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Bernadette Olivier, CEO and co-founder of The Volte

What’s causing fashion giants to topple?

The Australian fashion scene is facing a harsh reality check, with the recent collapse of the local arm of designer label Dion Lee. 

This high-profile closure follows similar struggles for other fashion giants globally, prompting the CEO of a popular luxury brand rental service to shed light on the underlying causes.

Dion Lee, the esteemed Australian fashion label favored by celebrities like Taylor Swift and Dua Lipa, faces a setback as it enters administration. This follows Cue’s decision to withdraw its investment. Antony Resnick from dVT Group is evaluating the brand’s future and seeking new investors. Despite this, Dion Lee’s Australian and online stores remain operational. Founded by Dion Lee in 2009, the brand is renowned for its luxury, body-conscious designs, blending traditional tailoring with experimental construction.

This follows the bankruptcy of other fashion giants like J. Crew, Neiman Marcus, and Brooks Brother. Farfetch, Net-a-Porter, and even Harvey Nichols are now facing challenging times.

According to the rental CEO, the industry is grappling with a double whammy: the rise of online retail powerhouses and a shift in consumer behavior. While fashion enthusiasts were undoubtedly saddened by the news of Dion Lee’s administration, especially considering the brand’s popularity with celebrities like Taylor Swift and Dua Lipa, it appears the writing may have been on the wall for a while.

Is “online trying” the new showrooming?

The fashion industry faces a harsh reality check, teetering on the edge of collapse according to Bernadette Olivier, CEO and co-founder of The Volte, a luxury brand rental service. Olivier points to a confluence of factors driving this crisis:

Bernadette Olivier, CEO and co-founder of The Volte says the fashion industry is in its moment of reckoning teetering on the edge of collapse.  “The rise of TikTok and the increased popularity of Instagram stories and reels revealed new consumer habits,” says Ms Olivier. “Consumers are turning online shopping into ‘online trying,’ often posting their ‘hauls’ to followers to decide which garments to keep while returning the majority. “Retailers have been slow to identify this trend, and report as much as 50% of inventory sold online is returned, with a significant portion ending up in landfill or incinerated due to cost-effectiveness. Retailers are grappling with these challenges, in addition to changing consumer sentiments such as rapid decreases in brand loyalty, increased regulatory costs as governments attempt to curb overproduction and increase supply chain transparency – and the emergence of new Chinese fast fashion powerhouses like Shein and Temu. These new players, with criminally low prices and massive advertising budgets, have left an already fragile industry on the edge of collapse.”

The mismatch in supply and demand, according to the Boston Consulting Group, has resulted in up to 30% of inventory produced never being sold, exacerbating textile waste and costing the industry up to US$210 billion annually. 

“This overproduction not only poses a financial threat but also a rapidly increasing environmental threat globally. Leveraging data analytics and AI to improve demand forecasting can help brands align production more closely with actual consumer demand. Enhanced development of virtual try-ons, accurate sizing, descriptions, and imagery, and using AI to offer personalised recommendations based on previous purchases can reduce returns.Brands must also embrace and integrate with the circular economy. The resale economy is growing 10 times faster than the traditional apparel industry, indicating that consumer demand for circularity is permanent. 

“Part of the integration must allow brands to earn from these new business models, enabling retailers to generate revenue aside from producing and selling more garments.” 

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Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

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