Marta Fryzowska (VRG S.A.): Fashion, AI and the future. Can technology be stylish?
Today no one focuses on having a lot of products in a offline store anymore. It is important that there be the goods that sell. Presented in an attractive, clean, clear way; that the product is well displayed, that this inspires the customer. And most importantly, so that the customers can always find the size they are looking for.
Just a decade ago, the fashion industry mainly seen through the prism of extravagant designs and glamour advertising campaigns. Today, trends are mixed with technology, and style goes hand in hand with the sustainability of the industry. Fashion industry is a powerful driver of the global economy, worth $1.7 trillion.
And the machine isn't slowing down - it's growing by 3.3% a year, creating not only trends, but also jobs for more than 300 million people around the world. At the same time, a powerful new hero is entering the scene - artificial intelligence. AI is revolutionizing every aspect of the industry - from design to personalizing the shopping experience.
According to some studies, in the near future by 2030 AI and could increase productivity in the fashion sector by up to 50%. Plus, this future wears green. Sustainable fashion is not just a fashionable slogan, but a real force. 2 out of 3 people declare an interest in fashion that not only looks good, but also contributes to the well-being of our planet. How is technology changing the work of the fashion industry? Is AI and in what areas is it becoming a must have in this business? Is the fashion industry synonymous with overconsumption or a future leader in sustainable development? Technology and fashion is the theme of my conversation with Marta Fryzowska, vice president of VRG S.A.,
who is actively shaping trends and the future in this sector. I invite you to listen to the conversation. Hi. Hello everyone. Today my guest and your guest is Marta Fryzowska, vice president of VRG S.A.. It's very nice to be hosted in Cracow at your headquarters. Good morning.
Today we're going to talk a little bit about the challenges of the fashion industry. It's a very broad topic and I think familiar to you. To begin with, I wanted to ask you to say a few words about how your situation at VRG is today in the context of the changes that are happening in this market. But also about how you came to the current situation and the position you hold today in the company, what VRG and your brands look like. Tell me about your entire career path in the fashion industry. So maybe I'll start with the company. VRG is a company that operates in two areas, segments: the apparel segment and the jewelry segment. I manage the apparel part
on a daily basis. If you ask me about my roots, definitely my roots are on the product side. I have always been involved I have always been involved in the production, preparation, purchase and creation of the product, which is nominally clothing products, clothes. It must be honestly said that these collections aimed at men. Because that's what my whole career path was like.
Today at VRG, I'm dealing with the process a little more broadly, thinking about the brands we have in our portfolio today. These are Vistula, Bytom, Wólczanka and Deni Cler Milano. I guess you can sum up these brands as ones whose unifying element is that they definitely dress our customers for those most important moments in their lives. And now the whole process involved in the creation of a collection - what I do today - is such a process from the idea to the delivery of the product to the showrooms or the website. The process is long, demanding,
and begins about a year before the product hits the stores. And here we are talking about such big concepts, so-called mega trends, which today suggest what will happen in the market well in advance. Together with a team of designers, managers, buyers, every year we plan collections precisely on the basis of those megatrends. Today, such major megatrends, for example, are related to ecology, to wellbeing or to product quality, and all that, of course, is happening in geopolitics. These are coherent processes and one follows from the other. On the other hand, there are also areas that today are related to the distribution of goods themselves, the stocking of stores, the presentation of goods on e-commerce and, of course, the whole omnichannel, which is also being built today and here in the company is dealing with it.
That is, precisely the correlation of the offline channel, which today still represents the entire enormity of our sales, and the online channel - combining this into one coherent whole, so that for the customer it is actually one space between which he moves seamlessly. Interestingly, this process, in which the product is created, is such a process already really immodestly - international, in terms of the inspiration itself. Designers, buyers, managers go to fairs all over the world, and these are fairs that both concern the trends themselves, quality, but also fairs in the area and e-commerce, for example. As a result, we are inspired very widely to pull these innovations from the market and stay up to date. And I think it has often been said that Central and Eastern Europe does not have its own fashion, and today I can honestly say that the product that we offer in the stores is a product that has international inspiration, that is global, and which, on the other hand, thinking about quality, which is important to us, because we want to be premium brands and so we build our product, is sewn here in Poland, and this also gives us a guarantee of the best quality. Therefore, the process
is very long, from the concept to the actual purchase realized by our customer. And how did your story with the fashion industry begin? Those were very different times. I always laugh that it's hard to tell someone who hasn't built a house how to carry bricks.
