The Covid-19 pandemic has been a watershed moment for a new wave of fashion tech companies. In fashion, luxury giant Gucci faces a double-digit decline in overall 2020 revenue, but a doubling of online sales offsets retail’s decline.

Gucci’s owner Groupe Artemis has just made a strategic investment in US resale marketplace GOAT, showing commitment to owning the online value chain and the growing trend of resale.

This moment coincides with a generational shift as ‘Gen Z’ comes of age. Indonesia has one of the highest shares of Millennials (born 1980 - 1995) and Gen Zers (1996 - 2012), with the two generations together comprising 62 percent of the population in 2020. 

The Mobile Generation

According to McKinsey's June 2020 report, Indonesian Gen Zers spend more time on their phones than any other group, second only to Thai Gen Zers. Coupled with rapidly increasing mobile broadband speeds, the obvious result is the massive continued growth in online spending.

But Gen Z consumers have a reputation for being picky and less loyal. They carefully manage their online identity, having at least two Instagram accounts. One public highly curated one, and one private one for close friends. They are also deal-hunters, making them tough customers.

• Gen Compare. Millennials and Gen Z know how to get the most out of the internet. They like to research before they buy. Over 50 percent look for discounts before buying. Shopee’s 11.11 discount campaign is used to buy the items they have already researched. This leads to lower loyalty. If the same product is cheaper elsewhere, and that store has some good reviews, they will be led by price. 

• More environmentally conscious. Across the Asia Pacific, Millennials and Gen Zers are concerned about the environment and say they prefer environmentally friendly products. Interestingly, Indonesians across generations are the most likely to agree that they are willing to pay extra for environmentally responsible brands, with over 60 percent agreeing. 

• Much more inclined to watch video content on mobile devices. Gen Zers spend much of their screen time watching videos on YouTube or TikTok. 70 percent of Gen Zers surveyed across the Asia Pacific say they discovered new brands through video at least once a month. This compares to 58 percent of Millennials and only 46 percent of Gen Xers.

These generational differences, coupled with advances in mobile device technology, drive 5 trends in fashion tech that are key in winning over Gen Z and Millennials:

1. Vertical super apps. In social networking, there are two main organizing concepts; social graphs (who you connect with) and interest graphs (what you like). Facebook and Instagram are social graphs driven networks, whereas Reddit is an example of a strict interest graph-based network.

Facebook has spent the last decade trying to integrate the graphs, with limited success. But China has several examples that bridge the gap. A good example is Poizon, which integrates social networking and commerce for sneakers and streetwear. Since fashion is inherently social, there are big opportunities in cracking the social side of shopping. 

2. Gaming is eating the world. The virtual environments offered by games are taking share from physical hangouts like malls. A great example is HAGO, a gaming centered social network popular in Indonesia.

Through a combination of social, streaming, and gaming, the app becomes a smartphone-based hangout to chill with friends and make new ones. The Avatars that people use in those environments have a growing importance for brands.

DMarket, a leading marketplace for skins, estimates the market size at $40 billion in 2020. Fashion is taking notice. A few weeks ago, Gucci and The North Face announced their new shared collection would be available digitally in Pokemon Go.

3. Augmented reality. The number one unsolved problem in fashion eCommerce is still sizing. Despite improvements, ‘the wrong size’ is by far the main reason for returns.

Around 90 percent of the smartphone installed base supports basic AR features, with gaming and selfie filters as the most popular use cases. As this technology advances, it will vastly reduce the frictions around sizing and try-on when shopping online.

4. Fashion creator economy.  A recent study under kids ages 8-12 found that nearly 30 percent aspire to become YouTubers. More than 50 million people now identify as being a ‘Creator.’ There is a shift happening, where creators transition from just ‘influencing’ their audience and being sponsored by brands to becoming brands and creating products.

There is a growing interest in custom sneakers and customized clothing. Brands that want to reach these younger audiences are already starting to engage with the best creators. The top creators will become the top fashion designers of the future.

5. Sneakers and streetwear. Gen Z is very unlikely to wear formal wear unless it’s for a wedding, funeral, or a theme party. There is an over 100-year trend toward more comfortable everyday clothing, which the pandemic has greatly accelerated.

Sneakers are the cornerstone of today’s fashion, and much of luxury fashion is shifting its collections more and more toward sneakers and streetwear to appeal to the next generation.

From Buyers to Sellers

These trends point to a future where reselling of fashion is a key component of the market. The social aspect of buying, selling, and trading, environmental consciousness, and the opportunities to make money provided by creator economy platforms drive this trend.

Reselling clothes provides a great opportunity for fashion-conscious youngsters to build a side-hustle or even a full business, while also looking great. If your clothes are easy to resell, you can also buy more of them and refresh your wardrobe more often, but without putting too much pressure on the environment.

In some categories, like limited-edition sneakers, the second-hand prices can be five to ten times higher than the original price, making resale aspirational instead of stigmatized as something for those who can’t afford to buy new. 

Gijs Verheijke is the founder and CEO of OX Street, an integrated sneaker focused marketplace. 

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