Get Ready for the Great Fashion Tech Acceleration

Updated: Jun 1

By Business of Fashion


This article was published in Business of Fashion May 4, 2022.This article first appeared in The State of Fashion: Technology, an in-depth report co-published by BoF and McKinsey & Company.


In 2021, fashion companies invested between 1.6 and 1.8 percent of their revenue in technology, on average. By 2030, that figure is expected to increase to between 3 and 3.5 percent. Indeed, after a steady, decades-long technological ramp up focused on the digitisation of customer-facing interactions, fashion technology advancements are now accelerating across the entire value chain. With widespread automation and sharper AI-driven analytics, technology is eating fashion — from internal processes to customer experiences.

Why is this happening now? As experts point out, in the next decade we will witness more technological progress than in the past 100 years.


By 2024, AI-generated speech could power more than half of all human interactions with computers, while 50 percent of work across all industries could be automated by 2025, both with deep repercussions for the skills companies will need. Meanwhile, more than 75 percent of enterprise-generated data will be processed by cloud or edge computing, improving website and app loading times and enhancing customer experiences. By 2030, more than 80 percent of the global population is expected to have access to 5G networks, enabling faster connectivity and data transfer across Internet of Things devices.


Meanwhile, fashion consumers’ digital adoption, which was cemented by the pandemic, is set to endure. On average, people spent nearly 4 hours per day on the internet on their mobile phones in 2021. Of the customers who made the move from offline to online shopping channels in 2021, 48 percent said they did so because of the Covid-19 pandemic, 27 percent cited convenience, 11 percent cited product availability and a further 11 percent cited promotions. The pandemic also increased fashion customers’ digital interactions with brands, with 72 percent of customers reporting they interacted with brands online in 2021. In the year ahead, this is expected to stabilise at 66 percent on average.


Companies that leaned into technology to weather the pandemic and other recent challenges learned valuable lessons for excelling in today’s, and tomorrow’s, digital ecosystems. Those that have embedded AI technologies into their businesses to increase operational efficiencies and improve customer engagement could realise a 118 percent cumulative increase in cash flow by 2030. For companies just starting on this journey, implementing AI-driven initiatives between now and 2030 could generate a 13 percent increase in cash flow. Laggards with no such initiative before 2030 should expect a 23 percent relative decline.


Now, fashion executives must lean into technology to not only grow their businesses and optimise profitability and cash flow, but also to address the industry’s most pressing challenges — from hitting ambitious sustainability targets to de-risking their supply chains.

Thus, while a significant proportion of the industry’s investment in technology up until now has been directed towards e-commerce, digitisation of internal processes is now also moving into focus. The top-three areas in which fashion executives plan to make digital investments between now and 2025 are personalisation, store technologies and end-to-end value chain management.


Brands from across segments are increasing investment in AI and machine learning for processes such as demand planning and pricing. Inditex committed to invest €2.7 billion (approximately $2.9 billion) in online capabilities and technology solutions under its 2020-2022 plan, while Nike is accelerating its transformation by investing in digital capabilities such as demand forecasting, insight gathering and inventory management. Meanwhile, LVMH has partnered with Google Cloud to use cloud-based AI and machine learning technologies to enhance demand forecasting, inventory optimisation and personalised services.


Moves such as these are creating a new paradigm for fashion, whereby the science of Big Data, advanced analytics and digital workflows are augmenting traditional creative processes. This transition will need to be underpinned by new talent capabilities, as brands seek to hire more data scientists, engineers and analysts, while also pursuing partnerships and acquisitions.


As fashion executives consider where to focus their attention and direct their resources, we explore five technology-driven imperatives for the industry in this report:

  • Metaverse Reality Check: Virtual goods and extended reality

  • Hyper Personalisation: Data- and AI-led marketing and e-commerce

  • Connected Stores: In-store customer experience with mobile apps and micro-fulfilment

  • End-to-End Upgrade: AI-powered value chain integration

  • Traceability First: Blockchain and tracking technology for sustainability

Decision makers need to prioritise technology investments to seize these opportunities in ways that align with their business goals while preparing their organisations for a hyper-connected, fast-evolving era of the industry. But integrating new technology can be resource intensive, especially if it is not a good strategic fit or lacks useability and thus fails to be adopted by employees. Thus, technology investments need to be made wisely, and directed towards company change management as much as towards the core technologies themselves.


Whatever the investment approach, executives will need to understand their companies’ appetite for change, creating an environment that enables a new digital culture, from factories to shop floors. For those that embrace change the competitive advantages are clear.



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