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Something with Data

You can’t get far in the fashion business with gut feeling alone, says Jürgen Müller. Now we need brains and analysts above all.

In the past, young people looking for a cool job did “something with fashion”. Today, the most capable minds are doing “something with data”. The beautiful – and for some, regrettable, if not threatening – thing is that the two worlds are increasingly overlapping. Among the 60,000-plus visitors to this week’s OMR festival in Hamburg were more than a few fashion people. And recent announcements by Hugo Boss and Esprit are further evidence of the increasing integration of fashion and tech.

A “hub for business innovation and technological excellence worldwide” is what the Future Lab, which Esprit is opening in Amsterdam in autumn, is supposed to be. The idea is to develop new methods “to enable the brand to implement new ideas to deliver breakthrough retail solutions and realise its new customer-centric vision by bringing its products and unique experiences closer to consumers and retail partners”. So far, so cloudy, and many a retail partner will wonder if the Esprit brand doesn’t have other problems at the moment.

Also in autumn, the tech hub of Metyis is to open in Porto, where in the medium term around 1000 techies are to analyse data for companies and develop digital solutions. 300 alone are to work for Hugo Boss. Last year, Metzingen founded a joint venture with the consulting company Metyis, with the option of taking over the joint company completely within five years. It’s a clever move that allows Hugo Boss to set off into unknown territory for fashion companies with a manageable risk and at the same time promises a shortcut to the digital transformation of the company. Setting up such an organisation, even with on-board resources and possibly in Metzingen, would be a lengthy or even impossible undertaking. In Porto (as in Amsterdam), there is the infrastructure, public funding and especially the qualified workforce. After all, Hugo Boss also tailors suits in Izmir.

Just as the fashion industry has tried for years to adapt the Inditex vertical business model (and is still largely labouring under it), the task now is to compete with the Amazons and Zalandos of this world. And these are data-driven business models. We are no different from other industries. It also took VW & Co a while to understand that Tesla is not just another carmaker, but that they are dealing with a new, superior operating system.

In the end, the data cracks alone won’t do the trick. Rather, both are needed: brains and guts.

Where verticalisation was already a feat of strength that extremely challenged traditional wholesalers, digital transformation will be a Herculean task that will overwhelm many companies. We are talking about brands that sell their products through retail partners, areas and regular departments, through their own stores and franchise partners, through outlets and shopping clubs, through their own web shop and online platforms. Through grown organisations where processes have become ingrained and structures have solidified. About workforces that have great expertise and many years of experience, but often do not have the digital know-how required today, and certainly not the agile mentality of start-ups. The latter can roll out their business models textbook-style and with ample outside capital, while changes in established organisations are often held back by internal resistance and a lack of money.

And the need for capital will be huge. McKinsey expects fashion companies to more or less double their technology investments from the current 1.6 to 1.8 per cent to 3 to 3.5 per cent of sales by the end of the decade. This will involve topics such as AI-based marketing, which enables a highly individualised, personalised customer approach (as Netflix & Co are already practising today). The linking of online and stationary channels, for example with regard to the collection and use of customer data or the integration of shops in the delivery process. It’s about a total integration of the value chain for more speed and a more efficient use of resources, about the optimal coordination of the various digital systems from planning to design, sourcing and logistics to pricing and allocation of the goods. And quite a few brands will deal with topics such as AR, VR and NFTs when it comes to marketing activities in the metaverse or even entering the business with virtual fashion.

Not only the capital, but also the expertise required for such topics is rare in many companies. This is not least a question of mentality. In the past, you could achieve a lot in the fashion business with a good gut feeling. The business attracted corresponding characters. Those days are over (except perhaps for the boutique segment). Now it takes brains and analysts above all. Getting the nerds excited about fashion is perhaps the biggest challenge.

But in the end, the data cracks alone won’t do the trick. Rather, both are needed: brains and guts. Zalando co-founder Robert Gentz confirms this in an interview with BoF: “You can’t do everything by machine and based on the past.” In the end, he says, the fashion business is about emotions. “At this point, the fashion people are helping the tech people,” Gentz says. “Nobody wants to shop in an automated logistics centre. It’s as much about art as it is about science.”