As China’s new privacy laws take their toll and high inflation continues to bite, Nikki Baird, vice president of strategy at retail technology provider, Aptos, tells Just Style exclusively how global fashion retailers can think outside the box to boost profitability.

An hour before the doors opened for the annual Retail Technology Show, Aptos’s Nikki Baird kindly sat down with Just Style in a quintessential British café hidden behind the back streets of London’s Olympia to discuss what she’s seeing within the fashion retail sector and its supply chain right now.  

The mood was instantly set as what should’ve been a buzzing ‘builders’-style café with the smells of bacon and baked beans oozing out of the kitchen, was virtually empty.  

It was a stark reminder that it continues to be a challenging time for both the hospitality and retail sectors as consumers maintain their tightened purse-strings.  

Baird admits it’s essential for fashion brands and retailers to find ways to cope with the cost-of-living challenges and to give consumers options to trade down without eroding value.  

The art of customisation for fashion retail

She points out she’s had lots of conversations with clients about the benefits of small luxuries. For men’s brands she explains this could be offering customers the chance to freshen up a suit with custom stitching or a replacement inner lining. In other words, it’s about breathing new life into existing consumer goods. 

Levi Strauss is a good example as the brand has a strong customisation offering, she adds: “Customers can purchase patches for jackets, replace buttons, and add custom embroidery – it’s all about giving customers the chance to feel fresh and new by spending money that they wouldn’t have done otherwise.”  

She also highlights the importance of applying good technology solutions to improve profitability and explains: “There’s a lot of investment in RFID (Radio Frequency Identification) and this is being driven by the omnichannel fashion retail businesses wanting to know the location of every piece of inventory so it can be sold.  

Baird believes keeping track of inventory is crucial, especially for companies that manufacture their own brands.  

Thankfully, she’s optimistic that as fashion brands source items eight to nine months before they hit the shelves, this spring should, in theory, be the last of the worst from a cost perspective.  

She is seeing a lot of emphasis on margin, but she notes most of it comes from trying to rein in the omnichannel.  

In a funny turn of events, she thinks back to the pandemic’s lockdowns when stores were closed and online was the only way to unlock store inventory.  

Today, she says fashion brands and retailers are all trying to figure out how to use physical stores to re-establish customer loyalty and making sure product is in the right place has become much more important.  

On the other hand, Baird continues: “We’re also seeing more careful consideration in terms of the messaging omnichannel fashion retailers give to customers. In fact, a retailer might tell a consumer an item is out of stock if it isn’t in the right place to fulfil the order for them.”  

Baird is a strong advocate of the benefits of using an omnichannel strategy and says it gives fashion brands and retailers a safety valve: “You can use it to reach inventory stuck in one location and get it to where it needs to be without marking it down. Plus, it helps you to ensure the right assortment is in the right location.” 

Given the conversation is taking place in London she highlights there’s been less emphasis on omnichannel in the UK as brands and retailers can shift stock from a warehouse and reach the whole country in a day. But, she says the omnichannel proposition and more specifically having a physical store remains crucial for providing the brand loyalty that is desperately needed right now.  

Agility to pivot with changing trends  

Baird also notes that her clients have cited the ability to pivot as being vital. She says agility is key and fashion brands and retailers that have complete end-to-end supply chains with control over the design and the materials are really benefitting.  

She says one brand she works with has adapted to the more relaxed back to work trend by expanding from formalwear into workwear with a more casual feel.  

At the opposite end of the spectrum, one retailer told her that now the pandemic is over, many consumers want to invest in completely new outfits for big themed milestone birthdays or weddings. This means having the right mix of formal and casualwear available can really drive purchases.  

Using rental and resale as an opportunity  

Many brands are tapping into the rental/resale space to promote sustainability and boost profits, with Baird pointing out it is already being embraced by younger Gen Z shoppers.  

