Transcript Blog- The Global Impact of COVID-19 on the Fashion Industry
In this episode of the Industry Insights by SAP podcast, Josephine Monberg interviews Peter Akbar, Global Vice President and Chief Customer Officer Fashion at SAP and Stephen Henly, Head of Fashion, Industry Advisory, EMEA North. Listen now to hear Peter and Stephen discuss the short- and long-term impact of the coronavirus pandemic on the fashion industry and how technology has helped in the recovery process.
For more episodes on Industries, please subscribe to “Industry Insights by SAP” Podcast Series.
Welcome to the industry insights by SAP podcast series. My name is Josephine Monberg, and I am your host. You are now listening to the COVID-19 special edition of our show. Welcome to our podcast. Hey, all listeners, and welcome to this episode of industry insights podcast. Today, we are taking a look at an industry we’re examining how the industry is being impacted by our current global pandemic, but also more importantly, what’s going to happen in the future and to take a closer look today, I am joined by Peter Akbar who’s the global VP and chief customer officer. And then I’m also joined by Stephen Henly, the fashion industry principal at SAP. And I think I just revealed the industry that we’re talking about, and that is fashion. So that’s quite exciting. Um, Stephen first let’s, could you just explain a little bit more about what you do at SAP and what your connection to fashion is?
Okay. Thank you very much, Josie. Yeah, within SAP, I’m the regional fashion industry expert across EMEA North region. And I do have some equivalence in other regions. And my prime role is to work with our customer and prospects and our sales teams to identify how SAP fashion solutions can help those customers deliver a success, both for their customer, for their individual customers or consumers and into their business and provide industry insight. And of course, a guidance and support around best practice around all of that. Then I’m involved in regional execution of the go to market strategies for SAP and the fashion world. And of course that all of this being said, I’m working closely with customer base our account teams. And of course our development teams and organizations like Perter and part of our organization like Peter’s.
Mm. And where in the world are you?
I’m based in Birmingham, which is in the central of the UK.
Cool. And Peter, what about your role? What’s your role in fashion?
So, Hey Josie, thanks for inviting us to this podcast. So, um, the, my role in fashion is essentially to drive innovation to SAP for fashion solutions, sort of done for nearly 24 years. So at SAP, it’s starting off with our solution back in the day and bringing our solutions together, for example, verticalizing our solutions. So my passions are fashion stems also from my time at Marks and Spencer’s back in the day, this is a long time ago and I’ve worked across development solutions management and, uh it’s and also with our customers. So it’s also about listening to our customers and making sure we drive the, the, understand what they’re saying and really being ahead of the curve to bring the innovations to market and working with Steven and folks in his organization to make sure our customers really get it. And, um, it’s been a huge amount of fun too, because passion is great. We all love wearing stuff and to see the impact of what you create and how it helps our customers is, is fantastic.
Yeah. I can only imagine. And your accent is a little bit similar to Stephen, so where are you based?
So, yeah, so right now I’m in the UK, so the city of Bath, but with SAP, I’ve spent 15 years in Boston in the US so perhaps I should have a bit of a Boston accent. I should also, six years in Munich in Germany. So, um, you know, I speak German too, so that’d be yeah. Naturally.
Wow. That’s amazing. That’s amazing. Okay. Very cool. Well, I’m super excited that you both joined us and I’m very excited to learn more about what’s going on in the fashion industry, because it is also an industry that is near and dear to my heart personally. So not saying that I spend a lot of money on clothes, but, um, that could be the case. So before we start talking about kind of the impacts of fashion, um, when we talk about, or when we get from an SAP perspective, talk about fashion, just to give an idea, what companies are we talking about, maybe starting with you, Peter.
So, okay. So for us fashion means everything across the entire value chain for fashion, right? So it really starts at the very front end. So for example, cotton farmers and farmers. So actually creating the very essential raw materials, the textile producers who make the mills and fabrics and denim. And that goes to then the, the brands, for example, you know, the jeans manufacturers and the retailers and the luxury brands. So we really covered the whole range of, um, of the fashion industry. And, um, you know, so it’s, it’s, uh, very, very interesting from that perspective, but also it gives us a lot of problems to solve, you know, cause we have to solve things for every single stage of that supply chain and make it all integrated across the piece too.
