[DX x Apparel] The key and prospects for the apparel industry to overcome adversity!

Due to the corona crisis, various industries are facing a crisis of survival. Meanwhile, the situation in the apparel industry has become very difficult.

Due to a decrease in telecommuting and inbound consumption, a large number of store closures and sluggish business performance continue. It can be said that the apparel industry, which is greatly influenced by the trends of the times and changes in consumer needs, is currently at a major turning point.

In this article, we will explain the current state of the apparel industry, its challenges, and its future prospects, as well as introduce the latest success stories in Japan and overseas.

Current status of the apparel field

Currently, it is said that “the apparel industry is tough” due to the market contraction due to the influence of the new coronavirus. From here, I would like to clarify the specific current situation, such as what kind of trend the market size is and how consumer behavior has changed.

Deficit continues, Fastori runs alone

With the spread of the new coronavirus infection, most apparel stores that received the declaration of emergency were closed.

In addition, of the 12 listed apparel companies, half of them, 6, have fallen into the red in the most recent financial results.

Among them, the three major apparel companies, including TSI Holdings (HD), posted net losses in the consolidated financial results for the March-November 2020 period, and together with Sanyo Shokai and Onward Kashiyama, they were called the “apparel big three”. Renown also went bankrupt.

As you can see from the bankruptcy of a listed company, it is true that the apparel industry has been in a difficult situation due to the influence of Corona.

However, the market size of the apparel industry was actually shrinking even before the corona shock.

According to a domestic apparel market survey released by Yano Research Institute on October 30, 2020, the size of the domestic apparel retail market in 2019 was 9,173.2 billion yen, 99.3% of the previous year’s size, and has remained flat to negative. You can see that it is in transition.

Fast Retailing is the number one apparel company in Japan.

The company, which operates UNIQLO and GU, is strengthening its overseas business by expanding into overseas markets while maintaining its domestic market.

In Asia, we are developing markets in South Korea, Taiwan, the Philippines, the United States, Thailand, Malaysia, Thailand, Indonesia, etc., centering on China. is.

With sales exceeding 2 trillion yen, Fast Retailing is far ahead of other apparel companies, and is completely leading the domestic apparel industry.

Consumers’ “casualization” of fashion is considered to be closely related to the success of fast reading.

Until now, casualization such as “cool biz” and “sneakers commuting” has progressed, but the corona crisis has accelerated the acceleration of casualization due to the establishment of remote work and the shift of behavior to the living area.

Consumers shift to low-cost thinking

Due to the influence of fast fashion and flea market apps, consumers as a whole have shifted to “low cost thinking”.

Fast fashion is a brand or business format that mass-produces low-priced clothing that incorporates trends and sells it in a short cycle. Uniqlo and ZARA are examples of familiar items.

A flea market app is an abbreviation of “flea market app” and refers to an app that provides a place to buy and sell between individuals online.

The main advantage of the flea market app is that the buyer can buy it at a low price, and the seller can transfer the unnecessary items without throwing them away, because the transaction is mainly for second-hand products. Famous flea market apps include Mercari and Yahoo Auctions.

In the past, consumers tended to choose higher-priced products over lower-priced products. At that time, there were many cases in which cheap products became useless more quickly than expensive ones.

Today, however, the level of sewing technology and quality control has improved, and products are imported from overseas factories with low labor costs, so low-priced and high-quality products are now available on the market.

As a result, consumers are less likely to buy expensive products, and are increasingly looking for low-priced products with excellent functionality and design.

In addition, the existence of secondary distribution markets such as Mercari is also one of the factors that affect the “low cost thinking”.

Nowadays, trends change rapidly, and more and more people are adopting trendy fashion each season. For such people, flea market apps that allow mass purchases and mass consumption are very convenient.

The rise of flea market apps, where you can get products at lower prices and easily buy and sell between individuals, has led to the spread of low-cost thinking.

Consumer demand polarizing

The Japanese apparel industry is divided into three price ranges: low, medium and high.

