Fast Fashion "Luo Sheng Men": Who Withdraws, Who Sticks To It, And Who Is Proud Of It?

Recently, the fast fashion brands that are active in China's clothing retail market have a high rate of appearance. Although the remaining temperature of UNIQLO (T:9983) and KAWS joint products is not yet available, the 35 year old fast fashion brand Forever 21 has announced that it will withdraw from China and close all its stores in China. Subsequently, it is reported that the brand is negotiating with private Holdings Company Apollo Global Management to seek new financing to promote the implementation of the restructuring strategy.

Coincidentally, 2018 is the most difficult year for the fast fashion brand in the world. The fast fashion brands including Topshop, NewLook, Forever21, Esprit and so on are facing crisis and even bankruptcy. In August last year, TOPSHOP announced that they would terminate their cooperation with the Chinese franchise partners, and then close the Tmall flagship store. Last December, New Look announced its closure of Chinese shops and Tmall flagship stores in its official WeChat public, official micro-blog and Tmall flagship stores.

At the same time, the fast fashion industry's three giants, UNIQLO, ZARA (MC:ITX) and H&M, were also hit by slowing sales, poor performance and closing stores. ZARA's parent company Inditex2018 net profit for the whole year hit a five year low. H&M slowed down the shop opening rate. The Topshop parent company Arcadia (NASDAQ:RKDA) group also applied for bankruptcy and closed all American stores, while New Look lost 74 million 300 thousand pounds in 2018.

What is the fashion brand fast winter?

The crisis seems to have spread to the 2019. At one time, the industry is in a state of panic. Fast fashion brands are facing unprecedented competitive pressure in China, which is in sharp contrast to the previous market in this market.

In view of the reasons, observers pointed out that these fast fashion brands are hard to satisfy the demands of Chinese consumers for increasingly high quality.

Many Chinese consumers sniff at the overall quality of fast fashion. "The quality of fast fashion is too poor, the price is cheap, the production speed is fast, and it is in line with the new trend, but its western design is often very unfriendly to the Chinese people."

Zhao Ping, vice president of the international trade and Economic Cooperation Research Institute of China's Ministry of Commerce, pointed out that most of the international fast fashion brands did not do well in China's localization. They were not familiar with China's business culture and consumer mindset.

Guo Jin securities analyst Wu Jincao pointed out in the previous research report that China's fast fashion market has entered a more sophisticated stage of differentiation and development. To seize the new opportunities, we may not simply develop in the extensive way of past experience, but need to have a better understanding of the local consumption culture, and further integrate ourselves into the Chinese mainland from the aspects of products, channels and marketing.

At the same time, international fast fashion brands are also facing fierce competition from local brands in China. According to a list of the latest 2019 fast fashion brands, Han brands, Semir, Taiping birds and other Chinese brands have entered the top ten.

Fast fashion comes to the crossroads, brand development split up.

The development of international fast fashion brands has come to the crossroads in China. However, according to the data of Euromonitor International, the annual growth rate of Chinese clothing is expected to decline from 2019 to 2023, but in terms of retail value, China will still be the largest clothing market in the world.

In winter, who withdraws and who sticks to it?

According to data from market research firm Euromonitor International, in 2014 -2018, the market share of fashion retail brand H&M in China was 0.4%, and its competitor ZARA's market share in 2014-2015 years was 0.4%, but it increased to 0.5% in 2016-2018 years. In addition, UNIQLO's market share in China increased from 0.7% to 1.2% in 2014-2018 years.

Guo Jin securities's research report also pointed out that at present, fast fashion brands in China, UNIQLO are advancing vigorously, ZARA is in the right place, GAP, and H&M resistance is obvious.

Compared with ZARA's performance, the company's performance crisis and H&M's decline have made it seem that UNIQLO seems to be standing in the competition. Its share of China's business grew from 9.9% in fiscal year 2014 to 16.3% in 2018, especially in the 2018 fiscal year. When other fast fashion brands Asia (China) accounted for a decline, UNIQLO's business in China still surged forward.

The peak of fast fashion market has passed, and sustainable development has become an important issue.

It is noteworthy that not only in China, fast fashion companies are facing unprecedented challenges all over the world.

The new generation of young consumers no longer agree with the idea that clothes are out of season, and environmentalists are also protesting the consumption of energy by fast fashion brands. At the same time, the fast fashion industry is becoming more and more vulnerable to moral criticism because of the issue of labor rights and interests of foundries.

According to a survey conducted by fashion marketer thredUP, 1/4 of us millennial consumers gave up fast fashion in 2019 for moral reasons.

Caroline Chalmer, executive consultant and chief operating officer of Global Fashion Agenda, points out that sustainability is closely related to three aspects: environment, society and morality. It not only exists in the supply chain of fashion industry, but also includes how to communicate with consumers through production, fashion sales, and, of course, how consumers consume fashion.

Mintel senior retail analyst Samantha Dover also stressed that consumers in the Internet age want to know the exact source and mode of production more than ever before. Therefore, fast fashion should not simply set up several simple old clothes recycling bins in the store, but consider how to make the whole production and supply chain more sustainable.

To sum up, fast fashion is facing more challenges in China and in the global market. The brands coming to the crossroads inevitably need to have a deeper understanding of the consumer demand in the Chinese market, enhance their competitiveness and find a more suitable way of innovation.