Industry panic Following the Followers of Fashion

Fashion companies worried that they no longer understand their customers are desperately seeking information about shoppers. But they struggle to create a coherent picture from the data.
Keeping up with the fickle preferences of buyers.

Berlin is in the throes of Fashion Week, with catwalk shows being held in former power plants, closed-down department stores, train stations and art galleries.

Tens of thousands of purchasing agents will spend the week criss-crossing the city from show to trade fair in a desperate search for whatever new trend might attract their customers.

Berlin Fashion Week takes place twice a year and is sponsored by Mercedes Benz. The event is an umbrella for a dozen different fashion trade fairs that take place all over the city.

This week's largest trade shows are Premium, held in a former postal railway station, and Panorama, located on Berlin's trade-fair grounds. At other smaller fairs, leisure wear is also in focus, with Seek and Bright dedicating their shows to all things casual. Sustainable fashion is also currently en vogue with two fairs – the Greenshowroom and the Ethical Fashion Show – featuring exclusively ecologically sound clothes.

As a label, it's particularly important to us to communicate directly with as many customers as possible. Tom Wallmann, marketing director, Marc O’Polo

The German fashion industry has been panicking since big retailers Steilmann, Strenesse and Wöhrl went bankrupt last year. Also, purchasing is down as shoppers increasingly hunt for bargains. Industry observers like Dutch trend researcher Lidewij Edelkoort, who advises high-end brands, sees the need for real change: “The fashion industry must redevelop everything from the ground up.”

Clothing makers are urgently trying to find ways to discover what their customers want. “Right now, companies are grabbing all the customer data they can get,” said Andreas Brandenberg, head of the Institute for Communication and Marketing at Lucerne University.

Marc O’Polo's approach is typical in the industry. The producer of premium casual clothing introduced a club eighteen months ago. When a customer joins Marc O'Polo for Members and provide their data, they receive rewards like special discounts and purchase recommendations. “As a label, it's particularly important to us to communicate directly with as many customers as possible,” said Tom Wallmann, marketing director of Marc O’Polo. He didn't say how many customers had shared their data but the company is likely to have gathered several tens of thousands of data sets by now.

The idea is not wholly new. Companies like Breuninger which issued customer cards early on now have mountains of data. The department store uses the data to connect with customers via its smartphone apps.

In 2011, Gerry Weber, a womenswear label, launched a card now held by 1.6 million buyers of the brand and its Taifun and Samoon collections. Hallhuber, a fast-fashion label owned by Gerry Weber, also has 500,000 card-carrying customers. It should give Gerry Weber a competitive advantage as it undergoes difficult restructuring. But although it is helping the firm to advertise, it's not strengthening its customer relationship management in the long term. “At the moment, a lot of our CRM [customer relationship management] is hand-knitted,” said Chief Executive Ralf Weber.

Mr. Weber, a descendant of company founder Gerhard Weber, is now investing a seven-digit sum in a new system. He presented a digital road map earlier this year and will soon launch a digital strategy with websites for each label.

The retailer is trying to catch up with online platforms such as Zalando. It has masses of information about its customers, enabling it to ascertain preferences for particular colors and labels. A spokeswoman for Zalando said the company used predictive analysis to offer customers perhaps “in a newsletter, exactly those products that might be attractive at the moment.”

Many other fashion firms are investing in new CRM systems, according to Uwe Seibicke from the consulting firm Hachmeister + Partner. But they all share the same problem: “Often, there aren't enough analysts with enough experience to make proper use of the information.” At Zalando, a team of 50 analysts filters the data.

Companies are now struggling to determine how often to communicate to keep their customers happy. “People who buy more want more information while others think it's too much,” Mr. Wallmann said.

Germany’s largest men’s clothing producer Hugo Boss now goes to great lengths to provide printed and digital information to its different customer groups. “A few years ago, it was enough to send the same newsletter to everybody,” a spokeswoman said. Today there are special offers for customers depending on whether they are interested in leisure wear, classic business attire or expensive suits. Companies use individual customer behavior and analytical models to identify who needs what, in order to stop shoppers switching to low-cost labels such as H&M and mid-priced retailers like Zara.

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Customers are also drawn to international labels like Massimo Dutti from Spain's Inditex that have followed a vertical strategy from the beginning. This means they control the entire garment chain from factory to shop floor. This gives them access to customer information that they combine with data drawn from their online shops, meaning they can react faster to new trends.

That's a big help for German labels which for a long time sold their blouses and pants through wholesalers and only opened up their own boutiques recently. They were later than their international rivals in making direct contact with shoppers and figuring out whom to sell what.

Gaining an exact picture of individual customers matters in order to be able to deliver wares that will actually be bought and that will hit the stores at the right time so clothing doesn't stay on the shelves or eventually wind up on the discount rack.

The huge changes in buying habits have led Hachmeister + Partner to ditch its old fashion precepts. “Our system up to now of classifying fashion according to style groups and price classes no longer works,” Mr. Seibicke said.

He focuses analysis on customers and the occasions when they wear clothes, from work or for their free time. In the new customer group "trend fashion,” the spread ranges from labels like H&M and Zara past Scotch & Soda to Drykorn. Fashion labels now also focus more on distribution and communication channels and the price categories that suit individual groups.

Even successful brands are being forced to take new routes and Marc O'Polo's Mr. Wallmann is now hoping to “include customers more actively in decisions in the future.” This extends to "discussing products with them.” The democratization of fashion has begun.


Georg Weishaupt covers the luxury and fashion industry for Handelsblatt. To contact the author: [email protected]