Learning From the Retail Rule Breakers

by | 14 November 2016

The fashion industry is a prime target for disruption. The industry came of age in the early 20th century with the rise of the sewing machine and has been slow to change in response to the internet, new consumer demands and concerns around environmental impacts and hazardous labor conditions.

In 2015, the top business challenges for the U.S. fashion industry were increasing production/sourcing costs, market competition and meeting consumers’ demands. Such conditions create opportunities for innovators who understand how to reach new consumers and how to streamline inefficient, antiquated processes.

For example, instead of designing clothes and guessing how many people will buy them, how about asking the consumer what he or she wants? This question struck me recently when I read about Gustin, a company that is upending conventional industry wisdom by producing top-quality denim and other apparel that is custom, ethical, zero-waste and American-made. For half the price!

How are these revolutionary rule breakers doing it? One word: crowdfunding. This approach is enabling innovators like Gustin to usher in the “garment industry 2.0”—an era dictated by individual consumers rather than mass market forces.

Gustin’s crowdfunded denim (Source: Gustin)

Welcome to fashion 2.0

Gustin founder Josh Gustin initially launched his company through the traditional retail route. But he soon became frustrated with the slow process of “designing, manufacturing, and convincing boutiques to sell his clothing, and then hoping consumers would buy it.” He wanted to solve the retail industry’s most vexing problem: how to precisely calculate supply and demand.

Gustin decided to go directly to the consumer by leveraging crowdfunding and crowdsourcing. Crowdfunding enables entrepreneurs to raise small amounts of money from large numbers of people. Internet-based platforms like Kickstarter and Indiegogo have made it possible to create a community of supporters who raise funds for projects they choose to support. Crowdfunding for fashion is becoming more common, with Kickstarter backers pledging nearly three times as much funding for fashion from 2012 to 2013.

After eight years of perfecting their platform and business model, Gustin is the first fully crowdsourced fashion company. Here’s how it works: Gustin designs a new product and launches a crowdfunding campaign for it. Consumers “back” the product by committing to pay a certain price. If a minimum number of people back the product in the allotted campaign timeframe, Gustin starts production and then ships the product to backers.

This unique business model also allows Gustin to produce their apparel with zero inventory and zero waste. Because the customers are also the funders, the model requires very little capital. Gustin’s approach is also far less expensive than the traditional process because they eliminate the middle-man and pass along the savings to consumers.

“Now I charge $100 [for a pair of quality jeans] and we still get the same 50 percent gross margin as we did before,” said Gustin.

Gustin’s radical business model (Source: Gustin)

You might be thinking: “Okay, this sounds great and now I want a new pair of jeans. But what does this mean for my business?” Like so many changes gripping the retail industry, there are valuable lessons that can be translated from the online domain to the bricks-and-mortar world. In this case, I think there are three deceptively simple lessons to be learned from “retail rule breakers” like Gustin:

  • Get to know the new fashion consumer
  • Put online strategies to work for bricks-and-mortar
  • Give your customers a voice

The new fashion consumer

Gustin’s business model appeals to the “new” fashion consumer—the millennial who is all about customization, sustainability and transparency. Writer and fashion industry problem solver Emma Birnbaum suggests that rather than “making something for everyone,” the new mandate calls upon sellers to “make everything for someone.”

Several established brands are experimenting with crowdsourced business models, too. Outdoor lifestyle brand Timberland asked customers to help design a “sneakerboot” called Crafletic™. Timberland is using a crowdsourcing platform built by Betabrand, another San Francisco-based fashion innovator, to solicit input from customers who can place orders for proposed ideas.

craftletic

Timberland’s crowdfunded Craftletic “sneakerboot” (Source: Timberland)

Topshop is taking a slightly different approach. The company created Top Pitch, a program that invites entrepreneurs and start-ups to participate in a “boot camp” on how to bring wearable technology to market. Participants have the chance to pitch their ideas to Topshop buyers and senior leaders, creating opportunities for the start-ups and enabling Topshop to develop new lines.

Bringing online insights into the retail store

As Gustin discovered, the crowdfunding approach can be a useful tool in balancing supply and demand. Retailers with both an online and physical store presence might consider how they can translate consumer shopping habits online to create a targeted inventory or special in-store offers. This can help a store become a true part of the local community rather than carrying a general assortment of SKUs.

Giving customers a voice

Crowdfunding is a unique way to create an efficient process, but the real brilliance of Gustin and other transparent, cutting-edge fashion brands is the way they leverage crowdsourcing to give consumers a voice.

Millennials, who came of age in the worst economic downturn since the Depression, prefer spending money on experiences rather than items. So when they do purchase, the item is carefully considered. This makes companies like Gustin so appealing because they not only offer a great product, but they engage their customers—encouraging them to express what they want and to be a part of the product’s story.

The more I read about garment industry 2.0, the more I want to be part of the story too.

Anjee continues to be an insatiable collector of all things retail. She’s a student of culture living next door to future shoppers, whose fleeting trends constantly change the retail landscape… driving retailers, landlords and developers crazy!

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