Group Project Report

as a part of

Marketing for the Virtual World

under

Prof Jaydeep Mukherjee

On the topic

Evolution of the Apparel Retail industry with

introduction of technology

Submitted by

Group 8
Aishwarya Shrivastava 18P068
Ashima Chopra 18P076
Rahul Rao 18P098
Radhika Sinha 18P157
Overview

An apparel is generally defined as a clothing item. However, when we move from apparel to
apparel retail, the definition becomes more specific. Apparels include day wear, evening
wear, sleepwear, shoes, purses, accessories, high end luxuries as well as active wear. Fashion
is one industry that has always been, is and will always be changing. The industry is such that
it needs to keep moving to survive through the changing trends and customer demands in
order to be in the basket of a customer. Seasonality of collections by designers is a major
consideration in the industry where every new season brings with itself a fresh wave of
trends, which may or may not survive for long. Some trends have proven that they are here to
stay while many lose their allure by the coming year. However, of recent the industry has
changed its trends. It is no longer affected only by the seasonal trends, but rather a much
bigger shift. This shift is rooted in better technology and higher ecological standards of
customers. Customers now demand an improved transparency in the process.

The advent of social media, experiential retail, digital collections, AI that helps to predict
trends, a growing awareness of environmental impact, 3D printing in fashion, instant
gratification, online shopping and other such trends brought along with advancing technology
is set to change the fashion and fashion retail industry at a very rapid pace. A survey
conducted by McKinsey notes that 74% of shoppers at a retail outlet make use of social
media before finalising their purchase. Moreover, more than half these shoppers also state
that the reviews of both product and company are important for them before finalising the
purchase. This is only a small example of the impact technology has on this industry.

The online sales have recently contributed to 27% of the industry sales in 2017. Additionally,
in the 2018s Top 1000 list for online merchants, a record 266 retailers made it to the list. This
was the highest number from among all other categories, showing a significant shift from the
offline to online mode of retailing. A survey of online apparel shoppers indicates that for 66%
of consumers positive reviews of the product in consideration is an important factor when
buying clothing online. In the same survey, 53% say that an item with the lowest price is an
essential factor, while 51% prefer items where they have been provided with details about the
items or if there is an option to interact with the manufacturer and know more details, if
required.

This research paper aims to identify the new technologies that have been introduced and the
impact of these digital changes, both on how the industry has changed as well as how the
customer has changed his consumption behaviour in accordance to the change. We first
identify the different advances in technology and how they have been internalised by the
apparel retail industry. Next, we analyse how the different companies have made use of this
technology. We also try to identify the difference in customer behaviour post the launch of
technology in this space, aiming to pick up significant changes, if any, in how the customers
are differently consuming fashion and how much of this difference is influenced by
technology. Finally, we look into how the companies have modified their business models in
order to incorporate the changing technology.
Evolution of technology and its applications in apparel retail

There are various technologies and developments across industries which are being adopted
for various purposes. The same is the case with the apparel or fashion industry. The fashion
industry has always been fickle and trends and fads have come and gone quickly, but in the
current era the concept of ‘fast fashion’ is widely on the rise. Designs go out of fashion in a
matter of days and advancement of technology in designing and manufacturing as well as
digitization globally are the drivers for this phenomenon. The following advancements have
had or have the highest potential to create the most impact in the industry.

1. AI in designing
Major companies like Google and Amazon are tying up with fashion platforms and
fashion houses to integrate automation and AI in designing by analysing past trends and
designs to come up with new ones. Google’s Project Muze used an algorithm to
create designs based on users’ interests and alignment with the style preferences
recognized by the network. One of amazon’s products uses machine learning to assess
whether an item is stylish or not. Another uses images to learn about a particular fashion
style and creates similar images from scratch.

2. Technology for manufacturing

New manufacturing technologies enable the apparel industry to move from labour-
intensive production to capital-intensive production, faster production, less waste, and
localisation of production nearer to market while having lower carbon footprints.
Some of the major innovations in manufacturing are:
 Innovations to sewing machines –
fusing machines, button hole
machines, laser-cutting machines etc
 Sewing robots
 Stitch-free clothing
 3D printing (current applications are
low but has high potential)
 Digital textile designing and printing

3. Arrival of the smartphone

With the advent of the smartphone people began to shop, purchase and reviewed items on
the go changing the business world.
Since innovative ways were required to appeal to customers, fashion retailers began
collaborating with tech companies to create virtual showrooms, real-time customer
service, payments on the go and most recently, apps to help simulate how items would
look on users.
This has also helped the business track and analyse consumer behaviour better.
 Automation, AI, machine learning and the
advancements in manufacturing
technology has made such models of
fashion design and production possible.
New designs and items can be churned out
at rates previously unimaginable.

