woman in blue bralette holding sunglasses putting on her eyes

Fashion ecommerce 2020: The trends disrupting the industry

Fashion ecommerce is continuously changing, with consumer expectations pushing brands to innovate in order to stand out amid stiff competition.

So, how are fashion ecommerce brands rising to the challenge?

Personalisation and AI

Mary Meeker’s Internet Trends Report 2019 proposes that digital data analysis is often the core of the ‘holistic success’ of the most successful companies of our time.

Meeker states: “Context-rich data can help businesses provide consumers with increasingly personalized products and services that can often be obtained at lower prices and delivered more efficiently. This, in turn, can drive higher customer satisfaction.”

For the most successful fashion ecommerce brands, personalisation extends far beyond addressing the consumer directly. Many now use demographic and behavioural data to integrate personalisation both onsite and offsite. This could mean, for example, including tailored recommendations in email content based on a customer’s past purchases. Or, in the case of Asos, changing the entire website navigation based on how a customer has previously browsed on its site.

Zalando is another example of a fashion ecommerce brand that prioritises personalisation – part of its wider commitment to being entirely ‘customer-centric’. Again, this means its personalisation efforts extend far beyond basic messaging, with Zalando using an artificial intelligence (AI) and machine learning recommendation tool to provide customers with unlimited outfit suggestions.

Melissa Weston, Zalando’s UK and Ireland marketing lead, told the Econsultancy blog that this level of individual customisation is key to the brand’s aim of being its “customers’ fashion companion, advising and inspiring them at the same time”.

Investment in AI is on the up within the retail industry. According to Capgemini Research Institute, artificial intelligence was used by 28% of retailers in 2018, up from just 17% in 2017, and 4% in 2016.

For Zalando, its investment extends to more than just a single recommendation algorithm. Alongside this, the company uses AI for inventory control and to streamline logistics and shipping. For example, a machine learning algorithm is able to detect which warehouse will generate the quickest turnaround for a specific customer.

Elsewhere, we’ve also seen examples of AI being used to power styling solutions, such as Asos’s visual search feature. Using image recognition software, the tool enables customers to find similar clothing or styles based on the photos they upload.

As well as speeding up the customer journey, the tool allows users to easily pinpoint styles they’ve seen on social media (even if the original content is in no way affiliated with Asos). The brand’s chatbot, Enki, works in a similar way, recommending items based on imagery, as well as the user’s previous purchase and browsing behaviour.

Another example of a fashion ecommerce company centred around personalisation is Stitch Fix: an online styling subscription service. Using a combination of machine learning and human styling, it delivers clothing recommendations to customers, allowing them to keep what they like and send back what they don’t.

To do this, customers are required to fill out their own style questionnaire, which is then combined with data from wider style trends and previous browsing or purchasing behaviour.

Once the AI has narrowed down a number of recommendations, a human stylist intervenes to select the final choices to be sent to the customer. This – alongside a hand-written explanation – enables Stitch Fix to deliver a service that is powered by sophisticated and intelligent algorithms, yet remains human in its one-to-one communication with customers.

Fashion as a service

As well as its use of AI, Stitch Fix is also notable for its part in the ‘fashion as a service’ movement. This refers to the growing number of companies that offer clothing subscription models, where customers typically receive a monthly box of clothing and apparel in exchange for a fixed fee. In the case of Stitch Fix, the company charges a $20 styling fee, which is then deducted from the items the customer decides to keep.

Due to the success of Stitch Fix and other digital subscription box startups, including Fabletics and Frank and Oak, big names in retail are starting to recognise the potential of fashion as a service.

Earlier in 2019, Bloomingdales launched a subscription service to rent designer womenswear. Called ‘My List at Bloomingdale’s’, the service costs $149 a month in exchange for four items, which can be kept for any duration but must be returned before a new box is received.

Rent the Runway was an early pioneer of this type of clothing rental service, however brands are now taking this and adapting it for modern consumers. While clothing rental used to mean one-off occasion-wear, consumers are now willing to rent wearable, everyday items in order to reduce their own spend and ownership. One motivation for this could be the growing demand for sustainability, which is another big issue affecting fashion ecommerce.