• Fast fashion brands that offer trendy designs at low prices
  Examples: Uniqlo, H&M
• So-called “select shop original” products and casual brands located in the mid-price range
  Examples: BEAMS and UNITED ARROWS
• Designer brands and luxury brands that develop clothes with unique designs despite being in the high price range
  Examples: LVMH, ISSEY MIYAKE

In general, low-cost thinking is widespread, but not all consumers want cheap prices.

While the number of people with a low-cost mindset is increasing, there are also those who want only one luxury brand item, and consumer demand is polarizing between “low price” and “high price”. increase.

In the current situation of the apparel industry, where “polarization” is progressing, promoting branding and appealing by showing individuality and characteristics will be a condition for becoming a winner.

Rise of EC

Among various e-commerce industries, the apparel e-commerce market is attracting particular attention.

In July 2020, the Ministry of Economy, Trade and Industry (METI) released the EC market research report ” FY2019 International Economic Research Project (Market Research on Electronic Commerce) Concerning the Establishment of an Integrated Domestic and International Economic Growth Strategy .”

According to this report, the size of the apparel EC market in the product sales field in fiscal 2019 was 1,910 billion yen, and the year-on-year growth rate was 7.74%, indicating that it is growing rapidly.

In addition, the apparel EC market size is not only rising, but the EC rate is “13.87%”, which greatly exceeds the average EC rate of “6.76%” for all industries.

“ZOZOTOWN” has a large market share in BtoC and mall-type EC sites, which is one of the apparel EC sites.

A mall-type EC site is like a select shop where various brands are in one EC site, so to speak, it is a shopping mall on the Internet.

ZOZOTOWN handles a large number of products, so you can select the item you want by narrowing down the category, size, color, etc. from a wide range of options.

According to ZOZO ‘s “consolidated financial results for the period from April to September 2020 (interim period) ” announced on October 29, the product transaction volume was 185.63 billion yen (up 16.3% year-on-year), and sales were 664. 192 million yen (up 16.2% year-on-year) and operating income of 19.905 billion yen (up 50.2% year-on-year).

ZOZO has also succeeded in cultivating new customer bases by incorporating “live commerce” and opening “PayPay Mall” stores.

Issues in the apparel field

Among apparel companies, while SPA companies that carry out everything from planning to sales in-house are doing well, fast fashion companies that produce and sell items that incorporate the latest trends in a short period of time at low prices are also doing well.

On the other hand, the apparel industry is susceptible to trends and social changes, such as a visibly sharp drop in the number of visits to physical stores and a decline in domestic consumption.

Here, I will explain three issues that the apparel industry is currently facing.

Sluggish domestic consumption

With the economic downturn, fewer people are spending money on fashion, and overall consumer spending is on the decline.

According to the survey results of GU in June 2020, 62% of about 28,000 people (17,000 people) answered that they were spending less money on clothes due to the corona disaster.

Also, looking at the results of a survey by the Cabinet Office, we can see that the consumption behavior of households is on a downward trend.

The unemployment rate (seasonally adjusted) in December 2020 was 2.9%, 0.7 points higher than the same month of the previous year (2.2%), which was the lowest level since 1992, and the number of new job openings in December was 720,000. , down 18.6% from the same month last year.

Due to the economic downturn, income has decreased, and there are many circumstances in which it is not possible to spend money on clothes in the first place.

Because fashion is strongly associated with hobbies and entertainment, consumers tend to tighten their wallets and spend less during recessions.

Thus, while the domestic consumption market is shrinking, the recovery in personal consumption is also slowing down.

clothes loss problem

The modern apparel industry has a problem of “clothes loss”.

Clothing loss is clothing that is discarded even though it is new or still usable.

In many cases, surplus inventory generated by clothing loss is disposed of by incineration or landfill without being displayed in stores.

This is because if you sell your inventory at a reduced price, your brand value will decline.

In Japan, 3 billion pieces of clothes are made each year, and half of them, 1.5 billion, are left unsold and discarded. In addition, the environmental load generated in the process has become a global problem.

Clothing loss in Japan has increased as overseas factories, such as those in China and Vietnam, began to produce large quantities of clothing cheaply.

There are two main problems with clothing loss.

( 1) Environmental impact due to disposal by
incineration Most apparel products are disposed of by incineration. Carbon dioxide (CO2) generated by waste incineration accelerates environmental problems such as global warming.

