The Effect of E-Commerce on the Fashion Supply Chain
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The Effect of E-Commerce on the Fashion Supply Chain

So what exactly happens at the very nexus of global geopolitics, global economic integration and the maturation of the digital age, including e-commerce, Big Data and social media? The world's fashion industry is proving a fertile ground for discovering the answer, as the entire fashion supply chain is being completely transformed.

The fashion industry is truly a global industry with a long and complex supply chain – from fibers and yarn production via fabric formation and finishing to garmenting, designing and retailing. Not too long ago, the fashion industry was a rather "local" industry in the sense that most textiles and garments were designed and produced in relative proximity to the end-consumer market.

Since the late 1990s and early 2000s, the fashion industry around the globe has been faced with structural and disruptive changes. These changes stem from different directions – globalization, technology (e-commerce, digitization) and sustainability (social and environmental concerns) – and are in many ways interconnected.


A new wave of global economic integration started after World War II with the establishment of international institutions like the International Monetary Fund (IMF) and the predecessor of today's World Trade Organization (WTO), the GATT (General Agreement on Tariffs and Trade). The main objective of these new institutions was to facilitate cross-border investments and trade of goods and services among countries around the world. Alongside these international institutions regional economic integration also intensified, whether in Europe with the European Economic Community (EEC) which eventually became the European Union (EU), or the European Free Trade Area (EFTA), or in North America with the North American Free Trade Agreement (NAFTA).

In this context, an additional acceleration and hence a disruptive change to the fashion industry was certainly the phasing out of the Multi-Fibre Arrangement (MFA) at the end of 2004, together with the accession of China into the WTO in 2001. The impact of these two major developments on the fashion supply chain was far-reaching. Suddenly, an enormous pool of highly motivated workers became available at much lower costs. As a consequence, more and more retailers and fashion brands around the world started sourcing in Asia in general, and China in particular.


The spread of the Internet in the 1990s and the growing number of Internet users opened up new opportunities for everyone. Suddenly, the Internet not only offered possibilities to display products and services, but products could also be increasingly ordered online. As a consequence of continuous and significant technological progress made in the past 15 years (e.g. mobile phones, touch screens, apps, 3D animations, e-payment systems, etc.) people can buy all sorts of products and services via the Internet, including textiles and apparel.

The spread of the Internet in the 1990s and the growing number of Internet users opened up new opportunities for everyone.

According to a 2013 report by Euromonitor International on global apparel distribution and market performance, Internet retailing of apparel in 2007 was only 3 percent of total retail sales. In 2012, this share doubled and was showing the fastest growth rates compared to all other retail channels such as specialist retailers, department stores and grocery retailers.

The new technological possibilities surrounding the Internet also had other important consequences. New brands did not need classical distribution channels anymore. They could simply open an Internet shop. Consequently, the number of brands has increased manifold in recent years. Customers are offered a greater variety of products and can increasingly specify parameters of the items they wish to purchase. Another important trend to consider is the digital functionalization of the fashion industry, referred to as "wearables". Textiles and garments are becoming the medium for collecting and analyzing data, for example in both the health and sports industries. In other words, digitization will lead to more cross-industry cooperation in the future.


While global economic integration and new technologies have been promoted by governments and companies, sustainability is a megatrend that is based on the perception of consumers that economic globalization and technological progress cannot be disconnected from social and environmental conditions. Consequently, in the 1990s a few fashion retailers and brands started to develop and produce fashion products that met certain social and/ or environmental requirements. Since the possible negative implications of global change have become mainstream concerns, sustainability has become a major issue that the fashion industry needs to take into account.

Interconnections and Contradictions

The fashion supply chain is shaped by many forces that have an effect on each other and often contradict one another. The process of increased global economic integration and the rise and proliferation of e-commerce provide the fashion industry and its customers with more choices at lower costs. While consumers welcome an increased selection, attractive prices and good services, they are also starting to pay more attention to sustainable aspects of the production, transportation and recycling of products. Since consumers are increasingly concerned about negative social and environmental aspects, they are demanding more transparency and traceability with regard to their purchases.

The Future of the Fashion Industry

The Internet in general, and e-commerce in particular, are still transforming the entire fashion supply chain. Twenty-five years ago, the fashion industry was mainly driven by producers, retailers and designers. Today the industry is mainly driven by consumers and the use of new digital technologies of all kinds. Furthermore, consumers are increasingly able to design their own garments by choosing fabrics, colors, prints, style, etc. online.

On the other hand, digital technologies also enable small, new or ethical fashion labels to gain access to markets around the globe. As far as production of fashion is concerned, new digital technologies also reduce the production costs of small lots and customized products. These new digital technologies are leading to a much more diversified and fragmented textile fashion industry along the entire fashion supply chain from production to distribution. The fashion industry as a whole is still adapting to these ongoing changes and there is little doubt that it is still at the beginning of this new digital age.