For children and teenagers, the need to continuously buy new clothing creates a further opportunity for fashion as a service. This is something Nike in particular is trying to capitalise on with its subscription product, Nike Adventure Club. The service provides kids with shoes on a monthly, bi-monthly or quarterly basis, with prices between $50 and $60 a pair. Adventure Club aims to prevent families from spending time and time again on growing feet. However, it is also likely to appeal to the desire for new styles, ultimately contributing to long-term loyalty for Nike.

Social commerce takes off

Social commerce has been around since 2007, when Facebook first started experimenting with marketplace and virtual gifting. Since then, retailers have taken advantage of buy buttons and integrated ‘shopping’ features on social platforms like Pinterest and Instagram. The idea is to give consumers the option to buy as they are browsing for inspiration on social media. And unlike travel, electronics, or automotive – clothing and apparel is one of the most accessible categories to buy in this context.

Many brands that have already succeeded in this space typically carry a low price point, with the likes of Boohoo and Pretty Little Thing appealing to social media’s young user base. This, combined with influencer content on these platforms, means that consumer willingness to buy through social is certainly there.

Meerker’s 2018 report showed a steady increase in the percentage of ecommerce referrals from social media – rising from 2% in Q1 2015 to 6% in Q1 2018.

In 2019, social commerce shows signs of evolving to become much more of a seamless experience. One of the biggest players is Instagram, which has a ‘Checkout’ feature that allows for in-app checkout from shoppable posts.

Around 20 brands, including big names within fashion and apparel such as Nike, Uniqlo, and H&M, were involved in Checkout’s launch, with many more retailers set to be included going forward.

Instagram’s shift to become a shopping platform offers greater opportunities for fashion retailers, mainly to meet consumers in the moments that influence their decisions the most. This might happen through influencer and user generated content, or wider category verticals that are still linked to fashion (or have the potential to be), such as travel or home interiors.

This feature could eventually mean that cost of entry in fashion ecommerce is reduced. Though Checkout is currently used by big retailers, new and smaller brands may ultimately be able to sell directly through Instagram (rather than invest in costly ecommerce platforms), as long as they are happy to have less control of customer data.

Instagram isn’t the only platform shifting into commerce. Facebook Messenger’s AR function allows consumers to visualise products before they buy them, or catch a more in-depth glimpse of soon-to-be released items. Nike is one brand that has experimented with the feature, using it to launch a new pair of trainers in 2018. Nike ensured the event had a sense of exclusivity about it, by asking users for a special emoji password in order to enter the AR experience.

Afterwards, users were given the opportunity to buy the shoes (which were not yet available anywhere else online), allowing Nike to tap into the hype that exists around limited-edition and exclusive sneaker collections.

This example also shows how fashion and apparel brands can use social commerce to build interest in a single product or campaign – capitalising on the online spaces that customers frequent.

The influencer effect

Even if customers do not buy directly through social platforms, social media still plays a key part in how retail brands reach and engage customers. Central to this is influencer marketing, which has become synonymous with the online fashion world in recent years.

In 2016, Vogue editor Anna Wintour made headlines for criticising so-called ‘bloggers’ for their (apparently unwanted) attendance at fashion shows. Wintour was referring to the swathe of digital fashion influencers who – as many pointed out in response – were generating more interest than the models showcasing the clothes.

Since then, influencer marketing has had its fair share of problems (mostly relating to issues with transparency); however, there’s no denying it has grown. ‘Paid partnership’ is now a common sight on Instagram, with online fashion retailers demonstrating a shrewd understanding of the strategy. One-off influencer deals have evolved into long-term partnerships, and for the very top fashion influencers, these can be highly lucrative.

Fashion Nova, which has five stores in California, is arguably the most successful example of an ‘influencer fashion brand’, with 16.3 million followers on Instagram. In 2017, Google named Fashion Nova one of the most searched fashion brands online. This was largely to do with the brand’s partnerships with high-profile influencers including Cardi B and Kylie Jenner, who featured the brand’s clothes on their own social channels.