While CO2 reduction and decarbonization are progressing not only in Japan but also around the world, the apparel industry, where waste continues to increase year by year, can be said to be moving in the opposite direction of social trends.

(2) Disposal loss puts pressure on profits
Apparel products have a “use-by date” because they are always in line with the trends of the times.

Inventory left over after discount sales will be difficult to continue selling, so it will eventually have to be disposed of. If you discard it, there will be almost no profit left, so you will end up with a management problem.

The meaning of physical stores is fading

The apparel industry is also being affected by the expansion of the EC mail-order market. While setting up a physical store, we also have an online shop at the same time, and it is not uncommon for online sales to be better.

For consumers, online shops have the advantage that they do not need to go to the store, and they may be able to purchase even if they are out of stock.

Consumers who are uneasy about buying a product without actually seeing it can use word of mouth to check the quality of the product.

In addition, for companies, online shops have advantages such as “less labor costs than physical stores” and “easier to promote”.

Against this background, online shops are expanding rapidly.

The spread of the coronavirus is also one of the factors behind the spread of online shopping.

Many people refrain from going out, and there is an increasing trend to use online shops instead of physical stores to reduce the risk of coronavirus infection.

However, there are still some issues, such as not being able to try on clothes at the online shop.

In the future, it will be a big issue to adjust the balance, such as “how to use online shops and physical stores properly”.

The future of the apparel industry

From here on, we will introduce “how to survive in the future” and “what trends will emerge” in the apparel industry, where existing business models have become obsolete.

In addition to EC, fusion with digital

In the apparel industry, it is old to aim only for EC sales, and the fusion with other digital is the key to survive in the future.

Subscription/sharing economy

In the subscription-and-sharing eco-model, which puts the customer experience of encountering fashion at the top of the list, there are many cases where the owners don’t throw away the things they no longer use, so they contribute to the ecology of society as a whole. But it’s getting attention.

A subscription is a business model in which you can use a product or service for a certain period of time by paying a fee. In English, it means “subscription” or “subscription”.

The sharing economy is a form of economy in which idle assets such as goods, places, and skills are shared and exchanged with many people. It is also called “share eco” or “sharing economy”.

AirCloset Co., Ltd., which has a management philosophy of “Fashion is also an era of sharing”, has created a new style in the apparel industry with a model of subscription x sharing economy. airCloset is a representative example of the subscribing and sharing eco model.

airCloset targets women aged 27 to 35 who are interested in fashion but have limited time and money to try out many clothes.

It is a business model in which professional stylists deliver clothes coordinated to each customer from among 300 brands and more than 100,000 clothes, and provide personal styling for a monthly fee.

In addition, there is no return deadline, and there is no need to wash or clean clothes, so you can easily enjoy encountering new clothes without having to buy, store, or take care of them.

AR

By incorporating AR x fashion, consumers will be able to enjoy fashion in a realistic way regardless of location.

AR is an abbreviation of “Augmented Reality”, which is translated as “augmented reality” in Japanese.

Specifically, it refers to technology that overlays (extends) virtual images on the real world through devices such as smartphones, tablets, and glasses.

For example, if AR is used in e-commerce, it will be possible to check the size and try on clothes anywhere, regardless of location, which may lead to an improvement in the purchase rate and a reduction in mismatches.

In addition, as a measure to improve the customer experience at physical stores, it will be possible to express the brand with AR interiors inside the store.

An advanced example of AR x fashion is the AR app “Chiquelle Style AR ” of the Swedish apparel brand “CHIQUELLE” .

The biggest feature of Chiquelle’s AR app is that it uses an avatar instead of superimposing an AR image on yourself. Since the avatar can be set in detail such as height, weight, size and body shape, it fully fulfills its function as a model.

In addition, you can save the coordinated clothes and items in your original closet and share them with your friends

RFID self-checkout

The spread of “self-checkout” is progressing due to labor shortage.

The self-checkout system makes use of RFID’s ability to read multiple pieces of ID information using radio waves. Simply by placing a basket containing a product in the self-checkout box, the ID information is instantly read, and the product name, points, and total amount are displayed. How it works.

