By Sean Coxall, Chairman of 707 International and member of the ESW Advisory Board
Despite the significant challenges caused by inflation, disrupted supply chains and labour costs, some up-and-coming brands are finding rapid growth in domestic and international markets by ignoring conventional wisdom.
First of all, these – often influencer-led – brands know that there is unlikely to be either the time or the money for them to get where they want to be quickly or at all, if they follow the ancient wisdom on sourcing and supply chain. They are impassioned by their close connection with their followers, and the gaps they see in the market, and while some existing brands worry about what office-based attire we might be wearing in the new normal, these start up brands look for the white space in the market. They have realised that the shift to casual or athletic-wear has been so profound that it has created several potentially profitable niches.
So rather than test the potential of these markets in the usual ways by undertaking endless market research or looking closely at what competitors do, they are connecting directly (or indirectly through influencers) to their followers, to find out what they really want. And they are using the most modern, most convenient, and most direct channels available to them, notably Instagram, Twitter, YouTube and Facebook. In this way, they mitigate overstocking inventory and the need to run sales, all based on the real-time feedback loop that social media gives them. They can gauge demand instantly.
Fashion brand Na-Kd, for instance, not only works with influencers but uses them as role models for the clothing, co-designing, curating for seasons, introducing retro looks, and enabling customers to sign up for future collaborations that come with discounts and early access.
The ‘Demand Chain’
These brands are not in the least bit scared by the challenge of having to build the backend, in terms of design, sourcing, manufacturing, shipping and general supply chain; they simply outsource all of that to third parties that have mastered the operational challenges of producing goods to demand, and getting them rapidly to where they need to be. For them, the argument around ‘build it/buy it/rent it’ for the supply chain has already been solved.
Brands that have been built using this new approach to the ‘Demand Chain’ understand that their core competency is using technology to stay close to their customers, and focus on what they want. Rather than try to predict what large swathes of unknown potential customers will buy for a whole season, they create and innovate at a rapid pace, leveraging testing techniques, engaging followers directly and most importantly, they listen. After that, it’s a matter of partnering with the right types of supply chain and ecommerce partners that can get their products into the hands of their followers rapidly, no matter where they are in the world. And then they listen again.
Home and away
Proof that this approach works comes from the number of brands that show ambition almost from day one, in that they are perfectly happy to operate across borders and go after territories where there is huge potential for growth. Tradition has it that brands would normally stick to their home markets first, seeking international expansion later. But new, ‘demand-led’ brands go where the demand exists and partner with the expertise that gets them there quicker.
Established brands meanwhile continue to struggle with their existing processes and the complexity of their current backend systems, trying to make them more efficient, or go faster, when the real problem is that they simply do not have an accurate demand signal at the front end.
These challenger brands are not only sitting happily alongside established brands, but in truth, many are taking market share away from established players. They don’t have the bricks and mortar overhead and they don’t need to build physical presences. Their connection to the customer is not through a storefront and a store clerk. Their connection happens in real time through a digital billboard that lives in the pocket of their customer. It is real, it is authentic, and their success is the ultimate proof that the market may well have changed permanently, with the customer at the very heart of everything these brands do.