AI And Blockchain And The $3 Trillion Fashion Industry – Challenges and Opportunities

“There is no beauty in the finest cloth if it makes hunger and unhappiness.” —Mahatma Gandhi

“When an industry doesn’t care about how people are treated, no consideration of sustainability is possible. You can’t just care about the environment and forget about the fair and ethical treatment of people.” —Simone Cipriani, founder of International Trade Centre’s Ethical Fashion Initiative (Thomas Reuters Foundation 2016)

The global fashion industry is worth around $3 trillion, but it is an industry that faces multiple problems at all levels of the supply chain. These problems are as varied as labour conditions in emerging countries, environmental concerns – especially in wastage management, recycling and incontrolable use of natural resources -, and an unfair value chain. These challenges are hard to tackle, but not impossible to fix. AI, blockchain and emerging technologies present an opportunity to leverage sustainability, social impact and ethical sourcing in one of the biggest industries of the world.

The fashion industry is a complex and on the verge of a collapse ecosystem. Moreover, its $800 billion global apparel industry has become notorious, famous for its challenges when it comes to ethical treatment of industry workers; IP, counterfeit supply chain issues; Environmental and sustainability and unlawful competition, and lack of rentability of the industry.

1 in 6 people in the world is somehow involved in the fashion industry and it accounts for 4% of the world’s Gross Domestic Product (GDP), which only makes the problem even bigger as it touches today’s whole society consumers, designers, fashion industry players and producers plus the end of the chain shoppers.

The fashion industry by the numbers

AI and Blockchain are the foundational trust technologies of our time. Blockchain or distributed ledger technologies have a holistic DNA and multiple capacities that can fix issues such as supply chain track record to create trust in provenance of products and identify sources of production and manufacturing, while also fixing some middle men serious issues. AI, on the other hand, can improve the understanding and processing of data to optimise processes in the global business landscapes. This leads to an optimisation of resources, preview issues and finding the best approach to tackle issues, automate and predict and manage in real time high concerns of production, distribution and quantify and optimise processes and operations.

The challenges with these advanced and new technologies are that it requires lots of maturity and a strong road map on how to push it forward, plus how to make it a global powerhouse that works to improve real things besides the hype and finding real scope and scalable solutions to entire industries and sectors. This is even bigger when it comes to AI and blockchain, can these techs and the new fashtech movement optimise the whole fashion industry? And how can this major part of the world economy and society use AI and DLT blockchain technologies to solve the issues and challenges?

AI and Blockchain: Optimizing the Fashion Industry

The fashion industry faces issues from labor force rights, and also important considerations such as counterfeit, handling of production by emerging countries and more. From an environmental perspective, things get even worse. First of all, there is the use of water. According to a report by the Boston Consulting Group,  it is thought that this will cause extreme scarcity in countries like China and throughout Asia by 2030. Fashion manufacturing produces over 92 million tons of solid waste, most of which goes to horrible and inhuman landfills or up in smoke. Last year, one of the major fashion premium global brands alone was called out for burning $37 million of clothes and goods rather than selling them at a discount — a common practice to maintain a brand’s luxury shine.

Sustainable responsible fashion

These deep challenges have made the fashion industry, as many other industries worldwide like Finance and its technological branch Fintech, to go through deep changes. The fashion industry is, in fact, shifting faster than ever. Customers are starting to pay attention to where the products come from, the conditions of the workers and, utterly, the impact on the environment that the clothes have. Meanwhile, new designers in the skin of entrepreneurs and new collaborations are trying to make things different to their well-known big rivals. They have found a loophole in this overpopulated market to really make a difference while being able to provide affordable, sustainable and fairer products.

Much has been written about blockchain in these few tech-frenzy years and much has been talked about how unfair and unsustainable the fashion industry is in today’s monopolized world. If blockchain is capable of setting up a decentralized and more democratic platform, this technology can help towards a more inclusive, sustainable fashion industry within the Fashtech movement. However, we are still in the beginning of it, and the road ahead is long and complex.

Fastech – Fashion Technology And The 4IR – AI and Blockchain

Basically, what Fastech means is quite simple: putting technology at the service of the fashion industry. More accurately is the definition provided by fashion expert Alfonso Segura: “We are living an incredible disruption in Fashion Retail, an industry that innovated the way to manage the supply chain to reduce seasonality risks (uncertainty of demand, overstocks, low-cost manufacturing versus lead times, postponement).

Nowadays, Fashion retail, again, is the example for other industries that need to transform their businesses in the digital era. Online is impacting the way traditional businesses understand retail expansion and market approach. Many fashion retailers are reducing their expansion plans based on brick-and-mortar, while others are closing stores and even closing their business. Zara, Amazon and other behemoths are taking part in this revolution, but long tailers, niche pure players, are the ones fueling it. And again, it’s the most adaptable that will survive, not the strongest.”

In some sorts, digitization was going to happen sooner than later in the fashion industry and those who are quicker to embrace these new technologies – Artificial Intelligence, Augmented Reality, Virtual Reality or 3D Printing – would be the ones with more odds on their side to survive. However, these fancy techs don’t assure the needed change in an unfaire, unsustainable and opaque industry per se, they have to be bolstered by a strong will, entrepreneurship and, why not, a technology that really does help to make the change swiftly.

And that’s the point where blockchain enters the game. This distributed ledger technology can efficiently manage large amounts of data, in real time, in a decentralized platform, while its encryption model can keep undesired eyes off of the network. A blockchain-based platform can improve basically any business, operation, transaction or endeavour, and it does so from the very foundational point. Being decentralized means that all computers connected to the blockchain-based network needs to agree that a modification in the network is genuine, so middlemen and intermediaries aren’t needed anymore.

