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The article first appeared on Entrepreneur.
Since the internet spawned the startup explosion, companies of all shapes and sizes have been scrambling to find new areas ripe for disruption, searching for the "holy grail" solution which solves common consumer problems in a more technological and innovative manner than competitors.
However, one booming area of innovation that is often overlooked is the fashion industry.
The global apparel market is valued at $3 trillion and accounts for 2 percent of the world's Gross Domestic Product (GDP), offering lots of space for disruption and innovation. After all, across all consumer demographics, if there is one type of product that we all buy and use in some form, it's clothing.
Startups pay top dollar to flock to busy tech conferences, networking events and trade shows to meet potential investors, interact with clients and get insights and inroads into emerging technologies. However, based on our experience organizing and working with many designers during New York Fashion Week, we have found fewer startups taking advantage of the opportunities for growth, networking and sales offered by fashion week platforms all over the world.
So, with NYFW starting this week, here are three reasons why startups should shake off their misconceptions, and start taking advantage of the potential benefits that Fashion Weeks can offer to their respective businesses:
1. Fashion is an extremely profitable space.
Despite being referred to by McKinsey as "one of the past decade's rare success stories" after notching up 5.5 percent growth year over year, the fashion industry is often overlooked as a profitable space by startups. However, much of this is based on misconceptions about the industry itself.
Many people view the fashion industry as inaccessible, too niche and luxury, and generally closed off to outside input and innovation, but actually the opposite is true.
Designers, fashion houses, brands and vendors all have similar problems as companies in other industries. They want to cut costs, monetize quicker and communicate with consumers better and faster, and they are willing to pay top dollar to startups that can offer them a fix, as reported in the 2017 McKinsey Fashion report, which highlights that fashion companies are determined to "improve performance through leveraging new technologies."
Aside from being a huge moneymaker for designers, brands and organizers, the fashion events industry also pumps a lot of revenue back into the cities that host the world's largest events. New York Fashion Week generated $598 million in revenue for the city of New York back in 2017, which is more than the amount brought in by leading sporting events like the Super Bowl, or the tennis U.S. Open. Out of the 150,000 total attendees, those visiting from out of town spent as much as $2,400 during their trip, which suggests NYFW attendees have funds, and are willing to spend them!
It is also becoming easier to grow, scale and raise money as a "fashion" startup, thanks to an increasing number of fashion incubators and accelerators. In New York alone, you can now find our own Futures, which invests in innovative event-tech startups; the CFDA Fashion Incubator, which is partnered with New York City's Economic Development Corp.; Brooklyn Fashion + Design Accelerator, which is partnered with Pratt Institute; and FIT Fashion Incubator, which is partnered with IBM.
There are also a number of fashion VC funds. New York-based designer Rebecca Minkoff recently launched a venture capital fund dedicated to finding relevant early stage fashion tech startups, and over 2017 we witnessed more VCs backing fashion startups than ever before.
2. There is still a lot of room for innovation in the fashion industry.
While Fashion Weeks are most famous for showcasing top designers' upcoming collections in a dramatic display of runway shows, the fashion industry itself is much more multifaceted. From sourcing materials, to design, to manufacturing, to advertising, to sales and in-store technology, there are countless processes that could potentially be disrupted or improved. And with demand comes opportunity.
The fashion industry is very driven by trends, such as sustainability, social responsibility and emerging technology, all of which offer opportunity to forward thinking innovators. For example, in the last year we have witnessed numerous designers and brands getting involved in wearables, interactive mirrors, see now/buy now applications, and AR and VR integrations that allow people to get a "front-row" view of the runway without physically needing to be in the front row.
On the manufacturing side, we are witnessing more automation, and an increased demand for customization from the "on demand" generation. As highlighted by McKinsey, "consumers have become more demanding, more discerning, and less predictable in their purchasing behavior," which is being "radically reshaped" by emerging technologies.
Despite the glam image of high-end fashion, every designer -- big or small -- still has to worry about costs versus revenue, and maximizing efficiency at every section of the product journey. Even the most famous designers need to go over show budgets with a microscope to keep their cash flow going into clothing production. As such, to maintain a steady flow of production, survival depends on designers' and retailers' adoption of agile supply chains that can process orders at the speed of light, and deliver quickly to keep cash working and not held up in long-term orders and accounts receivable.
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