Outside View: Software and Platforms Are Eating the Fashion Industry

Digital technology is either a blessing or a curse — and how it feels to you likely depends on whether you were born a digital company or are trying to become one. As a consumer, digital technologies are a boon — they enable us to purchase the products and services we want, how we want them and through whatever channel we want to obtain them. On the other hand, software and platforms have started eating many companies’ top and bottom lines as well as eroding their most precious asset — the brand they have worked so hard to create. As digital advisers and board members, we have noted that all industries are confronting this same reality — technology start-ups have dramatically higher valuations than their industry incumbents. The ratio of market cap to revenue is a good indicator here — i.e., how much do investors pay for a dollar of revenue? For The RealReal, it’s 8.84-times and Rent the Runway was just funded at a valuation about 10-times its revenue. Compare that to legacy physical players like Nordstrom (0.29x), Macy’s (0.24x) and Walmart (0.62x) and you can see the difference. And for good reason: • First, legacy businesses are hard to scale

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