Focus On Consumption: Why Fast Fashion Brands Are Entering A Low Point

In the past year, the most eye-catching fast fashion brand in the world is sheen. It is rumored that the clothing enterprises with an estimated value of 100 billion US dollars are from China, and have become popular abroad through cross-border e-commerce; But looking back at China, it is a different picture.

Over the past decade, after several rounds of horse racing and enclosure by European and American brands, Japanese and Korean brands and domestic brands, fast fashion brands have fewer and fewer stores in shopping centers, and the sales curve is like a falling meteor. Even in the hottest stage of consumer enterprise entrepreneurship, few people have set foot in the field of clothing.

On February 15, La Chabel, once known as the "Chinese version of Zara", once again issued a risk warning. It is estimated that the net assets of the company will be negative in 2021, and the company's shares may be terminated by the Shanghai Stock Exchange.

From H & M, Zara, to metsbaway, egger, Vera Moda, baccarat and La Chabel, whether it is European and American, Korean, Japanese, or local brands, why are fast fashion brands with various styles and prices getting more and more difficult to please consumers?

Decline of domestic brands

During its peak period, La chapel had nearly 10000 stores, which was called "China's Zara" among a number of domestic fashion brands. However, in the past two years, La chapel staged a big drama of closing stores, losing money, defaulting on suppliers' payments, infighting among senior executives, and protecting the shell. It is not surprising that La chapel has taken the step of delisting.

In terms of sales performance, the crisis of La chapel can be pushed back to 2018. In 2017, lashabel landed on A-share market. Unexpectedly, his debut was the peak. In 2018, La chapel lost 160 million yuan; In 2019, the operating income decreased by 24.66%, and the net loss reached 2.166 billion yuan. In 2020, the physical stores will be greatly affected by the outbreak of the epidemic. The operating revenue of La chapel is 1.819 billion yuan, a year-on-year decrease of 76.27%, and a net loss of 1.84 billion yuan.

All the way to loss, all the way to close shop stop loss. By the first half of 2021, there are only 427 stores left in La chapel. In 2021, the annual revenue is only 400 million yuan - 500 million yuan, and the net loss is 650 million yuan - 950 million yuan. It is estimated that the net assets belonging to shareholders of listed companies will be - 1.2 billion yuan to - 1.6 billion yuan by the end of 2021.

From 2018 to 2021, in only three years, the number of La chapel stores dropped from more than 9000 to more than 400, and the revenue dropped from 10 billion yuan to 4.5 billion yuan.

In this time, other fast fashion brands are not easy. In March 2021, Meibang sold its clothing Museum for 448 million yuan. At the end of April, Meibang announced its financial report for 2020, with an operating revenue of 3.819 billion yuan and a net profit of - 859 million yuan.

Losses have become commonplace for American bond. In August 2008, Meibang clothing was listed on the Shenzhen Stock Exchange, becoming "the first domestic casual clothing Stock". In 2011, the revenue of Meibang clothing was 9.945 billion yuan, and the net profit attributable to its parent reached 1.206 billion yuan, reaching a historical peak. In 2015, Meibang's net profit loss was 431 million yuan, a year-on-year decrease of 396%, which was the first loss in seven years since it was listed.

Excluding the short-term profits in 2018, in 2017, 2019 and 2020, the revenue of Meibang will decrease year by year, from 6.472 billion yuan, 5.463 billion yuan to 3.819 billion yuan; Losses are also increasing, with net profits of - 305 million yuan, - 826 million yuan and - 859 million yuan, respectively.

As for the number of stores, Meibang did not release the number of stores as early as 2017. According to the data published before, from 2013 to 2016, the number of stores of Meibang decreased from more than 5200 to more than 3900.

　　 Exit of European, American, Japanese and Korean brands

In the week before La chapel announced the delisting risk, Antarctic e-commerce quietly completed the holding of 100 good companies. On February 9, baijiahao (Shanghai) Fashion Co., Ltd., an affiliated company of baijiahao clothing, changed its business. TBH Hong Kong Limited, the former shareholder, withdrew, and the new shareholder, Antarctic e-commerce, held 100% of the shares.

Antarctic e-commerce acquired 100% equity of baijiahao with 180 million yuan, and included 78 Korean clothing trademarks including basic house, mind bridge, Jucy Judy, etc. with 330 million yuan. These Korean fast fashion used to be an indispensable brand in the women's clothing area of shopping centers. I don't know when it suddenly began to be neglected in front of the door. In 2020 and the first three quarters of 2021, the operating revenue of baijiahao was 1.337 billion yuan and 966 million yuan respectively, and the net profit was 183 million yuan and 66.75 million yuan respectively. During this period, baijiahao's liabilities were 1.094 billion yuan and 1.24 billion yuan respectively.

More than 100 foreign brands have been sold in clearance. In August 2020 and early 2021, Dutch clothing brand C & A and French women's clothing brand cachecache were sold one after another, with Beijing's private equity investment company Zhongke Tongrong as the receiver.

