Fashion, beauty and luxury are transforming before our eyes – these industries are entering a new era, where purpose is becoming as important as profit, consumer expectations are rising, Web 3.0 presents opportunities and challenges, and the climate crisis is at the fore.
Alan Hunt, Co-Founder of The Collective speaks to Francois Souchet, Global Head of Sustainability, and Impact Consulting at BPCM and Jamie Gill, Founder of The Outsider’s Perspective and Chair of the British Fashion Council Diversity & Inclusion Committee about the future of fashion.
Alan Hunt: Welcome both. There is a clear need for brands to be great storytellers in 2023 and deliver the personal experience. At the same time, brands must look at diversifying revenue streams while dealing with inflation, cost of living challenges and of course sustainability and social responsibility. How do you think brands should adjust their strategies and deal with the new economic realities?
Jamie Gill: It is an extremely fragmented picture. The large heritage luxury brands (and I say luxury instead of luxury and fashion brands), like Hermès, Louis Vuitton, Chanel, Dior, are going to go from strength to strength this year. Demand for them will continue to soar as consumers see their hero pieces as an investment piece in turbulent times. In contrast, many SME fashion brands have spent the last few years navigating Brexit, the pandemic, keeping people employed and now, as you say Alan, are dealing with the impact of inflation, cost of living and supply chain issues. SME fashion brands will need to figure out where their strength is for consumer demand and successfully deal with logistical challenges . They are not going to be able to operate on a strategy for the ‘greater day’ with diversification dreams, international expansion plans and rebuilding what the business was pre-pandemic. It is time to re-pivot, re-assess and re-strategise.
Francois Souchet: I agree, the premium luxury market has a resilience in times of economic difficulties as consumers focus their spending on items that maintain their value, accelerating alternative ways of engaging customers through rent or resale. For example, we’ve seen innovators emerging that can give you at the point of purchase an estimate for how your product is going to maintain its value over time. The alternative is that as wallets become tighter with inflation and the energy crisis, consumers will shift to ‘fast fashion’ and volumes here will increase which is not very sustainable fashion.
Alan Hunt: Sustainability has always been a key ambition within the industry and to pivot away from it would be dangerous.
Jamie Gill: It would be; however it is understandable from the consumer point of view when they are struggling with the cost of living, families to support and being squeezed on disposable income. However, there are still options for affordable and responsible fashion choices.
Alan Hunt: Jamie, you have a focus on diversity and are doing great work with The Outsider Perspective. As brands consider their strategy for these changing times, what impact does diversity bring?
Jamie Gill: As businesses plan for what the next year could look like, the majority are exposed to volatility and so restructure and redundancy is the reality if there is soft consumer confidence. It is important that while we reassess our business needs and teams, we remember the need for diversity and inclusion in the workforce. What kind of talent and skillset do you need and where has that existed? The traditional vocations that are closer to assessing risk – finance, banking, law – are not rife in the fashion and luxury sector. As we restructure it is a plausible strategy to look outside the industry at a diverse talent pool that could bring something new and a fresh perspective on how to navigate and pivot in these times.
Alan Hunt: Thank you Jamie, it is an important factor to be aware of. We’ve touched on sustainability and while the fashion industry is aware of its part in the problem, it is still grappling with how large that impact has been. As a lawyer I expect to see the continued enforcement of green washing, for example, by regulators in 2023. Francois, how do you think the fashion industry is measuring up on this front and do you expect to see real change?
Francois Souchet: We are seeing increased regulation in France and also in New York with the strengthening of the Fashion Act. It is unlikely that significant regulation would pass at the federal level in the US for the next two years but we are seeing change at state level. There is also the EU’s update on the circular economy guidelines around fashion and food coming later this year. This all points in the direction of increased trust, transparency and disclosure for fashion brands to focus on those Scope 3 emissions and Tier 2 suppliers and above, of their supply chain to really understand what is happening and how it can be reduced. Materials also have a significant impact in this industry. There has been considerable fundraising in 2021 and 2022 from innovators developing alternative sustainable material and this is very positive.
