The supply chain of high street fashion retailers has undergone a number of evolutions. The most profound was the shift of production to Chinese and Far Eastern manufacturers throughout the 90s and 00s. This resulted in dramatic reductions in the cost of clothing, allowed retailers to drive better margins, and at the same time offer better value on core items and a bigger range to customers. The longer lead times, however, turned picking fashion items into more of a gamble, with the risk of increased unplanned markdown for unsuccessful ‘bets’.
The trend is now moving to a more flexible model, further reducing lead times. Customers get fashion faster, and retailers are afforded more in-season flexibility to adapt with the market. Here we look at some of the consequences faster fashion has on the retail operating model.
A new model of retailer championing fast-fashion emerged in the 00s – that is, hold fewer core lines and turn over merchandise more times within a season by quick reaction to trends. The most notable practitioners of this model are retailers such as Zara, H&M, and Primark. They buy smaller batches of unfinished ‘greige’ goods from Asia to be finished to the latest trend in close proximity to key markets (i.e. in Europe). This model has seen fast-fashion retailers prosper by giving fashion-conscious shoppers what they want quicker than their competitors, and still at an attractive price.
The design-led model
Zara’s unique business model is often cited as one of their secrets to success – by employing it, they are able to deliver rapidly evolving ranges that can change 4 or 5 times within a season rather than just once. This model requires a much more vertically integrated supply chain, reaching all the way into how stores operate. Store managers take greater responsibility in creating stock orders in response to sales trends, as well as providing subjective trend analysis based on customer interactions directly to head office. This information is received by commercial teams who balance demand for stock across stores and introduce new products into the store order. In addition to this, design teams work with the commercial team to develop new products quickly in line with sales trends. New fashions are placed in small order quantities and either ‘fail fast’ (and relatively cheaply) or are followed by similar designs in larger quantities.
What is happening now?
Unsurprisingly, in the battle for the high street, new strategies are evolving for more traditional clothing retailers to accelerate their product development cycles and win back some ground in the fashion stakes. Rather than seek to emulate their competitor’s models, we have seen British retailers, notably M&S, take inspiration from fashion houses such as Burberry, who made the somewhat bold move of launching their first ‘buy now, wear now’ range in Autumn 15. This model enabled customers to buy new designs directly after fashion shows, rather than having to wait 3 – 6 months for the designs to come into season.
This step change in operating model sought to preserve the exclusivity of designs by reducing the time the high street had available to copy trends launched at fashion shows. M&S launched their first ‘buy now’ range a year later (ready for Autumn 16). As well as adopting a new critical path, beginning development earlier to deliver the ‘Buy Now’ range, this development has been preceded by significant investment in their global supply chain. This has meant moving away from relationships with full service suppliers to working directly with factories, particularly in the Near East, to enable closer working between design and production. In parallel, M&S has adopted a more flexible trading position by leaving a larger proportion of orders “open to buy” rather than committing to products upfront, before seeing a reaction from customers.
What does this mean for the future?
Whilst neither M&S nor Burberry are likely to expect to drive significant sales volumes from their buy now ranges, the underlying trends to build competitive advantage are clear;
- New product design must be linked directly to the customer – through sales data, external market research and other feedback channels – give customers what they want
- The product development cycle can only begin when the design starts – design on a continuous basis delivers products faster rather than on relying on a more traditional seasonal basis
- Reducing time you make customers wait for new products builds a competitive advantage. To optimise cycle times the end-to-end supply chain must be taken into scope, beginning with the customer and ending with the customer – gain brand credibility in fashion for faster turnaround from catwalk
The retailer supply chain and operating model is ever evolving – those who can keep up or even stretch the boundaries of what can be delivered will be the winners with customers, as long as they don’t take their eye off their bottom line.