The term ‘fast fashion’ has become very much de rigueur within the fashion retailing industry. Retailers have to react quickly to changes in the market, possess lean manufacturing operations, and utilize responsive supply chains in order to get the latest fashions to the mass market. Stores such as H&M, Zara, Mango, Top Shop and Benetton have been tremendously successful in being responsive to the fashion needs of the market. Excellent logistical and marketing information systems are seen as key to the implementation of the ‘fast fashion’ concept. ‘Fast fashion’ is the emphasis of putting fashionable and affordable design concepts, which match consumer demand, on to the high street as quickly as possible. These retailers get sought-after fashions into stores in a matter of weeks, rather than the previous industry norm, which relied on production lead times ranging from six months to a year. The concept of ‘fast fashion’ relies of a number of central components: excellent marketing information systems, flexible production and logistics operations, excellent communications within the supply chain, and leveraging advanced IT systems. These components allow stores to track consumer demand, and deliver a rapid response to changes in the marketplace. The results are invigorating for fashion retailers, with ‘fast fashion’ retailers’ sales growing by 11 per cent, compared with the industry norm of 2 per cent.
Within the fashion industry a number of different levels exist, the exclusive haute couture ranges (made to measure), the designer ready-to-wear collections, and then copycat designs by mass-market retailers. Fashion has now gone to the high street, becoming more democratic for the mass market.
The traditional fashion- retailing model was seasonal, whereby retailers would typically launch two seasons: spring and autumn collections. Fashion retailers would buy for these collections from their supplier network a year in advance, and allow for between 20-30 per cent of their purchasing budgets open to specific fashion changes in the market. Typically, retailers would have perennial offerings that rarely change as well as catering to the whims of fashion, such as basic T-shirts and jeans.
Now, through the ‘fast fashion’ philosophy, new items are being stocked in stores more frequently. These newer product ranges stimulate shoppers into frequenting these stores on a more regular basis, in some cases weekly to see new fashion items. Savvy brand-loyal shoppers know when new stock is being delivered to their favourite store. Through increased stock replenishment of new, fashionable items, consumers are increasing their footfall to these stores, and furthermore these stores are developing brand images as cutting edge, trendy, and fashionable. This increased footfall, where shoppers regularly visit a store, eliminates the need for major expenditure on advertising and promotion. Also the concept of ‘fast fashion’ is helping to improve sales, conversion ratios within these stores. Due to the limited supply of designs available, this creates an aura of exclusivity for these garments, further enhancing the brands of these ‘fast fashion retailers’ as leading fashion brands.
Famous for ABBA, Volvos and IKEA, now Sweden has another international success story: H&M. The basic business premise behind H&M is ‘fashion and quality at the best price’. The company now has over 1068 stores in 21 countries. H&M sources 50 per cent of its goods in Europe and the remainder in low-cost Asian countries. Sourcing decisions are dependent on cost, quality, lead times and export regulations. The lead times for items can vary from a minuscule two weeks to six months, dependent on the item itself. H&M believes that having very short lead times can be beneficial in terms of stock control, however it is not the most important criteria for all items. Basic clothing garments can have lead times running into months, due to consistent demand. However, items that are more trend- and fashion-conscious require very short lead times, to match demand. H&M is now also in the process of teaming up with prestigious designers like Karl Lagerfeld to create affordable fashion ranges.
The firm utilizes close relationships with its network of production offices and 700 suppliers. Unlike some other clothing retailers, H&M outsources all of its production to independent suppliers. The dyeing of garments is postponed until as late as possible in the production process to allow greater flexibility and adaptation to the whims of the fashion buyer. Items from around the world are shipped to a centralized transit warehouse in Hamburg, Germany, where quality checks are undertaken, and the items are allocated to individual stores or placed in centralized storage. Items that are placed in this ‘call-off warehouse’ are allocated to stores where there is more demand for the particular item. For example, if pairs of a particular style of jeans are selling well in London, more jeans are shipped from Hamburg to H&M’s London stores.
Table 1: Some of the key players in apparel industry
H&M
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Next
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Benetton
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Originated in Sweden
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Originated in the UK
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Originated in Italy
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Chain has 1069 stores in 21 countries
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Has 380 stores in the UK and Ireland and has 80 franchise stores overseas
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Has a presence in 120 countries and uses a retail network o 5000 stores
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Originally called Hennes & Mauritz, renamed as H&M. Sells women’s and men’s apparel. Doesn’t own any manufacturing resources. Motto—‘Fashion and quality at the best price’.
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Sells women’s wear, men’s wear and homeware. The firm has a very successful catalogue business. Targets the top end of the mass market, focusing on fashionable moderately priced clothing
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Sell under brand name such as Benetton, Playlife, Sisley and Killer Loop. Uses a network of franchises/partner stores. Established huge brand awareness through its infamous ad campaigns.