Other online-only brands such as Boohoo and Missguided have also made influencers a focus. And while there’s often perceived difficultly in measuring the ROI of influencer marketing – with metrics typically relating to engagement and interaction rather than direct sales – there have been case studies that prove the potential positive affect on revenue.

Missguided’s 2018 partnership with TV show Love Island – is one such example. Missguided sales increased by 40% during the show compared with the eight weeks prior to it airing, while certain items worn by popular contestants saw an instant 500% sales lift.

Missguided’s campaign was boosted by the interest that surrounds Love Island, with the brand capitalising on this as each episode aired (and the potential engagement from viewers browsing social media at the same time). The campaign took the combined power of product placement, social commerce and influencer marketing to the next level.

Reducing returns

Social media has been partly blamed for another trend within fashion ecommerce: the rise of the serial returner. These are consumers who buy online with the expectation that they will send the majority of the items back.

Some consumers are even buying items for the sole purpose of posting a photo of themselves wearing it, only to return it . This has been dubbed the ‘snap and send back’ phenomenon.

This only encompasses a small percentage of consumers, with the majority blaming inconsistent sizing for the large amount of items they send back. This is why returns are a bigger problem for fashion ecommerce retailers, with consumers unable to try on clothing before they buy it.

Barclaycard research found that UK consumers spend an average of £313 on online clothes shopping each year, yet send back £146-worth, or 47%. What’s more, as a result of sizing uncertainties, one in 10 shoppers buy multiple sizes of the same item and return those that don’t fit.

Despite many online fashion retailers viewing free returns as a key part of their customer experience, high return rates can have a detrimental effect on the bottom line. Online fashion retailers are unsurprisingly trying to find a solution to this problem.

Asos has taken perhaps the most dramatic action, extending its returns policy to 45 days instead of 28 and simultaneously announcing it will investigate and potentially ban customers it deems to be returning an unacceptable amount.

This measure is more of a last resort, however, as many retailers prefer to try and prevent returns from happening in the first place. Digital size and fit technologies are becoming all the more popular, for example, with companies like True Fit using data and machine learning to help retailers offer the right size. Retailers ranging from Kate Spade to Asics now use this kind of size and fit tool on their ecommerce sites.

It seems consumers are coming round to this type of technology too, and are increasingly willing to share personal details in exchange for a more tailored service. Research by Drapers found that a fifth of consumers of all ages, and nearly a third of consumers aged 18 to 24, are happy to share their personal measurements with brands. The benefits for retailers are certainly worthwhile. According to True Fit founder Romney Evans, shoppers who have a positive fit experience with a brand are 81% more likely to buy from that brand again.

Conversion rates are not the only thing that can be improved from this new focus on size and fit. Alongside the recognition of potential inconsistencies in sizing, many retailers are acknowledging that not all consumers look the same or fit into the standard eight to 16 range. This is being reflected in marketing, with the likes of Asos and Modcloth using models of different sizes and shapes to promote clothes on their website and social channels. This can lead to more positive brand perception and a wider customer base.

Recommerce and rental

Many of the most successful online fashion retailers of the past decade fall into the ‘fast fashion’ category – brands that accelerate the production process to offer a continuous cycle of affordable clothing. Despite the clear demand for this – Hitwise reports that fast fashion sites saw the most monthly visits in Q1 2019, above mid and premium fashion categories – there has also been something of a backlash. This is largely related to the environmental impact of these brands, and the consumer demand for change.

As a result, the idea of “recommerce” – which refers to the process of selling or renting previously-owned goods, and in some cases repurposing or recycling them – is gaining increasing traction among consumers.

Fast fashion retailers such as Boohoo have previously come under fire for their business practices, with Boohoo’s range of £5 dresses in particular being blamed for the promotion of unsustainable consumer buying patterns. The company has taken steps to address the issue, launching a dedicated recycled clothing range called ‘For the Future’ that includes 34 items made from recycled polyester.

