Fashion

The fashion industry will double technology investments by 2030

Are we at the gates of the greatest technological progress of the last 100 years that will involve the fashion industry? Apparently yes. In the wake of the boom in the e-commerce channel, the birth of new virtual realities such as the Metaverse and the Nft and the need to find sustainable alternatives to materials and production processes, in 2021 fashion companies invested on average between 1, 6 and 1.8% of their revenue in technology. This figure is set to double by 2030, when it will affect between 3 and 3.5% of turnover, according to what emerges from the report BoF e McKinsey & Company ‘The State of Fashion: Technology’.

Indeed, after decades of constant technological growth focused on digitizing customer-facing interactions, advances in fashion technology are now accelerating along the entire value chain, from internal processes to customer experiences to product and pricing, with widespread automation and sharper analytics based on artificial intelligence. Because even the fashion industry needs to innovate technologically to remain competitive in an increasingly wild market.

As experts point out, we will see more technological progress over the next decade than in the past 100 years. The digital adoption by fashion consumers, which was cemented by the pandemic, is set to last. Suffice it to say that, on average, people spent nearly 4 hours a day on the internet on their mobile devices in 2021. Of customers who switched from offline to online shopping channels in 2021, 48% said they did so at due to the pandemic, 27% cited convenience, 11% cited product availability and a further 11% cited promotions. Furthermore, by 2030, more than 80% of the world’s population is expected to have access to 5G networks, enabling faster connectivity and data transfer between devices.

The report highlights how companies that have leaned on technology to withstand the pandemic and other recent challenges have learned valuable lessons to excel in today’s and tomorrow’s digital ecosystems. Those who have incorporated AI technologies into their businesses to increase operational efficiency and improve customer engagement could realize a cumulative 118% increase in cash flow by 2030. For companies just starting this journey, the ‘implementation of AI-led initiatives between now and 2030 could generate a 13% increase in cash flow. While those who do not implement these processes before 2030 should expect a relative decline of 23%.

But it is not just an economic issue, in fact, the players in the fashion sector must rely on technology not only to grow their businesses and optimize profitability and cash flow, but also to face the most urgent challenges of the sector. from achieving ambitious sustainability goals to reducing the risk of their supply chains. Therefore, while a significant portion of the industry’s technology investments so far has been earmarked for e-commerce, the digitalization of internal processes is now also focusing. The top three areas in which fashion executives plan to make digital investments between now and 2025 are personalization, store technologies and end-to-end value chain management.

Brands across all segments are increasing investment in AI and machine learning for processes like demand planning and pricing. Inditex has committed to invest € 2.7 billion in online features and tech solutions as part of its 2020-2022 plan, while Nike is accelerating its transformation by investing in virtual reality and digital capabilities such as forecasting demand, gathering insights and inventory management. Levi’s relied on artificial intelligence for pricing, which led the company to beat Wall Street estimates. At the same time, the luxury giant Lvmh has partnered with Google Cloud to use cloud-based artificial intelligence and machine learning technologies to improve demand forecasting, inventory optimization and personalized services.

Moves like these are creating a new paradigm for fashion, where big data science, advanced analytics and digital workflows are fueling traditional creative processes. This transition will need to be supported by new talent capabilities, as brands will seek to hire more data scientists, engineers and analysts, while also pursuing partnerships and acquisitions.

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