Fast Fashion’s Secret Sauce: Keep Inventory Planning to a Minimum
L2’s report explores some of the key tactics that have made fast fashion a success.
In an “insight report” on fast fashion from L2, researchers at the data firm found that retailers such as Zara and H&M have created a business model that intertwines onlinesearches and social media while creating an operating platform that is “fast, flexible and lean.”
These retailers keep inventory planning to a minimum – making sure that most of it is based on demand, which is becoming critically important in the current “see now, buy now” market, L2 said.
Some of the key findings include that fast-fashion brands’ “‘just-in-time production’ is a fluid feedback loop involving online and in-store purchase analytics, social media follower engagement, and trend-based search-engine analysis,” L2 noted.
“Omnichannel fulfillment efforts vary by region, as fast-fashion brands invest more in click-and-collect in the U.K. while being more aggressive with free shipping options in the U.S.,” the researchers said, adding that by consistently “updating their sites, and acting on current trends, fast-fashion brands capture significant organic-search real estate.”
Some lessons for other apparel retailers include keeping inventory low. “Fast-fashion brands pilot outfits and constantly restock inventory based on demand, allowing them to avoid eating losses or discounting surplus items.”
By way of a case study, L2 said that Zara’s “process to get a product from design to the rack takes a maximum of only three weeks, a fraction of how long it takes most brands (between six and 12 months).”
And with inventory, L2 noted that Zara avoids “eating losses and discounting surplus items by planning just 15 percent of its inventory in advance, informing subsequent inventory in response to consumer demand.”
L2 said that fast-fashion retailers use online and in-store “purchase data analytics to gauge interest in specific items and collections that helps inform inventory cycles” – which they restock about twice a week online and in store “and saving shelf space for the items that truly sell.”
Some of the other insights from the report include fast-fashion best practices such as setting in place “flexible fulfillment options and leveraging direct-to-consumer capabilities on social platforms,” which allows fast-fashion brands to continue to capitalize on the see-now-buy-now market. Simultaneously, fast-fashion retailers closely study the shopping habits of their customers. “Before investing in sophisticated site features to replicate the in-store experience, brands should track how customers shop in order to better customize the online experience,” L2 suggested.
The researchers observed that fast-fashion retailers were late to embrace e-commerce. “Zara and H&M launched e-commerce in 2010 across the U.K. and Europe, expanding to the U.S. in 2011 and 2013, respectively. Each brand experienced spikes in retail sales growth the year after launching e-commerce in the U.S., with Uniqlo, which launched its U.S. e-commerce in 2012, achieving 23 percent growth in 2013.”
L2 said in the report that the combination of short inventory cycles and online selling “initially raised logistical concerns regarding the coordination of thousands of stores, warehouses and factories.” But the high inventory turnover worked to their advantage, L2 said, adding that these brands have come of age in the see-now-buy-now environment, which is “supported by lower price points and agile, flexible supply chains.”