Zara Fast Fashion

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You think your industry is tough? Imagine customer preferences that can shift literally overnight, product lifecycles measured in weeks, and the value of your product plummeting if you miss the latest trend. Welcome to the world of fast fashion. Donald Sull and Stefano Turconi examine how Zara, a leader in the industry, has pioneered an approach to navigate the volatility of fast fashion, offering lessons for any company facing rapidly changing markets.

Ffaassthion lessons
Haute couture has always been a fairly staid
affair. Big-name designers crafted clothing
that sold for tens of thousands of euros.
Astronomical prices served as the doormen to keep
the masses out of the exclusive club of high
fashion. Fashion houses introduced their collections
twice a year, and a designer’s choices on the height
of a hemline or colour of a skirt largely dictated
what was “in” and what was “out” for the following
six months.
How things have changed. In recent decades,
retailers including Benetton, H&M, Topshop and Zara
have revolutionized the fashion industry by following
a strategy known as fast fashion, democratizing
couture and bringing trendy, affordable items to the
masses. Fast fashion describes the retail strategy of
adapting merchandise assortments to current and
emerging trends as quickly and effectively as
possible. Fast fashion retailers have replaced the
traditional designer-push model – in which a
designer dictates what is “in” – with an opportunitypull approach, in which retailers respond to shifts in
the market within just a few weeks, versus an
industry average of six months.
While fast fashion is heaven for its target
consumers, it can be hell for traditional retailers.
Quickly shifting trends have slashed the shelf life of
many garments from months to weeks, or even days.
In the autumn of 2006, demand for a one-shouldered
cocktail dress exploded, and retailers rushed to stock
up on the hot item. A few weeks later, the same dress
was passé and unsold stock filled the remainders
racks. The message for traditional mass merchandisers
and specialty clothing retailers is clear: they must
refresh their inventory more frequently if they hope
to capture the fast fashion crowd. A study by Bain &
Co. estimated the industry average markdown ratio
at approximately 50 per cent, and also found that
fast fashion retailers sold only 15 per cent on sale.
For retailers that get fast fashion right, however,
the benefits can be enormous. Fast fashion chains
have grown faster than the industry as a whole and
seized market share from traditional rivals. In a
challenging European retail climate, these companies
are expanding their sales and profits over 20 per
cent per year. Their share of the domestic apparel
market (measured by sales value at retail) has grown
from virtually nothing in the 1980s to over 20 per
cent in Spain and 5–10 per cent in the United
Kingdom, Germany and France. Fast fashion leaders
typically earn higher profit margins than their oldguard
competitors, averaging 16 per cent, versus
7 per cent for the typical specialty-apparel retailer.
Growth of an idea
In 1965, Giuliana Benetton, who designed and
produced woollen sweaters, partnered with her
brother, Luciano, a textile wholesaler, to sell the
© 2008 The Author | Journal compilation © 2008 London Business School Business Strategy Review Summer 2008 5 →
Cover story
colourful sweaters she designed. The Benettons
initially sold their products through Italian department
stores, but in 1968 opened their first store. Over the
next decade, Benetton opened or franchised dozens
more stores throughout Italy each year and expanded
its product offering to include a wide range of fashion
items and fabrics besides wool. To succeed on the
international market, they learned to adapt the
colours of their collections to local tastes. Benetton
also priced its products below competitors of similar
quality in order to...
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