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Zara
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Mango
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Arcadia
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Originated in Spain
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Originated in Spain
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Originated in the UK
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Chain has 729 Zara stores
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Chain has 770 stores in 70 countries
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Chain has over 2000 stores
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Zara is the main part of the Spanish Inditex group and is valued at nearly €14 billion. Operates under the mantra of affordable fashion, and adopts the principle of market-driven supply.
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Operates a successful franchise operation (more than half are franchises). The company specializes exclusively in targeting the young female mid-market.
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Operates several different fascia, targeting different types of customer, with stores such as Burton, Dorothy Perkins, Evans, Wallis, Top Shop, Top Man, Miss Selfridge and Outfit. Owner Philip Green also owns BHS stores and Etam UK
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Sourcing low-cost garments with quick response times is a vital element of the concept. Many of the ‘fast fashion’ retailers utilize a vast network of suppliers, so that their stores are replenished with latest designs. Some firms are entirely vertically integrated, where the retailer owns and controls the entire supply chain. For example, Zara buys its fabric from a company owned by its parent, Inditex, and buys dyes from another company also within the group. Retailers source their goods from countries such as China, North Africa, Turkey and low-cost eastern European countries. If cost were the sole basis for supplier selection, then the vast majority of products would be sourced from the Far East. However, the lead times for delivery of goods are quite substantial in comparison to sourcing garments in Eastern Europe (e.g. shipping goods from China can take sex weeks, whereas from Hungary takes two days). As a result of this, retailers are using a hybrid approach, sourcing closer to markets for more fashion-orientated lines. The drive towards reduced lead times is allowing companies to be more responsive to market changes. The benefits of such a quick response to market changes are reduced costs, lean inventories, faster merchandise flow and closer collaborative supply chain relationships.
The concept of ‘postponement’ is a key strategy used within the fashion retailing industry. It is the delayed configuration of a garment’s final design until the final market destination and/or customer requirement is known and, once this is known, the garment is assembled or customized. The material and styles are kept generic for a long as possible, before final customization. A classic illustration of the concept of postponement is its usage by Benetton. Colours can come in and out of fashion. Benetton delays when its garments are finally product differentiated, so that this matches what is selling. For example, a Benetton sweater would be stitched and assembled from its original grey yarn and then, based on feedback from Benetton’s distribution network as to what colours were selling, the sweater would be dyed at the very final stage of production. The concept of postponement allows greater inventory cost saving, and increased flexibility in matching actual demand.
The production and logistics facilities for these ‘fast fashion’ retailers are colossal in that each design may have several colour variants, and the retailer needs to produce an array of garments in a number of different sizes. The number of stock keeping units (SKUs) is therefore staggering. As a result, companies require a very reliable and sophisticated information system—for example, Zara has to deal with over 300,000 new SKUs every year. Benetton has a fully automated sorting and shipping system, managing over 110 million items a year, with a staff of only 24 employees in its centralized distribution centres. Mango, another successful Spanish fashion chain, also utilizes a high-tech distribution system, which can sort and pack 12,000 folded items an hour and 7000 hanging garments an hour.
Many in the industry see Zara as the classic illustration of the concept of ‘fast fashion’ in operation. The company can get a garment from design, through production and ultimately on to the shelf in a mere 15 days. The norm for the industry has typically run to several months. The group’s basic business philosophy is to seduce customers with the latest fashion at attractive prices. It has grown rapidly as a fashion retail powerhouse by adopting four central strategies: creativity and innovation; having an international presence; utilizing a multi-format strategy; and through vertically integrating its entire supply chain. For the ‘fast fashion’ concept to be successful, it requires close relationships between suppliers and retailers, information sharing and utilization of technology. Information is utilized along the entire supply chain, according to the demand. It controls design, production and the logistics elements of the business. Real-time demand feeds the production systems.
Zara is part of the Inditex group of fashion retail brands. This group adopts a multi-format strategy with different store brands targeting different types of customers. Zara is its key fashion-retailing brand. Zara opened its first store in 1975 in Spain and has now become a fashion powerhouse, operating in four continents, with 729 stores, located in over 54 countries. It has become very hip all over the world, for its value for money and stylish designs. The chain is building large numbers of brand devotees because of its fashionable designs, which are in tune with the very latest trends, and a very convincing price-quality offering. Each of the different store brands (outlined in Table- 2) needs to be strongly differentiated in order for the strategy to work effectively.
Table 2 Number of Inditex stores by fascia
Zara
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729
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Pull and Bear
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373
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Massimo Dutti
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330
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Bershka
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305
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Stradivarius
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228
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Oysho
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106
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Zara Home
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63
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Kiddy’s Class
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131
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TOTAL
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2265
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Figure 1 Zara’s market-led supply
Zara does not undertake any conventional advertising, except as a vehicle for announcing a new store opening, the start of sales of seasons. The company uses the stores themselves as its main promotional strategy, to convey its image. Zara tries to locate its stores in prime commercial areas. Deep inside the lairs of its corporate headquarters, 25 full-scale store windows are set up, whereby Zara window designers can experiment with design layouts and lighting. The approved design layouts are shipped out to all Zara’s stores, so that a Zara shop front in London will be the same as in Lisbon and throughout the entire chain. The store itself is the company’s main promotional vehicle.
