In the original supply chains products move from supplier to customer meeting a manufacturer, distributor/warehouse and a retailer on the way. Products are produced in places where it can cheaply be produced and are then shipped to a big warehouse. From there it is moved to retailers, which sell it to customers.
Everybody is familiar with this supply chain. Especially when it is about clothing. But, some changes are on their way. The increased IT possibilities are making this a vulnerable market. To become a vulnerable market, the market must become easy to enter due to technological changes (Granados et al. 2008). Where the classic clothing industry was built upon brands which sold their products through retailers (like ‘De Bijenkorf’ or ‘El Corte Inglés’) there are now retailers selling clothes without owning a single B2C retail shop (like ‘Zalando’). This market is attractive to attack, there is a lot of profit to make. And difficult to defend, online shopping is easy and quick. And thus a vulnerable market.
Because of the shift from offline retailers to online retailers already one step in the supply chain is doomed to disappear. However, that is not where it stops. A new IT improvement can change this market again. At this moment the online retailers are struggling to give customers the right product. Lots of products are returned because it cannot be fitted as customers can in the offline shops.
Start-ups are creating solutions to solve this problem. Apps are being developed where customers can identify their exact sizes so this app can give you an advice about which size you should order. Regardless the sizing method. They even make it possible to order tailor made suits without being in a shop.
In my opinion this new development will change the market again. Another step in the supply chain becomes obsolete, the warehouses. Why store a thousand black ‘M’ size shirts in a warehouse when those shirts can be tailor made and send to the customer directly. This development even creates the opportunity for brands to sell their clothes directly to customers and skip the online retailers like Zalando.
What do you think? Is this development the end of warehousing? And can this already mean the end of newly fast-growing online retailers? Is this a vulnerable market again?
(1) Granados, N.F., Kauffman, R.J. & King, B., 2008. How Has Electronic Travel Distribution Been Transformed? A Test of the Theory of Newly Vulnerable Markets. Journal of Management Information Systems, 25(2), pp.73–96.
Dear Matthijs, Thank you for your blog post! For the moment, I do not think warehouses will completely dissapear. For my internship in the fashion industry, I have conducted research and found that many people still shop offline and learn about new brands online. However, I do think there is a shift in the way the companies work. For example, you can order a product online, and return or exchange it in an offline store. Thus, fashion companies are more and more integrating their offline and online business and creating synergies.
I do believe the market is a newly vulnerable market. As you said, it is easy to enter, attractive to attack and difficult to defend. For example, anyone could start a brand today, create a webshop, and generate traffic. However, the first part of the supply chain remains: the clothes have to be produced, and often this happens in foreign countries (countries outside Europe, for example). The fashion industry is one of the most polluting industries, and I think the development of fast fashion and fast delivery are not helping to reduce pollution.
I think the developments you described will make it crucial for clothing retailers to keep up with markettrends, and to integrate their offline and online efforts. And who knows, maybe it will be the end of warehouses someday!
Hi Matthijs, interesting that you choose this subject for your blogpost. Last weekend I heard from a friend that a particular technology related to measuring size with just two photos is in the final of the Accenture innovation awards. It is predicted that they will totally disrupt the fashion industry. They can predict your exact size with 95% accuracy. As Ting pointed out in college, I believe that online and offline will merge in the near future. I think that the combination of retail stores and online shopping is the next disruptive. Clothes remain experience goods and people like to feel fabrics and see how clothes look on them. In that matter I think people still will go to shops to have the experience. Nevertheless, store space is expensive so via an online shop retailers can offer a wider range of clothes (longtail effect). Moreover, with the technology I mentioned, retailers can measure the exact size so I believe that the future of shopping will be that people go to a shop to feel and experience the clothes. In the shop there are only a few samples available of standard sizes and colors. If a customer want to buy something he can do that in the online shop where the exact “tailor made size” is available in the color he likes. The advantage of this is that the longtail can be utilized to its fullest.
Hi Matthijs, interesting post! I wrote myself a post about dark warehousing, which is the trend of warehouses becoming completely automated and therefore not needing lights anymore. After reading your post and merging it with what I have researched myself, I believe that a reasonable analysis of the future of warehousing would be first a big further step in automation, and eventually the reduction in the amount of warehouses, maybe even their disappearance.
I do not think that warehouses will disappear in the near future however, as the size-finding technology you mentionned hasn’t hit the market yet. Moreover, since most people are still used to going to stores as well as buying online, I do not think the physical stores (and therefore related warehouses) will go extinct anytime soon. But I personally could totally imagine that the next decades will come with big changes in the way we buy clothes and that we will order tailor-made clothes online direclty from the supplier sooner than we think.
Hi Matthijs, thank you for your bog post! Few weeks back I was discussing with my teammates about how with the possibility of using 3D printing and machine learning technology retailers are moving towards providing custom made suits to customers through online channels. Well, the idea proposed here is coherent with current market trend. However, there is no one correct answer to it as is the case with most predictive analysis problems. There would be a number of different factors influencing a decision if warehouse is required or not. Such as demographic of buyers and seller, clothing category like daily wear or wedding product, or the brand status. Today artificial intelligence has made it easier to order products online and even produce an exact size for your tailored shirt/pants by simply taking a picture with your smartphone. Also, recommendation systems (branch in machine learning) is very actively progressing to identify ones taste and suggest products, this keeps user engagement high. Some companies like Stitch Fix and Third Love have their business models catered around this. Warehouses were always present until now and I think they will not disappear just because of technological advancement. Maybe the inventory size will reduce as we get better at predicting demand and optimize supply chain. The most important thing to remember clothing is still a tangible product which has to exist in one form or the other be it finished custom suit or raw material. Warehouse would be required if not by wholesale dealers then by manufacturers to store more raw materials because we are getting spoiled by choices.