The Future of Fashion Retail
We all know that fashion changes over time but what about the business model for fashion retailers? For a long time, it was a simple process. Customers go to a store, try something on and hopefully make a purchase. However, this is no longer the case as online shopping and subscription and rental services allow customers to shop from the comfort of their home. While the rising consumer activism has meant that customers aren’t always willing to support a company whose ethics do not match their own. In this episode, we speak with with Joe Mimran, the co-founder of iconic fashion brands such as Club Monaco, Joe Fresh, Pink Tartan, Caban, and Alfred Sung about what the future of fashion retail could look like.
Melinda: Hi, I’m Melinda and you’re listening to “Think Retail.” Today we are recording in the Purolator Podcast Studio at the Retail Council of Canada STORE 2019 conference here in Toronto.
We all know that fashion changes over time but what about the business model for fashion retailers? For a long time, it was a simple process. Customers go to a store, try something on and hopefully make a purchase. However, this is no longer the case as online shopping and subscription and rental services allow customers to shop from the comfort of their home. While the rising consumer activism has meant that customers aren’t always willing to support a company whose ethics do not match their own.
Today we’re speaking with Joe Mimran, the co-founder of iconic fashion brands such as Club Monaco, Joe Fresh, Pink Tartan, Caban, and Alfred Sung about what the future of fashion retail could look like. Welcome, thank you so much for joining us.
Joe: Thank you.
Melinda: Can you start us off by telling us a little bit about yourself?
Joe: Oh my God, that’s a long story. I don’t know if we’ve got enough time on this podcast.
Melinda: Well what are you doing now?
Joe: Oh, what I’m doing now. I’m doing many different things now, there’s sort of three legs to sort of what I’m doing. One of them is I have a consulting business, so I consult on a bespoke basis with very large retailers. So, Staples is one of them, Kroger is another by way of example, and I go in and help them on either repositioning, product development, product sourcing, category management processes, anything to do with product design, branding, packaging I help them with. But I look at it more from a retail lens of being an actual operator and being an actual product developer sourcing individual as opposed to just coming in sort of giving a fix and then walking away. So, I get very hands-on and I build a team around these projects, and they usually last anywhere between two years and four years. So, they’re substantial projects.
Joe: So that’s one leg. The other leg is Gibraltar Ventures. I’m chairman of that, it’s a venture fund and we invest in early-stage companies. We don’t invest in pre-revenue. So, we look at different industries. We started off in the tech industry, we started with a few investments there and now we’re moving more towards consumer-facing and we’ve just made a bunch of different investments there. One of them which we took 100% ownership of was Tilley Endurables, which is a great Canadian brand, so we’re looking to reposition that company and that’s really exciting, they have such a long-standing heritage. And then I’m also involved in the cannabis industry, I sit on a couple of boards, sit on the Canopy Rivers board and on the Khiron board.
And we just bought a company called Pivot Pharmaceuticals which has some really interesting IP around the consumption of the CBD oil and how to take the oil and make it more, I would say, bioavailable and certainly in terms of onset, controlling onset. These are great sort of pharmacy guys who have come up with 16 different patents, and they’re to be used in beverages, creams, sublinguals, all of it with much more effectiveness than what is currently available in the market. So, those are the things I’m involved in now.
Melinda: Wow, that’s quite a lot of really different stuff, that’s so interesting.
Joe: Yeah, it is.
Melinda: You’re known in Canada, though, for your career in fashion. And a big question to start you off with is, what would you say, since your career started to now, what would you say the biggest change has been for the fashion retail industry?
Joe: Well, I mean, there’s no doubt that it’s been the movement of shopping digitally, and that has been a tsunami for the industry. You know, it’s interesting, everyone said when it first came out, that, “Oh, there’s no threat to apparel because apparel people have to touch it, they have to try it on.” And I think the number two spend online is now apparel. So, it’s had a very, I would say pretty seismic effect on the industry itself. And I think across almost every retail platform, all bricks and mortars have been under siege ever since digital has come our way. And that’s a common theme. So, now what do we do?
Melinda: Absolutely, yeah.
Joe: I think that becomes the next big question, is how do you navigate in today’s day and age? And where does bricks and mortar play a role?
Melinda: And what about independent brands or brands like M.M. Lafleur or Warby Parker that started online and maybe they open up a little shop here. Do you see this is a great opportunity for them? Is this a trend that’s going to continue? Do you think they’re always going to have to then open up a store?
Joe: Yeah. So, native brands have an advantage over bricks and mortar brands because their consumer sees them as hipper just by virtue of the fact that they started there. And what I think a lot of e-commerce businesses find out after a while is that it’s almost as expensive acquiring a customer through digital as it is through bricks and mortar. So, that’s the first thing. There’s a sort of an economy there, if you pay the rent at Yorkville, you might get more customers by paying that rent than you would by trying to capture them, especially as online is getting far more competitive.