I definitely carried the bricks. Back then, in fact, the beginnings were such that we sent faxes, e-mails were such a complete beginning. As for data, we collected data physically by going to the store for analysis. Consequently, you had to collect this data yourself in order to enter it into Excel, for example, and analyze it later. In those days there was practically nothing, we were building it all up. All this know-how
that I have in my head today is definitely knowledge from the ground up, which I gained growing up and maturing in all this acquisition of this know-how. And I think that today I'm at a stage where I don't think there's much that can surprise me very much in this retail segment. But on the other hand, I look at what's happening around us with tremendous humility, because we know that the business, the world, the economy - as history has shown - is capable of changing the trajectory of our development and our points of concentration overnight. Consequently, I am watching, observing and learning what the world brings us, because there is indeed a lot going on here. But I have this sense that these basics are familiar to me, and I've actually gone through all the areas that allowed me me to understand what they come from and where are such key elements in this segment in the fashion industry, where there are such basic laws. For today, it's already a strongly stimulated development by technology.
You certainly know something about it. Before we talk about technology any further, I wanted to ask about these challenges. Because you said there are certain phenomena, such as geopolitics or other issues that are independent of the inside of your business, but which nevertheless have an impact on how you function as a whole group of companies, whether beyond such obvious black swans that everyone already knows about, such as the pandemic or the war in Ukraine. Are there others that the fashion industry knows about and others don't, that directly project the challenges you face? In terms of the challenges are occurring in the market. You mentioned COVID, you mentioned the war in Ukraine - these are indeed such drivers of change that have had an insanely significant impact on our market. But on the other hand,
there are elements that are completely new. VRG brands are brands from the area of, I say such an accessible premium level, such a means to give you long-lasting, good quality, but also accessible and friendly price. Today, certainly such an element that we are looking at, that I am also looking at personally, is the impact that brands from the value for money area or even lower, which are coming to us from Asia somewhere, and for which I have the impression that the Polish market is not quite prepared in terms of rights protection. And therefore, our activities seem even more crucial in this area so that we can be competitive in such a calm, secure way in the market. If we think of Shein, we think of Temu, these are not our direct competitors today.
Nevertheless, they are certainly changing the face of the market and the way the Polish customer buys. And here it seems to me that such a challenge for the industry is to talk about what these types of products carry and, on the other hand, how our VRG products, which are just quality, are meant to last longer, don't wash out, don't change shape after one wash - how their impact on, for example, the environment or ecology is significantly better, and to what extent we today, as those who are building this area of the clothing segment, are able to make the customer aware of what these types of brands carry and show what to pay attention to, which is key to making this market more stable. On the other hand, it is certainly changes in the area of customer behavior itself. Today, customers looking at their smartphone, looking at computer, are dealing with brands from all over the world. This means that our competition is no longer just the brands that are in the shopping mall, but in fact the whole world.
Consequently, it can be said that today we are fighting the whole world and competition whether from the United States, Germany or Japan. And here comes an insanely important element, what to do to make the customers feel exactly the same service, the same support that they feel from the biggest of this market. These are often benchmarks for us, these are the brands we look at and observe precisely in order to build this service most comprehensive and proactive for our customer. The customer today comes to the store, is looking for a certain size, and wants to get it at a certain time, and so we have to definitely deliver it to the customer. Aside from this omnipresent need for constant accessibility, is there anything else you observe in consumer behavior that has changed over the years? Omnichannel itself, that is, that the customer treats the online and offline channel actually as two parallel channels. Today it's the case that some customers and - this is what we see - are inspired online. Therefore, these cards on the Internet, the website
must be attractive and intuitive. They have to show all the best features and attributes of that product in a very precise, defined, easy and fast way. On the other hand, we see that there is portion of customers who, as they get inspired on the website, come to the store, measure and only there make a purchase decision. There are also those customers who come to the store as a showroom, look, touch, analyze whether it is in line with their needs, and finalize online, that is, for example, also through an app. And apps, websites become such a point of huge concentration for us to support the customer in this buying process. On the other hand, we have stationary stores, and today we also know that a stationary store is a quite different from what we had to deal with at the beginning of my career. Today no one wants a lot of products
anymore, just the goods that sell. Given in an attractive, clean, clear way. That the product is well displayed, that it inspires the customer. And most importantly, so that the customers can always find the size they are looking for, because if they don't find it in our store they will probably go to a competitor and make that sale on another company's account.
Consequently, these are insanely important areas that are key to success today. What is your strategy in this context, because of course I also identify with this. If I have a need to buy a suit, I want to buy it already when I actually get to that mall, I want to try it on, I want to choose it that day. But on the other hand, you talk about the fact that stores should not be overstocked, there should be those goods that sell and are in line with the customer's need. Given the seasonality, the constant change of trends - fashion is just fashion - the specificity of this branch of retail, which is not fast-moving, is related to the fact that someone influences the customers.