Other online retailers have also taken steps to promote sustainability, with Asos creating a ‘sustainable edit’ of ethical brands on its website. Retailers with a brick-and-mortar presence, such as H&M and Zara, have launched in-store recycling programmes, with the latter also announcing that all its clothing will be made from 100% sustainable fabrics by 2025.

Despite retailers like Zara taking action, there’s still a huge amount of skepticism when it comes to online fast fashion and sustainability. This notion has been compounded by the UK government rejecting many of the recommendations made in the Environmental Audit Committee’s ‘Fixing Fashion’ report, with ministers pushing back on calls to ban landfilling unsold clothes and introducing mandatory targets for retailers.

This growing frustration with online fashion means we are now seeing consumers look for alternatives to ecommerce brands, with second-hand, rental, and resale sites becoming all the more popular as a result.

For consumers looking for sustainable and stylish shopping, Depop is fast-becoming the app to beat. First launched in 2011, it now has 13 million users, with approximately 90% under 26 years old. Depop is a peer-to-peer commerce platform that allows users to sell or swap clothing and fashion with others. Its Instagram-like format – which allows users to post photos and descriptions of what they’re selling in their own digital storefront – has helped to generate an almost cult-like following, particularly from teenagers.

Depop has helped to digitise the experience of shopping secondhand (previously done in charity shops and flea markets). The extent to which Depop is disrupting the fashion industry is highlighted by the launch of its first show at New York’s Fashion Week in 2019– something typically reserved for mainstream designers.

Of course, Depop’s success is not to do with the demand for sustainability alone. It’s also been boosted by the demand for 1990s and 2000s fashion, and the undeniably addictive nature of its user experience. However, Depop certainly highlights the consumer willingness to now buy secondhand, and is striving to make resale a desirable (and indeed fashionable) concept again.

Another sign that secondhand is having a resurgence comes from online thrift store, ThredUp, which has recently rolled out concessions in large retail outlets Macy’s and J.C. Penney. According to ThredUp’s latest report, 64% of women bought second-hand fashion in the US in 2018, up from 45% in 2016. It also states that millennials and Generation Z are adopting secondhand 2.5 times faster than other age groups, with ThredUp’s partners clearly keen to draw this demographic back into retail stores.

For consumers that want luxury clothing but without the investment or environmental impact, companies like RealReal are also offering the option to buy pre-owned items. In China, YCloset uses a subscription model to allow customers to try out clothing and accessories (which the option to buy if they like). Meanwhile, Girl Meets Dress, Front Row, and even high street retailer Urban Outfitters all offer similar fashion rental services.

The growth of online luxury

While interest in fast fashion remains steady, mid-tier and luxury online fashion is also on the rise. According to Hitwise, the first quarter of 2019 saw top luxury brands such as Burberry and Lacoste generate impressive online growth, with Lacoste seeing visits to its website grow 36.6% year on year.

Luxury retailer FarFetch also saw visits grow 43.6% year on year in Q1 2019. This is particularly notable in comparison to high street retailers such as Forever 21 and Gap, which saw a decline of 19% and 17.6% respectively.

So, why are consumers more willing to part with large sums of money to buy fashion online? It looks to be due to the luxury market catching up to wider ecommerce brands, with retailers now redefining what it means to be a luxury consumer (and the experience it affords).

For example, luxury shopping used to mean going into high-end stores, and being given a highly personal and unique experience. Now, brands are beginning to offer the same online, using digital channels to engage and motivate younger consumers.

Previously, brands like Chanel refused to enter the online world, only selling through brick-and-mortar stores and boutiques. But since launching online, Chanel has gone on to become a $10bn company – even being named the most influential luxury brand on social media in 2017. The brand’s strategy involves maintaining a sense of exclusivity – through its arguably dangerous strategy of avoiding conversation with consumers through social – and creating aspirational influencer content and creative video.