Melinda: Of course.
Joe: So I think there’s that aspect to it. I do think that you will see more and more people from the digital world wanting to come into the physical world because they want to manifest their brand physically, they want to see it physically. I think people want to interact with the brand in a physical way at some point. The advantage they have is they don’t have a legacy of, you know, 1,000 stores. So, they can pick and choose their locations much more carefully because they’re so digitally competent. Their omni-channel is sometimes more evolved than some of the legacy retailers. So, they can have smaller stores in many instances, some of them have opened up showrooms instead of full outlets. So, they’re attacking it from a very different perspective than a traditional retailer would.
Melinda: When we’re talking about the role of the physical store, and we’re talking about connecting that, is there something that they should be paying attention to first, if they’re trying to get what these other brands have got just naturally or more organically?
Joe: Are you referring to the traditional retailers?
Joe: The traditional retailers have a bigger challenge. First of all, they’ve got to deal with the portfolio of stores they currently have, right? So they’ve got to deal with that. Then they’ve got to deal with how they get themselves up to speed digitally, and then how do they turn themselves into an omni-channel experience because, at the end of the day, people want to have the seamless experience between physical and digital. And so, there’s a lot of work they have to do on infrastructure and that’s the other issue. They’re not building infrastructure from a small beginning, they’re trying to change infrastructure for a large corporation or a large group of stores, which is far more difficult and more expensive. The capital that you’ve got outlay in one fell swoop versus sort of building the right infrastructure.
I think it’s very interesting because infrastructure is a very big part of being successful as a retailer. You’ve got to have the ability to really service your customer, get the inventory to the right store at the right time, the right colors and the right sizes and all of that have to get done in a seamless way because the consumer today also doesn’t want to wait for anything. If they wait more than five seconds, you know that you can lose them. So, imagine their attention span has gotten to a five-second point in which you can disappoint a customer. How many customers today will go into a department store or go into a large store and not find the service they want; they will just plunk their stuff down and leave.
Melinda: Yeah, that’s absolutely true.
Joe: And I think that’s the big challenge to them.
Melinda: It’s like having to go up behind the walls and replace all the plumbing and the electricity.
Joe: It’s really difficult. It’s sometimes easier to just build a new house than it is to renovate.
Joe: Whoever has renovated knows.
Melinda: Yeah. So, you’ve had experience working within lots of different retail formats, different sizes, different locations, different settings. Are there some common factors that are essential no matter what the format is?
Joe: I mean, the first one is great service. The second one is great visual presentation. The third one is product that resonates with the consumer.
Those fundamentals really don’t change, with everything that’s going on at the end of the day, it still boils down to the right product and the right place for the right customer. Universal, it never really changes. Yes, there’s all this upheaval, I was talking this morning about, or maybe not this morning but anyway, Deciem is a great example. When you go into their store, their store is not a large store, it’s not a particularly evolved retail concept, it’s not an expensive fixturing model. It’s pipe wracking, It’s got a great message tiling, but the product is great, the proposition is unique. It’s almost because it’s not so polished it actually resonates more with consumers. It’s authentic, it’s got all of the right elements to be successful, but those elements haven’t changed.
Melinda: It’s easy though to get distracted when there is a lot going on, it’s hard sometimes to just remember.
Joe: Right, what the basic principles of good retailing are.
Melinda: So, I’m going to talk a little bit about a few trends that are happening within the retail industry. One of them are subscriptions and rental. You’ve been able to rent a luxury gown or purse for quite some time, but now Anthropologie and Urban Outfitters and some other more everyday wear are getting in on the action. I wonder what your thoughts are on this topic?
Joe: Well listen, I think there is a trend that is in the market now which is about recycle and reuse. Anything to do with that trend is important, it’s becoming a big industry and people are looking at different ways to try and take advantage of that. We have one investment in a company called LXR which sells vintage handbags online and in-store. And we think it’s sort of the perfect item to sell because it’s what you want. You know, we’re not remaking anything, we’re not wasting anything, nothing’s getting destroyed. So, how do you take these items and bring them back to life, which I think more and more consumers are very interested in how people are consuming, how we are all consuming. And I think because of that this will continue to be a big trend.
Now, renting clothing is not a new idea. I mean, Syd Silver used to rent tuxedos 35 years ago. It’s like, everybody thinks, “Oh, is this such a new idea,” and it’s really not. It’s like now when you see a multi-branded store, people go, “Oh, yeah, it’s a multi-branded store.” Well, every store used to be a multi-branded store like 40 years ago. It’s kind of funny how, you know, you think things really change but they don’t really, I mean, they change but they don’t change and it’s always about trying to find the sweet spot. The sweet spot between what the consumer is really looking for and how you can deliver that to the consumer. And everything gets tired over time, every strategy ultimately fails, every strategy ultimately fails. So, you’ve got to be always looking for what’s new? How do I refresh? How do I connect with the consumer? What’s the consumer really looking for? Are they looking for stuff or they’re looking for an experience? Are they looking for connection or are they looking for, I don’t know, the next bottle of water?
