Fast fashion has for years been hailed as the "next big thing." But a glance at any major clothing store in Europe or North America would suggest fast fashion has already taken over the industry. What hasn't happened, though, is the accompanying shift in production to local factories that was so widely predicted. Here Mike Flanagan looks at why retailers show little sign of sourcing closer to home.

Since Spain's Inditex revolutionised the fashion industry by continuously modifying the range of clothes on offer in every Zara store, the days of a couple of collections a year seem to be gone forever.

But while rich-country retailers are getting clothes into shops more quickly and refreshing their ranges more frequently, they've managed to do this without moving production to factories near their sales base - which was one of the predictions that went hand-in-hand with fast fashion.

Indeed, US purchases of clothing from Central America over the past year have fallen twice as fast as clothes purchases overall.

And Western Europe has switched clothing production to Asia every bit as fast since the current crisis began - while China's share of Japan's clothes purchases has been falling all year.

Throughout the world, retailers and brands have been shifting their production away from the "near abroad."

So what's happening?

Fast fashion myth
Well, there was a popular myth about what fast fashion meant.

Here's the theory. A few garments went into a chain's shops. Customers told shop staff they'd like them better with pink buttons. All over the world shop staff entered the information into their Smartphones.

Then, in the twinkling of an eye, the chain's factories - located in a rich county, close to where most of those chain's shops were - would make thousands of versions with the pink buttons.

They'd be in the shops the following morning, fly out the same afternoon, a completely different set of garments would turn up the following day and customers would all come back to see what else was new.

Of course it was never like that. But Inditex still has factories in north-western Spain, and it still sources half its production from Spain or its near neighbours.

The Inditex business generates more money from making a lot of its clothes very near the point of sale, so reaction times are as fast as possible and the cost of keeping inventory is as low as possible.

Now that's a policy that's made Inditex, by turnover, the largest specialist clothing retailer in the world and number two in clothing sales overall only to Walmart.

But here's the strange thing. Almost everyone else in the trade has learned a lot from Inditex about keeping apparel offers fresh - but almost no-one else has successfully developed mass sales from extensive use of rich-country production.

Even Inditex doesn't depend on home production as much as it used to.

Asia accounted for practically no Inditex production in the 1990s; now it makes around 40% of the clothes Inditex sells. But because Inditex sales have more than doubled in the past decade, the volume of its Spanish production doesn't seem to have dropped that much.

Refreshing performance
Certainly, most retailers have managed to update their ranges a great deal more often: indeed, my research seems to show that the only retailers who haven't increased the frequency with which they change their ranges have all gone out of business.

And the chains that refresh best also seem to be performing best. In the US, The Buckle keeps emerging in just-style's monthly retail sales review as the only consistently growing US chain that's not a discounter.

The UK's New Look recently reported that sales increases had started to accelerate since early May, and a substantial proportion of Uniqlo's growth in Japan comes from its ability to keep offering its customers new products.

None of these businesses puts huge emphasis on getting new designs into stores the day after the designer dreamt them up.

In fact as far as sourcing philosophy goes, The Buckle looks distinctly old-fashioned: 80% of the clothes it sells are other people's brands.

And none of these businesses shows much sign of wanting to move production closer to home.

Most of the 20% of the clothes The Buckle sells under its own label are obtained through sourcing agents.

New Look has a fairly typical mix of direct sourcing and sourcing through agents, and buys clothes from more or less the same European and Asian countries as most other UK fashion chains.

Interestingly, neither company has followed the recent fads of elaborate networks of overseas sourcing offices or outsourcing sourcing to one large agent.

Uniqlo, which until very recently depended almost entirely on next-door China for all its clothes, is scouting round almost everywhere else in Asia for other places to source from.

It has persuaded a number of suppliers to invest over $80m in a new Bangladesh production complex, and there are signs of test production going on in a number of Asian countries where it has not previously bought much.

New attitudes
What's happened in almost every clothing chain has been a profound change in companies' attitudes to offering a continuous flow of new product.

Many have discovered it's possible to have a far more frequent programme of new garments - but they're not always designing new garments at short notice.

Inditex practices what Ken Watson of Industry Forum Services (who's done more studying of Fast Fashion than anyone I know) calls Continuous Flexible Flow: rapid new ideas that turn into real garments on real shelves very fast.

Most other retailers who change their ranges often practice what he calls Continuous Unmodified Flow, where design decisions are taken some time in advance.

If you can do it right, Continuous Flexible Flow makes more money. But it's tougher - which is why more and more businesses are switching to something closer to Continuous Unmodified Flow, though many mix and match a bit.

There are of course other factors coming into play.

  • A lot of Asian suppliers - who once had preposterously high minimum runs - have now organised themselves around relatively small orders which make buyers feel more comfortable if they're going to keep a constant stream of interesting new clothes coming into their stores.
  • Both Buckle and New Look have seen terrific growth in their Web sales over the past year. Suppliers around the Mediterranean or in Central America used to benefit from home shopping. Back in the days when they were geared to catalogues, home shopping retailers needed to keep every item in stock for the catalogue's whole life (often as long as a year), giving frequent top-up orders to relatively nearby suppliers. These days, when a garment on a website sells out, it's just replaced by another garment.
  • Asian suppliers' competitiveness has been sharpened over the past year or so. The end of US and EU quotas against China hasn't brought about a raft of ant-dumping petitions from protectionists - and buyers are now gaining the confidence to assume there won't be any. China's minimum-wage laws seem to be quietly getting forgotten. And India's currency has devalued. We've seen a raft of small improvements in Asian costings, which add up to greater pressure on Central American and Euromed manufacturers.
  • And the recession's hit different countries differently. For many younger consumers in the US and UK - where Buckle and New Look trade - the recession's brought many prices down, while relatively few have lost their jobs. In Spain and much of continental Europe, youth unemployment's got a lot worse since the recession started - and that's hitting sales in Inditex's heartland.

As with any new idea, there's no one right way that works for everyone.

Continuous Unmodified Flow - where ranges change in response to market demand - hasn't melted away: even in a recession, some consumers are always going to be tempted to buy more if they see clothes they like at the right time.

But the move to more frequent range changes isn't helping Central American and Euro-area manufacturers much.

Today's market is just too competitive for Continuous Flexible Flow to be a dependable business defence for manufacturers who just can't match Asian prices.

Continuous Flexible Flow is here to stay: I doubt we'll see shops selling the same merchandise for months on end again in a hurry.

But Euro-area and Central American manufacturers are going to need to try a lot harder to find a new way they can fight the Asians.

Mike Flanagan is chief executive of Clothesource Sourcing Intelligence, a UK-based consultancy that provides the western apparel buying community with objective information on apparel production, trade, price competitiveness, and apparel producers in over 100 countries. The new suite of Clothesource Guides help buyers find the best value - and give emerging-market lobbyists hard data on what their competitors offer.