RFID-based self-checkout is expected to reduce checkout time to about one-third that of conventional manned checkout.

Customer satisfaction can be further improved by resolving complaints about long wait times at checkout, which are common in apparel.

While the introduction of self-checkout will lead to maximization of operational efficiency, such as reducing labor costs and shortening logistics management time, there are also problems such as confusion for users who are not accustomed to self-checkout and unmanned shoplifting. It is appearing.

live commerce

Live commerce is a mail-order method that combines live streaming video with an Internet site and purchases products while watching live video.

Live commerce viewers can shop while asking and commenting on sellers in real time.

Compared to conventional TV shopping, which was one-sided, live commerce can be said to be attractive because it allows customers to gain a deeper understanding of products through communication, and also has a sense of realism.

SHIPS started live commerce in May 2020 under the name of “SHIPS SHOPPING TV”.

Instead of daring to use celebrities and influencers, shop staff appear to introduce products and how to wear them.

The delivery is as realistic as if you were shopping at a real store. It also seems that there is also an aim to get familiar with the brand image through communication with the staff.

It is distributed once or twice a week, divided into men’s and women’s items. Men’s items are delved into the details, while women’s items are mainly coordinated.

Strengthening the Pursuit of Sustainability

The apparel industry generates a large amount of polluted water and greenhouse gases in the process of making clothes. In addition, consideration for the natural environment is lacking, such as the use of animal skins and fur, and the large-scale disposal of inventory that I mentioned in the previous sentence.

In order to remedy this problem, the 2019 Summit Meeting of Seven Major Countries announced the “Fashion Agreement” with the aim of reducing the environmental impact of the fashion industry.

The agreement has also been signed by some of the world’s most famous luxury and fast fashion brands, aiming to achieve practical goals in three areas: climate change, biodiversity and marine protection.

If efforts to focus on a sustainable global environment and social environment become active in this way, “sustainable fashion” will attract even more attention.

Even if we say “sustainable initiatives,” the content of these initiatives varies, and the way in which they are implemented differs from company to company. Here are three examples.

(1) Do not use animal skins and fur
Previously, we called things that were not real fur or leather “fake fur/leather”, but now we call them “eco-fur” and “eco-leather” instead of calling them fake. has become pervasive.

This is another example of our sustainable approach, as we do not use animal skins or fur for animal welfare.

Concrete example:
In 2017, the luxury brand GUCCI stopped using real fur, a staple of winter luxury fashion.

It can be said that the world-famous brand Gucci has shown this attitude, which has had a major impact on the industry and is a factor in the current sustainable trend.

(2) Using recycled materials
In recent years, efforts to consider the natural and environmental pollution caused by plastic waste have attracted more attention than ever before, and we use recycled materials made from recycled plastic such as PET bottles. And the number of apparel companies that make products has also increased.

PET bottles are mainly revived as recycled polyester, but there are also plant-based recycled rayon and cupra other than PET bottles.

Specific example: GUESS
We are creating sustainable products from raw materials to production processes.

One of the fibers we use, LENZING™ ECOVERO™, is made from renewable wood sources, and we also actively use fibers made from recycled materials, including PET bottles, recycled cotton, and organic cotton. We are contributing to a clean environment by incorporating

③ Use
organic cotton The number of companies using organic cotton, that is, pesticide-free cotton, is increasing. Because we do not use pesticides or chemical fertilizers, we can consider not only the global environment but also the health of the producers.

Specific example: Patagonia Patagonia
is a brand that offers clothing and bags for outdoor sports.

We have been working on global environmental issues from an early stage and are thoroughly using only organic cotton.

In addition, to encourage more farmers to switch to organic cotton, we will introduce “Cotton in Conversion”, which allows us to sell organically grown crops, and the first product line that uses it will debut in the spring of 2020. Did.

summary

The apparel industry, where trends change rapidly, is susceptible to changes in social structure and the economy, as well as consumer thinking, so it is necessary to make changes as soon as possible.

In addition, while consumers are shifting to low-cost thinking, it will be difficult to revive the fashionable consumption of the past even after the coronavirus is over.

Therefore, understanding new consumer purchasing behavior and utilizing IT technology are the keys to its success.