What Lies Ahead for the Apparel Industry in 2017

Apparel checked in with leading experts in the industry to uncover their predictions for 2017 and identify trends that will shape the landscape. 

The growing uncertainty of upcoming trade policies:

Dan Stolarski, 703 Advisors
With the upcoming change in administration, there is a great deal of uncertainty as to what policies will be put in place in 2017 and beyond. Will there be greater tariffs on imports? What will happen to TPP? Will policies be enacted to promote foreign currency appreciation? Sourcing executives place a great deal of focus on reducing and mitigating risk, but it's difficult to know what to do in the face of such uncertainty. As such, we believe that there will be a paralytic effect on sourcing strategies. Retailers and brands will wait and see what transpires – for example, they will likely hold off on making desired changes to country and vendor mixes to be more diversified; they will wait on setting up needed infrastructure such as sourcing offices and QA field offices. Ultimately, this will lead to a period of stagnation in investment and growth in sourcing organizations until we see what the new playing field is like. Conversely, retailers may decide to focus on investments in building out their international supply chains to support growth in those markets during this period of uncertainty in the United States.

Paula Rosenblum, RSR
The big thing to watch is the potential of a trade war with China. If that happens, the working class and poor will get hit the most. I think that's the HUGE unknown. I am shocked that the Walton family hasn't weighed in yet.

Don't forget, China makes some of the most innovative fabrics (and leather) in the world. Not like I would hate if we did less business with them, but it represents a real problem for the industry.

Pushing into personalization:

Phil Seward, ICLP
Impersonal rewards programs will become increasingly obsolete. Utilizing big data to better understand customers' needs and desires will continue to be extremely important for retailers that need to build increased loyalty within their customer base, as ICLP research demonstrates that 74 percent of United States consumers would buy more if they were better rewarded with more relevant and timely offers. This statistic emphasizes the power of using personalized rewards that surprise and delight customers to make them more devoted to the brands they engage with. Retailers will improve this by analyzing the vast volume of additional information that can be yielded from mobile and social networks, augmenting transactional data with individual interests, location tracking, entertainment preferences and social influence to drive even more personalized engagement.

Emily Bezzant, EDITED
Retailers will embrace artificial intelligence for greater personalization. The savviest retailers are taking advantage of advancements in machine learning, deep analytics and AI for a more targeted and personalized shopping experience. Customers now have longer digital footprints (shopping histories, social media profiles and interests) giving retailers easy access to offer a tailored selection of products. Brands such as The North Face and 1800-FLOWERS.COM are already using AI to provide personalized recommendations. On a product level, retailers are also offering monogrammed accessories or handbags to meet the consumer's individual style preferences.

Shaping the supply chain:

Dan Stolarski, 703 Advisors
Every brand and retailer out there says that they have embraced omnichannel operations, but very few understand what that entails. We certainly expect omnichannel optimization to continue to be one of the top strategic priorities for retailers. Particularly, there are two areas where many retailers will need to focus. First, they need to take a holistic assessment of the organizational structure. Too many retailers still operate in functional silos. Many retailers are still organized internally by channel (e.g. e-commerce, wholesale, stores) - where marketing, planning, buying and merchandising decisions still happen in those channel silos.

The second area of focus should be on optimizing omnichannel operations and systems. Operationally, many companies still struggle with their supply chain, fulfillment and inventory management models. Companies that do a good job of managing their inventories deploy an enterprise-wide model of planning and managing their supply. More specifically, there is a widely adopted concept among consumer packaged goods manufacturers commonly referred to as Sales & Operations Planning (S&OP) – a way to continuously plan demand, supply, and appropriately balance the two competing activities. Apparel brands and retailers need to adopt a similar mindset. We like to refer to this concept as Merchandise, Inventory and Operations Planning (MIOP), which we feel is a more appropriate way to describe the relevant activities in our industry. Finally, to make inventory as productive as possible across the enterprise, more sophisticated systems such as Distributed Order Management (DOM) will be needed.

The ghost of recessions past:

Walter Wilhelm, Walter Wilhelm Associates
I believe we are living through tumultuous and uncertain times. I don't think we ever fully recovered from the 2009-2011 recession and retailers in particular are more conservative and cautious than manufacturers or service companies.  This is further complicated by the MAJOR shift from brick-and-mortar to ecommerce.  Consequently:
1. Inventory buys will continue to be lower in volume and more near-term so speed-to-market continues to be an important factor.  This plays into the hands of technology that reduces the sampling cycle (PLM and 3D fit) and it emphasizes local manufacturing.
2. The difficulty with local manufacturing (for the United States) is that we shifted our skills overseas when we started to outsource almost all our production.  Serious volume manufacturing is almost impossible to find in the United States but there is a move to bring modular manufacturing back on a geographic basis (e.g. manufacturing in smaller volume with quick turns for sportswear companies in the Pacific Northwest). 
3. Demand for 3D printing (especially for accessories) and wearable technology (healthcare, fitness, active sportswear, uniforms and military applications) will expand faster than the general market growth with more creativity and lower costs for the technology making the technology accessible to smaller, more innovative companies. 

