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Luxury brands are changing how they operate internally to react faster to customers

by Hilary Milnes

Luxury brands, feeling the heat from agile fast-fashion and online-only retailers, are speeding up production processes and reacting quicker to customer behavior by changing how they organize their businesses.

“I know people are sick of hearing about the ‘customer journey,’ but our focus right now is on creating an efficient, on-demand, well-organized customer journey,” said Lisa Pomerantz, CMO of Kering-owned luxury brand Bottega Veneta. “Organizations that are siloed are no longer going to be able to properly reach today’s customer.”

Pomerantz spoke at this week’s Decoded Fashion Summit in New York about the brand’s internal shift to be more accommodating to a modern customer’s needs, including repositioning departments to work cross-functionally and embracing the idea that organizations need to continually be evolving. She spoke alongside Karin Tracy, the head of luxury, fashion, beauty and retail industries at Facebook, who’s worked with brands like Bottega Veneta, Michael Kors and more on how to capture and effectively use customer data.

“Brands need to stop looking at what traditional competitors are doing to succeed and instead look at startups,” Tracy said on stage at the summit. “They don’t have the mentality that’s bogging a lot of traditional brands down right now. Look to them for their agility and their ability to move fast; those are the fundamentals of how luxury brands need to act today.”

It’s not just luxury, either. Fashion brands at all levels are changing how they operate in order to react faster to customer-driven trends, data and behavior. Brands and retailers from Gucci to Kohl’s are narrowing how long it takes to get new product to market, from an average of 12 to 18 months to as fast as four weeks.

“We’re essentially building a fast-fashion business,” said Kate Twist, the chief digital officer at Xcel Brands, a holding company that owns wholesalers including Isaac Mizrahi, Halston and C. Wonder. She referenced the “Zara effect,” which has trained the customer to check back in more regularly for new product, and the faster clip of the current trend cycle.

To accommodate for this shift in customer behavior, Xcel Brands brought on Twist two months ago as its first chief digital officer, and added a budget line for digital technology for the first time, as well, to account for investments in tools like AI software and other data-parsing technology.

The goal is that this data intelligence will touch across all departments, including marketing, merchandising, design and planning, as well as the brand’s retail partners. Twist said retail buyers at the company’s department store partners spend time helping Xcel brands to design and market to their end consumers, hoping to break down the block between retailer and brand data.

“The job of my group is to identify how technology can improve the work of every department in the business, so it’s touching on everyone at once. There hadn’t been that cross-functional element before,” said Twist. “It’s all new and it’s all TBD. But the more risks we take, and the more technology we bring in, the more organizational structures will have to change.”

While it’s not in place yet, Twist predicts those risks could eventually include AI-driven design, meaning that fewer human designers would be needed at the company. They’d primarily be there for a gut check.

As a company that works with wholesale brands, and therefore wholesale retailers, Xcel is bringing the retail merchandisers into the mix from the ground up to help track customer trends and make better product decisions. Other brands, including Rag & Bone and Theory, aren’t as focused on bringing wholesale retail along as they change their processes, and instead are changing how they operate internally in order to be less reliant on those partners.

During the Decoded Fashion Summit, Rag & Bone global CMO Johanna Murphy said that part of the brand’s strategy going forward would be to design new product more frequently and outside of typical seasonal guidelines. These collections would be sold and marketed outside of the wholesale retail structure. And Theory CEO Andrew Rosen has established an internal initiative, Theory 2.0, to modernize the company’s operations by running cross-department projects, including an event series, sustainability practices and capsule collections.

“The 2.0 initiative is run by groups of people in the organization who came together to really own something — people who would never be working together otherwise,” said Rosen in a recent Glossy interview. “I figure if the people inside the company are passionate about what they’re doing, and feel like they have control over it, that will be felt by the customer, too.”