The fashion industry is constantly shifting as retailers race to meet consumer demands for the latest trends. As the industry becomes increasingly competitive, consumers have the upper hand in the determining what they want and when.
They want it FAST. Not just fast, ultra-fast! In an age where speed and immediate gratification is of essence, the future winners of fashion will be the ones that can spot trends as or before they happen and deliver them to consumers in the shortest possible time frame.
Traditional Fashion Cycle: The Push Model
Before the rise of fast fashion, retailers placed large orders to meet an entire season’s demand. The “push” model meant that products were determined by retailers and “pushed” or marketed to the customers. Retailers decided what to buy and how much to buy using at best, internal past sales data and at worst, gut instincts. However, what retailers push may not always be what consumers want. Hence, there is often a mismatch between consumer demands versus what is being stocked. Due to the lack of predictive ability, retailers end up having to store large inventories and then hold frequent sales to clear off excess stock.
Fast Fashion: The Pull Model
The retail market has changed since then with retailers such as Zara & H&M flipping the coin from a “push” to a “pull” model. This way, consumers dictated trends and retailers have to adapt to them. What used to be a 6 months lead time from when a trend is identified to being available in stores, Zara now famously shortened it to mere weeks, making them the leaders of fast-fashion. Along with this phenomenon comes the uprising of retail intelligence data.
What attributed to their success of understanding the behaviors of their consumers is this. Hundreds of designers at Zara are constantly fed with streams of retail intelligence data captured from monitoring up and coming fashion designers who are making waves in their niches, what fashion advocates are wearing and posting on social media and on the runway, as well as competitor insights such as product assortment. It’s no wonder how Zara catapulted into the fashion enterprise it is today.
Top performing categories for Zara Malaysia in terms of stock percentage, taken from 1 Aug 2017 - 5 Mar 2018.
Ultra-Fast: When Fast Is Not Fast Enough
With fashion trends boasting a shorter lifespan from a year or so to 3 to 5 weeks according to the Boston Consulting Group, retailers worldwide are bracing for impact. Inspired by Zara’s strength in data analysis, young ultra-fast fashion retailers such as Boohoo, Missguided and ASOS, are adopting a “test and repeat” model by being eCommerce-first. For example, Boohoo mines Instagram to identify the trending styles within its target customer group. They then create initial designs which are made in small batches to test demand and if successful, more items are quickly produced.
Boohoo has the ability to get a product from concept to sale within just 2 weeks while Missguided is even faster, at just 1 week. The graph below shows the comparison between lead times of fast fashion retailers like Zara, H&M and ASOS vs ultra-fast fashion retailers like Missguided and Boohoo. Placed side by side, it is clear to see that even fast fashion isn’t fast enough.
Source: Fung Global Retail & Tech.
What happened as a result of embracing this trend? Boohoo became the year’s best-performing European consumer stock with its share value rising by 260% in 2016.
This model solved the historical retailer dilemma of product shortages versus excessive inventory and ensuing markdowns and lower margins. Compared to an average retailer, a fast fashion retailer typically provides a markdown of up to 15% while the industry average stands at 50%. This can be achieved because producers are producing just in time to meet the consumer demand.
Source: Fung Business Intelligence Centre/Fung Global Retail & Technology.
Fashion is getting faster and each generation is surpassing the one before in data mining, data literacy and most importantly, being able to combine all these information to make the best buying and stocking decisions. The speed of such growth forces retailers – new and old, to transform from a fashion-first to a technology-first operation.
So How Should The Fashion Retail Market Respond?
Evolution is inevitable. Every industry has a turning point and new technologies such as deep learning algorithms are reaching new levels of maturity. It is undeniable that trend cycles are shortening and adoption rates are getting shorter and shorter. Retailers do not only have to be fast but to understand what their consumers want and give them exactly that. Only then there is a chance of staying ahead amidst a whirlpool of all that is happening in the world.
Want to understand your consumers and tap into the fast fashion industry? Drop us an email at firstname.lastname@example.org and we’ll be in touch.