Blockchain ID, Trust Supply Chain to Counterfeit

“Blockchain also eliminates inefficiencies in international trade allowing all members of the supply chain (carriers, banks, traders, suppliers, etc.) to connect to a secure decentralized network, exchanging information, documents and data, directly. Blockchain reduces payment risks and prevents fraud while facilitating fast, secure, low-cost international payment processing services,” said the aforementioned expert Alfonso Segura about how blockchain could help the fashion industry.

Blockchain also supports smart contracts in an industry where email order confirmation is almost a rule. This will reduce human errors and misunderstandings regarding payment terms, returns, purchases, etc.

But promising to change the world as it stands isn’t enough. The world needs to see the blockchain in action.

A good example of how blockchain is applied today in the Fastech industry can be found in Martine Jarlgaard, a british fashion house and its recently announced partnership with Provenance, a blockchain technology-based startup. Blockchain allows brands to tell more of a story and give credit to all the people involved in the process. Every product has a story, from raw materials to the store, each part of the value chain is identified, as CEO Martine said.

There are also many other examples of how blockchain is influencing the fashion industry. “Nowadays, one of the major trends is sustainability and circular economy. Customers want to know where the product is coming from, and not only in Grocery but also in Fashion. Patagonia and Everlane are two good examples of companies betting on traceability and sustainability in their supply chains, allowing customers to identify their suppliers,” added Alfonso Segura.

Fortunately, there are some people out there, activists almost, fighting for a better fashion industry and have seen new technologies, specially blockchain, as one of their strongest allies. Because utterly, blockchain is something to be hopeful for. Experts from all sorts of areas have always ended up describing how its multiple characteristics can really make it the next big thing. It has been linked to powerful words such as “revolution“, “manifesto”, “ecosystem”, “collaboration”, “transparency“ or “decentralization”. That is what lies behind the likes of Vechain’s blockchain platform offering or Wave, a company that has created a peer-to-peer and completely decentralized network that connects all carriers, banks, forwarders, traders and other parties of the international trading supply chain.

In fact, many examples can be found in the rapidly growing Fashtech industry.

Fashtech ecosystem

Blockchain and peer-to-peer are highly linked and that’s the foundation motif from where Coin Fashion built its “ecosystem” based on peer-to-peer principles. For them, the final customer should be connected to a designer directly on a basis of trust and the final customer should play a key role in the process of creation (co-creation, customization); p2p promotion; co-pricing (paying less for being involved more); and in something quite innovative – co-investing.

We can also find other examples using AI and blockchain, two powerful allies indeed. JD.COM, one of China’s largest e-commerce companies, has launched a new artificial intelligence machine called an AI Catapult accelerator that will focus on the development of AI and blockchain technologies. its first batch includes six companies: Bankorus, CanYa, Bluezelle, Nuggets, Republic Protocol and Devery.

BONAFI is a blockchain company founded in LA which is on a mission to defend all brands and retailers big and small, and protect consumers from counterfeits by implementing a fail-safe authentication system using blockchain technology.

Implemented at a large scale, it can drastically change supply chains over the world, the way electricity is consumed, delivered and paid off. It has even disrupted, for better or worse, the financial industry over the world with the cryptocurrencies and all the products that came after them: ICOs for funding, tokenization, etc. Blockchain technology is a foundational technology of the Fourth Industrial Revolution: that gives a glimpse of the potential of the technology we have in hands right now. And now, it is at the entire service of the Fashion  industry.

AI And Fashion – Optimisation, quantification, predicting and automating

Fashion is and has always been a competitive discipline. Designers want to be two steps ahead of the fashion curve and set the tone for iconic trends.

When it comes to massier retail stores, they also want to cater to what their demographic is searching for. Be it high-end designers or commercial stores – in the end, their agenda is to influence and sell fashion choices. Fashion is all about trends and what everyone is wearing.

Along with being fashionable, businesses also have to be approachable and user-friendly. All of these require business strategies. Many of these strategies do not guarantee a massive success rate in fashion if done only on human instincts.

Many businesses have tanked because people are judging the market wrong or are nót paying attention to the best way to approach it. But, what if the guesswork and failed strategy were something fashion providers did not have to worry about?

AI in the Fashion Industry

Here is where artificial intelligence comes in. From a purely business standpoint, clothing makers – big and small, are gradually turning to artificial intelligence.

For example, fashion websites will become a lot more predictive. These days, almost every advertisement, post, or search we see on the internet is catered to our tastes. The machine algorithms are constantly learning and giving us the results that are best suited to us. And we are high-end oblivious to this fact.

Artificial intelligence stores a person’s characteristics with their search. However, this development is still not quite there in the fashion industry. Once AI seeps into fashion, the same will happen on a fashion website we visit.

Another way AI is influencing the fashion industry is through optimising and improving Visual Searching. AI is gravitating towards helping customers visualize their ideas. Be it putting in the color or providing a picture of a product, it will work like a reverse image search.

For example, if you have a pair of ochre suede boots in mind that a friend at a party had worn the other day, AI can help you get them. You can click a picture of the boots, upload it onto a fashion website, and the AI algorithms will present you with the same or similar products. Brands like Asos and Nordstrom are already experimenting with this technology on their current websites.

Additionally, the AI can be taught how to help customers with their fashion dilemmas and product queries while shopping online. Customer service optimisation, AI Chatbots and Visual Stylists. These can help customers customize their measurements, gauge whether a garment will look good on their body type, help find outfits, and solve queries. It will be like a customer care center but for fashion choices.

AI is not only making waves in the operation and business of the fashion industry but is also influencing trends. We, for now, have limited imagination as to how AI can change the face of fashion. We still haven’t discovered it’s full potential. But hopefully, that day isn’t too far off in the future.