The changing approach to innovation and digital strategies by top retailers and brands
Innovation is in no short supply in the fashion world. From Adidas’ Futurecraft 3D-printed running shoe to ECCO’s Dyneema-bonded leather, tech has infiltrated clothing for good. Yet advances aren’t just limited to R&D; the entire supply chain is undergoing a digital do-over. Logistics is changing with drone deliveries and smarter RFID offerings, blockchain is revolutionizing fraud detection, unique production partnerships are cropping up (e.g. the Miroglio Group and custom fabric with their start-up, TheColorSoup, thanks to employee training from the wizzes over at H-Farm), and B2B distribution platforms are literally changing the way we do business. As if that weren’t enough, where fashion brands identify lack of firepower in a given area, they are more than happy to go out and acquire or simply invest in start-ups with the requisite skillset: take for instance Chanel’s recent venture into Farfetch (https://www.mffashion.com/news/finanza/chanel-investe-in-farfetch-201802191205323757), an alliance which promises new digital services for Chanel customers for user experience fit for the future.
Given the new advantages offered by technology, the conventional wisdom of outsourcing certain digitally-focused services is being questioned. Whereas not so long ago, due to complexity, time constraints, steep initial investment and the low availability of digital talent, a great deal of innovative business channels were left to external providers to manage; today, however, the scenario is changing. Brands are starting to regret the opportunities missed due to not having full, direct control over marketing and the lack of immediate access to customer data and insights. Conflicts of interest are inherent to externalized omnichannel strategies and outsourcing has proven to be riddled with hidden costs while the majority revenue share model permanently cuts into gross margins.
Insourcing, on the other hand, offers plenty of benefits, such as improved communication with employees, professional growth (which in turn becomes a company asset), greater consistency, transparency and the ability to directly monitor resources and their productivity. Moreover, there are functional benefits too, such as greater data security and the opportunity to seamlessly link different business areas, such as e-Commerce and CRM, for instance. Now, thanks to increasingly tech-savvy resources, the advent of digital and innovation roles at Board level, plus the falling cost of ownership of enterprise-scale digital systems (including PaaS and SaaS models) companies are deciding to take back control.
But there are still challenges. many companies are unsure how to set up insourced operations, where to look for talent, how to innovate for a better business model, or even what type of start-ups to acquire for the future having identified their specific needs.
One thing to note however, is that a lot of these problems are intrinsically linked to location. Areas which demonstrably invest in digital education, which are well-served by business support structures (logistics hubs, smart taxation systems, proximity to dynamic business and investment-focused cities) will go a long way to ensuring the success of any insourcing operation. As a case study for this exact point, take Ticino, which continues to be an ever-greater attraction for the world’s leading fashion and retail brands. Positioned between high-financial Zurich and haute-couture Milan, Ticino bridges the gap by attracting the best digital talent from super-advanced Zurich to the north, while being right next door to the fashion capital, Milan. It is exceptionally well-served by logistics firms as well as being an attractive and stable location for foreign investment (and also for foreign managers: the Swiss lifestyle and exceptional quality of life don’t mean just a nicer homelife, but are instrumental in making workers at all levels feel at home, which has an often-overlooked effect of reducing staff churn). This is borne out by the numbers: over 220 NetComm Suisse associates have expressed interest in setting up shop in Ticino.
As the world of retail and fashion (but not only!) move towards a stronger and more developed insourcing model, we believe the winners will be those places which are forward-thinking enough to sow the seeds for tomorrow’s success: as well as the brands that seek these places out.