just-style management briefing: Fast fashion's competitive advantages
A successful fashion retail strategy is now often a race against the clock, as consumers' appetites for a revolving door of apparel trends continues to grow in the era of 'fast fashion'.
Whereas in the past it may have taken months for fashion trends to filter into the mass market from the catwalk, stylish and affordable international fast fashion companies such as Zara, H&M, Mango, and Topshop have been speeding up lead times drastically, with runway designs showing up on racks within weeks, rather than months.
This quick turnover offers obvious benefits to companies - with new items popping up every week, customers are shopping more often and making more impulse buys. But it also demands more complex design and manufacturing systems.
According to Spanish fashion group giant Inditex - owner of the Zara chain which operated in 82 markets with 1,830 stores at the end of 2011 - its approach to design is closely linked to customers, with a "non-stop flow of information from stores" conveying shoppers' desires and demands, and inspiring the company's 200-person in-house creative team.
The Inditex business model is a good example of how vertical integration can give a company a competitive advantage in fast fashion.
With Zara involved in all stages of the fashion process (design, manufacture, logistics and distribution to its own managed stores), it has a very flexible structure that can adapt to changes within each season.
The supply chain does not end when products arrive in-store either, and company stores represent an important resource for collecting market information, sending feedback to design teams and reporting on trends requested by customers, which contribute heavily to the new styles making their way to stores on a bi-weekly basis.
Monitoring consumer demand
Federica Balestri, owner and business development officer at made-in-Italy fast-fashion label POIS, says that while her company operates on a smaller scale than Zara, the overall approach in monitoring consumer demand is relatively similar.
At the beginning of a season, she explains, the team at POIS is inspired by catwalk looks from big designers, as well as "budding micro-trends in the best boutiques of fashion capitals like Milan, London, New York, Paris; street fashion in other trendy cities such as Tokyo, Berlin and Amsterdam; [and] what international celebrities choose to wear for inspiration."
As soon as POIS spots a trend, the company can produce its own models in reference to that trend in around 15 days. The company then has the capacity to measure the success of different trends by examining sales in its franchise network, and subsequently focusing only those trends that produce bestsellers.
Overall, adds Vertica Bharwaj, who works in the department of textiles and apparel at the University of Texas at Austin, US, differences between fast fashion retailers work from the very beginning of forecasting for the season, in terms of styles, colours, silhouettes, designs, and fabrics.
"For the most part, the decision of what and when to launch in the marketplace is driven by fashion runways, catwalks, fashion shows and other fashion related activities that occur...across the world," says Bharwaj.
"The photo shoots and other information from these shows - including fabric trends, silhouettes etc - are gathered in real-time and immediately released to design teams that take an inspiration and re-work on creating various prototype garments on less expensive fabrics to make their collection."
Warren Hausman, professor of management science and engineering at Stanford University, California, says that overall, one of the biggest financial benefits of a fast fashion model is better experience with markdowns and stock-ups, by introducing less products more often.
"If you do a closer job of fitting what you're offering to what people are actually willing to buy, then you're not going to have as big of a markdown problem at the end of a season," he says.
For example, looking at comparative performances, a fast fashion company generally marks down 15% of its items, while a traditional European apparel retailer marks down 30-40%, and a traditional US apparel retailer 50-60%.
In fact, US apparel retailers alone lose US$64bn annually due to markdowns, according to global consulting firm Kurt Salmon.
Similarly with stock-outs, says Hausman, companies like Zara play the scarcity game. "They essentially want to train people to think that if they see something they want, they had better buy it - because if they come back in two weeks, it won't be there."
With this strategy, fast fashion companies do not have to invest as much in advertising, either, he explains, as customers know to come into the store frequently to shop the ever-changing stock. Zara sees the average customer coming into its stores about 17 times a year, for instance, while the average number of visits is between three and six for more traditional retailers.
A unique approach to fast fashion
Likewise, Anastasia Charbin, fashion marketing director at Lectra, agrees that "fast fashion done right keeps demand consistently high, effectively limiting the number of items sold at a discount. A tight, efficient process promotes fast turnover, keeping collections fresh and consumers hungering for more."
Its impact also extends from the early stages of development and all the way through to production.
"Fast, informed decision making is one of the keys to getting designs out and into stores when they need to be there," she explains.
"This can only really happen when creative, technical, and production departments share information, work as a single team, and have the power to make validation decisions quickly. The changes on the manufacturing side are just as profound; those teams must rethink the traditional model to build flexibility into the production line.
While fast fashion companies continue to reap the majority of benefits from faster, more streamlined supply chains, they are not the only ones in the retail industry moving towards these models.
Bart MacCarthy, professor of operations management at the UK's Nottingham University Business School, says the entire apparel industry is shifting and changing in that the idea of two fixed seasons a year in the fashion world no longer exists, and almost every retailer is now refreshing within a season, based on what they are selling.
"Fast fashion has come to mean fashionable garments at low prices appearing quickly in retail stores - but it's also important to see the overall context, in that timelines are compressing right across the sector," he explains.
"What was the norm 20 years ago in terms of response to the supply chain is no longer the norm right across the board, no matter who the retailer is."
Charbin also notes brands and retailers are increasingly taking the fast fashion approach and making it their own by marrying the strengths of several different retail strategies to come up with their own unique customer experiences.
"We see companies in France combining fast fashion with high quality fabrics and luxury-level service to boost store traffic and increase consumer loyalty, for example.
"Certain distance sellers in the UK and elsewhere have taken a similar high service/fast fashion approach. And we've all seen the fast fashion/low price strategy that was the catalyst for the accelerated pace that is the norm in fashion today."
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