4. Virtual/Augmented reality
There are times when brands
have suffered the backlash
customers who received items that
didn’t match their online
equivalents. Through apps like
DressingRoom which uses
augmented reality, brands are
enabling shoppers to try outfits on
avatars before purchasing them.

Over time, these platforms provide

added value to the retailer, as
brands can gain valuable insights
through regular customer use,
which can be leveraged to provide
customers with a more
personalized experience.

Companies and their Evolution in Response to Technology

In the fourth leg of the industrial revolution, advancement in electronics and information
technology has made digital connectivity seamless and created a huge inventory of data to
leverage.
In this section, we will look at how digital technologies have changed the business of apparel
companies at various stages and also put an end to many of the common problems they used
to face. The greatest boon of this technology is in the ability to offer consumers a more
personalised experience with their product.

1. Internet of Things (IoT)

IoT is such a technology that it allows interaction between the consumer and the
product. A study by Retail Vision reported that over 70% retailers were willing to
adopt IoT as a means of improving the product experience for customers.
In the apparel industry, IoT has already made its mark with Nadi X yoga pants. These
yoga pants come with in-built sensors that assess the users pose and corrects their
 alignment. The pants are also equipped to guide the user for a full workout via the
app, essentially making the yoga experience seamless and easy to do at home.
Another similar example is of Like A Glove. The team developed a pair of yoga
pants, which when worn had sensors that would measure the users body shape and
transfer this information via Bluetooth to the Like A Glove app and go through the
entire catalogue of products that would match the users body shape, thus eliminating
the need for the user to go shop again for a pair of pants.

Integration of IoT into apparel is leading the way for smart clothing. In fact
Rochambeau’s Bright Bomber Jacket, comes with an NFC chip and QR code that
gives the wearer access to special locations and events throughout New York City,
acting like the wearer’s own special VIP pass.

2. Blockchain technology
Blockchain uses a shared ledger, where encrypted transactions can be stored on
multiple servers. A blockchain has the ability to create a timestamp for products, thus
bringing more transparency into the supply chain.
A single code on a garment can help trace back the yarn it was built from, its shipping
details, the cost accrued at each step, etc. Blockchain startup Provenance partnered
with Martine Jarlgaard for a pilot project to trace the raw materials of the garment.
While this technology is still in its early stage the wider application of this will be in
future to track the sustainability of garments.

3. Big data
Big Data, characterised by the 3Vs – Volume, Variety and Velocity, is the latest tool
of business intelligence used by companies to generate insights about consumers and
even fine-tune production and supply chain processes. In context of the apparel
industry, it has found use in mainly Inventory Management and On-demand
Manufacturing.
In March 2018, H&M reported that it had about $3.8 billion unsold inventory. In
addition, they were experiencing a 10-quarter slump in sales. H&M turned to big data
and looked at blog posts and search engines to identify primary consumers and
clothing trends. Their algorithms even took into consideration currency fluctuations
and pulled data from over 5 billion store and website visits. With the insights
generated, H&M reduced their SKU count by about 40%, removing the need of
offering markdowns on unsold products to clear inventory.
Amazon owns a patented on-demand manufacturing unit for clothes. While Amazon
is no fashion expert, it uses predictive consumer behaviour technology coupled with
enhanced supply chain and manufacturing capabilities to produced personalised
clothing with a next-day delivery policy, being the first of its kind to do so.

4. Artificial Intelligence (AI)

Machine intelligence or artificial intelligence, is a simulation of the human mind to
learn, reason and react. The technology works by acquiring knowledge or abiding by
a set of rules to come to definite conclusions. Combined with data collection efforts
today AI is being used for product design in the apparel industry, so as to determine
what consumers want to wear next.
Google, in association with a German brand, Zalando, deployed Project Muze where
a neural network was trained to understand aesthetic parameters such as colour,
design, texture, style, etc, to create algorithms that could design styles consumers
 would prefer. While not all designs were legible, the technology proved to be
promising in further iterations by different developers, particularly an AI designer
called DeepVogue that was created in China and won a People’s Choice Award in
their Fashion Design Innovation competition.
Back in 2018, Tommy Hilfiger set up an AI system with IBM, to decipher fashion
trends, customer sentiment surrounding the brand and resurfacing themes, colours and
designs, for their human designers who could use the information to design the next
collection.
Multiple such applications of AI exist in companies like Stitch Fix, True Fit, etc.

