Why mass producing fashion is no longer a worthwhile investment
Don-Alvin Adegeest| Wednesday, August 12 2020
New York-based fashion designer Mischa Nonoo, in an op-ed penned in business publication Fortune, claims fashion businesses are no longer a worthwhile investment. She has a point.
The global luxury market faced an unprecedented hit in Q2, showing even robust businesses like LVMH and Kering are facing startling revenue drops. While the world eschews buying more clothes and accessories, in favour, if the data is correct, of sweat pants and comfort items, fashion brands are treading water for survival and fortifying their web presence to try and make online sales a primary channel.
Nonoo states “we are witnessing the final crumbling of a tightly knit industry built on exploiting creative labour, wholesale cronyism, producing vast amounts of undesirable goods and dumping said goods into landfills.”
While this business model may not represent a majority of European luxury brands or independents, she is correct to call out “razor-thin margins and glacial pace of change found in many fashion organizations.”
The problem is inventory
“Nearly every flaw in the fashion system can be traced back to a single issue: inventory. The reliance on upfront, bulk production requires time and valuable resources to be allocated before consumers are able to indicate a preference for a style.”
I can attest to this, when first launching a small label out of Los Angeles, the average factory minimums meant producing 300 units of one style, compounded by fabric mills who equally required massive minimum orders. If you produced any less there would be financial penalties, increasing the price per unit. When a brand is starting out, investing much-needed resources to buy hundreds of meters of fabric before knowing which styles in which fabric will sell, would to most investors’ eyes sound like a botched business plan. Yet this is the crux of the industry.
The waste of mass producing
“When I produced collections on the traditional fashion calendar, I was asked to mass-produce a style 180 days before I could expect payment. I was also told a 75 percent sell-through rate was considered “great performance.” This casual assumption—that at least 25 percent of the inventory I bought months beforehand would go unsold—was a rude awakening. Wasted resources are built into the system. Imagine if upwards of 25 percent more revenue could be allocated to nurturing talent, sustainable sourcing, or operational development—all of which the fashion industry has become notorious for neglecting in recent years. This wastage of investment has enforced a downward spiral across the industry, where under-compensated teams in flawed supply chains unknowingly commit to producing underperforming styles without any way to recover.”
For a company like H&M, sending excess stock to the incinerator was one way of dealing with mountains of unsold clothes. Arguably, the 210 billion dollar global inventory issue and the absurd expectation to over-produce beyond what is saleable, is a side effect of the Fast Fashion industry that benefits but a few coffers and is a detrimental cost for everyone else, including the planet. An expense, that post pandemic, is no longer justifiable.
Nonoo writes “a handful of businesses, including my own, have pioneered an inventory-less fashion model. It is down to this that we are weathering the current crisis without the inventory strains our competitors face.”
This is why companies like FarFetch, Amazon and Zalando are posting double digit growth, and beating analyst’s expectations. But the digital behemoths have a role to play in slowing the pace, too, as online shopping is polluting the planet at equally unprecedented rates. According to the World Economic Forum, to meet the demand of online shopping, there could be 36 percent more e-commerce delivery vehicles driving around inner cities by the end of the decade – meaning more emissions, pollution and congestion. Not to mention the waste of excess packaging and returns.
“I urge the industry to reconsider its perspective on which changes should be made in order to give fashion a fighting chance. I am among a growing number of entrepreneurs who have already tackled the digital runway show, perfected the “product drop,” and streamlined seasonal markdowns,” concludes Nonoo. “The arguments for fewer collections, adjusted seasonality, and better websites will not result in healthier businesses if bulk inventory production still ties up resources, hamstrings design, and pollutes our planet.”