fast fashion speeding toward ultrafast fashion may 19 … · according to the company. zara also...

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May19,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

May 19, 2017

Zara and H&M, the two largest global fast-fashion retailers, pioneered the fast-fashion business model. Now, the two companies are competing head to head with a new set of younger online-only competitors.

New players such as Boohoo.com, ASOS and Missguided are bringing products from design to sale in as little as a week or two—faster than traditional fast-fashion retailers, and even faster than Zara. Fast fashion is turning into ultrafast fashion.

Consumers’ demands for immediacy are increasing and production cycles are becoming ever quicker. Retailers that have the shortest and leanest supply-chain cycles are posting the strongest sales growth results.

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May19,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

BringingUltrafastFashiontoMarketFastfashionisturningintoultrafastfashion.NewplayerssuchasBoohoo.com,ASOSandMissguidedarebringingproductsfromdesigntosaleinaslittleasoneortwoweeks—evenfasterthantraditionalfast-fashionpioneerssuchasZaraandH&M.

Thenewcropofonlinefast-fashionretailersisprovinghighlyadeptatrapidlyrespondingtoconsumers’increasingdemandsforimmediacyandconstantnewness,inturndrivingtheirrapidsalesgrowthandsuccess.

Boohoo.com,ASOSandMissguidedarenowabletoproducemerchandisein2–4weeks,comparedto5weeksforZaraandH&Mandthe6-to9-monthcyclefortraditionalretailers.

Thefashiondesignprocessisfasterthanithaseverbeen,duetothedigitalrevolution.Itismucheasierforretailerstocopyorobtaindesigninspirationfromfashionrunwaysanddigitalinfluencers.Socialmediaisnowakeytoolinformingsourcingstrategybecauseitprovidesdataonemergingandpopulartrendsandstyles.Pure-playonlinefast-fashionretailersareabletocontinuouslyrefreshandrotatealargepartoftheirassortmentstodrivecustomershoppingfrequency.Forexample,BoohooandASOSaddupto100and4,500productsdailytotheirwebsite,respectively.

Figure1.NumberofNewItemsAddedWeeklytoWebsite

Source:Companyreports/FungBusinessIntelligenceCentre/FungGlobalRetail&Technology

“Test-and-Repeat”ModelUltrafastfashionretailersalsoavoidthehistoricalretailerdilemmaofproductshortagesversusexcessiveinventory,andensuingmarkdownsandlowermargins.Ultrafastapparelretailersoperateagilesupplychainstoquicklymatchinventorysupplywithchangingdemandandstrictlycontrolinventorytocreateabalancebetweenundersupplyandmarkdowns.Initialdesignsaremadeinsmallbatchestotestdemand,and,ifsuccessful,moreitemsarequicklyproduced.Thesourcingbusinessestargetsellinggoodsatfullpricesandreducedmarkdowns,hencefast-fashionretailershavemuchlowermarkdownlevelsthantraditionalretailers,asdepictedbythetablebelow.

4,500

100

ASOS Boohoo.com

Boohoo.com,ASOSandMissguidedarenowabletoproducemerchandisein2–4weeks.

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May19,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Figure2.ProductMarkdowns(%)

Source:FungBusinessIntelligenceCentre/FungGlobalRetail&Technology

NearshoringandOnshoringFast-fashionretailersareabletobringproductstomarketandadjustinventorylevelsrapidlybybasinglargequantitiesofproductionclosetoheadquartersandkeycustomermarkets.

• Boohoosourcesover50%ofitsproductsfromtheUK,whichallowsthecompanytoofferthelatesttrendsandstylesveryquickly.

• ASOS’sCEOstatedthatheexpectsagrowingresurgenceofclose-to-shoreandonshoremanufacturingtoincreaseleadtimes,asyoungerconsumersarebecomingmoredemandingandfashiontrendsarechangingmorequickly.

• InditexhasstatedthatZarasourcesapproximately60%ofproductinEurope,mainlySpainandPortugal.