5. E-commerce
The advent of e-commerce has entirely changed the apparel retail landscape. In this
sub-section we will focus on how it has obliterated an entry barrier from a seller point
of view. With the dawn of websites like Etsy, creating an online shop became
marginally easy. In addition, as opposed to high-quantity manufacturing, small
batches of product can be produced and sold at reasonable margins, while building an
audience.
In India itself, websites like Amazon and Flipkart have helped local sellers scale
their operations countrywide using their supply chain.
For brands such as Tommy Hilfiger and Zara, which mostly deal in fast-fashion,
having an online presence helps them reach the consumers about 3-times faster than
traditional channels.
In fact, e-commerce is giving a major push to direct-to-consumer (D2C) sales, for
brands such as Bonobos and Everlane.

6. Augmented reality (AR) and Virtual Reality (VR)

AR and VR are the leading tech tools to offer experiential in-store services or “virtual
merchandising”. AR/VR is being used in three key areas with the following
applications –
 E-commerce: Allows customers to view products in 3D
 Physical Retail outlets: In-store AR, allows customers to view digital media
on in-stock products
 Marketing: By creating virtual experiences, marketeers are trying to delight
customers through interactive catalogues, VR recreation, etc.
TopShop used AR to improve the in-store experience for customers with their
AR mirrors, that allowed customers to see how the apparel looks on them
without having them to undress. Neiman Marcus offered a similar service in
37 store locations back in 2017.
Very recently, Neiman Marcus unveiled a first-of-a-kind store in Manhattan
that had Memory Makeover mirrors which allowed shoppers to view beauty
tutorials or demonstrations, a smart fitting room that allowed them to change
the lighting or check out from the trial room itself, and a voice-controlled
customer service platform that used AI to optimise the customer service staff’s
time on floor. It was built as a retail store of the future.

Besides these digital technologies, advancements in 3D printing and RFID technology, have
also greatly changed the way businesses function. Wastage of raw material has reduced up to
35%. Brands like Adidas and Nike are already relying on 3D printing techniques to build
limited edition shoes. In India, 3D printing is being considered for making armour and
uniforms for military in harsh terrains, to which carrying a lot of goods isn’t possible.
RFID tech, in addition to the traditional use as an alternative to barcodes, is today also
finding use as a verifier of quality. Original Moncler outfits come with RFID tags that can be
verified in-store or online to differentiate them from knock-offs. In stores like Zara, RFID is
also helping in the fast-fashion supply chain by reducing the replacement time for sold
garments and reducing the hours employees spend in tagging and maintaining the stock from
40hrs to only 5 hrs.
Through this section we can see how companies have improved their service and reduced
costs for themselves by integrating technological advancements with their business
operations.

Impact on consumer behaviour

It is natural that when an industry, its brands and its offerings change, the demands of a
consumer also change accordingly. The more a consumer is educated, becomes aware and is
catered to, the more their demands change and evolve. These changes often can’t be starkly
differentiated and often overlap due to interdependencies of the factors that contribute to
these observed shifts. In a broad manner the impact can be noticed as follows.

1. Demand for sustainable/alternative apparel

Consumers around the world but especially in Europe and the U.S have been
demanding more sustainable apparel. Social media is a big driver of this trend
giving consumers a platform to show what they think is important and affect the
masses in their own little way.

Changing consumer demands in favour of protecting animals and nature have

increased the demand for “green” material and brands, as a result are using latest
technologies to create newer more sustainable fabrics. For eg. Animal free leather,
soybean fabric etc.

Luxury brands have also been following innovative sportswear producers in

creating technology-heavy, functionality-focused fabrics.

2. Personalization
In a world where the customer is spoiled for choices, many fashion retailers now
investing in technology that drives a more personal experience for their shoppers,
with the goal of driving both loyalty and engagement.

Data analytics is being used to analysed buying patterns and help brands create a more
streamlined and personalised offering.

