By Jeff Fedor, CEO of Backbone PLM – shortlisted for Best Software as a Service for Small Businesses in the USA at 2021 Cloud Awards
The fashion industry has evolved, and the SaaS solutions that serve it are changing to meet its needs.
The fashion industry has rapidly evolved, and so have the SaaS solutions that serve it
Over the past 10 years, fashion and apparel brands have transitioned from focusing on major retailers to aiming for a more direct-to-consumer (DTC) business model centered on the thriving e-commerce economy. Manufacturing and selling goods from an e-commerce platform, with the consumer top of mind, allows brands to avoid the middlemen of traditional retail or wholesale operations.
The result is a greater diversity of brands serving more niche consumer tastes. In the United States, DTC fashion and apparel brands make up 68% of the total market. This segment represents more than ⅔ of the total DTC market and 33% of all US e-commerce storefronts. In 2020, the Shopify platform alone was home to 214,000 of them. According to PipeCandy, 87% of these brands have a gross market value (GMV) of less than $10 million.
As consumers changed their shopping habits following the events of COVID-19, this “new normal” provided a much clearer path for e-commerce brands to achieve a positive trajectory for new business opportunities and increased revenue.
The future of consumer brands is digital, and digitally native organizations must meet the needs of a changing market to stay competitive. Even many legacy brands that typically depend on brick and mortar for product distribution are now reframing their business models to mimic the efficiency and flexibility of DTC companies. As this trend continues, the SaaS platforms that support the needs of this booming industry are continuing to evolve, as well.
Consumer Demand Creates Opportunities for SaaS Solutions Solutions
The modern apparel industry faces constant demand for new products, with some brands going through as many as five production cycles per year. Factoring in the evolution of global trends and consumer expectations, it’s clear that DTC brands need to compete with others in the market by innovating on style, price point, functionality, and increased sustainability.
Like the global brands that have traditionally dominated retail sales, these smaller companies must source raw materials, manage supply chains, and bring their products to market on time. They need to operate even more efficiently to compete with the industry behemoths because they lack the capital needed to absorb the cost of adapting too slowly.
Various SaaS platforms are springing up at all stages of the product development lifecycle to offer flexible and accessible solutions and solve the challenges plagued by DTC fashion brands.
- Sourcing and Production – Smaller DTC brands don’t have the same leverage as larger competitors when negotiating with suppliers or vying for attention. Anvyl’s production management software helps maintain a more efficient production process by providing a platform for brands to source materials from various suppliers and manage production timelines without a major investment in personnel. The solution also provides essential visibility into logistics, enabling even the smallest DTC brands to have more control over their shipments and respond accordingly if delays occur
- Merchandising – From individual items to complete assortments, small brands need the right products in the right quantities to optimize their chances for success. Toolio, founded in 2019, just announced an $8 million Series A round of funding in October 2021. Solving the challenges that small brands have around merchandising, the platform integrates with e-commerce tech stacks and provides forecasting analytics that brands use to improve margins and manage inventory.
- Returns – According to returns platform Loop, returns jump 31% after Black Friday. With high shipping expenses, the cost of processing returns is a lot for small brands to handle. Loop’s data shows that mid-sized brands can expect to pay up to $19,000 to process returns from the 2021 holiday season. Add in the additional risk of losing repeat customers if returns are handled poorly, and this single business function can sink a small brand almost immediately. Innovative SaaS businesses like Loop are helping by offering solutions for automating returns and prioritizing exchanges while providing proactive customer communications about return statuses and optimized retail costs.
The Missing Piece: Product Lifecycle Management (PLM)
One critical phase of the product lifecycle that’s seen surprisingly less innovation is the time between designing and producing products at scale. This space has traditionally been owned by expensive Product Lifecycle Management (PLM) programs that were installed on-site and required heavy IT involvement to implement and maintain.
Traditional PLM is a massive enterprise software focused on the manufacturing and purchasing process to make decisions. There is no room for ambiguity, and traditional PLM acts like anything but a creative product development tool, delivering overall business value but causing daily headaches for the designers and product developers that utilize the program.
