Forbes.com

Fashion's new fast lane

Von Kristine Miller

First published on September 12, 2006
Min. Lesezeit


As the hip British apparel retailer Topshop prepares to invade the U.S. next year and competitor H&M continues to blanket American cities, they could teach other retailers an innovative lesson. Working on the principle that the customer is always right, Topshop and H&M are among a clique of "fast fashion" companies that includes Zara, Camaieu and other European retailers that not only solicit and value customer insights, they act on them. Here's how: Walk into a Topshop store, pick up a print skirt, then ask a salesperson if there's a complementary white T-shirt with a plunging neckline. If the store doesn't stock such a T-shirt, the store manager will likely transmit a message to the company's buyers and design teams. In a few weeks or less, that T-shirt could land on a Topshop shelf. In Pictures: Frugal Fashion As a result, fast fashion retailers are growing at about three to four times the rate of the sluggish apparel industry as a whole. It helps that while traditional retailers bring in new products about once a month, Topshop generates as many as 300 new designs a week. At Topshop and retailers like it, the shelf life of a garment has dropped from six months to a few weeks. That's why they call it fast fashion. Like fast food in the 1960s, fast fashion is an industry innovation. Instead of dictating styles months in advance, these companies take their cues from in-season trends. Instead of advertising heavily, they rely on a frequent flow of new products to lure customers into stores. These retailers introduce new designs to the racks two to three times per week versus just ten to 12 times per year in traditional stores. Fast fashion converts consumers by creating a "buy it now" mentality. Consumers know that a fast fashion product won't be replenished, and since it's reasonably priced, they buy it on the spot. Shoppers can't think, "I'll wait until it goes on sale." It will be gone before that happens. The result: significantly higher sell-through rates, the percentage of products sold at full price. Most fast fashion players sell as much as 85% of their stock at full price, compared to the industry average of about 60%. Despite higher production costs from local sourcing, they're achieving profitability that's more than twice as high as their traditional counterparts. For now, European retailers have been leading the charge, but U.S. companies are catching on. Fast fashion represents a 12% share of the clothing market in the United Kingdom but only 1% in the U.S., according to a Bain & Company study. U.S.-based companies like Forever 21, Charlotte Russe and Bebe Stores are applying fast fashion's here-today-gone-tomorrow mindset, which resonates so well with shoppers influenced by instant messages, iPods and reality TV. Meanwhile, other U.S. apparel companies are taking the threat seriously and infusing "pseudo-fast fashion" into their business models. Earlier this year, Target launched its Go International series, limited-edition collections by up-and-coming apparel designers that are available for only 90 days. Chico's FAS uses more frequent product flows to generate newness and scarcity. At the heart of any fast-fashion retailer is speed. One way companies achieve shorter cycle times is by delaying decisions farther and farther along in the process. Topshop can change the wash on jeans going through a factory in 24 hours, or decide to change a short-sleeve jersey into a long-sleeve with a single last-minute call to manufacturing. To make this work, companies need a flexible supply chain. That could mean forsaking low-cost production in Asia in favor of fast but higher-cost local production. The trade-off is working at Brooks Brothers, which has revved up necktie production in Queens, N.Y., of all places, reducing production cycle time from ten days to two hours. By delivering what the customer wants as quickly as possible—and at a price they can't resist—fast fashion companies have given the industry its biggest shot of adrenaline since the introduction of the miniskirt in 1965. Even more impressive, these companies have created a sustainable business model that could drive profitable growth in other industry sectors, everywhere from entertainment to housewares to consumer electronics. Who wouldn't want consumer-led growth, fast and responsive operations from design to delivery and improved inventory turns and profits? Fast fashion is one European trend worth buying into. Kristine Miller is a partner in Bain & Company's San Francisco office and the head of the firm's North American Retail Practice.

As the hip British apparel retailer Topshop prepares to invade the U.S. next year and competitor H&M continues to blanket American cities, they could teach other retailers an innovative lesson.

Working on the principle that the customer is always right, Topshop and H&M are among a clique of "fast fashion" companies that includes Zara, Camaieu and other European retailers that not only solicit and value customer insights, they act on them.

Here's how: Walk into a Topshop store, pick up a print skirt, then ask a salesperson if there's a complementary white T-shirt with a plunging neckline. If the store doesn't stock such a T-shirt, the store manager will likely transmit a message to the company's buyers and design teams. In a few weeks or less, that T-shirt could land on a Topshop shelf.

In Pictures: Frugal Fashion
As a result, fast fashion retailers are growing at about three to four times the rate of the sluggish apparel industry as a whole. It helps that while traditional retailers bring in new products about once a month, Topshop generates as many as 300 new designs a week. At Topshop and retailers like it, the shelf life of a garment has dropped from six months to a few weeks. That's why they call it fast fashion.

Like fast food in the 1960s, fast fashion is an industry innovation. Instead of dictating styles months in advance, these companies take their cues from in-season trends. Instead of advertising heavily, they rely on a frequent flow of new products to lure customers into stores. These retailers introduce new designs to the racks two to three times per week versus just ten to 12 times per year in traditional stores.

Fast fashion converts consumers by creating a "buy it now" mentality. Consumers know that a fast fashion product won't be replenished, and since it's reasonably priced, they buy it on the spot. Shoppers can't think, "I'll wait until it goes on sale." It will be gone before that happens. The result: significantly higher sell-through rates, the percentage of products sold at full price. Most fast fashion players sell as much as 85% of their stock at full price, compared to the industry average of about 60%. Despite higher production costs from local sourcing, they're achieving profitability that's more than twice as high as their traditional counterparts.

For now, European retailers have been leading the charge, but U.S. companies are catching on. Fast fashion represents a 12% share of the clothing market in the United Kingdom but only 1% in the U.S., according to a Bain & Company study. U.S.-based companies like Forever 21, Charlotte Russe and Bebe Stores are applying fast fashion's here-today-gone-tomorrow mindset, which resonates so well with shoppers influenced by instant messages, iPods and reality TV.

Meanwhile, other U.S. apparel companies are taking the threat seriously and infusing "pseudo-fast fashion" into their business models. Earlier this year, Target launched its Go International series, limited-edition collections by up-and-coming apparel designers that are available for only 90 days. Chico's FAS uses more frequent product flows to generate newness and scarcity.

At the heart of any fast-fashion retailer is speed. One way companies achieve shorter cycle times is by delaying decisions farther and farther along in the process. Topshop can change the wash on jeans going through a factory in 24 hours, or decide to change a short-sleeve jersey into a long-sleeve with a single last-minute call to manufacturing.

To make this work, companies need a flexible supply chain. That could mean forsaking low-cost production in Asia in favor of fast but higher-cost local production. The trade-off is working at Brooks Brothers, which has revved up necktie production in Queens, N.Y., of all places, reducing production cycle time from ten days to two hours.

By delivering what the customer wants as quickly as possible—and at a price they can't resist—fast fashion companies have given the industry its biggest shot of adrenaline since the introduction of the miniskirt in 1965. Even more impressive, these companies have created a sustainable business model that could drive profitable growth in other industry sectors, everywhere from entertainment to housewares to consumer electronics.

Who wouldn't want consumer-led growth, fast and responsive operations from design to delivery and improved inventory turns and profits? Fast fashion is one European trend worth buying into.

Kristine Miller is a partner in Bain & Company's San Francisco office and the head of the firm's North American Retail Practice.