3. Rental and one-time use models

With the hyper-adaptation of social media, influencer marketing, and a need for
variety and affordability, the rental or subscription model is growing fast.
 In more and more categories, consumers are choosing to rent rather than own goods
outright. Think of Spotify supplanting CD sales and downloads, Netflix replacing
video stores and ZipCar standing in for car ownership. This is a fundamental
evolution in consumer behaviour and it will have an impact in the fashion business in
the years ahead.

One of the most relevant examples for this is Rent the Runway, which had over 6
million subscribers by October 2016, and allows consumers to rent designer dresses
for four days or eight days for a greatly reduced price.

Current Strategy and Execution of Fashion Retail

There are lower digital barriers to entry for all clothing merchants which offers them a great
opportunity to market, sell, and fulfil orders worldwide. This has resulted in the growth of
global revenue and revenue per user (ARPU) as shown below:
3.1. Offline Marketing Strategy
A company can start with the store assets it already has.
3.1.1. Merchandise and fixtures
It is a good way to attract customers with great merchandise and stocking the
right products. Once the right merchandise is decided, creative displays and
arrangements to make them pop should be in place.
3.2. Window and curbside
Windows are a good opportunity to attract new customers.
Window displays – These should keep on changing and updating with latest
trends atleast once a month. In case of busy seasons like festival times, change the
displays every week.
It is a good way to tell stories through the window displays to engage the
customer. This can be done by selecting a theme and then finding stories
associated with it.
Curbside – There is obviously a need to keep the place tidy and clean but in
addition to this, a store can have quirky boards to grab eye-balls.
For e.g. Covet Shoppe & Jewelry Bar in San Francisco

3.3. Staff
 Starbucks spends more money on employee health benefits than coffee beans.
Starbucks is able to recognise that happy and healthy employees have a higher
productivity and are often more pleasant. They are so enthusiastic that they chat
with customers and identify their regular orders. It is because of the Starbucks’
employees that customers get an amazing in-store experience which makes these
customers come back again and again.
“Employees can be the best marketers”. It is extremely important to have them
engaged and motivated throughout. It starts with getting the right people on board
and treating them well by offering competitive incentives, training and a great
environment to work.
If employees are kept happy, their productivity rises which leads to a higher level
of satisfaction among the customers.
3.2 Online Marketing Strategy
In 2019, current strategies to master the Apparel Marketing by the companies are listed
below.

3.2.1 Revisit and revise the company’s social strategy. 

Facebook, Instagram, and YouTube, are the major platforms . The existence on

these platforms have become indispensable. Some questions that need to be asked
are: Are we engaging with our followers such that it makes us seem real, honest,
and human? Are we giving enough transparency regarding our products and our
company? Are we creating content which is visually appealing?

It is a valuable proposition to add a “social retargeting campaign” which will help

in creating multi-channel points of contact with shoppers. Once these shoppers
leave the website, they can be reached through Facebook and Instagram with
personalized ads which will be based on past engagement and buying intent.

Retargeting for Facebook and Instagram is a good way in which a company can
realize un-matched performance by offering a micro understanding of each
shopper’s complete web customer journey and purchase intent which will be real-
time, from apps and mobiles. The companies who have used Retargeting on
Facebook and Instagram have seen an average increase of 12% sales across every
retargeting campaign.

3.2.2 Have a Mobile App

In most of the regions in the world, the retailers who have a shopping app, they
account for 65% of online transactions and at the same time in-app share of sales
is growing continuously. This is because the app conversion rates are five times
higher than that of the mobile web across the world. Based on the current trends,
the share of mobile is expected to increase, especially the transactions from the
apps.

The app opportunity is quite high. According to a Localytics report, around 1 out
of 4 people discontinue using the app after one use. It is essential to have a
 strategy to engage the app downloaders actively otherwise the installed usage will
exponentially decrease. The apps which are unable to engage the downloaders
and are unused, are deleted eventually and the opportunity is lost.

In order to enhance the potential of the app, retargeting strategies are used to
bring the lapsed customers back to the app and at the same time maintain usage
through engagements.

3.2.3 Extract necessary data in order to deliver personalized experiences.

Millennials and Gen Z often ignore advertisements or use ad blockers. That’s

why when a company wants to reach out to them, they need to get it right. It is
essential to have a highly personalized advertisement with the right design, at the
right place and at the right time.

