Sartorial Success: Top Trends for Apparel Retailers in 2016

In 2015, retailers’ omnichannel offering took centre stage, as brands innovated across mobile apps and in-store technologies, multichannel fulfilment urban solutions, and coordinated cross-channel promotions and marketing. These kinds of initiatives will continue to be top of mind in 2016, particularly as consumer expectation for a seamless and personalised experience grows.

However, 2016 will also bring a new focus on enhancing the high street experience, which remains a key channel for many brands. Based on APT’s work with leading apparel retailers, here are the top trends to watch in 2016:

Unique high street experiences boost consumer engagement

As consumers place more importance on overall experience, retailers are introducing new attractions to drive visits and earn more time with their shoppers. Urban Outfitters, one leader in the space, is introducing in-store pizzerias. Club Monaco is adding libraries, cafes, and floral shops to some stores, and Liberty continues to offer beauty services at their in-store treatment rooms, all to extend the shopping experience and become a destination spot for consumers.

While these high street programmes are cutting edge, their success will vary widely. At a minimum, retailers will need to ensure that sales increase enough to pay back the capital expenses, new employee training, space allocation trade-offs, and other costs in each location.

Some retailers may find that some stores need a tailored approach or don’t benefit from a new attraction at all. To generate the best results, retailers should develop rollout strategies based on how the success of these “experience retail” concepts varies by location, format, and scale.

Lifestyle categories complement apparel

While product innovation is constant in the sector, apparel retailers are increasingly aiming to establish themselves as “lifestyle brands”–a hefty undertaking but one that can pay dividends if executed correctly. This trend has manifested itself in new collections like plus size and “athleisure” lines, as well as fundamentally new categories.

Several players have made significant investments to establish new athletic lines including Boohoo.com and Mountain Warehouse, which recently launched its Zakti brand. Meanwhile New Look recently introduced its new homeware range, complementing its existing beauty and sportswear assortment, while new luxury tables from COS echo the feel of their sleek clothing designs. Similarly, H&M is becoming a one-stop shop for customers after launching a beauty collection this past fall.

The idea of growing share of wallet and gaining new customers is attractive, but not all innovations will be profitable. Customers may substitute new products for other items (e.g., yoga pants for leggings) or simply drop one item to find budget for another. Further, while a new selection of products may attract new customer segments, it may not resonate with a retailer’s highest-value, existing customers and cause them to shift to competitors. Within the store channel in particular, making room for new products can also mean losing sales on products that are displaced, putting a high opportunity cost on reallocating floor space.

To profitably introduce new categories, retailers will need to test them in a subset of locations (often across channels) and compare performance to similar locations that don’t receive the change. Only the results of these in-market tests can tell retailers which moves are the best for their businesses, as well as how their product offering should vary across channels (particularly in-store versus online).

Empowered employees serve as a force for change

Executives are focusing on staffing and training to optimise costs without hurting the customer experience. Many retailers are using traffic-based staffing models to determine when more associates should be on the floor. Other leaders are enabling associates with better training and technologies.

Victoria’s Secret–who paves their way with innovation–continues to invest in training associates to give style and fit recommendations, while Zalando introduced a personal stylist service. Other innovators, such as Monsoon Accessorize and Chico’s, are equipping their associates with tablets to keep better record of their deep customer relationships and catalyse cross-sell with tailored product recommendations.

Even the most central labour changes (e.g., adding associates during peak times) come at a high cost, which means that retailers can’t afford to adopt programmes that seem great on paper but don’t drive sales. It’s likely that some stores will require more attention than others, both in terms of the number of associates and the mix of roles, which puts a high value on understanding programme impact on a store-by-store basis.

As retailers invest in more specialised labour and equip staff with new technologies, they should consider experimenting with different aspects of the programmes. These elements could include which types of employees should receive training or at which point in the customer experience staff should leverage in-store tablets.

Marketing campaigns get personal

With a myriad of marketing strategies at hand, apparel marketers are challenged with determining the ROI of each campaign both online and in-store. Solving this challenge is only becoming more complex as innovations like website personalisation and more advanced mobile apps with beacon technology emerge. For instance, several companies including Very recently launched custom versions of their website, up to millions of unique adaptations, tailoring content and promotions based on shopper interests.

Some of the top retailers are using these platforms to send personalised offers, such as Ted Baker’s trial of in-store beacons. These initiatives require an understanding of which customers should receive which messages and through which channels. A key risk with sending rewards and offers is that retailers may be giving away margin to customers who would have purchased anyway. Another potential danger is campaign over-communication (e.g., daily emails) and losing relevance and attention with some customers.

Navigating this world requires much deeper customer understanding, which is no easy task. There are a few ways to do this–the most common is to grow a loyalty programme, collect data about customer behaviour across channels, and test offers based on that behaviour. In 2016, the most sophisticated retailers will incorporate third party data to create more targeted offers (e.g., which customer segments have high industry spend?).

To leverage these expansive data sets, retailers will need to invest in tools to rapidly uncover opportunities, understand which campaigns work best, and craft more effective strategies. Iterative scientific testing should be part of the process of discovering and continuously evolving the most powerful message, channel, and frequency of engagement with each individual customer.

From large-scale initiatives like introducing new product categories to day-to-day marketing campaigns, apparel retailers need to vet each idea to understand exactly what’s right for their businesses. With the necessary tools and a list of innovative ideas, retailers will be ready to create a winning strategy.

The first step is to understand where your analytics stand today and how they can be improved. The second–to build a funnel of ideas to test in 2016. What better time to start than now?

Written by: Rupert Naylor: Senior Vice President, Applied Predictive Technologies.

Rupert is in charge of the European operations of APT. Prior to joining APT, Naylor spent many years at Bain & Company, working in London, Mumbai, Paris and San Francisco. He started his career in the UK Government, including a position at the Embassy in Tokyo.

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