Loose Threads 2016 year in review: six trends at the intersection of fashion, technology and commerce

2016 was quite a year for fashion, technology and commerce. This was the year where the reality of different ventures, channels, and theses started to become clearer, as we moved on from the pure hype cycle of endless venture funding and direct to consumer brands popping up left and right. There was plenty of great stuff that happened in this space, and there were a fair amount of reality checks as well. What follows is a review of the six major trends that came to fruition this year.

Ongoing questions of scale

The most interesting questions for me this year revolved around scale, and how brands scale successfully and unsuccessfully in the fashion industry. This topic was the focus of The Scale Series, a five part look at the current environment for scaling brands and how some are succeeding and others are faltering. Questions of scale are some of the most complex ones out there, especially since growth is at the core of capitalism itself. Even so, there still seems to be a lot of soul searching that brands need to do to figure out what type of scale is right for them. This question is an ongoing one, but there is increasingly more clarity around what is working and what isn't compared to the past few years.

Posts:

The Scale Series

Dumping gasoline on the fire

In the same vein of scaling a brand, we continued to see modern brands rapidly spend money on customer acquisition this year. Some are succeeding (Warby Parker, Outdoor Voices, Casper, Glossier) while others flamed out, most notably Nasty Gal. Going into 2017, I would expect brands to either double down on their acquisition spend if the math is truly working, or cut it off quickly as investors should be increasingly impatient if the business just fundamentally has poor unit economics.

As I've written previously:

Money is like gasoline. It works to blow up something that is already kindling. But if you dump gasoline on an unlit fire, you just end up wasting lots of gasoline.

Posts:

Nasty Gal: the dangers of ephemeral growth and focus

There is no right way to build a brand

One of the more interesting discoveries this year was the increased visibility of successful wholesale brands. I wouldn't call this a reemergence, since the brands existed while everyone was chirping about direct to consumer brands. But I've definitely never appreciated and understood wholesale brands more than I do today.

The decision about what channel to build a brand on should come down to two questions: 1) What is the goal for the brand?; and 2) What's the team's skill set? If the goal is to build a mass market brand and the team is full of marketers and technologists then direct to consumer might be the right move. If the goal is to design beautiful and luxurious clothing and the team is full of designers and fabric artists, then wholesale is probably the correct route. Vetements and Garrett Leight are two brands that stand out, since they both invested in the model for the right reason. If you're going to start a brand, think through these two questions a lot before deciding how the brand will sell its product. Misunderstanding how each these channels works can be perilous.

Posts:

Vetements and the exaggerated death of wholesale

Vetements follow up: Kanye, staying in stores longer and selling online

Loose Threads Podcast: Pioneering Wholesale in a Direct to Consumer World — with Garrett Leight

"Cutting out the middleman"

At the whim of a buyer

Loose Threads Podcast: By Hand, Not by Machine — with Tull Price of FEIT

Amazon continues to dominate on multiple fronts

Amazon probably wins Company of the Year for its continually transformative moves in this space. First, Amazon continued to capture the majority of new spending in online commerce more generally. More specifically in fashion and apparel, the company expanded its private label offerings, as it works to eat up much of the basics market. Luxury brands continue to hold out from selling directly on Amazon, but there is so much to capture besides luxury that Amazon has plenty to stay busy with until brands change their minds.

On the logistics side, Amazon continued to make major gains, ramping up Prime Air, its cargo service, laying the groundwork for a global logistics platform, doing the first commercial drone delivery, not to mention rapidly expanding its fulfillment centers around the world, which in turn strengthens its logistics offering.

I wrote about all Amazon is working on in this space in a piece titled Decoding Amazon's Fashion Ambitions for the Business of Fashion, and it's worth checking out if you're interested in how the company is transforming the space unlike any other.

Posts:

Decoding Amazon's Fashion Ambitions

A Prime misunderstanding: explaining Amazon Prime's success

Loose Threads Podcast: The Fashion Industry Is Not Exactly Broken — with Marc Bain of Quartz

Amazon's success phasing out list pricing is exactly where JCPenney failed

Old retail continues to suffer

Amazon's gains continue to be old retail's losses. Traditional retailers are suffering as they simply aren't conditioned to move sales online and have burdensome retail fleets built for the last decade, not the next decade. These mass retailers continued to suffer from falling foot traffic and incessant markdowns, which make it even harder to sell products at full price. It's not looking good for the incumbents in this arena.

Posts:

From online to offline: cost structures and sunken costs

Macy's, newspapers and Amazon eating the middle of the retail market

Social + commerce

We saw many different manifestations of social commerce this year. On the more innovative side, Snap released Spectacles by sending everyone on a treasure hunt. BuzzFeed launched Product Labs, which puts all of the company's content tools to use to make products that are nearly guaranteed to be a hit with its audience. On the more mundane but still interesting side, buy buttons continued to falter in their current state, but there are some interesting opportunities to revise them on a platform level so they map more closely to how consumers actually buy things. And Instagram still remains a powerhouse for some brands, even though the company barely supports commerce. It's starting to experiment by showing more product and pricing info, but it will important to see what steps the company takes to allow commerce to thrive on the platform level, and skim a tax off of it eventually.

Posts:

Hype vs discovery: lessons from the Spectacles rollout

BuzzFeed Product Labs and the intersection of everything

Ignoring effective frequency: why buy buttons failed

Loose Threads Podcast: Pins, Patches and the Post Office with Charlie Ambler of StrikeGently.co

Thank you!

Finally, I want to say a big thank you to everyone who read or listened to Loose Threads this year. I started the blog when I was figuring out how to build a menswear line, and it's been beyond exciting to see the blog take off in the past year. The depth and frequency of the analysis has continued to evolve. Some quick highlights: I wrote The Scale Series, the most in-depth piece I've ever published. I added a podcast, which has allowed me to have some excellent conversations with people across the industry. I started experimenting with the Cut Ticket for shorter form news. And I got to meet, talk to and tweet with a wide-ranging group of people who are as, if not more, interested in this industry than I am. Additionally, Loose Threads readership has never been stronger.

A big thanks to everyone who tuned in this year and I'm excited to reveal what's in store for 2017.

Richie