Technology will reach an inflection point in the fashion industry this year, as the development of artificial intelligence (AI) accelerates and the hype around web3 transitions to more realistic applications focused on utility, creativity and community. Concurrently, a global economic downturn is impacting growth opportunities and putting more pressure on businesses to ensure digital and physical retail ecosystems are optimised for success.
As a result, retailers need to be laser-focused on the path to purchase, balancing exploration of new tech-driven opportunities with investing in the channels, functionality and solutions that are driving results. Up to 73 percent of consumers plan to delay discretionary expenditure, trade down brands and seek savvier retail experiences, reconciling their fiscal caution with their spending impulses by being highly selective about which brands and experiences to engage with, according to BoF and McKinsey’s State of Fashion Report 2023.
“Start with consumer empathy — understand the individual experience, and then move as fast as technology will allow you,” said Maju Kuruvilla, chief executive at checkout technology company Bolt during the BoF Professional Technology Summit in New York. “The technology that is available today is amazing, whether AI or web3, there are many options to connect or activate consumers. Do not wait 12 to 18 months to implement change, because the world will be a very different place then.”
This is all the more important as privacy regulations and technological changes reduce the effectiveness of paid digital marketing, despite the fact that costs have grown dramatically. In 2022, customer acquisition costs rose on average 70 percent on TikTok and 39 percent on Meta platforms, according to The State of Fashion 2023 report. In response, business leaders are expecting internal data collection strategies to pick up the slack and enable deep customer profiling and behaviour analysis.
Indeed, this is increasing the pressure on technology leaders to integrate new technologies like AI, experiment in emerging web3 channels and refine increasingly atomised retail ecosystems, by optimising the path to purchase as much as possible. Coresights Research in partnership with Bolt found that today, 76 percent of online shoppers abandon their carts at checkout — a poor ROI on increasingly expensive marketing and brand expenditure.
To discuss this inflection point in the industry, BoF and Bolt hosted an executive roundtable during the BoF Professional Summit in New York last week, welcoming executives from Ralph Lauren, Tapestry, Michael Kors, Nordstrom, Farfetch, Saks, Rag & Bone, Proenza Schouler and Urban Outfitters.
Here, BoF shares anonymised insights from attendees from the conversation, conducted under the Chatham House rule, on driving growth through technology in turbulent markets, the channels that matter most and why customer-centricity is more critical than ever.
Invest in Product to Drive Growth
Referring to the importance of technological investment in nurturing returning customers, one attendee said “You do not want to pay to have your consumer come back — they should want to come back, and that will only happen if you invest in better experiences than those at your competitors.”
If you can get a rapid iterative approach and feedback, that gets you to a place where you are interacting and adapting to the customers’ changes.
“Right now, the battle is in personalisation, including how well can you personalise the path to purchase, and make sure that you understand your customer and have the technology to do so. Beyond that, focus on the end-to-end journey, down to making payments, which at present is quite inefficient with fraud being an especially big deal,” they added.
Trial New Solutions Quickly
“Speed matters now more than ever,” one participant said of trialling and adopting innovation to the consumer journey. “It is harder now because [business functions are] busy with their own things, and [when approached with a new idea they might] say, ‘Don’t come back and talk to us until August of next year’ — that is a long time.”
They further added businesses must minimise “the latency between seeing a signal and [identifying] where we can win quickly.” Companies should look to experiment with different tools and refuse the temptation of assuming they themselves can predict the future or the needs of various cohorts of customers.
Analyse and Adapt Your Attribution Model
As one event attendee mentioned, successful attribution “is not about being right, [but] being less wrong,” meaning that your attribution model should be under constant evaluation, with ingrained agility.
“If you build [your attribution model] yourself, you drag all of that upfront work with you, [when] you need to be able to change it quickly every time the market changes. Ultimately, we have to think about the journey in the same way our customers think about the journey.”
Training executives to be customer-centric is a more important solve than the specifics of digital.
One example of an evolving attribution model came from “Amazon, [which] completed a long-term-value (LTV) study and found that a customer who checked out of the Amazon site with a bottle of wine had the highest LTV — you would never have guessed that, no human would have ever guessed that. If you are trying to be predictive yourself, you are doing it wrong — that capability builds over time. If you can get a rapid iterative approach and feedback, that gets you to a place where you are interacting and adapting to the customers’ changes.”
Avoid Generational Bucketing
One participant highlighted the importance of creating unique consumer journeys, as opposed to assuming consumers’ preferences based on generic data like age. “We are assuming that generations are all the same, saying ‘younger generations behave in X way’. We need to step out of assuming that everybody in a generation acts in a consistent way.”
They added: “We also have to recognise that the value exchanges [for personal data that customers are willing to enter into] are very personal and not a generational point, which adds a huge amount of complexity. There is no easy way of solving that problem, but the insight of starting with not just a customer-centric view, but an individual view of each customer, is critical to personalisation.”
“The way that younger consumers shop is constantly changing, it is not a binary. Executives need to think like the consumer, they need to put themselves in their shoes [to understand] how they shop. While I am sure everyone in retail is striving to reach the Gen-Z consumer, we are also striving to reach all the other consumers — Gen-Xs, Millennials […] Training executives to be customer-centric is a more important solve than the specifics of digital.”
This is a sponsored feature paid for by Bolt as part of a BoF partnership.