Cache cache has been in China for 17 years. Before it was sold, there were only 550 stores, nearly half the number at the peak. In the past five years, the number of customers in its stores in China has fallen by 60%. C & A entered China in 2007. At the time of sale, it only had 66 stores in 22 cities in China.

At the end of 2020, the news of Etam egger's bankruptcy and liquidation shocked many netizens. Since entering China for more than 20 years, egger has opened more than 3000 stores. In 2011, the Chinese market generated 25.4 million euro revenue, but this figure dropped to 1.5 million euro in the next year. In the second half of 2014, egger began to close stores one after another, and in May 2018, it directly sold its business in the Chinese market. Old Navy, a sub brand of gap, will leave China in 2020.

More brands have no one to take over, directly withdraw. American fashion brand Abercrombie & Fitch (A & F) used to use muscle man as a new store marketing gimmick, but its Shanghai Jing'an Kerry Center store was officially closed on February 20. After that, only one Xingye Taiguhui store was left in Shanghai A & F store.

Starting from 2020, INDITEX group, Zara's parent company, has successively closed its physical stores in China of Bershka, pull & Bear and Stradivarius. Japan's women's wear brand Earth Music & Ecology announced that it would officially withdraw from the Chinese market on June 30, 2020, and samansa MoS2 and e hyphen word Gallery of the same group also closed all businesses in China. Earlier, in 2018, British fashion brands Topshop and new look announced their withdrawal from the Chinese market.

Fast fashion brands that continue to stay in the Chinese market still need to endure. In 2020, INDITEX group, the parent company of Zara, announced that it planned to close 1000-1200 stores from 2020 to 2021, accounting for 13% - 16% of the total number of existing stores in the world. However, its development in China has already begun to slow down. According to yingshang.com, there are still 16 new Zara stores in 2014, and it will drop to 12 in 2019, and even only 8 new stores will be opened in 2018.

　　 How to cross the cycle

Looking back, the first generation of local fast fashion brands, such as Meibang, Barney Road, Yichun, and SEMAR, grew up almost at the same time as the post-80s. They dominated the mainstream aesthetics of the younger generation at that time. However, when the young people of the small town go to the wider world, they are quickly captured by the fast changing new clothes on the shelves of fast fashion brands from abroad. This kind of freshness is an experience never before.

Fast fashion, as the name implies, only with the new "fast" can keep up with "fashion". It is understood that the average production cycle of fast fashion brands is 10 days, and the stores are updated at least once a week. In this industry, Zara is often compared with the case, it can be launched twice a week, about 12000 new models a year. But the average fashion brand is fast once a fortnight. For the first time, Sheen has received extensive attention, which comes from the microblog topic "7 days faster than Zara".

Some people in the industry have observed that the golden development period of Zara and H & M in China was basically started from 2011 to 2013. At the same time, Forever 21, Topshop and other brands also entered the Chinese market strongly in this period.

This period was also a period of rapid expansion of domestic commercial real estate. Almost every shopping center had H & M and Zara on the first floor, and the store area was not small. In 2013, H & M opened a flagship store with an area of 1100 square meters in APM, Wangfujing, Beijing. The store was originally located at Nike flagship store.

If you look at the growth trajectory of sports brands and fast fashion brands in the past 10 years or so, you will find that they happen to have an up and down relationship with each other.

At a time when fast fashion is in the shopping center and among consumers, sports brands are painfully closing stores and clearing inventory. According to the data, from 2012 to 2014, Li Ning lost 1.98 billion yuan, 390 million yuan and 780 million yuan respectively. In 2015, it turned losses into profits, ended three consecutive years of losses and achieved a profit of 14 million yuan. After 2015, fast fashion brands have begun to slow down the expansion speed, and Meibang also made its first loss since its listing in 2015.

In 2018, with the amazing performance of Paris fashion week, Li Ning quickly turned around with the concept of "national trend", and the performance of Anta and other sports brands also rose. At this stage, fast fashion showed its fatigue. In 2020, the golden position at the entrance of Raffles on the first floor of Dongzhimen in Beijing will be replaced with the large logo of lululemon, which was previously the territory of Zara.

Roughly speaking, it takes at least seven or eight years for a sports brand to go from a low tide to a peak. If this is calculated, it will take five or six years for fast fashion to return to its peak. However, it is not just waiting to go through the cycle.

The challenges fast fashion once faced are still there. One is e-commerce. After a large number of fast fashion brand stores expanded, e-commerce ushered in the fastest development stage of domestic e-commerce. E-commerce directly hit the offline clothing category. For consumers, shopping channels are more and more scattered, and the impact of the epidemic on offline stores is directly accelerating their decline process.

The other is the trend. The big killer of fast fashion is the fast response supply chain. From the popular trend on the album to the mass consumption in the store, it can be realized in a week, but it is ultimately defeated by the lifestyle. Domestic consumers began to pay attention to their own feelings, and have higher requirements for clothing materials and comfort. The "one-off" quality of fast fashion makes many people no longer list it in the shopping list. Especially after the epidemic, consumer decision-making is more cautious.