print individual garments (markers printed directly on fabrics) on-demand. Our business model is to take significant equity positions in brands and work with them to build their businesses. We have three incredible creator-driven brands on our platform today: Tucker, JC#RT and THE KIT. We will add four more this year and grow from there.
Every creator-driven brand on this planet will be in the fight of its life in the coming years as Zara (and Amazon) become increasingly dominant. It’s a battle for the continued existence of heart and soul, of design, of art, of vision, of creation. And it is a battle between good and evil. These two giants imagine (and plan for) a future where creators do not exist because they do not need to exist. We imagine a different future. A future where creation wins because it matters more and because creators can match or even beat these giants in business performance. A future where art and commerce don’t just coexist, they thrive.
Lawrence Lenihan is a former venture capitalist and the co-founder and co-CEO of Resonance.
Disclosure: Lawrence Lenihan is part of a group of investors who, together, hold a minority interest in The Business of Fashion.
The views expressed in Op-Ed pieces are those of the author and do not necessarily reflect the views of The Business of Fashion.