How will fast fashion survive amid global closures and bankruptcies?

“The fashion industry will need to ‘slow down’ so that people can ‘enjoy it much more’ without always looking for the next new thing,” said Anna Wintour, Editor-in-Chief of Vogue. 

Human beings are driven by all things ‘fast’ in order to meet their desires of instant gratification, which is amplified by the addiction to social media and all things online, in general. From fast internet speeds to fast deliveries, fast food to fast fashion, people have tailored their habits to the ridiculous pace, and brands in turn have tailored their offerings to cater to these new habits and demands.

While business models revolving around ‘fast’, especially fashion did seem to be the ultimate code-cracker for businesses, of late the bubble seems to be bursting exposing the hollow structure of its approach. The global fast fashion market fell from $35.8 billion in 2019 to $25.09 billion in 2020. A recovery is expected this year with growth estimates amounting to $30.58 billion in 2021, according to Global Newswire, owing to overall economic recovery and stores reopening post-pandemic. However, the crisis has left a lasting scar on the entire fast fashion industry, as many known brands and retailers have had to permanently shut shop in the last few years and bid adieu to the retail industry forever.

To understand the decline of a once-formidable business model, it is paramount to learn its origin and rise. Let’s go back a few decades.. to the 60s. That is when young women and men started desiring trendy and affordable clothing that they could keep ‘updating’. While it is hard to pinpoint who exactly birthed fast fashion, the stalwarts in the game including Zara, Forever 21 and the likes started setting shop in the 70s and 80s. The model worked around three key pillars – quick, trendy and affordable. Fast fashion retailers would be quick to replicate the trends doing the rounds on major runways and sell knockoff (not counterfeit) items in bulk at affordable (read: cheap) rates within quick turnaround times. Pace is certainly the driving force, given that fast fashion brands today have about 52 micro-seasons a year.

In order to hit the three fundamentals, fast fashion businesses rely on a lot of cost-cutting measures in order to deliver and become profitable. From the quality of the fabric sourced to mass production outsourced to factories in developing and underdeveloped countries where labour wages are minuscule, the resourcefulness of this model that relies on ‘lean retailing’ proved to be great for business. Come 2000s, fast fashion as a concept blew up with every existing giant in the space opening stores around the world and many more new entrants mushrooming globally. From the early 2000s to about 2014-15 is when most fast fashion retailers were at their peak minting billions of dollars worth of revenue, putting their founders and owners on world’s rich lists. In 2015, Forever 21 brought in $4.4 billion in sales from over 600 stores and its founders Do Won Chang and Jin Sook Chang had a combined net worth of $5.9 billion. The same year, Zara recorded total global sales of $19.7 billion beating the likes of Gap, Primark and Abercrombie & Fitch.

However soon after, customers were in for a shock as some of their favourite brands, started announcing store closures, liquidation rumours were doing the rounds and finally bankruptcy announcements were being made. So what went wrong? Despite the model revolving around low production costs, the margins for any fast fashion retailer are really low as the final marked prices are extremely low to attract customers who wish to purchase on a budget. In order to be profitable or even breakeven, fast fashion retailers would need to sell incredibly high volumes. Now, if for some reason productions costs go up, the supply chain gets obstructed, overheads become high, or general demands fall, it would mean doom for the retailer. Unfortunately, 2020 presented itself with all of the above, which resulted in many retailers sadly going bust.

“The Fast Fashion industry was severely impacted since the onset of the global pandemic. Drop-in demand disrupted the production and supply chain resulting in the closure of numerous factories and retail stores and loss of jobs. These factors led to a significant shrink in profits,” said Vinod Kumar, Head of International Retail, BFL Group.

In the UK, high-street brands such as Top Shop, Debenhams, Oasis and Warehouse have gone into administration. In the US, J.Crew, a favourite of Michelle Obama, has filed for bankruptcy, as has Neiman Marcus and True Religion. This, of course, is just the tip of the iceberg, as a whole host of other brands have announced their permanent closure.

However, even before the pandemic, many retailers were struggling and sirens hinting the downswing of fast fashion had begun ringing. Slow adopters of the online revolution were first to take the brunt as many attractive e-commerce competitors like SHEIN and Asos emerged as ultra-fast fashion retailers giving the legacy players a run for their money. Brands like Forever 21 had to go under for some other reasons too. While in the U.S. it was doing great and catering to customer demands, in its hundreds of other global markets, it seemed like they weren’t quite listening to their customers. The approach was more generic without attention to local trends and customer expectations, which resulted in declining popularity. Failure to abide by local rules and regulations also added to their troubles.

“Fast fashion stores will need to adopt a new business model that focuses more on transitioning to digital and omnichannel distribution to enhance competitiveness in today’s fashion landscape. They should also incorporate data analytics in their decision-making, because data-driven decisions play a strong role and can contribute to the business’ continuity and survival. The faster they adopt the current trends, the quicker the business recovery will be,” he said.

Monica Malhotra, founder of the The Gaggler, echoes similar sentiments on the state of fast fashion today. “From a business perspective, the cancellation of fashion weeks, closure of the high streets, growing unsold inventory and all-around economic recession has left many retailers facing closure,” she said.