• H&MhasrecentlyannouncedthatitwillinvesttospeedupitssupplychainandisconsideringmovingmoreproductionclosertoEurope,tocountriessuchasTurkey,inordertobringproducttoEuropeanstoresfaster.

50%

15%

IndustryAverage FastFashionRetailers

Boohoosourcesover50%ofitsproductsfromtheUK,whichallowsthecompanytoofferthelatesttrendsandstylesveryquickly.

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May19,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

FastFashionandUltrafastFashionPlayersBoohoo.com:FromTwoWeeksBritishonlinefashionretailerBoohoosellsown-brandclothing,shoesandaccessories,andtargets16–24year-olds.Earlierthisyear,Boohoo.comacquireditsremaininginterestinPrettylittlethingandUS-basedNastyGal.

Source:boohoo.com

Thekeytothecompany’ssuccessisitsbusinessmodelfocusedonspeedtomarket.Boohoo.comreportedlyhasthecapabilitytogetproductfromconcepttosaleinjust2weeks.

Thecompanyoperatesatest-and-repeatmodel,whichrevolvesaroundtheconceptofproducingitemsinsmallbatchesinitiallyandquicklyreorderingstrong-sellingproduct.Thesourcingmodelreducesinventory-holdingriskandenablesrapidmarketresponsetoquicklysatisfycustomerproductdemand.

• Boohoohasupto29,000productslistedonitswebsiteandcustomersarecontinuouslycheckingthewebsitefornewstyles.

Boohoo.comcollaborateswithcelebrities,artistsandsocialmediainfluencerstopromotestylesandtouncoverthemostrecentfashiontrends.

• BoohoominesInstagraminteractionstoidentifywhatstylesaretrendingwithitstargetcustomeragegroup.

Boohoohasupto29,000productslistedonitswebsite,andcustomersarecontinuouslycheckingthewebsitefornewstyles.

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May19,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

• Thecompanyalsocreatesuniqueseasonalcapsulecollectionsandentersintodesignpartnershipswithdigitalindustryinfluencersandcelebrities.

BoohoohasseenrobustgrowthintheUK,ContinentalEuropeandtheUS,andthecompanyclaimsitisnowtheUK’sthird-largestonlinefashionretailerbymarketshare,followingASOSandNext.

• Boohooreportedconstantcurrencyrevenuegrowthof49%to£294.5millioninthefiscalyearendingFebruary28,2017,andexpectsrevenuestoincreaseby50%yearoveryearinfiscalyear2018.

ASOS:2–8WeeksUKonlinefast-fashionretailerASOSoffers60%own-labelproductandtheremainderbypopularinternationalbrands.Thecompanyisabletobringproductfromdesigntostorein2–8weeks,dependingonthecomplexityoftheproductandsourcinglocation.Theaveragetimetomarketisaround6weeks.

Source:asos.com

• ASOSisabletodesignandgetproducttocustomersin2weeksifitisasimpleproductmanufacturedintheUK.Moredetailedandembellisheditems,calledfashionitems,takelonger.

• ForitemsmadeinTurkey,thesupplychaincantake4–6weeks,anditemsmadeinMauritius,whereASOSsourcesaround16%ofitsproducts,cantake4–8weeks.

ASOSteamsaretryingtoreduceleadtimesonASOSown-labelproducts.ASOShasincreasedthenumberofnewown-labelitemslaunchedperweekby10%yearoveryearinfiscalyear2016.

LikeBoohoo.com,ASOShaspostedverystrongsalesgrowthinthepastfewyears.

• ASOSreportedfirsthalffiscalyear2017salesfortheperiodendingFebruary28,2017up38%yearoveryear,andthecompany

6

May19,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

increaseditssalesforecastforfiscalyear2017,expectingrevenuestoincreasebetween30%and35%.

Missguided:From1WeekPrivately-heldBritishonlinefashionretailerMissguidedhasgrownrapidlyoverthepastfewyears,andisconsideringasaleorflotationduetothisrapidgrowth.

