Fung Global Retail and Technology, in its latest research report, has vehemently mentioned that the renowned fast fashion brand Zara has lost its position of supremacy to online brands.
Online fashion retailers such as ASOS, Boohoo and Missguided that specialize in fashionable and affordable clothing not only design a product but also make it ready for sale in just a week. These brands have streamlined their supply chain and moved production closer to key markets thereby helping them to speed up the process of design and manufacturing.
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The report further adds that “fast fashion is becoming ultrafast fashion”, and this is an issue for chains such as Zara and H&M, where their success was built around this unique business model. The new online stores are also regularly refreshing their products to drive customer frequency. Boohoo noted increase in sales of 51 per cent in the year ending February 2017; ASOS’ sales by 26 per cent in 2016 compared to the year before; and Missguided – 75 per cent in the fiscal year ending in March 2017. Also, these brands have an agile supply chain. Initial designs are made in small batches, and if they become popular, more are rolled out which helps them to match supply with changing demands.
H&M, in its recent quarterly results, announced a drop of 3 per cent in net profits. “We would be investing significantly in making the supply chain faster and more adaptable to keep up with the pace of changing demands,” averred Karl-Johan Persson, CEO, H&M. What is interesting is that these online brands emulate the tactics of Zara of keeping production close to the headquarters and in important customer markets. As per the report, Inditex, the parent company of Zara, sources 60 per cent of its products in Europe and similarly Boohoo sources more than 50 per cent of its products from the UK.