In 2018, the retail industry shook off the idea that the pursuit of agility was reserved for fast fashion retailers alone.
Now we’ve all accepted that to succeed in today’s competitive climate and meet new consumer demands, being nimble is critical for all.
At Nextail it’s something we’ve been talking about since 2014 and McKinsey’s State of Fashion Survey listed agility as a key priority for the year ahead. A third of its respondents wanting to “review organisational structures and focus on increasing employee productivity” in 2019.
Many businesses, across industries, have been inspired by the late 90s rise of agile software development, which has transformed the tech industry with its flexible team structures, its methods of reporting and responsiveness to change. All of which, were inspired by lean manufacturing.
In recent years, non-tech companies have begun experimenting with agile practices by creating a single isolated team within the organization. This team is responsible for the creativity and innovation of an entire business — it’s easy to see why this is not enough.
The stakes are high in 2019 — as Macy’s CEO, Jeffrey Gennette, says “Our biggest mission is, how do we make it easier for a customer? There’s still way too much friction with all retailers.” It’s time to scale up agile.
So how specifically does an apparel retailer achieve agility? We take a look at its core principles and how it impacts the merchandising function.
But what is ‘agile’?
Agile is not solely about the pursuit of speed to market. Being agile is achieving a balance of two seemingly opposing characteristics. On the one hand it is about being dynamic — set up to react and pre-empt the consumer. But it also requires stability — the adherence to a shared mission that’s clearly communicated.
While a traditional retailer may wait for the seasonal runway shows in order to detect future trends, an agile retailer commits to collecting and analyzing consumer and market data across the business, in order to know on a micro level the trends which are most relevant to them, feeding those insights throughout the business.
So yes, it’s about being adaptable, but it’s also about reducing risk, removing inefficiencies and developing a business-wide mindset that encourages learning and continuous improvement.
These are the hard-and-fast rules of agile retail.
1. The customer is absolutely paramount
Customer-centricity is at the very core of agile retail, driven by a mammoth shift in the relationship retailers have with consumers. The push-pull dynamic has shunted, landing firmly in the consumer’s court.
Consumers don’t need you to tell them what they want: they already know, and what’s more, they know how they want it. Frictionless, fast, and low effort.
McKinsey research shows that Google search interest for businesses that are “open now” has tripled in the last two years, while searches for “store hours” have declined. That subtle change highlights beautifully the small but hugely impacting shift there has been in the consumer mindset.
So what does putting the customer first look like in practice? An agile retailer maps out the entire customer journey, understanding in minute detail the relationship they have, often implementing design thinking to revitalize the customer journey. Processes are smoothed and any potential obstacles to customer engagement are preempted.
Customer feedback is the holy grail, and acting swiftly to it is critical. Thankfully we’re in an age when customer data is more readily available — and interpretable — than ever before, and shoppers are increasingly vocal.
“Determine what your customers need, and work backwards” Jeff Bezos.
2. Be ready to ditch the traditional hierarchy
Key to an agile approach is disrupting the hierarchy. The goal here is to reduce the layers of control with smaller, dynamic teams, and networks of teams.
Today, with consumers and technology evolving fast, silos are one of the most harmful blockages in the retail chain. New learnings and solutions get caught up in one area of the business and teams that would benefit from shared ownership barely know how to get hold of one another.
For most existing businesses something as dramatic as pivoting to a flat hierarchy — Zappos style — is unfeasible. But there are ways to let leaders lead while still retaining transparency. It requires a really clearly defined and communicated shared vision. One with long-term scope and that is constantly referenced.
And that’s all on a road to….
3. Empowering your staff
Removing hierarchy will call for a redistribution of responsibility. Agile retail relies on empowered staff at every level of experience — putting innovation in the hands of those closest to customers will increase their motivation and grow expertise.
Businesses need to start thinking in terms of ‘tribes’ or scrums of staff who are able to cluster on short-term projects and reform when those squads are no longer effective. This flexibility and movement calls for parity of staff viewpoints — a cultural transparency which celebrates speaking up and accountability.
Empowering staff also means making sure they have the tools they need to do their job. Tools which allow staff to move to value-added tasks: strategic and creative work while technology can optimize the analytical and lower value tasks. This is particularly relevant in an age of data. No longer can there be gatekeepers to data who hand out reporting across the business. Data needs to be available to all to enable quick decision-making.
The Harvard Business Review recommends creating a ‘taxonomy of opportunities’ to identify which teams reflect the business’s needs. In this insightful article, HBR recommends retailers “may break the taxonomy into three components — customer experience teams, business process teams, and technology systems teams — and then integrate them. “
Businesses of all shapes and sizes can be challenged by the fact that, frequently, the demographics of the executive team don’t match the end-customer. This is exacerbated in a time when younger generation’s digital behaviors are defining how they shop and socialize and we’re embracing customer-centricity.
4. A different approach to product
Agile retail isn’t just about structural and mindset shifts within the business. Moving to agile affects the products which retailers sell too — it needs to be an overhaul of the entire merchandising function.
Regardless of a merchandiser’s market, from fast fashion through to luxury, agile retailers are reorganizing their collections. Restructuring the way customer feedback is acted upon means an increase in capsules, or “drops” where the first allocation to stores is smaller, with shorter production times. Agile retailers then use data to understand which products need reallocating, reordering, or promotion.
This is not just creating newness for marketing sake. As Nextail CEO, Joaquin Villalba, says, “It’s about being set up to respond to market signals and align to supply and demand, ultimately meaning less deadstock — something that’s cost our industry dearly in recent years,”
“The risk of deep buys on singular SKUs is removed, and instead that risk is spread more thinly across a larger number of products. It’s hedging bets, in a retail sense.” It’s a tactic that retailers are racing to adopt across the fashion industry.
Moncler restructured its merchandising last year, replacing its seasonal collaborations with monthly introduction of new product. The push, called ‘The Genius Project’ has been a success but one which required enormous commitment.
“It’s a totally different approach,” explains chief executive Remo Ruffini in conversation with Business of Fashion, “we changed almost everything inside the company, from the organisational ideas to the logistics”.
5. Tech as the path to speed
The reality is, no retailer is going to achieve agility on people power alone. You need to embrace technology that amplifies your efforts. Things like real-time communication for all stakeholders, fast stock allocation and adjustment, AI to replace tedious or complicated processes and tools which support shopper’s digital experiences.
The most agile retailers have top-level support for seeking out new technologies that impact the consumer. That means that not only are these businesses open to discussing change in their process, but they’re ready to implement fast and are committed to communicating the benefits across the business.
Many retailers may want to wait for their competitors to ‘prove’ a technology. Agile retailers never underestimate the value in being an early adopter in this market.
6. Consistency and…adaptability
Being agile isn’t about always sticking to your guns. In fact, agile retailers need to be ready to throw out the plan.
Real agility is living by certain values and principles — things like unerring customer-centricity and a company-wide commitment to learning — which everything else is flexible around.
That’s something Nike has been very open about with its self-titled ‘Consumer Direct Offence’. Initiatives, like the manufacturing partnership with Flex, haven’t always worked out but the drive remains.
In an interview with Business of Fashion, Nike Chief Digital Officer, Adam Sussman, was open about the approach. “We’re not just building things because our gut tells us to build them. We have an incredibly disciplined approach that is very data-driven and metrics-driven. We’re not always right, but we test and we learn.”
And it’s working — the brand recaptured its illusive North America growth last year after a period of declines.
Without a doubt, 2019 is the year for increased dynamism. The retailers getting it right are producing some of the most creative products in the industry. At Nextail our belief in agile retail is so resolute that we built an entire technology around it!