How right-sizing the retail industry will manifest:

Dan Stolarksi, 703 Advisors
There is no doubt that we will continue to see disruption in the retail industry next year. The shift from in-store purchases to web will continue at an increasing rate, which will have a profound effect on the overall retail market. Store closures will continue at a rapid pace as there are simply too many physical outlets in the United States. The average square footage will decrease as brands and retailers are increasingly focusing their merchandising strategies. Retailers occupying the mid-market retail space will continue to get squeezed out and we'll see more brands and retailers liquidate. B-grade malls where retailers such Sears, J. C. Penney or Macy's are the anchors will continue to see significant traffic declines, further exacerbating the decline of malls nationwide. And Amazon will continue to steal market share, particularly in the apparel space. The retail industry is being turned on its head, and 2017 will not be any more comforting to many struggling retailers and brands. This of course will continue to open new opportunities for brands and retailers that can successfully navigate the new realities of the retail industry and a new type of consumer.

Retailers embrace lifestyles and experiences:

Emily Bezzant, EDITED
The explosion of sub-categories such as "athleisure," for example (predicted to reach $83 billion in global sales by 2020), highlights how retailers are evolving into lifestyle brands. Many brands have launched activewear/athleisure lines (including Kate Spade, Zara) or collaborated with celebrities (adidas/Kanye West, IVY PARK/Beyonce). In 2017, retailers will push further into niche and smaller markets to cater to consumers' lifestyles. Retailers will also expand into premium services in brick-and-mortar stores — think sipping prosecco or going to a grooming bar — to keep consumers in store longer and offer greater differentiation.

The dawn of the golden era of the marketplace:

Sucharita Mulpuru, ShopTalk
We'll continue to see online sales erode physical store sales in all apparel sectors.  Perhaps we'll start to see more sales happening on marketplaces like Pinterest and Instagram. I think Houzz will show that it's possible and these other guys will mimic that success. 

Retailers seize the power of authentic communication:

Phil Seward, ICLP
Effective communication is critical to driving the passion and intimacy that is essential for creating the strongest customer-brand relationships, but consumers will expect it to be increasingly more relevant, timely, and delivered through their preferred channels. According to ICLP research, 53 percent of U.S. consumers would purchase more if brands were more communicative with them. It's cyclical: the more devoted a consumer feels towards a brand, the more frequently they shop, the more they spend and the more willing they are to be brand advocates. As a result, retailers will continue to invest in ways to make customer communications more personalized, delivered according to customers' preferred channels and devices.

Mobile innovations will capture consumer attention:

Emily Bezzant, EDITED
People are choosing their mobile devices over their desktops for all Internet-based activities, including shopping. As the smartphone becomes the dominant platform, retailers are relying on social media and the latest applications in virtual reality to promote their wares. Whether it's delivering a 360-degree viewing experience so that a person feels like they are live at Fashion Week or using virtual reality to see how a product fits on a person's body, mobile innovations will provide a unique immersion experience to the consumer.

Sustainability remains central:

Emily Bezzant, EDITED
The retail sector has long recognized the need to be more sustainable, whether it's in product design, use, disposal or innovation. However, fast fashion and sustainability were previously viewed as being on opposite ends of the spectrum. With a growing consumer movement for more sustainably produced items, in 2017 retailers will look at how they can provide better quality products that last longer to align with the consumer's personal values. H&M and Zara have already started to make progress; EDITED's data has found that the median prices of their sustainable collections are $17.99 and $9.90 respectively.

What fizzled in 2016:

Sucharita Mulpuru, ShopTalk
Flash sales and subscriptions seemed like they didn't transform the landscape. Same for resale/online consignment. That said, we can expect Amazon continuing to make inroads into fashion.  We'll likely see denim gradually make a comeback as the trend seems to be heading in that direction. 

Paula Rosenblum, RSR
What fizzled?  Wearable tech. It'll be back, but not yet. I think they have limited purpose – basically exercise monitors.  And expecting people who have never seen a watch to actually wear one is a little odd.  So the addressable market for its current applications was saturated quickly.  They'll be back when they have better battery life and can actually do more stuff.  I expect to see them embedded in clothes, not on hands.