Yeah. I could imagine that’s a challenge and Stephen, anything to add to that?
I think it’s a good commentary, but if you think about that, a large mix from the SAP perspective, our consumer, our customer base, just thinking of the retailer and the brands, for example, it will move from your fast fashion brands like Uniqlo and H&M all the way through department stores like Harrods or [inaudible] that people are familiar with global sporting brands like Nike and Adidas and Asics, and then the iconic brands as Pete talked about the Levi’s of this world, Armani, Hugo boss, Valentino, and of course, right at the top of the luxury, the LVMH group or the caring group. So we have this big, big expansion of, of every different sector in what people call fashion.
Yeah, yeah, yeah. I’m nodding my head cause I do, I do, um, you know, I recognize a lot of those brands, so, okay. Let’s talk a little bit about COVID-19 because obviously COVID has a huge impact on all industries and fashion has seen huge impact too. So, um, what are the impacts of COVID on fashion, but also maybe talk a little bit about the business processes starting off with you Stephen.
Yeah, I think, um, I think we all know that the first impact of covert has, was effectively from a fashion perspective was an impact on the supply chain, particularly the supply chain coming out of China and at the same time for the luxury luxury segment on the demand patterns that are coming out of China, which is a big, important segment for them. But very quickly as the pandemic spread across Europe and into North America, that became a demand problem with, with the response of lockdowns and closure. So all the stores pretty much everywhere where at some point in time, during March and April completely closed, and that meant the revenues were falling, uh, unprecedented fall in revenue. Yes, there was some e-comm uptake. And if you look at some results recently, you can see that for example, um, tax reported a 95% increase in eCommerce revenue in April, and that there were 50% up in Q1.
But what’s really important is to think about that has changed the nature of, of the way we shop for fashion. We’ve now got used to shopping for fashion with econ. Yeah. So that’s really important. And I think that’s going to drive and accelerate the change in the role of the store. And I think we’ll see some really innovative store designs and store processes coming forward in the next, in the next six months and the rest of the year and next year, I think also, and Pete, we’ll talk about this. I think in more detail, it’s the drive to digitization, significant organizations and fashion brands have been digital in the customer facing parts of their business, but we can see more and more of them now facing up to the idea that they need to transform their supply and the rest of the value chain and use machine learning, artificial intelligence, and increasingly RFID to bring that digital digitalization and bring visibility and transparency. And then the final thing that’s coming back is the sustainability agenda. It got suppressed a little bit for two or three months, but from the consumer base, it hasn’t really gone away. And it’s, uh, it’s something that is dear to both our hearts and in that way. And I think Pete, you’ll probably pick up on this as well, is sustainability and circular fashion is going to come back and the leaders are going to be those that get to their customers through that process. Yeah. Um, yeah.
What are your thoughts on this one? That’s obviously a huge impacts. What are you, are you seeing the same thing?
Yeah, yeah. All the same. I mean it actually the same. I think that the, you know, it’s, it’s interesting because the it’s a tough time for fashion. And I think that the challenges which, which the winners are gonna be, you know, following, uh, like solving, um, technology in the stores, the digitalization of stores, for example, having appetites where you can try on stuff cause you can’t try and piece a pair of planting piece of clothing. How do you know it’s going to look any good? So we’re seeing loads, a lot of startups with new ideas about how to show, um, outfits on avatars yourself even, right? So you can make more informed decisions about what looks good, but also further up the supply chain. I mean, everyone at home, I’m working from home. For example, there’s been a unique challenge. We, um, so I lead the SAP fashion council, which is a bunch of C level executives from, you know, the top 25 30 or so fashion companies in the world.
The, the, um, 50% of those companies said that their, their people need to work from home. So how do you enable your entire organization to be digital? Right? So today, if I’ve got to carry a piece of paper from one desk to another, to get something done, that’s a nightmare in a world where you can’t see that person. So the digitalization where everybody in the organization would no matter where they are, has to be able to work and hand over their work in a seamless end to end process. Absolutely super critical. Then the other stuff Steve mentioned it, but it’s like supply chain. So imagine you are producer and I’m making stuff and it says China. And if that is, China’s shut down with a second wave, where do I get myself from? I’m open for business in my country. So we’re looking at companies looking at diversification of their supply chains and making sure that they can solve in multiple areas. Um, and again, with the sustainability pieces in actually sustain, uh, understanding if I’m a fan of what’s my carbon footprint now, what am I a sourcing, sustainable fabrics, all of these things that come to the public’s attention. And so customers, uh, in our world are actually now responding to that very deeply to make sure that they can provide central products. So, and we think that that’s only gonna increase.
