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Impact of e-commerce, smart manufacturing on fashion industry

DIGITIMES, Taipei

The final day of the inaugural World Digital Textile Forum

The exponential growth of e-commerce, especially during the pandemic, is changing the way the fashion industry works. Furthermore, smart manufacturing could help textile and apparel manufacturers improve operational efficiency and sustainability. This was the focus on the fourth and final day of the 2021 World Digital Textile Forum, hosted by the Advancement Association for Digital Textile (AADT) on Nov. 19.

The last day of the forum featured two experts. First was Paloma Hsieh, the head of business development at Amazon Global Selling in Taiwan. Next was Jill Lai, associate managing editor for DIGITIMES Asia.

Returning to host the final day of the forum was Nicole Chan, chairperson of the AADT.

Evolution of e-commerce in fashion

Hsieh started her presentation by pointing out that 2020 was the first year since the 1960s that worldwide retail revenue dropped. At the same time, retail e-commerce sales witnessed significant growth, benefiting from the new norm as a result of the pandemic. In fact, from January 2020 to June 2020 traffic from online shopping websites worldwide increased by 36.6%.

"By the end of 2020, the total e-commerce sales worldwide was over US$4 trillion, which accounted for 18% of all retail sales," Hsieh explained. It is forecast that e-commerce will account for at least a quarter of total retail sales by 2025. "This is definitely something that cannot be ignored and online is something the industry needs to start focusing on," she added.

Currently, the apparel and accessories sector of online retail holds the second-largest share in terms of retail e-commerce sales in the US at 20.7%. Additionally, the online sale of fashion products worldwide is expected to reach US$953 billion by 2024, at a compound annual compound growth rate of 12.7%.

In talking about apparel on Amazon, Hsieh used the "Amazon Coat" story as an example of social media influence on e-commerce sales. In the winter of 2018, a coat from Orolay, an unknown China-based brand, suddenly became the season's viral "it" coat thanks to social media. Years later in 2020, Hsieh noted that the coat still sold more than 10,000 pieces in two days during its Prime Day sales event.

"The relationship between fashion and e-commerce, that the branding and the brand value could actually come from all the different formats such as KOL and social media, it could all contribute to sales and create trends," Hsieh said. "Nowadays the brand value building is a lot of different pieces. Value for money is as important as value for quality."

Hsieh also identified several changes in fashion shopping trends. She pointed out that consumers now put more emphasis on product practicability and functionality. Consumers now expect product design to meet their actual demands as opposed to simply looking good. Today's shopper is also paying close attention to social media and is easily influenced by popular social media trends. Furthermore, new stay-at-home, work-from-home and healthy lifestyles are increasing the demand for home dress and sports and healthcare-related products.

Regarding how Amazon Global Selling supports sellers and their products, Hsieh explained unlike regular crossover commerce where a product goes from factory to exporter to importer to distributor to the retail channel to consumer, manufacturers can go direct to the consumer through Amazon.

One of the benefits of this is being able to collect first-hand customer feedback to better understand consumer needs. "That is something that is very important and all echoes back to sharing quick reactions and how to stay close to your customer," she said.

"Eliminating the middle channels, we have invested a lot in seller support in the past few years. In the last year, alone Amazon Global invested over US$18 billion to create over 250 new tools and services to support our seller partners in four different areas: selection, operations, compliance and shipment," Hsieh explained.

When it comes to Taiwan-based sellers, Hsieh pointed out that the number has tripled on Amazon Global Selling since 2017.

To support sellers in and from Taiwan, Amazon Global Selling has established a brand incubator in Taiwan to prepare the next generation of e-commerce talent, support seller needs, and support Taiwan brands. Hsieh also talked about the service provider expansion, which supports Taiwan sellers for logistics, taxes and customs. "This is something we have been investing in and working on in the past year, and something we will continue working and focusing on in the coming years. Our vision is to empower Taiwan brands to expand globally. This includes our fashion brands and apparel," Hsieh added.

Accelerating the manufacturing digital journey

Lai shared information gathered by DIGITIMES regarding how manufacturers in Taiwan have accelerated their digital journeys. The survey, which was conducted earlier this year, surveyed 627 manufacturers, all of which have over 100 operators in their factories. Industries surveyed include technology and non-technology sectors and focused on the automation and intelligence level of these manufacturers.

