Fashion tech investment grew 66% during the pandemic

Investment in fashion-related technology has increased 66% during the pandemic, according to research by The Business of Fashion and McKinsey.

The report found that the value of the 50 largest investments in fashion-related technology over the past year, whether through fashion retailers or companies that sell products and services to fashion-related businesses, increased 66% to $16.2 billion since 2019, indicating an increase Capital invested in technology in the fashion sector.

According to The Business of Fashion and McKinsey, about 55% of these investments were directed towards e-commerce technology, while the rest was mostly put into payments technology, technology, buy now, pay later, and social commerce.

This was closely followed by investment in reselling technology, supply chain and logistics management, non-fungible tokens, and virtual reality companies.

Imran Amed, founder and CEO of The Business of Fashion said: “The pandemic has reinforced the vital role of technology in the fashion industry, particularly in relation to e-commerce adoption. But now the industry must lean more towards new technologies by experimenting in the metaverse, and embedding flows of Working fully digital across their organizations and investing in tracking tools to help them reach their sustainability goals. Those who choose to wait on the sidelines risk being left behind.”

Covid-19 has accelerated some of the technology trends that the retail sector was already experiencing, such as the increase in online shopping, and brands of all kinds began to use technology to beat the pandemic and meet the increasing demands of customers.

Investment in technology across the fashion sector is expected to increase further over the next eight years – The Business of Fashion and McKinsey said 2021 saw companies invest between 1.6% and 1.8% of their sales in technology, which is expected to rise to between 3% and 3.5% by 2030, and suggested companies already using artificial intelligence (AI) for automation and customer engagement could see an 118% increase in cash flow by 2030, or 13% for those just implementing those changes.

Areas to invest in

The report highlights some of the areas that retailers or retail suppliers may look to invest in over the next 10 years, including the metaverse, personalization, connected stores using artificial intelligence across the supply chain, and tracking technologies such as blockchain.

The metaverse is a popular topic in the retail sector with experts speculating how it could offer a more sustainable future for some retail sectors — The Business of Fashion and McKinsey said fashion brands that take advantage of opportunities in the metaverse could earn about 5% in revenue from These technologies are from now until 2027.

The report found that 30% of the $110 billion spent on virtual goods in 2021 went towards virtual fashion – but growth in this space depends on consumer adoption, as well as the pace of technological advancement, with the report stating that 78% of customers have experienced virtual worlds and were Shopping has missed face-to-face interaction.

The biggest opportunity for fashion in the virtual world lies in the younger generation visiting virtual worlds and using social media – about 70% of younger consumers in the US said their digital identity was important to them, and The Business of Fashion and McKinsey predict sales could grow “forms in online gaming to $70 billion by 2024.

More than 70% of customers now expect a personalized experience when interacting with brands, such as personalized recommendations, and roughly the same amount would be disappointed if a personalized experience was not offered.

Business of Fashion and McKinsey technology has allowed customers of all types to have more access to a personalized brand experience where it was previously more likely to be provided to luxury goods customers, with salespeople manually recording interactions and feedback about customer preferences.

Customer expectations were already high before Covid-19, with customers switching between brands if they didn’t get the experience they were expecting, but the pandemic has made customers more demanding.

With restrictions loosening, customers are starting to return to stores with their newly acquired digital expectations. Both the Business of Fashion and McKinsey noted that technology such as single dataset and artificial intelligence will help guide a single view of the customer, connecting online and offline experiences.

The report found that across Europe more than half of customers still wanted to shop in a physical store, and that if technology was involved in that experience, customers would spend more time in the store.

A McKinsey survey conducted in 2020 found several reasons why customers want and don’t want to visit a store, and the proposed technology could be used to address pain points highlighted by customers as well as further strengthening the reasons why consumers visit stores as a start.

McKinsey’s 2020 research found that half of people avoided visiting stores because it took too long, but 50% of consumers also said the reason they visited stores was because they needed an item without having to wait.

A fifth of customers go to stores because the delivery and return policies of online shopping are inconvenient, and 60% said they want to be able to touch and try products before they buy.

The connected store, or physical locations that are adapted to provide experiences rather than just buying, is not a new premise, but has been accelerated by the pandemic, with retailers now looking to adopt technology such as mobile apps, QR codes, RFID tags and social media integration.

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