So, I really think that the consumer is more complex today, but the principles are the same.
Melinda: And you mentioned environmental concerns, and they’re becoming more important to today’s customer. How important is it for fashion retails specifically to embrace this new sort of consumer activism?
Joe: I think for retailers who are involved in the fast fashion industry, it’s a real challenge because it costs more to be more responsible. And when I say more responsible, I’m talking about at the most extreme end to being more responsible. So, this is like closed loop, all my fabric is going to be recycled fabrics, I’m going to ensure that the recycled fabrics that are used are from recycling of product that’s already been out there. And I’m going to also ensure that my product is recyclable. So, this is an expensive process and I think that fast fashion will have a hard time getting their arms around that, if they want to deliver the kinds of pricing that they’re currently delivering. Now, most fast fashion companies do follow very strict social responsibility and lot of consumers don’t realize how much work fast fashion companies actually put into that aspect of what they do.
They also get a very bad rap because they make clothes in low wage countries. And westerners don’t believe that anybody should be working at that wage level. What they don’t understand is if they don’t have those clothes to make, then there may be no wages for them. And the fashion industry has always been the wedge for many of these countries to actually lift themselves out of poverty. And because women, in particular, get affected by this because women are the greatest part of the workforce in these countries. But I’ve seen it, you know, going back to Japan, where they used to make clothes and they got too expensive. And then it went to Korea and it got too expensive, then went to China and now it’s getting too expensive. And now it’s in Bangladesh, eventually it will be too expensive in Bangladesh. These countries will pull themselves out and they do it on the backs of the apparel industry and the apparel industry takes a real rap for this.
But yeah, I think social consciousness is a really important aspect. I think we should all take it very seriously and look to improve conditions everywhere. But consumers will have to pay more if they want to be totally, completely ethical in the way that they perceive their shopping should be. And so there’s a whole market for that, there’s a growing market for that. I believe that there’s a big opportunity in that area and there’s a lot of people pursuing it now and doing it quite well. And consumers will pay more and they’re happy to pay more.
Melinda: Yeah, because there’s always going to be somebody who wants to buy that shirt for $15 that they’re going to wear the one time to that one party. And what about technological advances?
Joe: There’s a lot of research being done now in that area. There’s a company in Canada by the name of Myant, who have been a leader in this area where they’re trying to embed technology right into the apparel. They hold many, many different patents. Tony Chahine, who’s the founder of the company, a great entrepreneur, really has been steadfast in pursuing that direction. He’s working with some of the great companies in the world, like Nike and Lululemon and some of the others in developing products. And also working with the industrial industry because he’s got clothing that will heat up in very, very, very tiny power cells and product that will measure edema in your legs and your ankles, and T-shirts that will be able to take heart impulses on an ongoing basis. And so, he’s developing lots of this product and it hasn’t taken hold yet.
I’ve seen certain companies trying to introduce it, you’ve got smart-tech in sneakers that they’ve been talking about, which will measure the number of steps and intensity, and tiredness, and all of these things. But I still have yet to see it being broadly adopted in clothing. I think it’s coming. I think it’s still a bit early. I started a cannabis company in 2004, it was the first public cannabis company in Canada, with myself and two other partners. And what was interesting was the market wasn’t having it in 2004. It morphed into a biotech business but timing is everything.
Joe: Timing is everything.
Melinda: So, I’ll ask you one last question. Are there any other big trends that you foresee impacting fashion retailers in the near future?
Joe: I think we’ve touched on a lot of them. I think this notion of consumers voting with their wallets on social issues is going to become a stronger and stronger trend. I think the younger generation, in particular, is going to be very interested in who their dollars are directed to, and what good is that company doing both from a social perspective and environmental perspective. And I think that will continue to really become a huge trend. I do think the influencer trend continues to be getting stronger and stronger. This recent deal that Louis Vuitton did with Rihanna and Fenty is really a harbinger of things to come. That will continue to be, I think, a very big trend and will alter branding forever.
Melinda: Well, thank you so much for being with us. It’s been a great conversation and such a pleasure to meet you and to have you join us.
Joe: Thank you, I appreciate it.
Melinda: The right product, in the right place, for the right customer. It sounds so simple, but we all know how much it takes to get there. One thing I’m really reminded of speaking with Joe, who has really hit home run after home run in his career, is that although trends and new technology changed the way brands do business, the fundamental principles of good retail remain the same. I also found it interesting that he believes that every business idea will eventually fail and maybe embracing that uncertainty has been one of the key factors to his success.
I hope you enjoyed our conversation with Joe. It’s too bad we only recorded audio because he didn’t disappoint and was dressed impeccably. Thanks for listening.