Fast-Fashion: the most successful business model in the industry

Wednesday, 01 October 2014
The fast-fashion business model, refined by Spanish fashion label Zara, is the most social and most successful long term business model according to Emiliano Duch, Lead Specialist in Globe Trade and Competitiveness Global Practice at the World Bank Group.

During the IAF 30th World Fashion Convention in Medellin, Colombia, Duch, one of the key speaker's at the conference, discussed how the fast-fashion business models offers the most shared prosperity to the industry and society as a whole.

According to Duch, traditional fashion business models tend to first create their designs, then move to manufacturing before the product reaches the store and then its client. However Zara's business models first looks at its clients in its stores to see which garments they are buying and what is selling before designing their items and heading to manufacturing. Zara collections are based on the most recent fashion trends, which are designed and manufactured quickly and cheaply to allow the mainstream consumer to take advantage of current clothing styles at a lower price.

During his presentation Duch broke down the industry into three apparel strategic segments and compared which one contributed the most to shared prosperity within the industry: the low-cost business model, the designer brand model or the fast-fashion model.

Duch noted that the first model, value-fashion model, is based on volume manufacturing, which usually takes a minimum of 60 days to produce a series of 300.000 items in large outsourced factories overseas. Then the designer brand keeps its production costs as low as possible to ensure its margins goes back to the brand to help fund its large advertising budgets. However the fast-fashion business model revolves around time-based competition, placing smaller orders with factories closer to home to ensure products arrive on time. The maximum amount of time it takes for an garment to go from a design to arriving in store is usually 28 days.

Incorporating a vertical business can also ensure fashion companies are able to respond on trends quickly. Duch described the most innovative fashion business model as an organization which reacts to trends quickly and focuses on local needs. He adds that is not not necessary for fast-fashion retailers to operate on a global basis, as focus on smaller regions and specific audience can help strengthen the business model, which revolves around satisfying the consumer ever changing needs.

Inditex has many retail formula's focusing on specific audience in certain regions, for example. He noted that although traditional global fashion retailers tend to launch several fixed collections per year for their entire global market, the vertical fast fashion player launches new items focused on regional customers tastes throughout the year. Zara stores are known to place orders every two weeks for new items depending on what is selling in each individual store and by keeping its offering new and fresh, consumers are more likely to pay the store a visit more often than not.

“Anyone can start this business as long as you focus on fast response to trends and on a specific audience in a specific region,” stated Duch. He stressed that fast-fashion model benefits all parties involved, including factory workers, business partners, company owners as well as consumers, in comparison to other traditional brand business models or apparel retail companies.

As the majority of company stakeholders also benefits the most from a fast-fashion model compared to traditional business models, fast-fashion can arguably also been seen as the most long term business with an ever increasing market share.

Related News