Someone shows certain trends, and then you have to keep up with them. What does this look like your perspective, strategic supply planning throughout the chain - from suppliers through your warehouses, then the stores. As I mentioned earlier, we start almost a year in advance to build assumptions for the collection in terms of trends, but also in terms of structure. That is, we have knowledge and information about what is selling at any given time, what quantities, what price thresholds. And this we plan well in advance.
Once the goods reach the warehouses, a completely different process begins, that is, the process of stocking the stores. And here we aim to have each salon stocked in a way that corresponds to its potential. We examine potential through the prism of history - what shares of a given assortment are in a store is precisely due to the potential that was generated in previous years.
Today, we focus on studying history and forecasting before shipping what will sell best in this store. And here we are talking both about products, i.e. specific model-colors, we are talking about quantities, the shares of a given assortment group in the store. And the whole philosophy is to stock up in such a way that we sell out this products as quickly as possible, so that we don't have overstocks and out-of-stocks, that is, so that this value of goods is optimal for what the sales potential is. This also correlates with what we talked about earlier - we want to spend purchase budgets in a more efficient way.
As a result, it seems important to have exactly the right amount of goods and the kind of goods in a given salon that will generate the maximum amount of sales and that will lead to the least loss of pieces. We also have such examples that there are stores that sell better expensive suits, and there are stores that will have a higher efficiency on, for example, summer goods, because the location of that store is completely different, and thus the needs of the customer who enters it are different. Therefore, it's starting to become such a puzzle, where we are helped again by technology, precisely Machine Learning and AI. This is a topic close to me, of course. I'm always a fan of talking about how these models that have to analyze so many variables, and in the context of various phenomena that affect sales, are able per product, per store to forecast that potential.
But I'm curious, because you mentioned earlier that at the very beginning of your work in fashion, things didn't necessarily look like that. Well, yes, already data collection was tedious and manual. Today, of course, it's the maturity not only of VRG, but of many companies in Poland that ensures that the data is simply available and is of high quality, making this analysis possible. But do you see any other barriers to technology adoption in the apparel industry, and in VRG specifically? From what I, for example, sometimes observe with our clients, it's a matter of the adoption of the solution, that kind of change management. That is, the technology itself, like an autopilot, helps with these tedious, repetitive processes, or just helps a person, colloquially speaking, embrace what human perception won't, which is so many variables that affect that sale. But in the end, someone has to want to use it.
Yes, I think this is an important element and it's a question for us, how we introduce a given technology into the company, because it's certainly very human - people don't like changes, they don't like to go outside their comfort zone. Despite the fact that it may turn out that in six months, a year, this technology will bring them huge benefits and this comfort will improve, and their work will change from such I would say almost analog to planning and analyzing scenarios. Therefore, the very moment of this transformation and in general the integration of the project and the technology in the organization is demanding, but it simply entails that it is necessary to motivate the teams that will implement this process, and it is necessary to translate precisely those gains and benefits that at the very end of this certainly demanding path will be associated with the technology. So it's certainly a demanding process, although as I watch our teams that are, at least today, implementing Occubee, my impression is that their energy, their optimism for what this implementation will end up and how this tool will be able to help them, is rather positive. And if there are problems, they are simply dealt with on an ongoing basis, and we actually just analyze what's coming up in the numbers, match it with what's come up in the past years, how compatible this scenario is, talk about it, and those barriers fall down somewhere.
So we are certainly very curious about the final results, but nevertheless I think the team is very positively motivated to get this technology and implementation finished and to make it work. Because if we think about the fact that each index, each SKU is a single unit, which used to be manually generated by a human and had to analyze it in more than 400 stores, the amount of this data was actually impossible to analyze by a single human being or a team that dealt with it. Today, this is what artificial intelligence is supposed to accomplish for us, and through this we are supposed to receive the clue and the essence; a specific scenario, rather than going through the whole process of analysis.
The second thing that is important in the context of technologies is their availability, also in terms of price, because not every company will be able to afford the implementation and not every implementation will translate into the price of the product, which, let's be honest, is one of the key elements of the customer's choice or decision. It's like in the past in cars there was no air conditioning, no automatic transmission, today practically this air conditioning or built-in radio is in every, even the cheapest, model. Therefore, if the technology translates into some concrete profit, then its absorption into the market is much greater.
