The Amazon Effect

septiembre 5 2018 Hector Ritondale

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The Amazon Effect

Hector Ritondale asks how fashion brands can secure their place in an ever-changing market

With 2018 predicted to be the year that Amazon overtakes Macy’s as the largest seller of clothing to American consumers, it’s fair to say that Amazon has definitely made its mark on the apparel industry.

With its core business model built around high volumes and low prices, many fashion brands are finding it increasingly difficult to know how to best deal with the market-changing force that is Amazon. For some, it’s a choice between lowering prices to fall in line with Amazon’s pricing model (something that’s almost impossible to achieve in an industry that’s already under increasing pressure to do more for less) or joining the site as a third-party seller. Even global brands such as Nike seem to have adopted the ‘if you can’t beat ‘em, join ‘em’ tactic after years of not ‘allowing’ their products to be sold directly on Amazon, but it’s not always possible for smaller, less well-known brands to take that step.

It’s not all doom and gloom though. Every ying has a yang and for Amazon, the downside to its business model is a lack of control over which brands sell on its site. This means that it can’t prevent them from leaving, therefore private label brands are more appealing as Amazon can own both the brands and the sourcing. Consequently, there’s very much scope for fashion brands to carve out their own models and niches to compete successfully. But, with such a dominant force as Amazon in the picture, it does mean that fashion brands need to make some major changes to the way they operate if they are to have any hope of maintaining their share of an already saturated marketplace.

Optimum efficiency
What’s worth bearing in mind is that Amazon doesn’t copy other business models, it just finds a way to do the same thing, only cheaper and on a mass scale. And, to a certain extent, this is how all fashion brands should think – how to do things more efficiently. And, as we all know, with greater efficiency comes a big difference to the bottom line. In a complex industry, with multiple processes, lengthy supply chains, complicated product lifecycles and the added pressure of fast fashion, business agility and flexibility are key to survival, whether you’re an online or bricks & mortar store, or a combination of both. What matters is making sure your fashion business can outpace not only your competitors but customers as well.

Simplify and streamline
What’s needed is a way to simplify organizational and supply chain complexity, easing the passage of both products and information through the business, from initial design right through to dispatch. A good place to start is by taking advantage of the various software solutions on offer which are tailored to suit the specific needs of the fashion industry, giving your business the necessary functionality to get ahead and stay ahead. Where many fashion brands are lacking is with creaking, legacy IT systems which simply can’t compete with the cutting-edge technology that some competitors are making full use of.

Comprehensive business information
Forward-thinking fashion brands are investing in the latest Enterprise Resource Planning (ERP) systems to unite all processes and procedures across the business, spanning design, development, production, inventory management, distribution and finance (among others), breaking down silos of departmental information and bringing together all business data in one, intuitive and accessible solution. It’s the resulting visibility and transparency that make a real difference, making it much easier to identify and rectify business inefficiencies and bottlenecks, streamlining operations, maximizing productivity and speeding up time to market.

The right ERP system enables a fashion business to get a handle on the multiple variables within the business, with built-in analytics making real sense of the increasing amounts of data that are now part and parcel of doing business. It’s this business insight that is invaluable, with decision-makers given real-time access to comprehensive, accurate information, meaning that they can make better decisions and faster, something that’s vital if the business is to achieve the levels of agility that can make the difference between success and failure in the fickle world of fashion.

Plan to succeed
This insight enables more accurate demand planning and forecasting, the holy grail of the fashion business, helping you to optimize production, streamline inventory and better respond to customer demand, all while enabling you to readily identify new opportunities for growth and expansion. With integrated CRM functionality too, the best ERP system make the most of customer information, something that Amazon does so very well, analyzing what customers buy and when, and factoring this information back into your forecasting and demand planning. For fashion brands, data is key and the right ERP system will ensure you use this data to its full potential.

The right systems can give your business the flexibility and agility needed to adapt and respond to an ever-changing market-place and ever-changing customer demands. By working smarter and more efficiently, fashion brands can hold their own against the Amazons of this world, setting themselves apart from slower, less agile businesses. It’s only by investing in their back office that fashion businesses can continue to be profitable when faced with such fierce competition. By investing now and establishing robust, efficient and agile processes, fashion businesses will be well placed to meet current and future business challenges, all while taking full advantage of any growth opportunities that come their way.

For more information on how Argentis can help your fashion business optimize operations, contact us.