In 2018, Chanel teamed up with luxury marketplace Farfetch. This was not a commercial tie-up, however, but an ‘innovation deal’ that sees Farfetch develop digital initiatives for Chanel such as a branded app and personalised in-store experiences. Shoppers can still only buy Chanel beauty and skincare through its ecommerce platform, with its clothing and accessories only available in stores.

Brick-and-mortar remains of key importance to luxury fashion – arguably more so than other retail categories. Speaking to Business of Fashion, CEO of Farfetch, José Neve, stated that “fashion cannot be digitised like music. The physical experience is going to continue to be where the majority of the action takes place.”

What can be digitised, however, is the shopping environment, which is where Farfetch’s ‘augmented retail’ concept comes into play. This involves in-store features such as a universal login that recognises customers when they check into stores, digital mirrors that display wishlists, and joined-up mobile payments. Data is then gathered by Farfetch to fuel personalisation and innovation both offline and online.

Farfetch’s partnership with Chanel and other brands is part of its aim to ‘reinvent the luxury shopping experience’, and not just in terms of its own marketplace. The company has also launched other innovative initiatives such as a 90-minute delivery service with Gucci, and a digital customisation service with Fendi.

All of this has contributed to Farfetch’s reputation as a technology company as well as a standalone fashion marketplace, now with a valuation at over $7 billion. Of course, Farfetch’s own ecommerce offering means that it remains a big player within the sector. It’s commitment to fast shipping – and even same day delivery on certain brands – is a big draw for luxury shoppers looking to buy online.

Innovation from Asia

China is typically thought of as advanced, specifically in terms of technology within retail and ecommerce. Much of this is related to Alibaba’s concept of ‘New Retail’, which involves grocery stores being integrated with ecommerce technology. However, this level of multi-channel innovation is fast-becoming a blueprint for all retail categories – particularly luxury fashion.

According to McKinsey, China is predicted to overtake the US as the largest fashion market in the world in 2019. This looks to be partly driven by a boom in luxury fashion, with Chinese consumers expected to deliver a whopping 65% of the world’s luxury spending by 2025.

WeChat is now key to how Chinese consumers browse and buy online, with social and entertainment features creating an entire ecosystem for digital life. Users can complete their customer journey entirely within the WeChat app, going from initial search and discovery to payment checkout.

Alibaba’s ecommerce platform, Taobao, is also taking a huge share of the fashion retail market, having generated 636 million active users in 2018. The app previously expanded into social commerce with Weitao, which was created so that sellers and consumers could communicate. Since, Alibaba has also invested in Xiaohongshu (also known as ‘Little Red Book’), a shopping review community that reportedly generated $200m in annual merchandise sales in 2016.

Similarly, short video platform Douyin (known as TikTok in the UK) has come to the forefront for its combination of content and commerce, with big fashion brands like Michael Kors and Adidas creating custom content for the music-video platform. Douyin also launched an ecommerce feature in 2018, enabling applicants to set up ecommerce pages in order to embed product links into videos and live streaming.

Pinduoduo, which was founded in 2015, has also seen huge growth in the past couple of years, largely due to its clever concept of ‘socialising’ product discovery. The app combines low prices with group discounts that users can lock in by rounding up their friends on social media. Pinduoduo’s integration with WeChat also adds to its functionality and discoverability.

It’s not just social apps that are driving fashion ecommerce in China. Events such as ‘Singles Day’ are big business. The annual, one-day ecommerce event generated around $45 billion in sales in 2018 – more than Black Friday and Cyber Monday generated in the US combined.

For global retailers, Singles Day is becoming hard to resist. In the past, clothing brands including Lululemon, Dior, and Adidas have all participated in the event, capitalising on the opportunity to extend awareness and engagement in China. It’s not just the day itself either. Events in the run-up, such as Alibaba’s “See Now, Buy Now” fashion show – where audience members can buy what catwalk models are wearing via Alibaba-affiliated platforms – also help to generate huge interest.

With similar ecommerce events like Black Friday remaining a key date in the global retail calendar, fashion brands are increasingly looking to China for both inspiration and opportunity.