by -- March 25, 2014

The steep decline in 2013 4th quarter net revenue posted by Abercrombie & Fitch (down 12%), Aeropostale (16%), and American Eagle Outfitters (7%), should be a compelling signal to traditional apparel retail leadership that their model is misfiring.

One possible solution might be to learn from the success of fast fashion retailers such as Forever 21, H&M, Uniqlo, and Zara.  These companies have been able to deliver lower priced clothing and accessories that reflect consumer tastes throughout the year – all while maintaining a competitive cost structure.  What might the traditional apparel companies learn from the fast fashion retailers?

LESSON ONE: SPEED AND FLEXIBILITY ARE JUST AS IMPORTANT AS LOW COST
Zara, one of the most successful of the fast fashion retailers, manufactures more than half of its products either in the factories it owns or within close proximity to the company’s headquarters in Spain.  By producing the trendiest items closest to home, Zara’s production process takes only two to three weeks to complete, from start to finish.  Higher Spanish labor costs are offset by greater flexibility -- no extra inventory lying around -- and through faster turnaround speed.

LESSON TWO: CONTINUAL, NOT SEASONAL
Traditional retailers have long followed a model where clothing and accessories are by rule released two to four times a year, usually coinciding with the traditional fashion seasons of summer, autumn, winter, and spring.  In the world of fast fashion, these release cycles have been compressed into shorter durations of at most four to six weeks.  As a result, customers always find something new in stock that is more reflective of the latest trends and styles.

LESSON THREE: DEMAND DRIVEN INVENTORY MANAGEMENT
Unlike traditional retail, fast fashion retailers will often limit the seasonal collections they ship to stores to only three or four dresses, shirts or jackets in each style.  As a result, there is very little leftover stock, few extra-smalls or mediums hiding in the back.  When demand warrants it, however, store managers are able to request additional inventory, which can be delivered by the next day in most instances.

LESSON FOUR: CUSTOMER DRIVEN FASHION
Fast fashion retailers also carefully monitor the purchase behavior and reactions of their customers.  Store managers are asked to share customer feedback with headquarters (for instance “I like this shape of this lapel” or “I hate the color of this coat”), where a team of in-house designers quickly incorporate that insight into their new designs.

LESSON FIVE: BUY IT NOW OR NEVER
Customers of the traditional retailers might very well find the clothing they found on a rack in October still on that same rack in February.  By contrast, the rapid inventory cycles deployed by fast fashion retailers compels immediate consumer action, since the product you like today may not be around when you return in two weeks.  You either buy it now, or never.  And low prices only further contribute to the motivation to buy it now.

LESSON SIX: LOW PRICE + TRENDY CLOTHING = BUY NOW!
Fast fashion has also driven people to spend their money in a different manner.  In places like Forever 21, H&M, Uniqlo, and Zara, every purchase is an impulse buy.  You buy clothes not just because you love them, but because, at $40, those jeans are less expensive than lunch for two….and likely to be gone in a matter of days.

Given their desire to appeal to Millennials, who have grown accustomed to getting “what they want, when they want it”, traditional apparel retailers would be well-advised to consider some of the lessons of fast fashion retail, or face the consequences of becoming the equivalent of an old pair of polyester sweatpants to a generation that increasingly expects their apparel retailer to live by the motto “go fast or go home”.

Next in our 4-part blog series around fast fashion: A look at how fast fashion retailers have leveraged their manufacturing processes and supply chain to beat traditional retailers at their own game.