According to the industry experts at WhichPLM, the typical customers for PLM software over the last fifteen years are brands with revenue of $50 million and above. That has been consistent until just recently as the rise of the e-commerce DTC brands has created tremendous opportunity for SaaS companies to offer dynamic, modern PLM solutions. Backbone PLM is one SaaS startup that is doing just that, bringing needed change to the fashion and apparel industry.
PLM Meets SaaS
In 2014, brothers Andrew and Matthew Klein began to notice the lack of PLM SaaS solutions. They saw a new generation of digitally native, DTC fashion brands entering the market to compete against traditional apparel brands. However, brands became lost in the cloudiness of rigid legacy platforms, or simply couldn’t afford them and struggled to bring products from design to production.
From their experience designing for fashion powerhouses like Tommy Hilfiger and Ralph Lauren, and running large-scale industry trade shows like Magic and Project, they eventually realized the limitations of a traditional PLM system. Instead of designing and developing new products, valuable hours were wasted conducting manual data entry in massive spreadsheets. In fact, in the fashion and design industry, it’s estimated that 20% of production time is lost scouring through spreadsheets for product information.
As these brothers shared their experiences, Backbone PLM was born to meet the creative needs of emerging DTC brands. From its inception, the platform was designed to be cloud-based rather than installed on-premise, user-friendly with a focus on designers rather than business executives, and offer a seamless interface for product developers and fashion designers to collaborate and access product data. Modern PLM tools like Backbone also need to consolidate product information from other outside platforms to allow brands to create and collaborate consistently in a repeatable, scalable manner.
In Backbone’s system of interconnected libraries, dynamic data is at the center of every step in the development cycle, so brands can create product records, color swatches, and tech packs without a hitch. Product data is easily shared, edited, or reused, which reduces sampling time, limits errors, and improves quality assurance.
The result is these smaller organizations are able to professionalize their operations and have a fighting chance to compete in a challenging and fast-paced industry. When brands adopt Backbone PLM into their product development process, they:
- Introduce products to the market 45% faster
- Reduce manual data entry by 42%
- Save an average of 26% on materials costs through efficient consolidation
- Manage supply chain shortages and delays more effectively
- Manage a larger number of SKUs (Stock Keeping Units) with the same team resources
- Track and optimize sustainability efforts to make the fashion and apparel industry more environmentally friendly
Brands using solutions like these empower the creativity of their teams, push products to market faster, and ensure their products are driving revenue with better access to data during the early stage of the product lifecycle. Best of all, they’re able to do it with an affordable tool that’s much easier to implement and use than the unwieldy PLMs of the past.
The Future: SaaS Solutions Continue to Move Downmarket
E-commerce fashion and apparel brands continue to see a positive trajectory for new business opportunities and increased revenue with the help of cloud-based SaaS platforms. The transition from traditional retail to DTC e-commerce is permanent, which means there is tremendous upside for digitally native brands to thrive and prosper.
More of these small companies will join the market in the coming years. Not all will survive, but having the right SaaS solutions available will help more brands endure the competition. That is why SaaS platforms should continue to move downmarket with cost-effective solutions that are tailored to their unique needs.
Backbone has seen its cloud-based PLM customers make confident, well-informed decisions regarding material costs, design revisions, and changes to timelines throughout the creative process. This allows each Backbone user to safeguard revenue, reduce waste, and gain greater visibility into their product data.
The company’s most recent announcement has been the launch of Backbone Lite, the latest SaaS solution now available in the Shopify app store. Backbone Lite meets the most basic and functional needs of the smallest DTC brands by helping them organize product data, professionalize their operations, and develop products efficiently from the conception of their business.
Looking ahead, “growth” is the key phrase for the entire e-commerce space. DTC brands must strive to be deliberate about business objectives, build purposeful relationships, and stay atop evolving trends in the industry. SaaS platforms that offer flexible solutions at various stages of the product lifecycle add greater value to DTC brands of all sizes. As these solutions deliver to an emergent market, SaaS companies will continue to benefit from expanding their market share, too.
The Cloud Awards Team encourages business of all sizes, freshly starting or with a well-laid foundation in the industry to expand and innovate the industry with the Best SaaS Product for E-Commerce or E-Shops category of SaaS Awards. Eligible software services include e-commerce website plugins, customer-facing solutions or back-end organizational software.