Yeah. And so, so huge actually fundamental changes of from what I’m hearing all positive, taking the industry in the right direction. And you both talked about the role that technology plays, but let’s talk about it a little bit more Stephen. So what are, what are you seeing the role that technology plays in helping them, you know, um, dealing with the challenges that they in front of?
I think there are, there are two, there are two elements there. And I think Pete started to talk about one element. I’m just going to come back to pick up on some of the Petes points in a moment that the first part of the element is were we’ve gone through a reaction and we’re in recovery mode now. And progressively, as we worked through the rest of the year, we’re going to be in getting ready for 2021 and beyond mode, you know, as they move out of that, that recovery and get going again. But at the moment I think technology is providing, I think Pete is very right. It’s about how do you communicate with your written a disparate workforce that’s maybe furloughed, maybe on short time, significant numbers of being on part time and short time. Our stores are reopening. Not every store is opening flat out or opening all 600 stores in one go.
So think so, you need to think about how do, what technology solutions can I use or can we use, or can we as SAP support our customers with, to help them communicate with it with, with their staff and help them understand how their staff, um, you know, crudely, how they’re feeling and what their concerns and issues are and enable them to tailor the process, the management and the leadership to tailor the processes of communication and induction into those staff, into the business as they reopened. So that’s one area that we can look at. I think the other area is that we need to remember also that you think about, for example, the idea that there’s a lot of staff would have been furloughed many will have been laid off in some cases. So organizations, when we look into potentially reemploy folks or actually it’s a new world, so they’re going to have to re onboard, um, folks, how do you work in a fashion store where you have to run, um, managed social distancing?
What do you do with the fitter picture? It’s about the fitting rooms. Yeah. And what do we do about the fitting rooms? How do we help customers put together a look in store? So that’s going to require a whole bunch of new training and onboarding and technology can help that help with that by providing that sort of on your own device learning. And what have you. The other thing I think is important is to think about how technology goes back down the supply chain and the value chain, and that I think is going to be super important in terms of providing visibility as to where product is and where it needs to be. So there’ll be more and more use of, like I said before, artificial intelligence machine learning to think about smarter ways of distribution and smarter ways of that eCommerce fulfillment channels. I think you’ll see that coming along very quickly as we move into the second half of this year.
Pete, What are your thoughts on that? How will tech help them overcome the challenges they’re faced with?
Yeah, sure. No. I mean, echo, everything Steven said there Josie, so, but I think the fundamental piece is that the digitalization of the business comes first, but it’s also because, uh, you know, for example, if I’m offering stock online and I haven’t got the stock there, I’m going to really upset a customer. They’re going to go somewhere else. But if I’m offering new technology, for example, I’m in store. So I pick up the top and then the technology is saying to me, Hey, these bottoms would go really great with that. Have you considered wearing leggings instead of jeans with that top? Um, so w you know, technology will do that today very nicely, but if hadn’t got that stuff in store, or I can’t say go pick that up from the next door, you know, it’s, it’s a waste, right? So, so we, so I think, uh, you know, brands need to be very careful about the need to introduce this technology, to help customers shop in new ways, matching things together.
I think advertise that you’ve got to have that connected to your digital world. This is going to be super good goal. Um, yeah. And I think also the, you know, as you get further up the chain, if you even need to look at the, uh, the designers. So we work with fashion designers, especially in New York. And also we do some programs with the runway of dreams, which is adaptive fashion. So they’ve been very good adopters. Um, some of them, I shouldn’t say of, of sort of democratizing their own weights, right? So they basically sharing what’s going on in the runway, not just on a video, but actually giving people apps for feedback. We’ve got a runway app, which lets designers, it gets, gets the fans to give you this feedback. Right? So these, you know, now that nobody can run a fashion show, wherever, you know, they’re all going digital, and then it’s going digital this next week. So you’ve got to basically have new technology in there and the ones who aren’t going to do that are going to be stuck because they won’t reach their customer base.
