Building a B2B Product in Fashion-Tech
The Final article in the 3-article series of how to build B2B product in Fashion-tech
Hello Helloo! All you amazing people out there. I am Nikhil Kedia, working as a Product Manager at Adobe. This blog is about tech products and startups (from a PM perspective). This particular series is a result of my research on the immense scope of B2B SaaS business in fashion and my conversations with industry stalwarts. I have broken the series into 3 segments:
The first article laid the foundation for the B2B SaaS world. There we covered the opportunity sizing, customer journey, monetization, and some other nitty-gritty of B2B SaaS. The second one took a dive into the fashion-tech ecosystem. This one takes a look at it from an operations management perspective and combines the learnings.
Product LifeCycle Management
Refreshing context of what we have discussed earlier
Our road to this article began by talking about the world of B2B SaaS in general via this piece. Here we took some ideas from existing Indian SaaS startups like Darwinbox and from European fashion giants like Lectra. Philippe, the innovation lead of Lectra took us through the journey of the company and gave a glimpse of how one does a SaaS business in fashion. One very important element that Philippe and his team had built was a Product LifeCycle Management - which we will talk about in more detail. In our next piece, we elaborated on the idea of the world of fashion-tech. This time our guest was an Indian - Co-founder of the Indian B2B marketplace startup - Fashinza. We learnt some nuances of the world of fashion. Understanding this was important because it showcased why is fashion industry a unique one and what are the potential areas of disruption. In this final article, we are going to take insights from one of the most popular professors of IIM Ahmedabad - Prof. Saral Mukherjee
Deeper understanding of PLM from Fashion-tech PoV
Before discussing anything about building B2B SaaS startups, let us dive straight into Lectra once again and talk about the core around which it is built - PLM (Product LifeCycle Management). Why is understanding this important? Because in the Fashion industry - every SaaS startup’s product will either be doing one or more of the stages of the PLM. Decrypting Lectra’s, Fashinza’s and fashion industry’s PLM:
A. The concept and design stage is the ideation of how the dress should look like. This is where a startup helps in modularizing design, merging colors, cutting shapes. This is something Lectra does too
B. The next - Develop stage could be about deciding the fabric, choosing the manufacturers, connecting the brands and finalizing the product. This is the segment Fashinza targets
C. Production and Launch then could be about sending this for actual manufacturing. The manufacturing machines could be cloud-connected - Lectra is present here as well and has deployed hardware along with software
D. Support and Service including time to production, delivery, quality etc. - This is necessary pretty much for all startup because when it comes to convenience, it is difficult with service and support
E. Finally, how to decide on what would be next and what would die in the world of fashion. Not very clear on the approach of Fashinza and Lectra with respect to this. But if a startup has a separate innovation manager, you can assume things are sorted. Fashion industry can be a fast-moving one, especially in the case of brands like Zara, and therefore, important enough to keep up with the pace.
But then - how do you move some of these levers - through an efficient supply chain, through operations management.
Product-Operation Fit
The most important function in the fashion industry is and will always be operations. While technology and digitization can sure transform the industry, it will have to revolve around operational efficiency. So while we talk about product-market fit, I want to talk about something new - Product-Operation Fit.
Elephants and Cheetahs
And this brings me to applying some learnings from one of the best profs of IIM Ahmedabad, Prof. Saral Da. Speaking about the untalked, untouched, unheard beauty of operation management in class, he introduced a new concept - Elephants and Cheetahs, on which the course was named and so is the title of his must read book. One important purpose of coining elephants and cheetahs was to help students understand the difference between time-based competition and cost-based competition and show why is this a dilemma. The metaphor of the cheetah was a very powerful tool to intuitively explain the differences in strategic choice; elephant is not structured to run as a cheetah, and we cannot have both cost efficiency and time responsiveness beyond a point. Elephants are basically the larger manufacturing plants with higher inventory and stock
Why does it matter for Fashion-tech
You might have visited Zara stores and been overwhelmed by how quick they come up with new designs. Infact, it is not easy to find too many replicas of the same design at a Zara store. Zara is renowned for coming up with products on a short timescale instead of taking forever. They are known for taking around 2 weeks to develop products and have been known to come up with around 10,000 new designs every year (which is an industry record). This does sound cost-ineffective. This is fast fashion. And this is the new trend in the fashion industry, especially with millennials. Zara is a Cheetah. This model does lead to higher cost, making tech all the more important.
On-demand manufacturing
And in my conversation with Philippe, this is what came up as the biggest growth driver for fashion-tech. 70% sales come from brands that are into fast fashion. Today, even the elephants and mass manufacturers want to shift to the Cheetah model. More and more people look for on-demand manufacturing. There are a lot of issues with enabling on-demand manufacturing. For the end product to be on-demand, everything in the production cycle has to be on-demand. Can’t be scaled up without technological intervention. And this brings in a whole world of opportunity.
Key Differentiators to focus on
So. Now that we have established why is product-operation fit something that companies should strive for, let us wrap this article on building a B2B SaaS product in Fashion-tech by combining our learnings and talking about the key differentiators:
Image courtesy: Fifty five and five
A. Developer expertise: Building a developer and partner ecosystem is very important especially in the SaaS space in general. More so in the B2B Fashion space because a lot of it is about word of mouth.
B. Find the unique problem that you are solving even if it is a cluttered space. This would take us back to the PLM. Identify which stage do you see a problem with. Look at the existing solutions & see if there is a product-operations and product-market fit
C. Understand all the key stakeholders, not just the end consumers. Customer and user are generally not the same in B2B. An example from my experience - Adobe sells Creative cloud product to enterprises too. The team who buys it could be sales/brand/marketing people but the people who use it could be designers.
D. Ignore Fomo. Something for everyone always fails. This again comes from the idea shared by one of the professors at IIMA. May be will talk about him in the next blog. But this is more so true in fashion because the industry is already so big, fragmented and unorganized - that trying to do too much would leave you astray.
E. Collaborate with existing companies for faster adoption and integrations. Any form of integration is key in the world of B2B. It helps drive adoption. As a new startup, if you are able to get a few big known names, you have already won half the battle because brands don’t like taking risks in fashion
F. Journey of making a product - Always begin with Data. Vision, customer segment and pain, positioning, goals, KPIs, competition, market, roadmap, experimentation, and execution. So let us talk about metrics in our last segment:
SaaS Xtrashots: Metrics in general
Net New ARR:
New subcribers/users - Cancellers/ones who left + Business Expansion
For a SaaS business, the Net New ARR is a combination of 3 things. And one would need to measure all three. Business expansion could mean more revenue from the same customer by entering another stage of the PLM and adding a product/feature to the offering.
Calculating churn rate in SaaS is complicated:
Well why. Let us say I am Lectra. I offer 3 features in a particular product of the PLM stage. One customer has full subscription. The other uses one feature only. Those two leaving would be very different end output for the company. So, find out what matters to you
Funnel:
The conversion funnel helps you understand what could be missing in sales, in marketing, in the initial user experience of the product. The funnel starts right from when the customer lands on your product page. And goes down all the way to drop-outs in the first week to the first month and first year depending on the type of plans and type of trials. This brings an important point - TRIALS.
North star. Game of attention. Of transaction. Of productivity:
What you want as your North Star is something that can’t be generalized. It depends on the end goal of that feature, or of the product. Let us take a specific example of Fashinza. Given its idea of connecting brands and manufacturers - its idea relies on how easy does it make for brands at the end. How does that happen - if the response time from manufacturers is low. And this therefore becomes its North Star metric - Turn around time.