Accelerating off the Ledge
I have written time and time about the fashion industry because I was in it and on both sides, retail and wholesale. One of the KPI’s has always been about making your numbers. You want your gross numbers to be higher every day than the year before. That is one of the many reasons why the industry is where it is. The industry has grown accumulating massive debt along the way with little creativity.
I have been espousing the death of large department stores for years. It was bound to happen but Covid-19 just accelerating it off the ledge. Brands controlled the stores, stores no longer control what is in their stores losing the ability to curate for their customer. For brands, it is the only way to be willing to pay for the mark-downs at the end of the year. It works for the stores so they can be profitable but not profitable enough.
That is when the debt comes in. It helps you hold on to believing you will eventually be able to pay it back but that would take a bold shift in the way the business runs from engagement to technology to sustainability and nobody has made those changes fast enough or big enough. Instead, the stores had to fire many workers, close stores without shaking up the stores left with a new vision. It is the only way the department stores knew what to do in order to pay the debt back. It is the gamification of the private equity world.
So now what? The department stores have killed the fashion industry but the fashion industry also killed itself. Let’s hope that young designers can grow, small curated stores return that know their customer, only small amounts of clothes are manufactured (sustainability is so key), and the turn around of small clothing capsules gives to individuality and paying at full price, sell in season and keep it small. Big stores must rethink the way they operate and actually take command of their business with creative buyers and operators based on location.
Here is the thing if they don’t change with the times and create new trends, Amazon will just take over as the biggest department store. Amazon will eventually sell 70% of its own products creating its own brands based on the data of selling the designer’s clothes. It will kill the industry. We need to reimagine the industry from bottom-up because here is the thing, Amazon will never need debt.