“With a focus on online shopping experiences, customer engagement, branded content and new technologies, businesses can adapt to changing consumer habits in the face of coronavirus with a focus on digitization. Not only can they adapt, but they can also find new and valuable ways to connect with their customers, building brand affinity, reputational value, and ultimately brand loyalty. Those businesses that invest in such efforts and keep their fingers on the pulse when it comes to the often fast-changing demands of consumers in the face of unpredictable environments will do well. As will those committed to upholding the principles of agility, innovation and sustainability,” she added.

Another major challenge that the fast fashion industry is faced with is customers becoming more conscious or ‘woke’. As has been established, fast fashion isn’t the most sustainable or ethical way of doing business. Trend replication, rapid production, low quality, competitive pricing all adds up to having a detrimental impact on the planet and the people involved in garment production. The fashion industry is responsible for 10 % of annual global carbon emissions, more than all international flights and maritime shipping combined. In 2000, 50 billion new garments were made; nearly 20 years later, that figure doubled, according to the Ellen MacArthur Foundation. Working conditions of garment labourers with the long hours, unfair wages, lack of resources, and even physical abuse have come under scrutiny ample amounts of times in the past.

“Consumers have become increasingly more conscious of their carbon footprint and there has been growing pressure on the industry to adopt more sustainable policies. As a result, there is a shift away from fast fashion. With increasing attention on the amount of clothing that ends up in landfills, the use of unsustainable fabrics, and excessive amounts of water used to produce items designed for short-term use, eco-conscious consumers are increasingly turning toward investing in long-lasting clothing. Demand is growing for more sustainable fabrics with classic designs that will last for several seasons,” she said.

Reflecting these trends within the fashion industry, a growing number of international brands from H&M to Puma are launching more eco-friendly collections. Algae, used to make fibres and dyes, draws particular attention from the sports industry for athleisure garments and has also attracted the attention of H&M. It is entirely bio-degradable and has multiple environmental benefits. Pineapple leaves, meanwhile, once a widely used material, can be used to make fibres, as one company, Piñatex, is doing. As bioengineering benefits from more research, we will likely be seeing newer alternatives to traditional materials soon.

“Sustainability can also come from innovative business models in response to changing consumer demands. The market for second-hand luxury goods is estimated to be worth some $24 billion and is growing at four times the rate of the primary luxury market. Used-luxury goods, which come at a fraction of their original price, make luxury accessible. A recent report published by Farfetch, the global luxury online retailer, in which it surveyed 3,000 consumers across the US, UK and China, demonstrates that cost-savings are the number one reason for purchasing pre-owned goods,” she said.

However, despite the many vices of fast fashion, the success of companies like Zara and H&M points to the fact that there still is demand and potential for the sustenance and growth of this model. Both brands from the start have kept its customers at the core and been keen observers of changing trends, habits, and behaviours. Both brands have also been adept at using technologies in-store and online such as RFID that helps to reduce inventory costs, provides greater flexibility to launch new designs, and allows fulfillment of online orders with stock from stores nearest to the delivery location thereby reducing delivery costs.

Fast fashion isn’t dead, It’s just time for it to reinvent a little, and perhaps, slow down a bit. Consumers would still need affordable clothing delivered to them quickly, but the lifespan of clothing could now be longer. Customer’s data to determine their personal individual needs and preference will play a major role in shaping trends over blindly following what runway models have been flaunting that season. AI and Machine Learning algorithms will start fashion forecasting and help retailers assess what is stylish and what is not. Innovative fashion experiences are going to be looked up to and chased – both in-person and otherwise. Technology, e-commerce, and social commerce will have to be seen as ‘must haves’ and the retailers should be able to reach the customers when, where and how they want to be reached.

For very long the world has been dominated by pace and materialism fostered by brands leveraging these habits for their own gain. It is now time for retailers across the board to step back and reflect and help society move towards the ethical and sustainable path – even if it means slowing down.

Global Bankruptcies

1. Sears– The fashion brand has closed over 100 stores across multiple locations after filing for bankruptcy in 2018. The Covid-19 pandemic stopped the rejuvenation of the brand and it continued to close.
2. Debenhams – The fast fashion giant closed all its UK stores on 15th May 2021 after more than 200 years of trade on the UK high streets. The brand has struggled after years of falling profits and rising debts. After being bought by fellow retailer, Boohoo, the brand is set to operate solely online. 
3. Topshop – The company admitted the forced closures were a result that the Covid-19 pandemic has had a “material impact on trading”. Along with three other Arcadia retail brands the stores will shut permanently as online fashion retailer sealed a £265 million takeovers.
4. Forever21 – The fast-fashion retailer’s expansion internationally took a toll and contributed to the brand’s decision to file for chapter 11 bankruptcy protection. Furthermore, it plans to exit most of their business overseas, in Asia and Europe.
5. Charlotte Ruse – After the brand filed for bankruptcy and was unable to find a buyer to help rescue the business and hence started shutting their existing 500 retail stores.
6. JC Penny – Near the end of May 2020 the brand shutdown 30% of its stores. After a lack of revival and essentially no profitability the brand is continuing to shut down its retail stores as a victim of the dying fast fashion phenom.
7. Stein Mart: The off-price chain announced that they were filing for bankruptcy in 2020. The company was pushed to the brink because of the Covid-19 pandemic as its liquidity dried up and sales tumbled, forcing the company to officially close all its stores.
8. Century 21 – The famous New York discount store chain became yet another retailer to be felled by the pandemic. The brand that provided designer goods at a discount said it failed to receive $175 million from insurers and would close all 13 of its famous locations.