One of Zara’s key philosophies was the realization that fashion, much like food, has a ‘best before’ date: that fashion trends change rapidly. What style consumers want this month may not be same in two months’ time. Fashion retailers have to adapt to what the marketplace wants for the here and now. The company is guilty of under-stocking garments, as it does not want to be left with obsolete or out-of-fashion items. The key driving force behind its success is to minimize inventory levels, getting product out on to the retail floor space, and by being responsive to the needs of the market. Zara uses its stores to find out what consumers really want, designs are selling, what colours are in demand, which items are hot sellers and which are complete flops. It uses a sophisticated marketing information system to provide feedback to headquarters and allow it to respond to what the marketplace wants. Similarly, Mango uses a computerized logistical system that allows the matching of clothes designs to particular stores based on personality traits and even climate variances (i.e. ‘It this garment suitable for the Mediterranean Summer?). This sophisticated IT infrastructure allows for more responsive market-led retailing, matching suitable clothing lines to compatible stores.
At the end of each day, Zara sales assistants report to the store manager using wireless headsets, to communicate inventory levels. The stores then report back to Zara’s design and distribution departments on what consumers are buying, asking for or avoiding. Both hard sales data and soft data (i.e. customer feedback on the latest designs) are communicated directly back to the company’s headquarters, through open channels of communication. Zara’s 250 designers use market feedback for their next creations. Designers work hand in hand with market analyst, in cross-functional teams, to pick up on the latest trends. Garments are produced in comparatively small production runs, so as not to be over-exposed if a particular item is a very poor seller. If a product is a poor seller, it is removed after as little as two weeks. Roughly 10 per cent of stock falls into this unsold category, in direct contrast to industry norms of between 17 and 20 per cent. Zara produces nearly 11,000 designs a year. Stock items are seen as assets that are extremely perishable and, if they are sitting on shelves or racks in a warehouse, they are simply not making money for the organization.
In the course of one year alone, Zara has been able to launch 24 different collections into its network of stores. After designs have been approved, fabrics are dyed and cut by highly automated production lines. These pre-cut pieces are then sent out of nearly 350 workshops in northern Spain and Portugal. These workshops employ nearly 11,000 ‘grey economy’ workers mainly women, who may want to supplement their income. Seamstresses stitch the pre-cut pieces into garments using easy-to-follow instructions supplied by Zara. The typical seamstress’s wage in Zara’s workshop network is extremely competitive when compared with those in ‘third world’ countries where other fashion retailers mainly outsource their production. Furthermore, the proximity of these workshops allows for greater flexibility and control, Zara achieves greater control over its supply chain through having a high degree of integration within the supply chain. By owning suppliers, Zara has greater control production capacities, quality and scheduling. This is in stark contrast to Benetton, which is close to being a virtual organization, outsourcing production to third-party suppliers and directly owning only a handful of its stores, the majority being franchises or partner stores.
The finished garments are then sent back to Zara’s colossal state-of-the-art logistics centre. Here they are electronically tagged, quality control double-checks them, and then they are sorted into distribution lots, ensuring the items arrive at their ultimate destinations. Each item is tagged with pricing information. There is no pan-European pricing for Zara’s products: prices are different in each national market. Zara believes each national market has its own particular nuances, such as higher salaries or higher taxation, therefore it has to adjust the price of each garment to make it suitable in each country and to reflect these differences. Shipments leave La Coruňa bound for every one of the Zara stores in over 54 countries twice a week, every week. The company’s average turnaround time from designing to delivery of a new garment takes on average 10 to 15 days, and delivery of goods takes a maximum of 21 days, which is unparalleled in an industry where lead times are usually months, not days. Zara’s business model tries to fulfil real-time fashion retailing and not second-guessing what consumers’ needs are for next season, which may be six months away. As a result of Zara utilizing this ultra-responsive supply chain, 85 per cent of its entire product range obtains full ticket price, whereas the industry norm is between 60 and 70 per cent.
The successful adoption of the ‘fast fashion’ concept by these international retailers has drastically altered the competitive landscape in apparel retailing. Consumers’ expectations are also rising with these improved retail offerings. Clothes shoppers are seeking out the latest fashions at value-for-money prices in enticing store environments. Now other well-established high-street fashion retailers have to adapt to these challenges, by being more responsive, cost efficient, speedy and flexible in their operations. The rag trade is churning out the latest value-for-money fashions at breakneck speed. ‘Fast fashion’ is what the marketplace is demanding.
Questions:
1.
Discuss
how supply chain management can contribute to the marketing success of these
retailers.
2.
Discuss
the central components necessary for the fast fashion concept to work
effectively.
3.
Critically
evaluate the concept of ‘market-driven supply’, discussing the merits and
pitfalls of its implementation in fashion retailing.
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