2 Decades Out From A Fashion Oligopoly

Out of sight and out of mind, industry consolidation has been quietly chipping away at the funeral services business in the United States. "Big Funeral" as it is now labelled has seen the sector move towards characteristics resembling that of an oligopoly.

Service Corporation International (SCI), is one such firm sweeping up family owned businesses across the Country. Accounting for more than 23% of the market, these publicly listed companies are buying out "mom and pop" shops, brazenly hiking up prices without so much as a whif of concern from the federal trade commission.

Another industry that could follow in the the footsteps of Big Funeral. Big Fashion.

Asking supply chain chiefs about the futures of household middle market brand names is a rather morbid topic. These fashion companies have fallen out of grace from consumers, despite huge efforts that have been made towards rejuvenation. An elixir of eternal youth might be forever out of reach for these firms. In 20 years, Artificial intelligence powered fashion firms may have eroded at the market shares of these firms to a point of irrelevance. 

The fashion industry's industrialised supply chain has been a great scaler of the sector. Lowering the barriers of entry and powering the innovation of product. Digital technology is fast becoming the great consolidator. If "product is king" then technology is the emperor, the army and the grand palace.

Barriers to entry into the industry still remain low, in large part thanks to a supply chain more visible and accessible thanks to travel and technology. But the right to compete at scale has fundamentally changed.  

This year, Shein claimed an 18% market share worldwide within the fast fashion category. Around 1 in 4 US consumers report shopping at Shein in the past 12 months.

But this is about more than Sales. The technology behind a Temu or a Shein take habit forming features from today's social media heavyweights coupling these with a omnichannel experience as soon as a "Shein Drop" lands at a consumer's doorstep. Dopamine with a click followed by a hit of dopamine with the ring of a doorbell. For incumbents, re-engineering their business models to reflect a more JIT / made to order one has proven to be fickle business.

An overdrive of digital investment brought on by lockdowns has proven to costly in the long run as stimulus related disposable income has diminished, the worldwide economy has softened greatly. Fashion firms are going experiencing a type of competition unlike any other sector has experience before. The entry of "industry outsiders" through organic growth has soaked up market share. For incumbents to attempt to shift models to embody the likes of Shein would mean a costly reinvention, no budget exists for a risk so grand in today's marketplace.

Supply chains, responding to changes in demand invested heavily in transitioning production systems from fulfilling large orders to ones that can work with small MOUs. The Chinese AI fashion companies, once heavily restricted from production capabilities in duty free Countries will begin capitalise on production opportunities in geographies less exposed the geopolitical tension. Vendors who reach this level of MOU capability will find their levels of integration with a business like Shein's without interoperability with legacy fashion brands. Trade offs will ensue and commerce will win out.

Physical retail remains the protective moat that holds the A.I. hounds at bay. That moat is drying out, not from drought, nor from an enemy's siege. But from self inflicted wounds. When The Children's Place announced a collaboration with Shein in October of this year, onlookers with their mouths agape saw a shift in an unwritten alliance, the changing of sides. It was supposed to be the Fashion firms versus the great axis of fashion artificial intelligence. A big name setting up a virtual storefront will without a doubt bring a stream of early adopters. Threatening what have been resilient consumer retail shopping habits, window shopping and mall walks.

Returns, a painpoint for fashion firms now can be outsourced to Shein. This is one of Shein's lock-in opportunities. Like a merchandiser is to MS Excel. Shein's superior reverse logistics capabilities wipes out a large cost of doing business. The trade off is the dependency that it will create.

When lockdowns ceased, the industry's physical selling nature rallied. Retail leaders proclaimed loudly across shopping kingdoms that physical shopping experiences will forever trump digital ones. This is largely because they were competing with themselves and their digitally non-native business models. Pure play AI firms are in a different league and they do online far better than any retailer playing the ecommerce game. 

A public firm siding with Shein, a business that has been painted as an imposter and a harm to the fashion industry will catalyse more consolidation. Shein's playbook is akin to that of Amazon, just backed by a superior algorithm, a more nimble supply chain built around high SKU counts and a consumer that regains spending appetite at a faster pace than ever before.

Inditex revolutionised the sector, coining the term 'fast fashion". Firms like Shein represent the next revolution, fast fashion powered by artificial intelligence, just much faster and cheaper. Like Inditex's impact on the industry, Shein's is altering the sector's mechanics permanently. The fashion oligopoly is emerging, look no further than the technology titans dominating in search and social media. Sectors now made up of a few unstoppable firms, with legislation too slow to keep pace. The rolling snowball isn't melting.

Big Fashion is here and brands propping up Shein storefronts could be organising their own funerals.

What is "The Supply Chain Chief"? The NewShore and Spire Executive's exclusive newsletter for supply chain leaders. We'll be delivering weekly hits of industry insight consolidated from our global network of fashion executives. We once wrote weekly under a banner, Sourcing Soundbites. One year later and following a limited writing calendar, we're back.