Hmm. Did you have anything to add?
Yeah. I just, this thing to what Pete is talking about, it reminds you, it reminds me of it, given that the volume of e-commerce traitors biz has been so big, relatively speaking over the last three or four months, um, what you’re going to see, I think is a greater requirement from a customer to actually be more flexible in that approach. I think Pete you’re right. You know, yes, we can say this, top works with this, these leggings instead of jeans and we’ll have, and many retailers are already doing that, but then the trick will be to put that look together and to be able to satisfy it. And then it’s next day, next hour, same day delivery. And that connects you back into it. It’s a fulfillment chain in a way deeper than a way that they haven’t really had to think about over the last couple of years. It’s all been, yeah, we can deliver this and we’re going to deliver it. But now it’s actually got to be super quick because people have got used to the idea they order today and it arrives tomorrow.
Yes. Yes. Thank you, Amazon prime. Yeah. It’s funny. Yeah. I’ve lived in the US for six years and you totally gotten used to Amazon prime, then I moved to Denmark, which is where I’m at now, where I’m from. And I ordered something and it took them like two weeks and I was like, you know, cause, cause you’re not, you’re not, you’re not used to that. So I think it’s something and that reflects negatively on the business. So I think it’s something companies have to step up on and, and talking about that because it essentially comes down to supply chain. So do you guys see ways in which that companies should consider new ways of engaging with their suppliers? And perhaps also you’ve talked a lot about customers, also new ways of engaging with their customers moving forward. Um, and repeat you or Peter, do you want to go first?
Sure, sure. Yes. Josie. I mean, yeah, absolutely. From the supply chain perspective, it’s about transparency. So clearly, you know, fashion is really interesting because I do really want to two things either buy off the shelf and buying tee shirts and everything else, which is premade, um, or I’m actually collaborating with manufacturers to get it designed. If I’m lucky enough, I’ve got my own manufacturing, which is which I can be very flexible with. Right? So if, but if I need to have alternative sources of supply, I need transparency. So underneath it to be able to do what if simulation business simulation is, is absolutely critical right now because you’ve gotta be able to simulate now, what happens if I can’t get supply from one country, these plants, what happens if I move it to another? And then I need to also be able to simulate what happens if I have a DCs warehouses, for example, you know, you mentioned that the experience in Denmark, if I didn’t have a DC near a near a city, right, it can’t take, you know, and I’ve got a centralized DC in, in, in Europe, which has often been the case for many of the customers.
Now, if I can’t get to a store or I didn’t want to go to a store and I want to get something quickly, I need to have a different policy. So being able to simulate that, um, is important. And we’ve seen this success customers that have a digital supply chain and a digital delivery chain where they can simulate and do things very fast. Sprint DCs, use big stores as DCs. For example, a lot of customers can’t get to them vital. So you need to go to represent that, that physical world in your digital world. And you can’t do that unless you’ve got this digital foundation.
Stephen, what are your thoughts?
I kind of, I echoing absolutely what Pete says and I would add on the transparency piece as we get to have more and more as we spread the sourcing profile and less reliant on one regional one manufacturer, I can see our passion brands thinking about also how does the sustainability and ethics agenda fits into all of that. So they’re going to want to add a much more robustness around, uh, signing off and approving the ethics of a particular new supplier or manufacturer in a new location. They’re going to want to be making sure that they’ve got visibility of the sustainability metrics that they’re tracking. For example, the carbon footprint, for example, maybe pollution in the, in the local, um, the use of water and so on. So they’re going to add that. So as well as they’re going to be thinking very much about, you know, how do I maximize the sales at full price by through the [inaudible] process, they need to be looking at how do I minimize the impact of what I’m doing on my carbon footprint or my sustainability agenda, and how do I actually report that? So that I’m looking at two sides of that equation. And particularly in some of our younger fashion brands, sustainability and ethics are really critical. And we’ve seen recently with all the BLM activity, you know, all of a sudden this is all important. It’s not instant sustainability and their things. And we can’t, I think organizations are going to have to bring that into that, into that discussion and they’ll need the data and the, and the what ifs to bring that through. Yeah.
