fast fashion speeding toward ultrafast fashion may 19 … · according to the company. zara also...
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May19,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]: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&[email protected]: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&[email protected]: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&[email protected]: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&[email protected]: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
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May19,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]: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&[email protected]: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.
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May19,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]: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&[email protected]: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&[email protected]: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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