Strategy & Organisation März 03, 2017
OMR FASHION PANEL WITH OLIVER CLOPPENBURG
Oliver Cloppenburg (Dept), Armand Farsi (Arvato) and Florian
Heinemann (AboutYou) were interviewed by Boris Lokschin (Spryker) on
the subject of how the fashion industry can successfully grow online.
3:00 min: What are the three biggest changes you have observed over
the past ten years? How has fashion changed online?
Armand Farsi: Ten years is an extremely long time. So much has changed, but to sum up: there has been a massive acceleration of the dynamics of competition, especially for fashion players. New players are appearing on the market and creating a completely new situation. These include Primark and Inditex, who are creating real problems for established, small and medium sized brands. Then there are of course all the platforms. We think these have arrived at a tipping point where you can no longer do without them, such as Amazon, Zalando and the rest. This is leading to professionalisation on the brand side – of their teams and their skills. They are recruiting massively from consultancies, from Rockets, from Zalando and so on.
Oliver Cloppenburg: The industry has come of age. We have come very far – especially in fashion. The fashion industry’s level of maturity is remarkable. But this doesn’t apply to every company. We’re working on lots of things that are still somewhat behind. First and foremost, data analysis. How do I address customers? In my view, that’s only just beginning. Not everyone has mastered this, even in the fashion industry. These are some of the big themes. There are things, different issues that still need to be raised such as content commerce and cross-channel commerce. These are the things we’ve seen. They are professionalising themselves, and people are discovering what works and what doesn’t. All in all we have grown up a lot. BI is a big subject, data analysis. That’s the next big thing which I can see.
Florian Heinemann: I think there’s a good illustration of this level of maturity in the share of fashion retail online – when you consider how suitable fashion and shoes are for selling online. I think it’s around 25 or 28 percent in the shoe industry. If you compare that with tyres or products that can be distinctly described, they only have 12 percent. You can see by that the level of professionalisation, how well people are doing it. The online share of shoes and fashion, where people ten years ago were wondering whether it would work, is now very high. That also shows how good the customer experience is. I think the most interesting part is who is able to keep up with these fast fashion cycles and to abandon the seasonal mindset – pre-orders and post-orders at regular intervals, and ongoing orders. This is something where you have to ask yourself, what is in fact the role of manufacturers and small retailers in a world based more on platforms? I think that will be the next big topic. And how do you actually establish a fashion label now? Does it have to be vertically integrated? Is its existence justified if it’s being sold via Zalando, Amazon, Otto? Should it be offline or multichannel or Pure Play?
Oliver Cloppenburg: For the past 15 years we’ve been improving things, looking at figures, testing anything and everything – but we’ve forgotten about the brand. We all have wonderful online stores but nobody’s talking about the brand. We have to take care that we don’t end up doing the donkey work for marketplaces – putting the brand on our platforms while people buy it off Amazon. That’s the big problem. As brands it costs us a lot of money if the sales channel moves away towards marketplaces.
7:27 min: Talking of Zalando, how do you advise your clients? Is it an opportunity or more of a risk?
Armand Farsi: We have, after all, arrived at the tipping point; the platform is too big to be ignored. In the short term – fabulous sales prospects. For many of our clients, participating in this kind of partnership programme and marketplace model is the key growth lever. In the short term it can be a lot of fun. In the long term, we have to ask ourselves what it means strategically. In future, customer access will be more important – who possesses customer sovereignty. We have to think very carefully about this. It is an opportunity and a risk – you have to play it cleverly.
Oliver Cloppenburg: I think what is needed is an intelligent marketplace strategy. Do you launch the complete range or part of the range? Should I try to claw people back onto my platform? You have to look very carefully at how to go about it. There are strategies you can pursue. It isn’t entirely simple. You have to be very careful about what you do, how you keep the brand in check and how not to burn it out too quickly.
11:10 min: What do you recommend to a brand which is not yet digitally represented? Does a brand still stand a chance of launching digitalisation in 2017? Or would you say to them, they should have done it long ago, better to sell on a marketplace?
Oliver Cloppenburg: That’s incredibly difficult to answer in one go. It depends. In the end, brands have to be present online, including with an online store, regardless of Amazon, Zalando and the rest. Customers simply demand it. The same goes for cross-channel services. It’s housework, it’s keeping things tidy – you simply have to do it. It doesn’t matter whether you make much money with it or not; you have to play the game.
28:46 min: Digitalisation is important to every retailer and every brand. Is it realistic to insource technology, code and data even if you don’t have digital DNA? As a traditional company, shouldn’t you consistently outsource these things since you can never build them up?
Florian Heinemann: That all depends on ambition. If you’re Adidas and you’re not yet digital, then I believe there’s no alternative to doing it inhouse at some point. As a well-managed brand I think you can easily run 80 percent of everything via Zalando-Amazon, but not 50 percent. The problem is that this 80 percent is a moving target. It’s getting better and better, which means the 80 percent will grow. If you’re a brand with an awful lot of ambition, then you have to have a certain amount of architectural expertise in both data and technology. That doesn’t mean you shouldn’t have an agency that still does certain things, but I believe you at least have to establish very, very serious sparring partners, and then bring in certain things like product management.
Armand Farsi: We have noticed that our clients are bringing in more expertise and doing more inhouse in areas like BI and data. It makes partnerships more fun. When we analyse and perform benchmarking, we’re listened to and we can do things together. It isn’t that you have ideas while the other person is thinking completely differently and you talk at cross-purposes. As a hypothesis: the fashion expertise in eCom Teams at fashion players is becoming less important, not more.
Oliver Cloppenburg: The problem isn’t whether to do things inhouse, who does what and how, it’s where to get people from in the first place. We’re the last of the semi-digital generation. We’re still used to telephones, we think a bit differently. Strategic thinking will change entirely; we can keep up a bit, but other generations are much stronger in that and think entirely disruptively.
Florian Heinemann: That’s backed up when you get young people straight out of university. It’s incredible how productive they are after one year.