Yeah. I am vividly nodding my head. I think we are at this point in time now where there’s a movement happening, right? You can’t as a business, sit back and just ignore what’s going on. You have to take a stand and you have to, to prove that you are sustainable and that you lead with a purpose. So just to finish off now, because we covered a lot of different topics and, um, a lot of different technologies were mentioned and so on. So if I could just put your, both on the spot and just ask, let’s say, you’re sitting in front of one of your customers see of a fashion company and you were to get them your top three advised about what should they be doing right now to future proof or two to come out stronger of all of this? What would you say, who should I put first Peter starting with
So then moving from, from survive to grow to growth, right? Because you know, they’re coming out of survival, you’ve got to go to growth. Um, you’ve got to have, um, make sure that you’re, you’re, you’re, you’ve got a stable, independent IT service to support all of the new things that you’re doing, right. That’s absolutely critical foundational piece, right? You’ve got to meet the promises to your customers, your consumers, uh, and you know, Steve mentioned the ethical side also to your suppliers, right? So, so that, that those policies of how you help them through the bad times important, because if they’re not there in the good times, where’s your product coming from? I think also, so that means that accelerating product, product projects, which do the digitalization of their business, critical supply chain, the fulfillment chain, all that needs to be done. So we’re seeing customers move forward with all of those kinds of projects.
Um, and also then this whole multiple sourcing strategy is the, what if all of those things are very key wrapped up in that and make sure we don’t lose sight of simulations. Two final points though. Um, we think that runways will go digital and also product discovery is going to go digital in a big way. So trade shows where typically you go today to find out, well, what are the new shirts? What are the new, you know, clothing aspects, uh, you can’t get there in that, right? People are gonna be reluctant travel. So the whole discovery aspect is gonna go digital. So get prepared for that. And the last one is we think that the circular economy will be huge. So mass rentals with. if you’ve got a recession in some areas of the world and people with without much funds, without many funds, rentals are going to go, huge, recycling is going to get even bigger also because of the ethical and sustainability concerns that Steve mentioned. Um, and I think, you know, that, that that’s, so the circular economy will become a natural part of people’s lives. So CEOs get ready for it.
Get ready for that. Yeah. Yeah. There’s a company called rent the runway. Um, that is us that, um, yeah, I might’ve used a couple of times. Um, okay. Steven over to you, what are you on?
That’s an extensive list. I think I would just add, uh, around that lesson. I echo absolutely totally what Peter said, but in amongst all of that, I think if you’re in the C suite, you recognize all of those issues, but you have another bunch of other compelling, um, pressures. So the first thing I would think about is thinking about the rapid time to value and value can be dollars and euros and pounds, but it can also be back to your sustainability and ethics and, and your brand positioning and your linkage with your customer. So recognize that you need to faster time to value and that when you’re making those investments, that you’re thinking about adding resilience against the risk of something like this happening again, and also embedding sustainability in absolutely everything you do. So that’s number one, number two, I think Pete’s talked about accelerate digitalization and be prepared to accelerate and take innovation and accept the innovation may be a bit like, um, passion, themes, and clothing.
It comes in and it goes out, it comes in and it goes out. So you’d be prepared to take risk about bringing in new activities and new process. Cause that’s what your customers are doing. Yeah. So Pete talked about stable foundation. Absolutely. Right. But also be prepared to keep innovating and pre be prepared to, to, to take some of those innovations to fail, um, as you seek to get the right thing. And then finally, let’s not forget the store. The role of the store is going to change. We will see it as we open up over the next month or so. Um, think about how those stores, uh, how you can reimagine those stores, how you can reimagine them in a, in a world where you have to do different, um, different processes for clicking, collect different processes for your, uh, fitting rooms and maybe have less density of people in those stores. So think about how you bring those as a brand experience, as well as a place to sell product. So those would be my, those were my takeaways. I think we’re on a cusp of a change actually. And it’s a lot of, um, it’s a lot of, uh, acceleration of trends that were already in place. I think that you will see a big change over the next year,
exciting times to be living in, even with COVID it’s happened. This is still such an exciting time. Guys. I have so much fun talking with both of you. I so appreciate you coming on the podcast and to everybody who listened to this episode. Thank you so much for listening in. Hopefully I’ll see you on the next episode. Thanks everyone.