Luxury, Fast Fashion, and Certifications: Tesisquare Outlines the Future Scenario
Demand for luxury goods has been experiencing a significant slowdown since mid-2023. The two key markets for high-end products, China and the USA, are dealing with a decline in demand following the post-pandemic "revenge shopping" phase. In this context, high-end companies are also facing other challenges related to supply chain transparency and sustainability. Alberto Proverbio, senior advisor at Tesisquare—a leading provider of digital supply chain solutions whose mission is to develop digital ecosystems in the supply chain sector by overcoming barriers and silos—outlined to PambiancoNews the current situation in the luxury segment.
Demand is subdued, and luxury is becoming less ostentatious, which is impacting companies in the sector. What changes is this bringing about? What strategies can companies adopt?
Global demand for luxury is stagnating, unlike in the past. In China, demand for high-end goods is disappointing, and we are observing the repercussions, even though a stimulus package has recently been launched to support the economy in the country. The current scenario shows a polarization in company performance: while demand is declining, some successful companies are achieving good results, while others are not performing as well.What are the levers for successful companies? In addition to the importance of brand communication, other values, such as consumer trust, can also be achieved through product quality, sustainability, and supply chain traceability. Therefore, it is essential to develop sustainable and transparent supply chains.From our perspective, demand will remain volatile in the coming years. Consequently, it is advisable to develop and improve demand and supply chain planning processes, including stock reduction, in light of the new Ecodesign Regulation (ESPR) that prohibits the disposal of unsold items. For this reason, it becomes essential to leverage new technologies such as AI, IoT, digital product passports, and blockchain, as well as to develop services like repair management and second-hand offerings.
Technological Innovation is Driving Growth. Spending patterns are changing rapidly, driven by increasing polarization among luxury consumers and the introduction of new loyalty and personalization strategies by brands. How can innovative technologies support fashion and luxury brands?
Innovative technologies are essential for companies in this sector. Which ones? For example, artificial intelligence. Over 70% of executives have identified the application of this technology as one of their priorities, and at least 50% are conducting tests and pilot projects. The main challenge lies in the availability of skills and talent. AI can be applied across all company processes, for example, in managing sales campaigns and online shopping assistants. In the supply chain, it can help improve sales forecasts by considering a range of external variables and macroeconomic factors and allows for a better understanding of the supply chain (supplier intelligence through access to multiple data sources).In the case of tags and RFID technology, these enable serialization of the finished product and end-to-end traceability of all semi-finished goods throughout the entire supply chain.Other technologies, such as augmented reality, digital twins (a digital replica of the product with all its information), and digital product passports, also represent growth drivers for companies.
While Luxury is Slowing, Fast Fashion is Growing Rapidly, what regulations and events are impacting both fast fashion and luxury players?
The fast fashion sector has experienced steady growth in recent years. Fast fashion is certainly characterized by certain aspects that require attention, such as the culture of excessive consumption, the risk of unsold inventory, and the opacity of its supply chain, which impacts social and ethical aspects. From an environmental perspective, fast fashion also presents risks in terms of pollution and carbon footprint.Globally and in Europe, a series of regulations are emerging that push towards extended responsibility along the supply chain, end-to-end traceability, and sustainability. One example is the “Ecodesign for Sustainable Products Regulation,” approved in July this year, which is set to take effect in 2027 for the fashion sector. This regulation introduces the concept of a digital product passport and prohibits the disposal of unsold goods.There is also the Corporate Sustainability Due Diligence Directive, which will take effect in 2026, and the Agec law already active in France. Faced with these trends and regulations pushing for extended traceability, fast fashion companies face significant challenges and will need to rethink certain aspects of their business model.In this context, the luxury sector has the opportunity to invest in transparency and visibility and convey a message of trust to the end consumer.
What is the Current Status of the Digital Product Passport for Companies?
The regulation was approved in July and will take effect in 2027 for the fashion sector. However, we are observing that many companies in the fashion sector have already started associating “digital product passports” with their products, and it is already possible to scan tags/QR codes linked to the product to access product information. They have understood the importance of transparency for trust and authenticity.However, it should be noted that most of these activities are still at the pilot level, and the implementation is limited. For example, there is no objective assessment of environmental impact. Currently, there is only mention of impact reduction compared to past values, without applying PEF (Product Environmental Footprint) criteria, which include a series of indicators (not just water, CO2, energy).
How is Tesisquare Supporting Fashion and Luxury Companies During this Transition?
Tesisquare’s mission is to support companies in developing digital supply chain ecosystems. In particular, Tesisquare has worked extensively on these topics over the past two years, releasing an “ESG Vertical” solution in 2024, consistent with new regulations, to support companies in this area through digital collaboration across the entire supply chain. This solution enables companies to manage a supply chain discovery process, collect ESG-type data (environmental, social data, and certifications) at supplier, product, and production lot levels, manage structured data for each product (at batch or serial number level), track batches through various production processes, communicate product storytelling to the consumer, implement digital passports, and integrate with Blockchain.
Additionally, Tesisquare comprehensively supports companies in this transformation, including process and supply chain model changes, supplier engagement and onboarding, LCA (Lifecycle Assessment) activities at suppliers and production sites, and compliance with new regulations such as the European Sustainability Reporting Standard, EUDR (anti-deforestation), ECDDD, and others.
In this evolving demand scenario and following the introduction of EU regulations, companies that can quickly adapt to new paradigms will be best positioned to fully capture the recovery in the luxury market.
Source: pambianco.it
Tesisquare per il Fashion e Luxury
In today’s Fashion and Luxury landscape, sustainability and traceability have become essential for business management. Environmental, Social, and Governance (ESG) factors significantly impact corporate strategies and operations, requiring a comprehensive review of supply chain processes. Tesisquare has developed various solutions for managing the Fashion and Luxury supply chain to anticipate and adapt to all upcoming changes in the industry.
