Is fast fashion — the sector said to be taking sales away from many retailers — the next retail channel to face a slowdown?Rumblings have circulated in the markets in the past month that the fast-fashion sector is slowing down. When juniors' chain Styles for Less Inc. filed its voluntary Chapter 11 petition last week seeking bankruptcy court protection, its chief financial officer August DeAngelo in a court document attributed the retailer’s difficulties in part to “shifts in consumer spending away from fast fashion and toward services and experiences.” Now Kurt Salmon, a part of Accenture Strategy, has weighed in with a study indicating that fast-fashion firms are facing strong pressures on growth amid an ongoing struggle with high inventories and slow sales. It also said the trend toward shifting to lower-cost production channels is not the right answer to counter margin pressures.The Kurt Salmon report noted the “abundance of apparel and footwear products coming in fast cycles of innovation” that are available across a range of retail and online channels. It also cited pressures on gross margin that include: Lower percentage of goods sold at full price, down to between 50 and 70 percent from 65 to 80 percent; higher level of markdowns at 15 to 25 percent from 12 to 15 percent, and a lower inventory turn rate, now at two-and-a-half to three-and-a-half times compared with 4 to 5 times in the past. Another challenge faced by companies is the “continuous increase of cost in the classical sourcing markets resulting in even stronger pressure on overall gross margin performance of the business.” The report noted rising costs in China and in typical low-cost sourcing destinations in Southeast Asia — Bangladesh, up 47 percent from a 2005 baseline; Pakistan, up 40 percent, and Indonesia, up 30 percent — due to rising labor costs, in part from competition for skilled factory workers and the strengthening of local currencies.The study said some firms in reaction to rising costs have shifted production from Southeast China to less developed regions, such as Western China, Myanmar and Cambodia. While that shift has eased short-term pressures, it also adds risks, such as operational performance, product quality and perhaps a limitation on the ability for larger shifts of volume as well as issues connected with products that have more sophisticated technical requirements.The report, written by managing directors Dr. Peter Rinnebach, Praveen Kishorepuria and Dorothea Ern-Stockum, suggests ideas for fast-fashion firms to consider, including a strategic focus on product innovation — the kind that differentiates products in a world consisting of undifferentiated brands and includes access to deep technical expertise. The authors also suggest that as speed-to-market has increased in recent years, companies need to pay closer attention to consumer needs and trend impulses, and correlate that with seasonal needs to balance the mix of near-shore and far-east sourcing destinations. And with shorter in-store product life cycles, they also suggest a look at delivery reliability, since a delay of one or two weeks would impact sell-throughs on collections that are planned to have just an eight-week life cycle, for example.The authors also predict that overseas buying offices will gain importance, both due to traditional functions such as supplier search and quality management and because of material management and technical research and development capabilities. They also said firms should pay attention to differentiated supplier capabilities with an eye toward leveraging and developing close collaboration along the entire value chain. The conclusion was that data analytics across the value chain could enhance predictive analytics for improved merchandise planning and production capacity planning, particularly for decision-making in volatile environments and on shorter timelines.
@serenawilliams, in @versace and a @bulgariofficial necklace, with @alexisohanian attending the #royalwedding at St. George’s Chapel. See all of the celebrities in attendance on WWD.com. #wwdeye #wwdfashion
The wait is over: Meghan Markle picks @givenchyofficial’s Clare Waight Keller for her wedding dress. Markle entered St. George’s Chapel in a Givenchy Haute Couture gown paired with Queen Mary’s Diamond Bandeau Tiara, loaned to her by The Queen. Read more on WWD.com - Link in bio. #wwdnews #wwdfashion #royalwedding