The level of personalisation required is huge and hence a large amount of data
and a sophisticated Artificial Intelligence to analyse the data are needed. It is
important to use the CRM data (transactions, sales, etc.) to identify and reach the
targeted segments online through interactive ads.
3.3 Pricing Strategy
3.3.1 Budget Pricing Strategy
There are many customers who look for low prices when they shop for apparel.
This means higher sales volumes but lower per-unit profitability. Here, customers
are giving up quality for affordability and hence loyalty is less likely. In such
cases, bundled pricing is effective. When many products are bundled together and
sold at a single price which is low, the shoppers experience a higher cost
efficiency. Achieving economies of scale are an option to sustain lower
profitability.
 3.3.2 Luxury Pricing Strategy
Among the luxury customers, price sensitivity is related to a brand’s image as
compared to the market value of the product. Consumers in this category care
about the quality of durability of the apparel. This pricing strategy is focussed on
marketing and brand positioning. A premium can be charged in this segment as a
result of brand equity.
3.3.3 Value Pricing Strategy
The value pricing strategy exists between the luxury and the budget pricing. The
strategy focusses on creating a balance between price and quality. Value shoppers
do not sacrifice quality for extremely low prices, but they are also not intending
to pay above the brand value. Consumers look for apparels which will last longer
and hence durability is an important aspect. In this case, prices are not pushed low
and, prices are not inflated to gain brand equity. Rather, Good quality materials
are sourced and standard mark-up is applied to each product.

Future Outlook

The major impact that technology will have on the retail industry in future will be by
affecting the need of inventory management, that too in a positive way. There will be a lesser
need to carry large inventory at the store itself, where the dressing room will in turn act like
an inventory. Customers will be able to identify right fit, need for alterations, availability of
different variants etc and be able to try it on virtually with help of technology.

Also, technology has improved the customer connect of several companies with its
customers. Chatbots have now become a very common technology used by companies to
interact with customers visiting their websites or mobile apps. These chatbots aim to help the
customers by delivering the them the right product, thus helping in faster and quicker product
discovery on the online store and also advising on the correct product in terms of both fit and
cost. Also, technology has enabled small companies by giving them a platform to reach a
large scale of potential customers. While these small retailers would have to traditionally tie-
up with mass-merchandisers in order to reach a similar audience size, they now do not have
to worry about these tie-ups. D2C is now an emerging business model, especially for these
small retailers.

Thus, we see how technology has had a significant impact on the apparel retail industry.
Technologies like AR, VR and MR have traditionally been confined in the gaming industry,
but there is large scope for including those technologies for enabling a better customer
experience both in the offline and online retail of apparel. While technology may bring about
significant changes in the industry, for now the retail industry is also hinged on a personalised
experience of a store where people want to try the clothes before buying. Soon, technology
will enable to deliver this experience to customers in an alternate form, providing a better
experience to customers and less hassle to the retailers.

Sources:
1. “6 Retail Marketing Strategies to Help You Get New Customers”, Francesca Nicasio;
February 16, 2018
2. “Apparel Marketing: How to Master the 3 Biggest Trends for 2019”; November 30,
2018
3. “The State of the Ecommerce Fashion Industry: Statistics, Trends & Strategy”, Aaron
Orendorff; January 10, 2019
4. “Technology trends in the apparel industry” February 27, 2019
5. “The Future Of Fashion: From Design To Merchandising, How Tech Is Reshaping
The Industry” May 21, 2019
6. https://www.epam.com/about/newsroom/in-the-news/2019/clothing-as-a-service-the-
future-of-connected-apparel
7. https://www.cbinsights.com/research/fashion-tech-future-trends/
8. https://www.lsretail.com/blog/6-technology-trends-reshaping-luxury-fashion-industry
9. https://immago.com/modern-technology-changed-fashion-industry/
10. https://www.mckinsey.com/~/media/McKinsey/Industries/Retail/Our%20Insights/The
%20State%20of%20Fashion%202019%20A%20year%20of%20awakening/The-
State-of-Fashion-2019-final.ashx
11. https://smallbusiness.chron.com/analysis-retail-apparel-industry-70514.html
12. https://www.cbi.eu/market-information/apparel/how-apply-new-technologies-apparel/
13. https://thenextweb.com/contributors/2018/08/14/how-technology-is-changing-the-
fashion-industry/
14. https://www.mporium.com/blog/digital-commerce-innovation/changing-consumer-
behaviour-in-fashion-industry/