Kornit Digital CEO On Disrupting The Traditional Textile Supply Chain

It's a pleasure to be here. Thank you very much.

Yeah, we need to understand that the fashion market and the textile market didn't change for ages. We saw a transformation in many, many industries, but the textile market and fashion market is being produced like it was used to produce 100 years ago. Being produced in China, in Bangladesh, in Sri Lanka, offshore, shipping products 12,000 miles into the US, into a warehouse, and trying to push it to the consumer. In today's digital world, it doesn't make any sense. Today, social media is defining what the consumer would like to consume. Everyone wants to express themselves. Consumers would like to buy what they like and not what they're being pushed to buy. Production is moving from offshore to near-shore to onshore. The pandemic created an inflection point in the industry, and the production is moving really into the US and in Europe. But more than ever, what we've seen is an explosion in e-commerce. Actually, we saw in the last 10 years that e-commerce is growing rapidly, but what happened in the last one year is that it grew in the same pace of the last seven years, just in one year alone. And what does it mean? That e-commerce is growing, the consumer is going online and buying the product that they would like to have, but the supply chain of producing far away in the Far East and shipping it to the US doesn't fit. So the virtual world and the physical world don't combine together. What Kornit is bringing to the market is actually connecting the virtual world to the physical world by enabling on-demand manufacturing, producing onshore next to the consumer in a fully sustainable way to meet any creativity and any design the consumer would like. Now, let me explain to you what does it mean on-demand manufacturing. So it means that when you are going online and ordering a T-shirt like what I'm wearing now, this T-shirt does not exist; it virtually exists. And when it virtually exists, you actually can have any type of design, any type of color, any type of size, and you start to produce the product only when you get the order. If you are a brand, if you are a marketplace, or you are retail, the production is being done next to the consumer. So if the consumer sits in New York, the production is in New York to enable shipment within 24 hours or 48 hours to the consumer. Consumers really need to receive the product as quickly as possible. So Kornit enabled this connectivity between the brands and the marketplaces and the retails to a network of fulfillers all around the world that they can produce on-demand manufacturing closer to the consumer.

Yeah, so when you're talking to the brands, they're all talking about two main issues: one, DTC, direct-to-consumer, how they can connect to the consumer through e-commerce; and the second thing is sustainability. They all care about sustainability. The textile market is the second most polluted industry in the world after the oil and gasoline market. So it's the second most polluted. By using our technology and using on-demand manufacturing, actually, you can reduce the pollution dramatically. So think about it from where it's coming, the pollution. Other than the dyeing of the material and the waste of water, the consumption of water, there is about 30% of other capacities that are being produced. So from all the things that are being produced, 30% are being thrown away. We generate 21 million tons of textiles that are being thrown away every year. By producing on-demand, you actually reduce the inventory to minimum. You don't have inventory, so you produce exactly what the consumer needs, and you don't produce to forecast or, should I say, hope-cast of trying to predict what the consumer will buy through the e-commerce.

So, of course, we are developing the technology. The technology is the machine, the system, the ink, the services, a lot of software around it to connect the brands to our fulfillers. The fulfiller can be traditional screen printers that now are moving into digital. It can be brands that are buying our machine to produce on the machine, or it could be in marketplaces like Amazon, which is our biggest customer, buying our system all over the world to produce closer to the consumer on-demand. So we are not producing ourselves. We are selling technology to different customers that are using our technology.

So the main trends are, first of all, the consumer today is different from the consumer that used to be 20 years ago. Everybody would like to be unique. They would like to choose the product that they like. Nobody would like to go to the gym and to wear the same shirt that their friends are having. So they would like endless variety. Also, designers would like to express their design and to sell it. So this is one thing that we see very, very clear. Another trend, which I mentioned, is the move from retail, selling in retail, to e-commerce, to online. And online is virtual, so you need to change the entire supply chain to become also agile and flexible to meet the need of the e-commerce. By that, we see the move into onshore production because if you're using digital e-commerce, you need to react fast, and you need to produce next to the consumer, and you need to be able to produce any type of design. So this is another big, big trend that we see. And the last trend that I would say, mega trend for this industry, is about sustainability. There's a lot of regulation now coming in place with governments really limiting the old way of production of excess production. All the brands, when they're publishing their reports, are saying they're moving into sustainable production and into recycling production. And using Kornit technology, there is no waste of water. You produce to an order. You don't produce to forecast. You can react fast, endless. There is no limitation about design, and there is zero waste of water, which is really, really important. Our ink is fully green, using pigmenting and meeting all the market standards.

Yeah, but before that, maybe regarding the designers, you know, think about the different markets. Think about the book market. About 20 years ago, Amazon decided to move online with the books, enabling consumers to go online and to buy virtual books. So we saw a shift from buying books in the retail to the online, and then Amazon actually printed it on-demand. They didn't have those books on the shelf. You ordered books, and they printed for you. And now they had unlimited titles of books. But what it created really, it created that every person could become a publisher. You didn't need to sell hundreds of books; you could sell one book. The same thing is going to happen in the fashion world. Now every person can go and open an online shop in eBay; it will take you half an hour. You can put your design online, and now the problem is how do you produce when you get the order. And Kornit really is coming into play and helping to connect them to a full network of fulfillers that fulfill the job on-demand closer to the consumer in a fully sustainable way. So this is a big trend that we see in the market. This is where the market is shifting. We see many new emerging brands. We see many brands that are coming online without retail and focusing really on their online, addressing young generation but any population as well. So this is really a big growth that fueled the growth of our customers. So in the last few months, our customers really are working around the clock and asking us to supply them with more systems, more ink, more support, and we see them expanding not only in a specific site but all over, closer to the main city to be able to deliver within 24 hours, 48 hours the product to the end consumer.

Thank you very much. It was a pleasure. Thank you.