We also see the co-ordination of action relating to supply chain decarbonisation, for instance last year the Apparel Impact Institute (Aii) introduced a Fashion Climate Fund to offer a blended capital approach to investment regarding carbonisation in the supply chain. There is also a ramp up of technologies that can enable that, for example, waterless technologies or more effective lower temperature finishes. It will be interesting to see more developments like this.
Alan Hunt: Are we doing enough to bring new types of materials to market or should we just be doing what we're currently doing but in a much better way?
Jamie Gill: From the research we’ve done looking at start-ups who are advancing sustainable materials, there is nothing that’s come to market that we can innovate at scale and will then hold true as an equivalent heritage investment piece in material and convince the consumer of this. It does not need to be like for like but has to have the qualities of traditional craft and luxury while also being sustainable and ethically sourced. It must stand the test of time and have a resale value. I think brands will take to it if it exists, but we are not there yet in terms of material offering. It is a hot area for so many new VC funds and I think once it is there, brands will trial it.
Francois Souchet: I work with a lot of material innovators, and we’ve witnessed a significant change of interest from brands and investors to explore and support sustainable material innovation. In the last year some of them raised over $100million compared to seven years ago when they were really struggling for traction and capital. A few of those materials are getting close to reaching the point James references, for example, Avenue launched a material last year that out competed nylon in terms of performance and resistance, and Hermès is working with MycoWorks looking at how they can integrate their mushroom leather alternative material into their collection. There is also an understanding of the climate impact of existing materials like cotton, wool, cashmere and how improved farming methods can significantly reduce impact. Brands are committing funding and volume to regenerative material and this is leading to real hope in terms of lowering impact in the industry.
Alan Hunt: Thank you both, these are fascinating and encouraging insights. I’d like to now shift to talking to you about the metaverse. Fashion and luxury brands have been the early adopters in this space and also key drivers of change . There are some who are excited by it and others who have not fully bought into it. In a world where digital marketing is fundamental to the success of any brand, it feels like a play that needs to happen. Are you fans of the metaverse?
Jamie Gill: It is such an interesting place, especially from a consumer / brand relationship perspective as it allows brands to speak directly to the end digital consumer. Currently, for brands to speak to their digital end user (whether on Snapchat or on Instagram), they have to go via Meta who controls that platform and controls how you can speak to your consumer, which is governed by the AI algorithm. Brands must buy access to their own following and it is becoming challenging to share a brand message to your existing audience. As Web 3.0 builds and grows, the brand message will go directly to the end user and that’s quite exciting and full of potential.
Francois Souchet: I agree with Jamie, there is the potential to complement the real world with the digital world in a much more integrated way. The interactions we have on social media are fairly flat and it is just about consuming content. It is fairly hard to capture people and share more meaningful stories. If you have that direct contact and the ability to augment your product with something that is uniquely attached to it in digital format, your potential for storytelling is much more interesting.
Alan Hunt: I’d like to finish by asking you both, what do you think will be the biggest game changer for businesses in 2023.
Jamie Gill: The biggest game changer for brands is to be ready quickly to pivot and re-strategise against a backdrop of inflation, geopolitical instability, high energy prices and logistical supply chain challenges. This means understanding where the brand’s strengths lie and what part of the industry they are best placed to play in and refocusing strategy here. At the same time, it is ensuring brands have the necessary operational skillset to deliver this strategy. Change is happening so quickly that is important for brands to be agile and ready to ensure the business survives.
Francois Souchet: I agree, brands need to equip themselves to capture the opportunity that the convergence of a number of trends bring – technology, sustainability and the new businessman – as this brings economic headwind but also growth opportunities, given the hundreds of millions in funding that has been invested in these areas and can be leveraged. How can all of this be tapped into to deliver better customer service, greater engagement, greater diversity of interaction and greater resilience from the brand? That is the exciting dimension for me.
This is an extract from The Collective Conversations: Future of Fashion. You can listen to the full episode here.
