by Paula Rosenblum 01/20/2015
Last weekend another teen fashion retailer, Wet Seal, filed for Chapter 11 Bankruptcy protection. On the face of it, Wet Seal is just another mid-market fashion retailer that failed to grow profitably. A deeper looks makes it apparent that the world of teen fashion has changed irrevocably.
The list of casualties is long: while cheap-not-so-chic retailers Delia’s and Deb Shops are headed for the dustbin of history, and American Apparel struggles to find its identity, other higher-end retailers have also had some real trouble retaining customers.
After several years of lackluster sales coupled with seemingly endless high profile faux pas, Abercrombie and Fitch’s controversial CEO Michael Jeffries abruptly retired in early December. Given some of Mr. Jeffries decisions since the Great Recession, and his perspective that A&F was for “the beautiful people,” it’s also somewhat easy to dismiss the company’s troubles. Couple that with the trend away from large logos as status symbols, and it is almost possible to dismiss poor results at Gap GPS +1.29%’s brands as well.
But wait (as they say), there’s more. Urban Outfitters, which seemed to be withstanding the fickle teen market, also took a hit this past fall, although it seems to be rebounding. Sales, gross margin and foot traffic fell. Target TGT +0.54% has become more grocery-focused and less in tune with teen apparel trends. Macy’s, a chain that seemed to be on the mark recently announced a restructuring of its buying and marketing departments across its Macy’s and Bloomingdale’s divisions. The ostensible reason: To better serve omni-channel consumers. The initial actions: layoffs and cost-reductions.
In other words, many companies serving the teen market have been taking a serious sales and profit bath over the past twelve to eighteen months. Where have those sales gone? Blame it on Fast Fashion.
Fast Fashion retailers include H&M , Forever 21 , and the Godfather of Fast Fashion, Zara, a division of Inditex. They have many similar traits.
The clothes are low-priced but stylish, styles cycle in and out of stores (and web sites) as quickly as every three weeks. That means, the product is turning well over twelve times a year, when traditional fashion retailers get excited at turns of 6 or 7.
Because sales cycles are so short, product development cycles must ALSO be short. In 2010, my company surveyed retailers on their time-to-volume for new product introductions. At that time, the majority reported a product lifecycle of twelve to eighteen months. That’s just too slow for a Fast Fashion world.
On the flip side, Zara has long been commended on products that can go from concept to shelf in a matter of weeks. Back in 2012, The New York Times published a comprehensive piece on Zara’s rise to prominence and its processes. Shortly thereafter, IBM optimization specialist Jean Francois Puget published a piece explaining “how Zara did it,” highlighting the role of mathematical inventory optimization in Zara’s decision-making. The short way to describe this concept is to say if you’re going to fail, fail fast. Don’t take eighteen months to do it.
Forever 21 is considered a “fast follower.” That means the company creates less expensive versions of fabrics and styles soon after they’ve been shown on runways or other high end stores. The company has been sued for all kinds of things: from ‘stealing’ designs to collecting too much information at the Point of Sale. But customers keep shopping and product keeps selling.
H&M seems to be a hit wherever it opens, and while it caters to teens, middle-aged women seeking the hip factor in their lives also shop there. After all, the product is cheap enough that a fashion faux pas can be easily forgiven and forgotten.
So while Fast Fashion retailers are doing really well, we have three other schools of teen retailing taking hits: there’s just plain cheap, like Deb Shops and Delia’s. And then there’s more expensive and classic, like Gap and Abercrombie and Fitch. In between there’s Macy’s, Target and even JC Penney.
The long and the short of the situation is this: today’s teens aren’t interested in wearing someone else’s logos to define their identities. Instead, they mix and match their own selections, and when they get tired of them, they move on to something else. The clothes don’t need to last. They just need to look good for a while.
Traditional product developers have had a heck of a time knocking off the knock-offs. Their supply chain cycles are longer than the demand cycles of the products they’re selling. That’s a hard business model to sustain in today’s world.
Ultimately, the entire retail apparel world must adjust. Two keys to success are speed to market and responsiveness. Fail quickly. Succeed quickly. And move on to the next product. Logos are yesterday. Today is all about something else. And the Fast Fashion retailers will be there to figure out where it is going tomorrow.