Rory Tahari

Rory Tahari, cofounder of State of Mind Partners, and a board member, former president and chief marketing officer of Elie Tahari, on Wednesday spoke about the massive disruption occurring in the fashion industry, which she attributed to three big elements: data, discounting and price transparency.

As the keynote speaker at the Young Jewish Professionals Fashion & Luxury Forum in New York, Tahari said fashion is a $2.4 trillion industry, and it has changed in profound ways that the current leadership is not capable of addressing. “The revolving door is higher than in any other industry, by double digits,” she said. “And yet the industry keeps recycling the same designers and the same ceo’s over and over. And everyone keeps expecting different results.”

She believes that the three biggest culprits, starting with data, are destroying the industry.

“Data killed off employees, it killed off companies, it nearly killed off the entire industry. It was all brains and no instinct,” she said. She explained that long gone are the merchants who were the true visionaries, such as Fred Pressman, founder of Barneys New York, and Marvin Traub, former chairman and chief executive officer of Bloomingdale’s.

She told the crowd that the fatal flaw with data is it can only tell you about things you’ve already done. “Data cannot innovate. Data is not creative. The job of a fashion designer is to be creative. To know what you want, before you want it. To create an illusion that once you’ve seen it, you feel like you always wanted it. You see, if something has truly never been done before….there is no data,” she said.

She reeled off statistics such as the fact that there are 7.5 billion people on the planet and three-quarters of them can’t even afford to buy any of this. And even if they could, that would mean every person on the planet would have bought 17 new pieces of clothing last year. “So here we are compared to 15 years ago, consumers are buying 60 percent more clothing and keeping them half as long. And 25 percent of the 100 billion garments produced end up in landfills. It’s not sustainable,” said Tahari.

She feels that in following the data, stores left the customer desperate and demanding newness and relevance, and that’s being filled by creative fashion brands today such as Off-White and Kith.

The next issue, she said, is discounting. “The stores got the customers hooked shopping on sale,” she said. Bloomingdale’s was the first and biggest culprit. Then Macy’s, then Saks Fifth Avenue, then Neiman’s, “and even the illustrious Barneys,” she said. “Soon they will all be out of business. All of them. Every single department store will be out of business.

She attributed the third issue, price transparency, to the growth of online shopping. Department stores told Tahari, when she worked there, that the customer would never buy directly from a brand. She explained Elie Tahari launched its e-commerce site in 2001, one of the industry’s first. “We thought the stores might have been right [that no one would buy online], when we didn’t receive a single order the first month, or so we thought. Until we realized that no one had checked the e-mail account where all the orders were being collected. And there were a lot. Funny to think about that now,” she said.

She said fast-forward to today, and the customer can see who was selling what, where and for how much, literally at any time all over the world. She said the customer could even track exchange rates and buy the same piece of clothing even cheaper from other countries. “Customers had become retail arbitrageurs,” she said.

“And loyalty toward a department store? Those days are over when this is the common refrain of today: ‘I don’t want to have to walk into a store, see anyone, or deal with anyone, when I can buy and return online for free,” she said. She said there were $250 billion in returns last year, just in the U.S.

Looking to the future, she said the areas that are impacting fashion right now are renting, retail’s evolution and how clothing is made. She noted that renting and re-commerce are growing at a record pace. “The rental of clothing is massive, and only getting bigger by the day. Consumers rented their clothes last year to the tune of $1 billion.” And there were another $1 billion of rentals in the U.K.

She said the future of retail focuses on storytelling and experience. “The retail store’s purpose will not be to buy and carry out, but an experience to talk about. Just like theater,” she said, pointing to Gucci’s newest store in SoHo, which is a combination of storytelling and stage. “Because of this, designers will have to invest in its people, as much as its product. The salespeople will not only be an extension of the brand, but a personification of the brand.”

She believes that we are looking at a future of on-demand production. She cited a quote by Jack Ma, chairman of Alibaba, who said “manufacturing will shift to more personalized manufacturing, largely driven by customer demands.”

“Almost every other industry has moved toward on-demand. Content is on-demand. Food is on-demand. Cars on-demand. Hospitality on-demand. The fashion industry must become an on-demand industry,” she said.

Explaining that the fashion industry is in a vicious cycle, she said, “Desire for low-cost labor leads to overseas manufacturing, which creates long product cycles. Therefore all manufacturing is speculative, leading to liquidation sales and disposal. As a result, there is no price control, which leads to brand erosion, low margins and minimal profit. This is over. It’s not going to work anymore. This is not sustainable, economically or environmentally,” she said. She noted this past summer, news surfaced that Burberry had burned almost $38 million of unsold merchandise, rather than let it show up in discount channels, and other companies do it as well.

With on-demand clothing, she said it will take only nine hours to produce a garment (rather than the current nine weeks), it can be delivered in two hours (not like the current two days) and available on mobile only. “Retail will thrive on the high- and the low-end only. Everyone in the middle will be gone, and I mean literally everyone,” she said. For all this speed to happen, she said clothing production will have to come back on-shore, even to New York City. She said on-demand can eliminate and mitigate inventory risk.

“There is now an opportunity to create a new economic and ecological sustainability through technology. Tech like 3-D printing and robotic sewing. On-demand models that look to solve for the entire solution suite; brand, e-commerce and automation for production. This is where the industry can get the big multiplier,” said Tahari.

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