For example - virtual fitting rooms. A technology that has been talked about for many years, which has already been tested in competitors somewhere, but I don't have the feeling today that it's something that will conquer the market. It's probably a matter of time when this tool will be refined, but nevertheless it's apparent that there are also technologies that need more time for them to monetize. This is probably related to those benefits that you, as retailers, expect from these technologies. In the context of your current
strategic efforts to deploy artificial intelligence, are these types of expectations more in terms of increasing sales or reducing the allocated capital you have to spend on this stock? I think these are two parallel elements. This is what I mentioned earlier - for us it is important that the product is there where it has the most potential to sell. Therefore, there will probably be stores where this goods is needed maybe twice as much as we have it today, and there will be salons that we will allocate at minimum levels due to the fact that these rotations are the longest there. Therefore, on the one hand it is so that by analyzing the numbers & data we will certainly try to draw this final information, how much stock is active, how much is inactive, and on the other hand - where these goods must be found in the largest quantities, and where in the smallest. Precisely so that some stores this constant sales, and on the other hand - so that we have the least investment in those areas where these rotations are simply the longest.
I always laugh that we never know what would happen if we... So an example situation - in one store every five minutes a customer came in and wants to buy a black T-shirt in size L, for example. Today we will probably sell one piece, then the second piece, and then on the third, fourth, fifth customer entry we have just this lost sales. What if we learned how much this lost sales is and could cover the potential for five or six black T-shirts in size L.
That's the task for us today - how to boost sales in areas where the potential is, and how to reduce that cost in areas where those sales aren't there. While not dramatically increasing working capital. I understand. I'm curious in the context of technology,
but not only, because technology, of course, is a dimension that is changing your work as a supplier, as a producer and as a provider of the goods that your customers buy. Also, customers, of course, are using technology on their side and have more and more access to it. More and more purchasing decisions are being made based on some kind of technological inspiration. I'm curious, in this regard, do you see any trends or potentially future changes in consumer preferences that are just going to be driven by technology? For us today, surely such a point of importance is to personalize the offer for the customer. This again involves serving the customers as well as possible and giving them exactly what they expect. Today, technologies allow us to tailor what we present to our customer in a more precise way.
So as to fit exactly into a given need. Imagine a situation where a customer buys a suit from us. We know it, we see it, and we are able, instead of, for example, another suit, to offer him a shirt that will be holistically, set-coherent with it and will look good. Plus a tie and shoes, and maybe a coat.
This completely changes the form of the service. You can say that in this way we don't burn through money on advertising a second suit, which the customer probably won't buy again so soon, and we are able to support our sales, revenue by applying information directionally, individually to the customer information that will simply generate another sale. Consequently, this is the kind of element for the coming months that we will certainly be strongly improving and that is supposed to help us adapt to the needs of each customer. It's a bit of that situation where the customers, when they go into the app or into their account on the website, will have their own custom world, rather than a world for everyone. They will receive exactly what they is most interested in.
This is certainly an important element today as well. We hear a lot about personalization, whether it's marketplaces or even just individual mobile apps, and it's actually a direction that's interesting in that for many people, especially from the younger generations, it's probably natural for a customized feed like on Facebook, Linkedin or on Instagram. that it's not the same information that my friends, my colleagues, my family see. This is information tailored specifically for me in terms of my preferences.
Because what do I as a customer get today, for example - living in Krakow I get information about an event in Gdansk. It would be better to get information about an event in Krakow. Unless, of course, someone knows you are going there. Maybe, but it's not so common anymore, although I come from the Tricity, it's true. We're slowly heading to the end of our conversation, and I'm curious - I like to ask this question - because it gives non-obvious answers. Is there anything that, in the context of your entire experience in the fashion industry, was important to you, important enough that it would be worth sharing with others who might have a chance to relate it to their personal experiences? I think that such an element, which for me was a huge surprise and motivator, is such a thought that I have today the impossible does not exist. Based on the experience of COVID.
That is, how wonderfully we are able to react in an emergency situation, how quickly we are able to adapt to what is happening in the world, how wonderfully the teams, managers react precisely to secure the interests of the company. And it is with this feeling that I remain in the context that even if times are difficult, and they are difficult all the time - since 2020 - with every year we face something, the impossible does not exist and we are able to deal with it. There is only the question of how intensively we will analyze it and work with it, and how quickly we will make accurate accurate and right decisions.
Thank you very much for the conversation. It was a great pleasure not only to be a guest at your headquarters, but also to be able to talk to you. I hope that technology will indeed help you a lot. This is an area where we can lend a hand, while, of course, I also hope that the whole trends associated with changing consumer preferences will move in the direction that I think we are following and supporting together. That is, greater environmental awareness greater awareness of the quality of products, which translate directly into their life cycle. I'm keeping my fingers crossed for VRG as a whole, of course.
I'm a loyal Vistula fan myself, as you'll probably notice. Thank you and see you next time. Thank you for listening to our podcast.
I believe you enjoyed today's conversation. If you want to stay up date with future episodes, we encourage you to subscribe to OccuTalks on streaming platforms and keep an eye on our social media. You can also find more information about Occubee on our website occubee.com. See you in the next episode.
2024-08-28 20:55