She notes that a lot of the bigger mass brands have chosen to outsource their rental / resale services so for now it’s more of a marketing activity. However, she believes that over time it will get moved in-house.  

In contrast, most luxury brands have kept their refurbishment offerings in-house and Baird says British luxury handbag brand, Mulberry, which is an Aptos client for order management, is already leading the way.  

“Mulberry is distributing its pre-loved items to a lot of its stores and as a result the mix in store is more varied, so consumers feel like they must grab what they want before its gone. But Mulberry is also posting pre-loved items online to give all consumers the chance to get hold of a must-have item.”  

Having worked with Mulberry, Baird also shares that it has discovered a particular shade of blue from one of its previous collections is always in high-demand. This means Mulberry knows if it has a pre-loved item in that shade it will get snapped up quickly.  

Similarly, this knowledge is useful for future designs as if a similar shade is included in a future collection it could easily create a spending frenzy.  

Baird believes the refurbishment and repair supply chain is an interesting space but it requires lots of pre-thought to make it work.  

For instance, Mulberry keeps hold of every extra element when making its bags – every rivet and zipper is kept with the aim of refurbishing pre-loved items in future.  

She admits Mulberry is a luxury fashion house so it benefits from consumers’ desire to get hold of a design from a limited run, however in the mass market she says H&M is a good example of a brand investing in sustainability.  

If you bring old clothes into an H&M store you can get a discount on a future purchase, plus consumers can do this safe in the knowledge that H&M is investing in the technology to break down garment materials into threads for new clothing.  

The impact of China’s new privacy laws  

Before Covid, China was often cited as a key growth opportunity for fashion brands and retailers. It benefitted from being a key fashion sourcing destination with a growing middle income consumer market so making items in China and selling them to Chinese consumers was considered a no-brainer.  

Of course, it’s well known that China’s strict Covid policy caused major disruption to global supply chains, which resulted in many fashion retailers and brands wishing to diversify their sourcing efforts. Plus, forced labour laws in places like the US has made it extra challenging to source cotton from the region.  

Baird reveals, however, that for a lot of Aptos clients, China is still an important business but operating there has become more challenging.  

“China has launched its own version of GDPR (General Data Protection Regulation) but there isn’t much written on how the rules work.”   

The privacy law, which is called the Personal Information Protection Law (‘PIPL’) went into effect in November 2021 and professional services organisation EY highlights it means global companies must assess their data compliance maturity levels and determine whether their processes can be improved. 

In reality Baird says some brands are telling Aptos it means they can’t export any customer data from China at all.  

She says: “If you lose that view on the Chinese market then you lose the reason to source there if you can’t sell there and if you do sell there it will be through a completely consolidated company where all you get is consolidated sales results.”  

Reading between the lines, she suggests it could be a way for the nation to protect against too much power being given to international companies. 

It means there’s a lot of fear and concern around this with different auditors having different ideas on the types of data that can or can’t be exported.  

Baird equates it to when GDPR first arrived in the EU: “The rules aren’t set and consultants have different ideas of what’s required – it’s a very disruptive time for sales in China.”  

And it goes without saying, she continues that China is such a big consumer market: “A lot of luxury brands were looking at China as being their biggest growth opportunity for the next five or so years and now they’re not sure if this is going to be the case.”  

Planning versus execution  

There are several challenges facing fashion brands right now, so Baird’s key message is to focus more attention on the execution side of the business as opposed to the planning.  

She says there often is more emphasis on the buying and forecasting side of the fashion retail business but if fashion brands planned it 100% right, they would never need to mark anything down.  

Baird concludes: “It’s time to think more about execution and executing profitably as opposed to planning due to the current uncertainty amongst consumers.”  

She says paying attention to localisation and the margin in the execution stage of the supply chain is a key area that shouldn’t be ignored.  

Now is the perfect time to reassess how to get the right inventory into the hands of the right consumers to ensure your fashion brand or retailer continues to grow.   

By Just Style