Fashion groups transform back-end systems to aid bounceback
Brands which quickly reorganised distribution channels have softened pandemic impact
A growth in ecommerce during the coronavirus pandemic has helped some fashion houses and clothing retailers continue to do business even under lockdown. Industry experts now believe deeper digital transformation of distribution and sales could help fashion manufacturers and luxury brands with some longer-standing challenges posed by changes in consumers’ retail habits. According to Goldman Sachs, fashion groups like Prada, Gucci and Ferragamo could bounce back faster than initially forecast, thanks to the recovery of the Chinese and American domestic markets. Analysts also expect brands that are focusing on digital marketing and ecommerce strategies will have substantial competitive advantages over their less nimble rivals. For Italy, where the fashion industry is worth almost 1.5 per cent of GDP, prolonged shop closures around the world have had a devastating effect on fashion companies’ results and weighed negatively on domestic suppliers. Carlo Capasa, the president of Italy’s national fashion chamber, predicts revenue will be down 30-40 per cent this year for companies across the sector. He also warns that many of the 200,000 small enterprises that form the backbone of Italy’s fashion industry risk shutting down permanently. For many family-owned businesses, whose revenues shrunk during the past two decades due to increased global competition and recurrent domestic economic crises, Covid-19 is likely to be the last blow. But the brands and manufacturers that were able to quickly reorganise their distribution and sales channels have so far managed to mitigate the impact of the pandemic. Data published by researchers at the Ecommerce B2C Observatory of the Milan Politecnico in July shows online sales of clothing grew by more than 20 per cent in 2020. While online purchases still represent only a fraction of total clothing sales in Italy, experts agree Covid-19 acted as a catalyst for a long-overdue overhaul of distribution and delivery.
London-based investor Alessandro Binello, chief executive of Quadrivio Group, which focuses its investments on Italian food, fashion and design, believes the main challenge for the so-called Made in Italy sector will be to develop the skills and the technology that will allow companies to survive the digital transition. “Covid-19 accelerated a trend that had already begun,” says Mr Binello. “Fashion brands will necessarily have to digitalise through their own platforms and through third parties like Yoox or Farfetch.” Quadrivio bought online-only accessories brand Rosantica and 120% Lino, a linen apparel manufacturer. Mr Binello believes one of the biggest problems with adapting to modern workflows is that “tech skills are extremely rare in Italy”. Large companies are likely to have the upper hand because they have the resources to hire talent and implement ecommerce strategies of their own or through partnerships. For example, Armani signed an agreement over the summer with online luxury goods retailer Yoox Net-a-Porter to improve its digital platform that offers clients online access to both its digital catalogue and in-store items via Yoox’s distribution channel.
Milan-based Yoox, part of Richemont group, has made substantial investments in high-tech warehousing, artificial intelligence and software to enhance ecommerce services that have attracted 4.3m customers to date. The group sells directly to global customers through its own multi-brand online platform but it also manages individual online sales and distribution for over 30 brands including Balenciaga, Bottega Veneta, Isabel Marant and Dunhill. During the pandemic, platforms like Amazon, which sells fast-fashion clothing, boosted their Italian logistics and delivery network. “In September, we started operations in our fulfilment centre in Castelguglielmo, Rovigo, that will create 900 permanent jobs in three years,” says Stefano Perego, European customer fulfilment vice-president at Amazon. The online retailer is also planning to increase delivery stations throughout Italy across the next few months. “These sites add capacity and flexibility to Amazon’s delivery network by enabling regional carriers to deliver our orders,” adds Mr Perego.
Other Italian-based companies like Luxottica, the world-leading eyewear manufacturer, are also upping their game in getting products to a global market. It has previously reduced the number of its distribution hubs from 13 to four globally, in order to integrate production and digitalised distribution processes. The next step for the company will be the creation of an online platform, open to other eyewear makers. “The strength of our logistics infrastructure will support the group’s willingness to build an open and collaborative service platform that will allow our partners and opticians to connect to global consumers,” according to Giorgio Striano, Luxottica’s chief operating officer. “Maybe we can start envisaging a new form of sharing industry to tackle upcoming challenges.” The Italian government is taking stock of this digital transformation. Simest, which manages subsidised loans to small enterprises on behalf of the Italian foreign ministry, is helping small businesses — the bulk of Italy’s economy — that want to expand, including through ecommerce platforms.
Mauro Alfonso, chief executive of Simest, says loan applications to finance the launch of online sales platforms increased significantly between May and September, in the midst of the pandemic. “We see empirical evidence of an acceleration in Italian companies from across-the-board sectors strengthening online operations,” he says. According to Simest data, almost 300 applications were received in the four months to September 17 and textiles and consumer goods companies were among the top five categories of applicants. “It signals a probable permanent structural change in how we do business,” Mr Alfonso adds. Mr Binello of Quadrivio Group believes the digital transformation is an opportunity for both smaller Italian businesses and multinationals, and will help forward-thinking manufacturers tap consumers, reduce costs and survive crises and competition beyond the pandemic. “I’m optimistic,” he says.