Amazon is shaking up apparel retail with new products like the Amazon Echo Look app lets users preview outfits, mark favourites and compare styles

Amazon is shaking up apparel retail with new products like the Amazon Echo Look app lets users preview outfits, mark favourites and compare styles

The old guard of the United States apparel and footwear industries better wise up to changes occurring all along the supply chain if they want to see their companies survive, the head of a leading Hong Kong based research centre told a room of industry representatives in New York last week.

"Apparel is the most expensive and dumb system," Edwin Keh, CEO at the Hong Kong Research Institute of Textiles and Apparel (HKRITA), said on the second day of a sourcing conference organised by the American Apparel and Footwear Association (AAFA) at the city's Fashion Institute of Technology.

As Keh and other participants admonished the audience, apparel and footwear have lagged behind other consumer sectors in a significant way when it comes to technology. "Ten years ago this September was the introduction of the iPhone and the only thing we could do with our phones was make phone calls.

"In the last 10 years we haven't kept up with the lifestyle changes of consumers," he said. "Ten years from now none of us will be doing the same thing."

A recent watershed development cited by Keh was the announcement in April that Amazon had filed a patent design for an on-demand apparel manufacturing facility. Once this and other similar ideas are realised, this disruption could go far beyond the bricks-and-mortar retailers already impacted by online commerce and adversely affect manufacturers as well.

But a more potentially lethal threat to the established order comes from abroad.

"Alibaba, not Amazon, is the company to worry about. This is the insidious giant," he said. "They are neck and neck with Walmart and they're on course to become the world's first trillion dollar retailer.

"Right now we don't hear so much from Alibaba because most of their customers are in China. But I've spoken to them and now that they have saturated the Chinese marketplace they want to expand overseas. The way we look at the world – make things in the East and consume them in the West – is probably outdated."

"Twenty years ago, fashion was a top-down affair," Keh said. "A bunch of designers getting together and saying it's time for black."

While Alibaba has "levelled the path for small businesses, a lot of these small businesses are counterfeits," he said, predicting that the Asian giant would soon have to move to clean up its act. "It's just not sustainable otherwise when you have such a large platform of vendors."

Change is necessary

This top-down state of affairs has been unsettled both by new technologies and new business models and trade relationships. "Change is obviously hard but change is necessary," said Shoshana Pollack, senior research associate at Fung Global Retail & Technology. "Consumer behaviour has changed and Amazon has changed everybody's expectations."

One big catalyst for change is the shift in trade patterns between East and West, as middle classes in China and other Asian countries continue to grow. Despite the resultant swing in markets, the industry has been slow to adapt. "Our inventory is in the wrong places; they're still warehousing these pants [destined for China] in New Jersey," said Keh.

Retailers and factories need to think about Asia Pacific when making decisions on everything from sizing to allocation of production facilities, Pollack agreed. "I don't think it's a coincidence that certain retailers are struggling. They do one thing very well but you can't do everything very well.

"Evolution, both in biology and business, is really long periods of stagnation followed by rapid periods of change," observed Kurt Cavano, president and CEO of GT Nexus, a cloud-based global trade and supply chain management network. "In the last five years, we have seen a rapid acceleration of change."

Cavano noted that applications involving the so-called Internet of Things (IoT) are just getting started in the apparel sector in terms of "wearable" features connecting apparel to the web, but said that the ramifications of this have yet to be felt. "Taking control, and this whole idea that everything is connected, is going to totally change the supply chain."

Another dimension to disruption is generational, Cavano said, comparing current consumer cohorts to the heyday of the Baby Boom, which saw entire industries cater to its predilections due to its sheer size. "Generation Y is actually bigger than the Baby Boom," he said. "If the stores are not focused on how they engage using technology to these consumers, they're just not going to survive.

"My job is to try to scare you into action. You've got to develop a culture of experimentation. If you don't, it's going to be really challenging to survive in this environment."

Management motivation

HKRITA CEO Keh, for his part, observed that at least some big players in the industry are starting to catch on, pointing to Walmart's US$3bn purchase of online platform jet.com and Nike's recent partnering with high-tech manufacturer Flex as evidence that more established players may be willing to experiment.

But this can cut both ways, he warned. "The challenge is not the teaming between Nike and Flex but what if Apple decides to make footwear?"

Keh also questioned the ability, and possibly the willingness, of "senior" management at more established companies to take on the risks of tinkering with business plans and supply chains.

"I spoke to someone at Brooks Brothers and asked what he thought the biggest problem there is and without hesitation he said: 'We still think our customers work on Madison Avenue'."

"Look at your typical boardroom, where everybody is in their late 50s or early 60s," he said. "One thing about old people like me is that you don't want to learn anything new. Do you want to risk your bonus? For that reason, paradigms can be hard to shift: 'What you believe is the last thing you give up'."

But these changes need to come, if only for survival's sake. "Global supply chains are very dynamic and we need to understand how to react to that dynamically."