Fashion companies will double their investment in technology by 2030, according to a recent study by The Business of Fashion (BoF) and McKinsey & Company. Particular focus: personalization, store placement technologies and end-to-end management.
The fashion industry is already experiencing an acceleration of technological innovations across the entire value chain. According to a recent study by The Business of Fashion (BoF) and McKinsey & Company, this should continue to increase in the coming years. Forecast: Investment in technology will grow from 1.6 to 1.8 percent of sales in 2021 to 3.0 to 3.5 percent in 2030.
The goal is to use appropriate technologies to make fashion retail more flexible, more sustainable and more attractive to customers. In 2021, the value of the top 50 technology investments in the fashion industry increased by 66 percent compared to 2019, a total of $ 16.2 billion, according to McKinsey analysis.
These investments went either to fashion retailers or companies that sell products or services to fashion companies, rather than fashion brands.
Exciting: About 55 percent of the investments were made in e-commerce, which has benefited from the increase in e-commerce caused by the pandemic. The rest were mainly in payment technologies, including buy now, pay later companies, in social commerce and resale, followed by supply chain and logistics companies and companies involved in NFT or virtual reality technologies.
Fast fashion for the luxury segment
AI technologies are particularly promising: Companies already using them in their business to increase operational efficiency and improve customer loyalty can see a cumulative increase in cash flow of 118 percent by 2030. Organizations that have just started using artificial intelligence can see their cash flow will increase by 13 percent by 2030, the study authors said.
Investment in technology and innovation affects all segments of the fashion industry, from fast fashion to luxury, albeit in very different ways. In the luxury segment, for example, where about 80 percent of sales are already characterized by digital contact points, personal, direct service will continue to be the focus of the shopping experience. However, client apps and other tools can help store staff engage better with their customers.
Another prediction from McKinsey: The technology focus shifts from a customer-centric element at the end of the supply chain to revolutionizing the internal processes of the enterprise to maximize the overall benefits.
The analysis also highlights the three best areas that fashion industry leaders plan to invest in between now and 2025: personalization, in-store technologies, and end-to-end value chain management.
Technology will also be high on the agenda of business leaders as they set their strategic goals for the coming years. Industry leaders believe that integrating digital processes into their organizations will be among their top five priorities by 2025.
Achim Berg, Senior Partner and Global Head of Apparel, Fashion & Luxury at McKinsey, sums up: “Last year, fashion companies invested between 1.6 and 1.8 percent of their sales in technology. We are confident that this number will increase by Will double in 2030 as technology can help fashion brands gain a competitive edge, both in customer-facing activities – which companies have traditionally focused on – and increasingly in their operations can help become more sustainable. “