The cycle of business has always moved in five major steps: Prediction, Creation, Supply, Sales and Profits. With cutthroat competition, effectively forecasting demand has emerged as one of the key elements in the success of apparel retailing, as low inventory of a hot selling product is a loss in opportunity while bulk of an unwanted design, leads to significant markdowns and inventory costs. The concept of ‘crowdsourcing’, being used by retailers like GAP, Walmart, Levis, Nike, Target, Burberry to guarantee demand for their products, eliminates the cost of ‘prediction’ and adds it to the last step of the business cycle – profitability.
When Zara sales bypassed that of the iconic American brand GAP in 2008, a new business model emerged. Zara created a unique supply chain wherein instead of offering products that take a year to plan and sell; Zara directly delivered a product that the customer demanded. The importance of ‘demand based’ products has magnified overtime and the most recent addition to the trend is crowdsourcing, the process of analyzing the consumers demand to create the product. Brands no longer are dictating the fashion scenario, instead they have reached out to the consumers and are asking them what they would like to wear, in the “buy now, wear now” scenario prevailing in the markets globally. Again with, web and social media affecting the way people shop, consumers now have more direct impact on the items they purchase, either through customization or “crowd-sourced collections”.
One of the biggest challenges that the designers and retailers have always faced is deciding how much to produce and what to produce. In the past, such decisions usually relied upon gut feeling and the sales of the previous seasons, but even the best made mistakes, crowdsourcing helps these retailers to know what the customers like in advance and determine orders for the regular sourcing channels down the chain.
As per a recent survey, 65% of crowdsourcing businesses and websites come from the USA and 12% operate in European countries, such as Holland and Germany. 64% of crowdsourcing initiatives that focused on customizable products and competitions were also executed in the US. Crowdsourcing technique users reported a 75% increase in revenue last year to $ 376 million, up from $ 215 million in 2010 and $ 141 in 2009, according to a report by crowdsourcing.org.
Success stories
Designer Derek Lam, used eBay’s 90 million strong global community as a way to trial the brand’s diffusion line in 2011. The ready-to-wear collection on eBay was placed for votes from the audience and the selected designs were available for purchase at a fixed low-price, exclusively on the site. New label, Velvet Brigade, has taken the concept to a larger scale, with all their products being designed by young designers, who submit their fashion drawings for the public to vote on, the sketch that receives the most votes is manufactured and the brand is planning to get into retail after its immense success online. Well-known denim brand, Wrangler, has invited its fans to work on their designs on Wrangler’s new line called Next Blue. Burberry launched a website, The Art of the Trench, showing everyday people wearing Burberry trench coats, the exercise of inviting photographs of people wearing their trench coat, was a platform to generate more sales for the style. ModCloth, a $ 15 million online clothing retailer based in Pittsburgh, has an initiative, called “Be the Buyer” that encourages the customers to vote online on clothing samples sent by its vendors and if a garment receives enough votes, the brand orders for the same and then sells the item.
[bleft]One of the biggest challenges that the designers and retailers have always faced is deciding how much to produce and what to produce. In the past, such decisions usually relied upon gut feeling and the sales of the previous seasons, but even the best made mistakes…[/bleft]
Fashion has always been aspirational and exclusive, but now fashion brands are being pushed to be more attainable and accessible. The Creative Factory app, created keeping crowdsourcing in mind for brands, enables the shoppers to design clothes, accessories and shoes with social media integration, giving the retailers and manufacturers a significant competitive edge in the marketplace. JCPenney providing its customers with the same allows minor customizations in already existing designs as per the choices of the customer.
Walmart’s The Get on the Shelf (GOTS) promotion has already generated over 250 million votes for more than 4,000 products vying for the chance to get on Walmart shelves. On the other hand, GAP failed to understand the power of crowdsourcing, going miserably wrong with their logo design. Companies are using crowdsourcing to gain a better understanding of their consumer and to use the consumer’s ideas directly in their creative process.
One of the main reasons, of the concept gaining momentum, in the past few years is that everyone in the supply chain from manufacturers to retailers, are trying to curb and minimize the wastage of available resources. Further, exclusive privileges given to the participants or winners in the exercise, which includes pre-order discounts and online store credits, attracts further attention of larger population of potential clients and brand loyalists that could generate higher sales in future as the consumer feels connected to the brand. For the manufacturer, crowdsourcing is a process that could result in bulk orders as the buyers are sure that the product will sell. And so, the concept of letting the customers telling the company exactly what they want is helping drive sales and production.
