From the printing press to AI-generated virtual worlds: Media vs. Fashion industry

From the invention of the printing press in the 15th century to the present day of audiobooks, music, films, short form videos and games streamed to mobile devices, the evolution of the media industry has been shaped by a series of technological disruptions. This disruptions successively drove down the cost of media production, distribution and consumption. Nobody thinks and writes about these trends more clearly than tech blogger Ben Thompson of Stratechery, an absolute go-to resource for anybody interested in the strategic evolution of IT and its impact on all facets of life and business. The release of general public AI-tools like ChatGPT or DALL-E has inspired him to explore the next disruptive technology wave which portends a future media landscape full of AI-generated content or even whole virtual worlds. His three 2022 think pieces ‘DALL-E, the Metaverse, and Zero Marginal Content’, ‘The AI Unbundling’ and ‘AI Homework’ should be mandatory reading for anybody professionally or personally interested in the subject.

Are there any parallels of this evolution in the fashion industry and if there are, what may this tell us about the future of fashion creation and consumption? I clearly believe that there are very obvious parallels and want to explore some of these today.

In its pre-industrial phase, the creation of clothing or fashion was a fully manual and completely personalised process, even the making of the textile materials with the help of human-operated spinning wheels and weaving frames was very slow and costly. In a way it could be compared to the pre-Gutenberg creation of books in the form of painstakingly hand-written and therefore scarce and expensive pamphlets produced by scribes for a very limited audience, mostly for circulation inside religious institutions.

The 18th century mechanisation and later automation of the production of textiles and at least to some extend the garment making process, similar to the printing of books, brought a massive production cost reduction and therefore a consumption democratisation of clothing and other textile products. Most of these products were relatively standard, basic needs inspired wares for everyday use. Creatively designed fashion pieces remained for a long time a luxury for a relatively small rich clientele and were still made by tailors in a very manual process.

The rise of mass-market fashion brands and large-scale distribution through store chains and catalogue retail in the 2nd half of the 20th century brought the next step towards industrialisation and democratisation of fashion creation and consumption. The marginal cost of designing, producing and distributing a single piece of clothing kept falling rapidly due to economies of scale at every value creation stage. This in turn led to massive sales volume growth due to lower consumer prices. And as a result a typical late 20th century department store was overflowing with the affordable wares of the fashion industry, complemented by shelves stacked with the products of the media industry (books, music, films and video games)

The cost of the garment making process, that stubbornly resisted full automation, was further driven down by outsourcing to countries with lower and lower labour costs, going into overdrive after the phase out of the Multi Fibre Agreement in 2005. During that same time, digitalisation started to make inroads into fashion design, production and distribution through various design and full product lifecycle management (PLM) software solutions, digital printing and eventually fashion products followed books, CDs and DVDs into e-commerce.

Then somewhere around 2010 the trajectory of the fashion and media industry seem to start to diverge, while first books, music, film and video games became digitally downloadable and later directly streamed to mobile devices, sales of the fashion industry remain tightly linked to a physical product. It seems logical, because in the end we all need and want to wear something physical when stepping out into the world as we all learned as kids that even emperors don’t get away without it.

But when it comes to a business or an industry, it is not the material product that is made or sold that counts, but the profit or ultimately the customer value that is created. If this wasn’t so, cement and steel companies would be the most valuable in the world. As we know this is very far from the truth. Today’s most valuable companies are all tightly linked to the digital world. Microsoft, Google and Meta (Facebook) sell almost no physical products and the few they sell exist essentially to strengthen the ecosystem of their digital services and even Apple may one day derive more sales or at least profits from their service offerings.

So is there a future for the fashion industry in which most of its value creation is linked to digital goods and services. And if so, how may this look like and what does that mean for the fashion industry as we know it today?

When thinking about this, we can again look at the journey of the various sectors of the media industry. For instance, video consumption has gone from artistically, professionally and expensively created moving image stories (aka films) exclusively consumed in purpose-built viewing places (aka cinemas), to today’s world of user-(and soon AI) generated short clips consumed through always reachable mobile devices (aka Tiktok, Instagram…). The same goes for music, games and written entertainment/information. Not all earlier generation formats must necessarily disappear completely though. Various generations can co-exist for a long time. We still have cinemas in bigger cities, people still buy some physical books or even vinyl disks and single-use gaming consoles are still selling, but their sales have either gone into decline or their providers had to reinvent their business models to remain viable. Cinemas may earn more money selling drinks and snacks then from movie tickets. Gaming console makers derive most of their profits from the games (mostly downloadable today) they sell.

That it is possible to decouple value creation from production volumes or material consumption growth in the fashion industry has already been demonstrated by the luxury groups. Today’s most valuable fashion businesses such as LVMH, Hermès or Kering are far from being the largest volume producers of fashion products. But their business models remain firmly rooted in a traditional industrial paradigm where in a fully integrated process in-house professional designers create products which will then be made by highly skilled manufacturing operators and sold through tightly controlled shopping channels to carefully targeted consumer segments.

