The Importance of Digitisation in Times of Crisis

The Importance of Digitisation in Times of Crisis

Written by Leong KexinApril 2, 2020

The Importance of Digitisation in Times of Crisis

In just a matter of weeks, the deadly COVID-19 pandemic has spread to over 136 countries, leaving a dent in the global economy across most sectors – especially in retail. 

This has caused great uncertainty, pushing the industry to move at a quicker pace as consumer behaviour continues to shift amidst the pandemic. Brands able to accelerate their strategies to mimic market movements will be the ones who will succeed in today’s climate.

Spring Collection Cancellation Creates Inventory Trouble

Many fashion brands are in turmoil due to an onslaught of spring order cancellations from retailers. Brands are left to bear the cost for merchandise that has already been paid for and produced. 

This leaves brands with only a short window of time to clear their spring stock before it becomes obsolete next season. Footfall has taken a severe hit with more shoppers confined at home due to the mandatory closure of non-essential businesses, further dwindling offline sales. This is especially urgent for brands with more trend-driven assortments. Primark’s decision to eschew e-commerce will result in dire consequences as the fast fashion retailer has announced the closure of stores until further notice.

A New Wave of Digitisation Arises 

However, not all hope is lost. Despite the evident toll on traditional brick-and-mortar stores, the pandemic has undoubtedly driven more housebound consumers to seek out digital alternatives. 

Nike's digital ecosystem.
The Nike Train Club (NTC) app. Image Source: Apple Insider

This was observed in China when homebound consumers turned to digital fitness apps to maintain their healthy lifestyle. Nike aligned with the immediate digitisation of daily routines by leveraging its digital app ecosystem and the Nike Expert Trainer network. 

In return, the Nike Training Club app saw an 80% increase in engagement within the last quarter and resulted in more than 30% climb in digital sales in China. The success of the sportswear empire’s digitisation strategy was twofold – seeing an increase in consumer engagement and potentialising on the demand for activewear.

Tapping into Demand Opportunities

Certain apparel demands from consumers are key opportunities for digitally savvy brands to seize sales. “What started as a supply shock, is now obviously a demand shock,” shared John Thorbeck, the chairman of Chaigne Capital and former general manager of Nike. 

Categories such as activewear and loungewear are experiencing a surge in demand during this period, as consumers spend most of their time at home. As of February 2020, Omnilytics data showed an upward trajectory for nightshirts and nightgowns from Asos UK. 

Brands can start to assess their current stock and drive sales for categories with potential to thrive, such as core products and transitional pieces. During this period, it remains crucial for brands to keep a watchful eye on market demands to immediately detect key opportunities and adapt.

Consumer Behaviour Shifts Boost Digitisation

This may cause a ripple effect by further migrating more purchases to e-commerce, even after the effects of the outbreak declines. The change in consumer behaviours can be observed in the surge of digital purchases during the recent holiday season. 

“With more housebound residents shifting to e-commerce to make purchases, this develops an online shopping habit for many – starting from essential goods and trickling to non-essentials. This could reshape how consumers shop in the future, even for the most hardened offline shopper. Brands and retailers will need to adapt effectively to the shift,” shares Barry Ooi, Director of Fashion Analytics at Omnilytics.

As more consumers shift to online shopping, brands that typically rely on offline sales will have to follow suit. The ability to seek potential sales areas and diversify accordingly is key to generate digital sales, especially when traditional methods are now obsolete. Brands must get innovative when exploring various ways to move online.

Optimising The Right Assortment Mix Across Varying Sales Channels

To broaden online stock distribution, brands will have to diversify their sales channels to expand customer reach.

The online marketplace and wholesale landscape can be tricky to navigate given the vast number of brands available. Each channel has varying demographics – resulting in different demands. 

To ensure the effectiveness of diversification, brands will first need to diligently analyse the performance and demand across different channels.

March sell-out performance of Nordstrom US.
Sell-out performance of Nordstrom US in March 2020.

Omnilytics data showed three key apparel categories from Nordstrom US. It can be observed that there was low demand for jeans due to the lower overall sell-out performance in March, although one might assume that a pair of jeans is a work-from-home essential. Meanwhile, tops and dresses delivered better performance on Nordstrom in the same month.

With this information, brands will have granular insights of high-risk or high-demand assortments based on a marketplace. Stock allocation can then be targeted according to potential areas.

Digitisation strategies also encompass marketing tactics to boost customer engagement.

New Distribution Channel Uncovered

For Labelhood, a platform for emerging designers in China, going digital delivered promising results. “As founders of a start-up, we can’t afford to stop even for one day,” said Tasha Liu, the founder of Labelhood. Liu and her team immediately adapted by turning to WeChat groups and Tmall to continue connecting with customers. 

Labelhood's livestream to drive sales.
Labelhood’s livestream. Image Source: Vogue

As of March, Labelhood has also optimised livestreaming platforms to drive sales for new arrivals. Its new digital sales channel helped reach a new market outside of Shanghai. Despite the reopening of its store, Labelhood still continues its daily livestreams to maintain the relationship built with its customers. 

Luxury Goes Digital in China 

Luxury brands took a similar approach to engage consumers by optimising social media platforms in China. Miu Miu and Prada were the latest addition to Tmall’s Luxury Pavillion, dubbed as a gateway to Chinese e-commerce for luxury goods. Shanghai’s IAPM Mall has recently turned to WeChat to drive sales, with nearly 70 brands establishing their personal accounts on the platform. The brands’ digitisation strategies of expanding to different sales channels surface the importance of localisation and adapting to local consumers’ mindsets. 

Key Takeaway

There has never been a better opportunity for brands to reinvent themselves now. Brands cannot afford to wait for normalcy to return. 

Diversification of digital options such as online marketplaces and social media sales channels is key for brands to immediately explore. Brands who reinvent themselves by exploring various sales channels, leveraging digital consumption, and pairing those actions with a data-driven approach to understand trend movements in the current market, will be successful during these uncertain times.

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