"We found that only 17% of the companies have over US$360,000 investment in intelligent projects. That includes IT, automation and intelligent equipment," Lai said. "The rest of the manufacturers, especially the smaller ones, their budget is usually lower than US$36,000."

While these numbers are slightly higher than last year, according to Lai, this shows that the attitude of small manufacturers has become more conservative; however, the overall budget for intelligent projects this year is still higher than last year.

The survey followed the ISA 95 standard and used the enterprise control system hierarchy model, which divides the information system of smart factories into 5 levels. Levels 1 and 2 deal more with the automation of individual manufacturing equipment, level 3 production and operations, level 4 production support, and level 5 corporate governance.

Overall, adoption of levels 1,2 and 5 are higher than levels 3 and 4, the survey found. This shows that adoption of automation equipment, network data acquisition and ERP systems is higher, but lower for systems such as quality inspection, defect detection and supply chain and warehouse management.

Lai suggests that manufacturers find a way to integrate these 5 levels. "If we can form a really good integrated system, I think we can form a good business model," she opined.

Lai also pointed to the fast adoption of new technologies such as AI, 5G, IoT and data analysis. While the adoption of edge computing and AI is starting to pick up slowly, she noted that industrial robots are now widely adopted with cobots and automated guided vehicles coming next.

In terms of digital transformation, the survey found that 32% of companies have set up full-time projects for it. On the other hand, 41% have yet to start digital transformation projects. "From the survey, we tried to understand what is the major obstacle for digital transformation, especially for manufacturers. This year, the major obstacle is technical talents. But last year it was insufficient budget and resources," Lai highlighted.

So what really triggers companies to do digital transformation? According to Lai, the pandemic is a major driving force due to the manpower constraints and demand changes it has caused. As a result, manufacturers are looking to use intelligent services or systems to address these problems. "But I don't think that goes far enough," Lai said. "I would suggest all manufacturers to really be determined, to be consistent in their digital journey, no matter if the market demand right now is increasing or decreasing. It needs your determination to make it happen."

Reducing waste and increasing efficiency

Hsieh believes that digitalization is definitely something that could help reduce waste. "I think digitalization here goes beyond data analysis and beyond inventory management," she said.

Going global is one suggestion Hsieh has for not only expanding channels but reducing waste. "When we talk about fashion and apparel, there's seasonality, but when you go global, the global market voids your seasonality. There is always winter somewhere on earth, and there's always summer as well. Going global provides a marketplace where you can promote your product year around. This is something that has been a nightmare for the fashion industry, but e-commerce can help with this," she added.

Lai explained that addressing levels 3 and 4 of the hierarchy model could help address inventory waste issues. "Level 3 is more about production automation and is driven by data analysis so that manufacturing can ultimately do quality inspection and defect detection...Level 4 is an extension of level 3. For example, scheduling automation and how to help predict demand...If you want to check the stock status, you need to know about your warehouse automation, and if you want to make your inventory in time, you need to make your supplier understand your information. So everything needs to be clearly integrated."

Wrapping up the first annual World Digital Textile Forum

To close the final day of the World Digital Textile Forum, Victor Chao, CEO of Frontier.cool, the event co-organizer, stated that he hopes the forum can help brands and suppliers enter the new world of digital textiles.

"Frontier's role is to accelerate this process to enable the new world of digital textile to take shape more quickly and allow more people to enter the new world of digital textile without fears or barriers," Chao said.

On behalf of the AADT, the day's moderator Nicole Chan closed the event by emphasizing the benefits of digital textiles on zero-waste fashion, sustainability and customization.

"Only by deepening the digitalization of textiles and expanding digital textile applications horizontally will we be able to truly bring fashionable textiles to a new level," Chan concluded.

The final day of the inaugural World Digital Textile Forum

The final day of the inaugural World Digital Textile Forum focused on the digitalization of the fashion industry, covering smart manufacturing trends related to fashion e-commerce and the emergence of the digital fashion textile ecosystem.