In these uncertain times, anticipating the future seems daunting. We investigate how one fashion company employed predictive models, from monitoring trigger events to periodic forecasting, to stay ahead of its competitors.


Fashion retailers look to the future as logistics challenges stack up

No industry relies on being fast quite like fashion. For fashion retailers, it is no longer enough to monitor trends and track purchases in the present. The most pioneering companies are looking to the future by deploying data-driven predictive models that improve supply chain efficiency, cut waste and—crucially—keep them ahead of the competition.

“We’re one of the few fashion companies that invested early in data science,” says Meera Bhatia, president of expert services at TechStyle Fashion Group. The global fashion retailer, whose brands include Fabletics, Savage X Fenty and ShoeDazzle, is perhaps best known for its membership-based model which combines data on industry trends with a move towards personalisation.

That model, Ms Bhatia explains, allows the company to collect data on customer preferences and formulate predictions on how demand patterns are likely to change.

“We are constantly looking for trends in customer behaviour and feeding that into the buyers, who are then putting in the orders. That’s not fully automated—it’s still a creative process—but it is data-driven.”

When it comes to forecasting, perhaps the most transformative effects of technology are not on the demand side, but in logistics.

Predictive logistics

For retail clients moving goods around the world, there is nothing more important than predictability, says Rafael Almoguera, global account manager (lifestyle) at Maersk. “What is vital is that when you say it will be 28 days, it is always 28 days sharp,” he says. “That way, the customer can plan around those timeframes and optimise their supply chain.”

To ensure that kind of reliability, retailers are increasingly asking their logistics partners to predict potential disruptions, such as a strike, a storm or congestion at a port.

Companies “do not want to wait a week before finding out there could be a delay,” says Mr Almogeura. “They want to know immediately so they can start planning.”

In the case of TechStyle, Ms Bhatia says the company’s technology achieves this by constantly tracking the location of its products, be they in transit or at the destination warehouse.

“Say someone puts in an order on our site,” she explains. “Our software will look at our multiple warehouses and say, based on where the customer is and on inventory availability, which warehouse to send that order into. Then we can get the product to the customer as quickly as possible.”

TechStyle’s use of technology does not end there; its data analysis platform can also optimise the transit process in real time by assessing which carrier should be used to send any given product.

Cutting costs

Greater efficiency through better forecasting can also give a boost to companies’ working capital. “To give an example, you may have US$50m permanently on container ships moving from one place to another,” explains Mr Almoguera. “If you can reduce the transit time and the lead time on your supply chain, you may be able to reduce that to US$40m on the water instead.”

That also lowers the risk of items going out of fashion before they are delivered. “For these kinds of fashion retailers, their core business really is in logistics,” says Mr Almoguera. “The capacity to have shorter cycles compared with their competitors relies on shorter lead times and optimised supply chains. To have that, you need to be able to predict ahead.”

The sustainability revolution

Sustainability concerns have been growing across all sectors in recent years, and that trend has only accelerated in response to covid-19. When virus containment measures brought global trade to a near standstill, companies were urged to simplify and localise their supply chains.

“A move towards localisation is the only way to reach the sustainability goals the fashion industry has set for itself,” says Lisa Morales-Hellebo, co-founder and general partner of New York-based REFASHIOND Ventures.

Ms Morales-Hellebo argues that moving away from fast fashion is an essential next step, but one which will only come about if infrastructure is localised. That is not necessarily bad news for fashion retailers, however.

Maersk’s Mr Almoguera agrees that near-sourcing is a “clear trend”, with European companies increasingly sourcing goods from nearby Turkey or Morocco, for example, rather than more distant markets. “It means we might have to be more efficient when it comes to door-to-door operations, optimising assets by not having huge container ships moving all the time,” he says.

Thus, a new norm is being established. As businesses build more resilient supply chains, employ predictive models and bring production closer to home, they are increasingly able to respond to trends and world events faster than ever before.

For these kinds of fashion retailers, their core business really is in logistics.

Rafael Almoguera
Global account manager (lifestyle) at Maersk

We are constantly looking for trends in customer behaviour and feeding that into the buyers, who are then putting in the orders.

Meera Bhatia
President of expert services at TechStyle Fashion Group

Disclaimer:

Produced by (E) BrandConnect, a commercial division of The Economist Group, which operates separately from the editorial staffs of The Economist and The Economist Intelligence Unit. Neither (E) BrandConnect nor its affiliates accept any responsibility or liability for reliance by any party on this content.

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