“Theres this massive disruption thats about to take place," says Cavano

“There's this massive disruption that's about to take place," says Cavano

Easy access to cheap capital, infinite computing power, and “the Uberfication of everything” are converging to create a perfect storm of disruption that's already starting to shake up the apparel retail industry, according to Kurt Cavano, founder and chief strategy officer of cloud-based supply chain platform GT Nexus.

“We're entering into one of the biggest times of disruption I've ever seen in any kind of business, not just fashion,” Cavano explains. “It's exciting but scary.”

Cavano’s assessment of the current state of play carries even more weight given that it comes from someone who, for more than 25 years, has been helping companies use technology to improve their global supply chain performance, perhaps most notably in the apparel industry as founder of the TradeCard platform back in 1999.

TradeCard, which helped companies manage their extended supply chains by collaborating in real-time with global vendors, merged with GT Nexus in 2013. And in its next reincarnation the platform, which counts Adidas Group, Columbia Sportswear and Levi Strauss & Co among its customers, is to be acquired by ERP software supplier Infor in a $675m deal announced earlier this month.

Cavano clearly has great fun watching and evaluating new start-ups and shifts in technology – and their impact on customer behaviour and existing business models.

And perhaps the biggest trend he’s watching right now is “the Uberfication of everything.” He’s referring, of course, to the Uber taxi-hailing app that connects customers to cars, has transformed peoples’ perception of a taxi service and, in just five years, has achieved a market value of around $41bn and a presence in every major city.

“Uberfication is this new sharing economy; its collaborative consumption,” he explains, adding that it has also shifted people's expectations of the businesses and services they use. Other examples include ‘Rent the Runway’ (rental high-end dresses, jewellery, and handbags); ‘Bib + Tuck’ (buy and sell vintage and designer clothes); and Poshmark, a huge online exchange that sells unwanted items for a commission.

Uberfication is also leading to the evolution of two social classes: people with time and no money, and people with money and no time. And of course there are tools to help share “a whole set of personal services between these two groups of people.” Like TaskRabbit, which outsources chores like queuing to get tickets for a show; and StyleBee, which provides last-minute in-home beauty treatments.

This is also going to be a big disruptor “because it's going to allow those people to trade with each other.”

Cheap capital and technology

Underpinning all these trends is easy access to capital, coupled with the fact technology is also getting better, faster and cheaper.

“The world is awash with cheap capital right now,” says Cavano. Online funding platforms like Kickstarter and ezbob “are allowing a huge rash of brand start-ups. It has completely de-risked starting brands and starting companies, and that has never happened before.

Now, “a designer in a big company like Gap or Levi's can just go out and start their own brand, [whereas before] people had to quit their job, come up with an idea, raise some money to go do it, and then make it and see if it sells.” Tools like Bigcommerce make it possible to build a website in a weekend without any programming skills.

And because of this easy cash “all this new stuff is starting, and that's going to kind-of up-end everything that's going on: you put [an idea] out on Kickstarter and if it sells, you make it; you pre-sell it.”

UK lender ezbob has even gone one step further, teaming up with Chinese online giant Alibaba in a deal that will allow British companies to set up a credit line to buy supplies worth up to GBP120,000 (US$137,000) through Alibaba’s website, rather than finance purchases up-front.

“So if you want to do a start-up, have an idea, source it on Alibaba, get the lending – and boom, you have an instant company. It's never been like that in the past.”

The second catalyst is “infinite cheap computer power in our pockets,” Cavano says, adding: “Here's the statistic that blows me away: in the first three days that the Apple iPhone 6 went on sale, the amount of computing power that was sold with this phone was 25 times more than all the computing power that existed on the planet in 1995.

“So think about the power that's being put out there, and it's almost free. We get it as part of a cellphone contract; we don't even buy the computer any more.” On top of this, not only are these phones enabling online consumption, they’re also competing with fashion for consumer spend.

“What does that do to consumption…this combination of easy cash to start a company, infinite cheap computing power in our pockets, and a new generation of kids who are quite happy to exchange and trade things with others? I can do all my shopping online on my phone, I don't need a computer, I don't need to go to the store.

“There's this massive disruption that's about to take place, and there's going to be so many winners and losers. But the stores just do not know what to do. If I was a fashion executive at a big brand or a big store chain, I'd be scared to death right now.”

From start-ups to stores

Another challenge for mainstream retailers is that the new set of brands has been so wildly successful online that many are now starting to move beyond the web and open brick and mortar stores. But what sets them apart is that they’ve already mastered the omnichannel challenges that traditional retailers are all grappling with, “so their stores are not stores, they're showrooms, they're fulfilment centres, they're warehouses all in one.”

Think Warby Parker for eyeglasses, Birchbox for personalised make-up and beauty products, and Rent the Runway again. “Warby Parker already, in their limited number of stores, sell more per square foot than Tiffany & Co,” Cavano says, coming second behind Apple. “That's how fast they're growing; they were just an idea five years ago.”

On top of this, the cloud vendors like GT Nexus (supply chain), Salesforce (customer relationship management) and NetSuite (ERP) are giving companies the tools so that they can scale.

“We don't work with the smallest guys, but the people who are growing really quickly. So now you can get started easy, you can use cloud-based tools to scale, and you can raise all the capital you want in this crazy world awash in capital.

“We're going to evolve so quickly; the way it's going to be five years from now is not where it is now. That's how fast it's happening.”

Click here to read the second part of this interview, in which Cavano discusses how this disruption is likely to impact apparel production and the supply chain.