Photo: RetailWire
Is fast-fashion slowing down?
Recent stumbles from key fast-fashion players have some wondering whether the fast-turn, disposable trend has hit a speedbump.
Among the reports:
- Uniqlo has quietly closed five stores since January amid financial challenges;
- H&M’s sales rose more slowly than expected in its most recent quarter. Investors are concerned that its 10 to 15 percent expansion rate is leading to cannibalization;
- Forever 21 has slowed expansion and closed some of its largest stores as a bankruptcy of a key supplier pointed to a steep drop in sales for the teen chain.
It’s tough to gauge the health of the trend with overall apparel retailing in the doldrums, hurt by mild weather over the holiday season, heightened online competition, a shift in spending toward eating out and vacations, and other factors. Zara also continues to do well, perhaps due to its higher-end positioning. But the fact that a few fast-fashion chains are slowing their growth may mean that they expanded faster than warranted. Fast-fashion may also be largely suitable for major cities given that all of Uniqlo’s closings focused on suburbia.
The bigger question is whether the business model — tied to frequent, smaller deliveries of runway knockoffs — has some kinks. The Wall Street Journal said H&M’s localized model, for instance, forces the company to “rapidly open stores in new markets to justify the cost of local distribution centers, merchandising and property teams and other infrastructure it opens in every market.”
The trend also runs counter to the sustainability and better-quality trend being championed in food and other sectors. Some question how the cheap items can be made ethically and rage against the eco-damage of such throwaway items.
“It comes back to how delightfully cheap everything is,” Abigail Glaum-Lathbury, assistant professor of fashion design at the School of the Art Institute of Chicago, told the Chicago Tribune last November on fast-fashions’s allure. “If something is $5, there’s no downside, but that is a problem on another level. That kind of mentality, that’s not how we treat people and our friends and that’s not how we should treat the environment and our limited resources, especially in the face of global warming.”
- Are We Officially Burned Out on Fast Fashion? – Esquire
- Uniqlo’s struggles cause fashion chain to close stores – New York Post
- Fast-Fashion Leader Keeps H&M at Bay – Dow Jones Businesswire
- Forever 21 Rethinks Its Love of Giant Stores – Forever 21
- Fast-fashion’s rapid growth starts to slow – CNBC
- Is fast fashion at odds with sustainability? – PYMNTS
- Zara Owner Inditex Stays Ahead of the Competition – The Wall Street Journal (sub. required)
Discussion Questions
DISCUSSION QUESTIONS: How do you explain the recent struggles that fast-fashion chains are having? Do you still see fast-fashion making gains against the traditional apparel model in the years ahead?
Poll
BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Christopher P. Ramey
President, Affluent Insights & The Home Trust International
Fast-fashion retailers (especially Forever 21 and H&M) have expanded very quickly as real estate has become available during the past five years. (This includes Forever 21’s move into some vacated mall anchors.) They are probably finding — like other brick-and-mortar retailers — that there can be too much of a good thing when it comes to square footage. And some of those store openings have been in regional malls that are in decline anyway.
it doesn’t help matters — during this period of over-expansion — that fast fashion retailers are suffering from the same malaise as department stores. (Only the off-pricers seem somewhat immune right now.) Given weak demand for apparel, and the lack of a sales-driving trend, it’s tough for most fast-fashion stores to gain traction.
I think it’s not about the segment itself, it’s about the continued presumption that markets are infinite. There are only so many doors, stores and brands that the consumer can actually consume. Right now, there are simply too many.
I expect the herd to be winnowed in the coming year and then the segment will bounce back.
Fast-fashion is seeing the same kinds of decreases that many apparel stores are seeing as the consumer shifts to online purchasing and as the younger generation matures and creates a spending impact on the retail picture. We can expect to see more online shopping, fewer traditional store purchases and continued changes in the traditional apparel retailing market as consumers take advantage of online’s ease and convenience.
in the end, demographics impact spending in this category. Fast-fashion is probably the last segment to be impacted by online, so brick-and-mortar segments are less affected than books or electronics. If the segment is down then there’s nothing new or fewer people buying.
Just being fast is not enough. Retailers have to make the products consumers want to purchase available when they want to purchase them. Maybe the fast turn around model is no longer viable, maybe it is not viable for all retailers, maybe some retailers are offering products consumers do not want to buy.
Just the fact that the term “fashion” is used to describe this category of retail should be your first clue. The very meaning of the word and even the industry itself is about something that comes and goes. If you’re hot now, you’re not hot later. That’s just the nature of the beast.
And a fashion retailer can become consistent by hitting the right fashion in different departments at different times and, sometimes, you can hit them all at once and be on fire. But with the likelihood that you’ll hit them all at once comes the opposite scenario: you miss them all at once. And you’ll see both happen to fashion retailers over a period of time if you pay attention. And let’s not downplay talent. If a retailer has someone with a great eye for what’s next, that can and will make all the difference in the world. But even that’s fleeting. People change jobs or get burned out.
Another factor is category or “look” heat. When khakis and cargo bottoms were fashionable, you actually saw new retailers pop up pretty much based on that look. And they were successful for years. Until the look died. No one wanted it anymore i.e., it became UN-fashionable.
What’s happening now is both. Some fashion retailers are simply making mistakes and missing the hot looks (Uniqlo), while others are hurting because there isn’t enough hot categories now to make the numbers they’ve been making prior (XXI).
To sum it up, the fashion business is almost impossible to maintain consistently for too many reasons. Having said that, just wait until the next look hits and watch some of the current floppers flip back to your favorite store. That’s fashion!
In general fashion retailers are always at risk because of seasonal and stylistic changes. For fast-fashion this risk goes up as there are more chances to get trends or inventory predictions incorrect.
With the pressure from investors to generate returns, some of these companies scale too quickly without fully mastering all aspects of the supply chain. The consequences can be disastrous to the bottom line. I believe one of the key attributes that separates the winners from the losers is the level of commitment to being customer-centric.
Look no further than reviews about a retailer and it is easy to spot who says they are customer-centric and who actually makes changes to be customer-centric. From there flow policies and decisions that increase customer retention and profitability.
Companies that maximize profits too early pay the price of having customers that like them, versus customers that love them.
The business model of fast-fashion still has a lot to prove, but it also has a lot to learn. I think the market is still being defined. But in general, the fashion vertical is no easy place to compete.
Millennials, a key market for fast fashion, care more about sustainability, adventures and experiences than apparel. That’s why restaurant sales are up.
“Struggles”? That seems a stretch, unless your definition of the word is going from rapid growth to moderate growth. That having been said, once an industry — or in this case really a sector of the industry (women’s clothing) — reaches a saturation point, its growth will reflect the overall economy … which of course has been slow for a long time.
“Fast fashion” is an industry term. It has little to do with customers. Nor do I believe consumers see it in conflict with sustainability.
Prospects can only drink so much; there’s a difference between a faucet and waterboarding. America is over-stored and under-customered.
Fast-fashion may appear to be slowing down, but it is probably more of a function of some retailers feeling the pinch of more competition or over saturation in the marketplace. I think there is still a strong market for value-priced fast fashion. Today’s younger consumers are shopping discount brands and fast-fashion retailers because they don’t want to spend $200 on a sweater when they can get a similar one for $20 and wear it a few times and get a different style or color next month.
The success of Zara, with 2016 Q1 sales up 12%, and Primark demonstrate that there is a demand for fast fashion. The retailers that have the right combination of product, assortment and price strategy will continue to be successful in this space. As with any retail category, there are winners and losers.