Most businesses do not just want to do well, they also want to do good. But regardless of size and segment, retailers in 2019 will be challenged to achieve those objectives.
Retailers now need to take an active stance on social issues, satisfy consumer demands for transparency and sustainability, and have the courage to “self-disrupt” their own identity and the sources of their old success in order to win new generations of customers, says a McKinsey report on The State of Fashion in 2019.
“The question is how consumers will spend their money,” says Alex Atzberger, president, SAP Customer Experience. “And do they really care if their garments end up in landfills as they keep on consuming in increasingly shorter cycles between purchases?”
Atzberger previously led SAP Ariba, the world’s largest business network running best-in-class cloud solutions that enable procurement organizations to connect their purchases to purposes. He believes consumers are starting to care more and more, and he knows how technology can support purpose driven business.
Buying Is Not the Same as Selling
The Forbes Global 2000 companies collectively account for $39.1 trillion in sales, and they spend $12 trillion on goods and services annually. Seventy-five percent of them are connected to SAP Ariba.
“Most of these companies are committed to the UN Sustainable Development Goals,” says Atzberger. “They have the buying power to ensure fair labor practices are implemented across their supply chain, that no slave labor is being used to make their products, and that suppliers adhere to environmental regulations. In addition to saving money and driving efficiencies, they can make a difference in the world.”
It’s a whole different story on the retail side of the house. There’s no way to force consumers to reduce wasteful consumption. But you can motivate and inspire them to make better buying choices by sharing the story of your company’s purpose and how your products are produced in ways that benefit society, the economy, and the environment.
The fact is that purpose is becoming a core differentiator in today’s retail landscape. According to a Cone/Porter Novelli purpose study, nearly nine out of 10 (88 percent) Americans say they would buy a product from a purpose-driven company, and the majority would try new product lines from those brands — and would be willing to pay more.
For retailers that want to create sustainable clothing, it’s a matter of finding your North Star and honing in on it.
At the recent “Big Idea” session on this topic hosted by SAP at NRF 2019, John Douglas, CTO of Tory Burch, a company noted for its programs to support the economic empowerment of women entrepreneurs, said success in the purpose-driven environment starts with full buy-in from top executives.
“The Board at Tory Burch is very receptive to sensible technology that enables sustainable business practices. We’ve decided to focus on three things: brand, product, and customer. We’re basically outsourcing everything else,” Douglas explained.
The Big Shift Ahead
McKinsey’s State of Fashion report points out that consumers are beginning to shift away from traditional ownership toward newer ways to access a product. Many people today consider it a faux-pas to be photographed in the same outfit twice. At the same time, they are more aware of the impact of fast fashion on the environment.
As a result, the lifespan of products is being stretched as pre-owned, refurbished, repaired, and rental business models evolve at a fast pace. Companies like Rent the Runway enable women to buy less and wear more by rotating outfits they rent from a “closet in the cloud.” These companies are revolutionizing fashion with subscription-based business models that are eliminating ownership completely, just like Spotify has eliminated the need to own CDs.
“Our role is not to be the judge and jury of consumer habits,” says Atzberger. “Our role is to provide technology that enables retailers to revolutionize their business. We can give enterprises the capability to become intelligent, to be sustainable and transparent. We provide total visibility with data management tools that enable better decision making.”
Atzberger believes SAP can inspire others with its own purpose to help companies run better and improve people’s lives.
“SAP Commerce Cloud helps our customers achieve their business objectives regarding efficiency and resource management so they can offer their customers more sustainably sourced products at competitive prices,” he adds.
In a world where CEO decisions start with the customer experience, it is imperative to deliver tools that enable agile responses to shifting trends. If consumers want to end ownership and put their closets in the cloud, then retailers and their technology partners must find a way to do it. That’s the future of retail.