If the evolution of the media industry is a useful indicator, than this will not be the future of the fashion business. The disruption of the media industry, according to Ben Thompson, is a story of disintermediation and a general shift of power from producers to consumers, or at least to companies that can successfully aggregate many consumers (digital platforms). Is such shift underway in the fashion business too?

I believe we can certainly see more than a few glimpses of it. In the same way that digital tools such as software and smartphones and the Internet have democratised media production, they have opened the world of fashion creation to new entrants, even individuals, which can reach audiences and potential consumers in a way that used to be exclusive to big business players. Fashion bloggers and influencers have built audiences counted in their millions and create trends and business opportunities much faster than corporate bureaucracies. Individual designers today are barely limited by the creative tools and marketing channels they have at their disposal. Very similar to some individual bloggers or journalists whose audiences already exceed those of the New York Times, The Economist or major national daily newspapers. As more (digital) manufacturing-as-a-service offers and more efficient last-mile logistics become available, the power of direct-to-consumer business models in fashion will further rise, notwithstanding the slight post-COVID e-commerce dip we see today.

The next technology frontier seems to be the democratisation of AI. The launch of tools such as ChatGPT or DALL-E sends shock waves through many creative and knowledge professions. Teachers feels threatened because students can get perfectly acceptable essays written by ChatGPT with literally no effort of their own. And not only artists and other creatives have very mixed feelings about a world full of AI-generated music, paintings, films and whole virtual worlds. Examples of AI-generated or AI-supported fashion designs start ?to fill the professional websites and social media feeds I tend to see. This evolution is indeed very fundamental and its repercussions cannot be overestimated.

To start with, for most creative work, you needed at least two distinct skills. The skill of coming up/imagining/visualising/recognising truly creative concepts in your mind and the skill of translating these concepts into a representation that is accessible to other people. A painter with creative ideas but poor painting skills would not make it very far and it would be hard to find a great music composer that didn’t master at least one instrument. With the help of AI, people who lack on one or even somewhat both of these dimensions, maybe find ways of competing with the traditional creators. Or as OpenAI, the creators of ChatGPT and DALL-E put it “DALL-E is an example of how imaginative humans and clever systems can work together to make new things, amplifying our creative potential.”

A second and more fundamental source of disruption from a fashion business point of view is AI’s impact on the cost of creativity. The more a business is driven by the creative function, like the major fashion and luxury houses, the more this function is a costly but extremely valuable asset and a formidable competitive barrier to entry. As AI drives the marginal cost of creation towards zero, the lower that barrier becomes. So could fashion become another example of Ben Thompson’s concept of ‘Zero Marginal Content’?

And finally, we may in the long run see an AI-driven convergence of the IT, media, entertainment and fashion worlds. Some people today already spend more time creating and curating their restaurant, holiday or whole life experiences on social media, rather than truly living and experiencing them in the moment. Gamers can literally spend whole days in fancy virtual worlds while sitting in their pyjamas in their parents basements. The physical world we live in will become more interwoven with virtual elements and the more we learn to interact with these virtual elements the more we will attach distinction and value to them. Special virtual skins, outfits and accessories which have no use or meaning in the real world, can confer levels of status and superpowers in a multiplayer game for which people already today are willing to pay astonishing prices. As the virtual worlds and metaverses become more commonplace and taken for granted by future generations the value creation from such virtual goods including virtual fashion will likely grow massively.

Where does this leave a fashion company today looking at the future and the strategic choices ahead of it? One thing is clear, ignoring and denying the digital wave is a fool’s errand. Disruptors equipped with digital tools and digitally enabled business models will attack your business from all angels, whether you are a mighty luxury or athleisure powerhouse or a small knitwear manufacturer. The fashion business is so huge and has so many niches and profit pools to go after that even if many of these digital disruptors may initially fail, some will succeed and grow fast from their first bridgehead in the market. One of the simplest start advices I ever heard was ‘Find a profitable business that still operates a fax machine and disrupt it’. There are still some fax machines in the fashion business today…

The interesting question is not so much if we will still be producing and wearing physical clothing in 50 or 100 years – I’m quite certain we will – but who will derive the most economic value in a digitally transformed fashion business that may be a reality in less than 20 years.

If you want to get a first overview on where digital disruption is already successful in the textile and fashion industry today and where the next digital opportunities may present themselves, join the Textile ETP’s brand new pilot Masterclass on Textile Digitalisation. The initial 6-month phase starts on 31st January. It is available free of charge for our members, and for a moderate fee for non-member. Find out more here.

About the author: Lutz Walter is Secretary General of the European Textile Technology Platform (Textile ETP), a Brussels-based non-profit organisation managing the largest European community of textile research and innovation professionals. He has over 20 years of experience working with companies, research and technology organisations, universities and policy makers on all matters relating to textile innovation.