»»Fast Fashion Suggests New Strategies to US Retailers
In times where most of companies go offshore to cut costs, whether moving manufacturing plants or outsourcing to low salary countries, new fashion trends lead to new strategies in the apparel industry.
The concept that is going to have major implications for the supply chain of American retailers and on the manufacturing of apparel, as reported in the Newsweek article: A New Fashion Frontier - March 20 issue, is Fast Fashion.
Fast Fashion, for retailers means avoiding overstock and clearance sales, by introducing new items much faster than the norm, for shoppers means checking out the latest items weekly or even daily, rather than monthly. This typically European trend is now spreading out among the American consumers.
Top European retailers, such as H&M and Zara are moving rapidly into the U.S. market, as big American players, too big to copy the fast-fashion model from the ground up, are borrowing elements of it, moving from a seasonal cycle to something much faster.
Even though fast fashion remains a niche—it represented a little more than 1 percent of American market of apparel, H&M says the United States will be its fastest-growing market.
That could leads to shifting production for the U.S. retail market from China to less distant sites, like Mexico, in order to cut delivery times.
European companies solved this problem by bringing production back to eastern and southern Europe; that cut average delivery times from more than a month to about two weeks.
For US companies, Mexico would be an option because the labor costs in the United States are simply too high, to justify producing entire collections there.
Already H&M, Old Navy and Wal-Mart are looking at Mexico as a source for their American stores.
Mexico is “higher cost than Asia, but it saves three weeks’ time, so it could make sense on certain trendier items,” says Morgan Stanley analyst Gregory Melich.
Bain & Co. consulting translate the Fast Fashion trend in figures: about 15 percent of fast-fashion items are sold on sale, versus an industry average of about 49 percent. That means higher profit margins.
Bain estimates that the margins for the average fast-fashion retailer run about 16 percent, versus 7 percent for the typical specialty-apparel retailer.
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