Source:missguided.co.uk

• Missguidedrevenuesincreasedby75%to£206millioninthefiscalyearendedMarch31,2017.Internationalsalesincreasedby130%yearoveryear.

• Thecompanylaunches1,000newproductseachmonthandupdatesitssiteonceadaywithnewstock.Ifapopularfashiontrendsurfaces,thecompanystrivestohaveitavailableonitssiteinunderaweek.LikeBoohoo.com,thecompanyalsorunsmarketingcampaignsthatfeatureinfluencerstospotandpromotenewfashiontrends.

Missguidedlaunches1,000newproductseachmonthandupdatesitswebsiteonceadaywithnewstock.

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May19,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Zara:5WeeksTraditionalfast-fashionpioneerZarausedtoproduceafewcollectionsayearandnowthebrandlaunchesover20collectionsannually.Zara’sdesign-to-retailcycleis5weeks,whilethecompanyneedsonly2weeksforrepeatordersofhigh-sellingproduct.Storesworldwidereceivenewproductstwiceaweek.

Source:zara.com

• Zara’sfastsupplychainisbasedongeographicproximity.Europe,especiallySpain,accountsfor60%ofZara’smerchandiseproduction,accordingtothecompany.Zaraalsosourcesaround10%ofitsmerchandisefromnear-shoremanufacturersinMoroccoandTurkey.Onlyabout30%ofproductissourcedfromAsia,mainlybasics.

Zara’ssalesgrowthcontinuestostronglyoutperformthatofmostotherapparelbrands.However,salesgrowthhasbeenbelowthatofyoungpure-playonlineretailers.Zara’scomparablestoresalesincreased10%yearoveryearinfiscalyear2016,belowthe30%+ratesforASOSand40%+forBoohoo.

8

May19,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

H&M:AFewWeekstoSixMonthsSwedishretailerHennes&Mauritz(H&M)hasalongleadtime(lessflexible)supply-chainmodelcomparedtothenewultrafastfashionplayers,aswellasZara.

• H&Mlaunchesupto16collectionsayear.Whilenewproductsaredeliveredtostoresdaily,H&Mleadtimesvaryfromafewweeksto6months.Newgarmentssuchasbasicsandchildrenswearareorderedinadvance,whilemoretrendyclothesthatrequiresmallerquantitiesmaybeproducedatshorternotice.

• H&Msourcesabout80%ofitsproductfromAsia,accordingtothecompany.SuppliersareusedinEuropeforfashion-sensitiveitemsandthosethatrequirerapidreplenishment.

H&M,inparticular,hasseensalesandmarginssufferduetolowercustomerdemandandhighersourcingcosts.Thecompany’sfirstquarterconstantcurrencyrevenuesforthefiscalyearendingFebruary28,2017increased4%,missingitsfull-yeartargetof10%–15%year-over-yearannualgrowth.

Source:hm.com

Toaddresslacklustersales,H&Misinvestingsignificantlyinitssupplychain,suchasnewlogisticssolutionswithgreaterlevelsofautomationandoptimizedleadtimes.

Toaddresslacklustersales,H&Misinvestingsignificantlytospeedupitssupplychain.

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May19,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

KeyTakeaways• Fastfashionisturningintoultrafastfashion.Newplayerssuchas

Boohoo.com,ASOSandMissguidedarebringingproductsfromdesigntosaleinaslittleasaweekortwo—evenfasterthantraditionalfast-fashionpioneers.

• Thenewcropofonlinefast-fashionretailersisprovinghighlyadeptatrapidlyrespondingtoconsumers’increasingdemandsforimmediacyandconstantnewness,inturndrivingtheirrapidsalesgrowthandsuccess.

• Thefashiondesignprocessisfasterthanithaseverbeen,duetothedigitalrevolution.

• Fast-fashionretailersareabletobringproductstomarketandadjustinventorylevelsrapidlybybasinglargequantitiesofproductionclosetoheadquartersandkeycustomermarkets.

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May19,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comEvaKubickaSeniorResearchAssociateHongKong:8thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017

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