Fast fashion faces strong headwinds
Fast fashion, once seen as a way for brands and consumers to keep abreast of the latest trends, is facing a toll. As consumers become more environmentally conscious and second-hand clothing becomes more readily available as tangled supply chains delay product availability, some retailers are feeling the pain.
Take, for example, the departure earlier this week of longtime ASOS CEO Nick Beighton, who apparently won’t commit to staying with the company for at least half of his next five-year plan – this, after 12 years with the retailer. , including the last six as CEOs.
Mat Dun, former CFO of ASOS and now COO, said in a statement that the retailer’s performance over the next year “will likely be constrained by volatility in demand, the global supply chain. and cost pressures “. The company is expected to outline a growth strategy in more detail next month, although investors appear wary – as of Monday, ASOS stock has fallen more than 16%.
Read more: ASOS CEO steps down from leadership
ASOS said its revenue grew 20% over the past year, but growth was slowing and gross profit margin declined by 2 percentage points, which the company attributed to costs transport costs and increased investment in the customer experience. Annual profit could fall by more than 40%, ASOS said, less than two weeks after competitor Boohoo also warned that higher costs will reduce its annual results.
Nike CFO Matt Friend said last month that transit times to the United States from Asia have now doubled from pre-pandemic levels to 80 days, and that the European market has also experienced a deterioration in transit times. Clothing brands are also facing weeks of factory closures in Vietnam, which is especially difficult for fast fashion as it is difficult to sell inventory out of season.
Related: Factory closures cause more than 10 weeks of lost production for Nike
The rise of resale
Fast fashion is also facing a growing number of consumers who are focusing on the environmental impact of their lives and purchases, especially after a global pandemic. A report from the National Retail Federation and IBM found that 57% of consumers are willing to change their habits to reduce their environmental impact and 77% say it is at least moderately important that brands are sustainable and eco-friendly. the environment.
This may not bode well for fast fashion brands, which are often accused of overproducing and creating clothes meant to be thrown away – a valued 11 million tonnes of clothing is thrown away in the United States alone.
A headwind for fast fashion, however, could be a tailwind for the second-hand clothing market, which is expected to grow 11 times faster than the broader clothing retail industry over the next five years and reach $ 77 billion by 2025.
“While we are still in the early stages of this retail transformation, emerging signals suggest the opportunity is replacing traditional retail,” thredUP CEO James Reinhart told analysts in August. He noted that resale is expected to be twice as big as fast fashion by 2030, as consumers opt for the occasion more often.
“Consumers say they care more about wearing sustainable clothing than before the pandemic, and also have a growing disregard for ecological and financial waste,” Reinhart said.
Swedish company H&M, best known for serving fast fashion across the world, seems to be bracing for the changing winds. The retailer owns around 70% of the second-hand store Sellpy, which earlier this year expanded to 20 more European countries. H&M is also working with Sellpy on a new warehouse in Poland, as well as distribution and quality control efforts for apparel and order management.
See: H&M Sellpy used eShop debuts in 20 European countries