Fast Fashion, Zero Inventory?

Fast fashion, zero inventory?

When people talk about fast fashion, most of them will come up with the well-known Spanish brand, ZARA. Accepted as the bellwether of the fast fashion industry, ZARA has opened over 1900 franchised stores over 87 countries around the world, in China, there are over 140 stores by early 2014. Generally speaking, ZARA will not make the clearance sale over 50% off, however, recently, ZARA made the 70% off sale in China both online and bricks-and-mortar stores in order to clear the stock. For instance, a winter jacket was sold at 299 yuan with the original price of 799 yuan in the sale. Besides the eye-catching discount mark, the sale’s duration will be over 2 months. All these are rare unusual for a fast fashion brand, which labels frequent replenishing, fast selling and low or even no stock.

Obviously, the zero inventory era may has passed as the market’s digestive ability for their products has been settled down after those fast fashion brands’ rapid development and intense expansion in the domestic market of China. Although the fast fashion has advantages including short updating period, large variety of styles and small number of units per design, which are all useful methods to avoid inventory, these brands may also encounter questions due to the increasingly demand for personalization and the lack of creative and innovative costume designs. Undoubtedly, inventory can reflect these problems at the first time.

Nowadays in China, many shopping centers regard fashion brands as theirs standard configuration and usually facilitate themselves with fast fashion brands like ZARA, H&M and Uniqlo etc. The increase of fast fashion stores however, has not leads to the rise of profit to some extend.

For one thing, consumers now are not as irrational, assuming those fast fashion brands’ styles are cool and up to the trends and buying without hesitation, as before since so much popular brands can easily be found around several blocks. As a consequence, consumers can compare one particular brand with another and become more rational when shopping.

For another, since so many fashion brands are competing intensively in the Chinese garment market, and the depression of the market itself, the supply has exceeded the demand for particularly fast fashion industry, hence hard for ZARA to keep the high level of profit improvement as always, and no wonder ZARA made the sale to make up for the decrease of profit and probably the inventory cost.

Actually I lived in Beijing and my hometown is a mid-size city in southeast China and my city had a bricks- and0mortar ZARA store, however, every time I walk into the store, I can see the big SALE all around me. It can also be easily recognized that the design and style of this store are not as fashion as the counterparts in Beijing, probably they are the leftover stock to be sold all the time. Chances are that people there are not as fashionable as people live in big cities and can easily be catered to by selling leftover stock. ZARA can clear the inventory and make profits at the same time. Frankly speaking, this may be a smart way to balance between inventory cost and customer services, but I believe there must be other methods to solve the problem.

References:

http://www.businessweek.com/articles/2013-11-14/2014-outlook-zaras-fashion-supply-chain-edge

http://cc.sjtu.edu.cn/G2S/eWebEditor/uploadfile/20130316155348364.pdf