Learning from a Fast Fashion Business Model; How Technology & Agility Can Help Companies Get Ahead of the Game
In their latest guest blog with us, Centric Software explores the technology helping fast fashion businesses to stay ahead of the curve; fast fashion, Centric argues, comes the closest to delivering against customer expectations whilst remaining reactive.
Across apparel, footwear, accessories and consumer packaged goods, companies are fighting over the same share of shoppers’ wallets – and fast fashion retailers are coming out on top. Stanford University research shows that the business model adopted by leaders in fast fashion is up to four times as profitable as the alternative used by department stores, wholesalers, athletic brands and even specialty retailers.
Why? Because, in a world where almost every other consumer industry is moving to an on-demand model, fast fashion comes the closest to delivering against customer expectations – quality product, quickly – and balances risk and reactivity in a way that allows retailers and their supply chains to respond when circumstances change.
Hit with that one-two combo of short lead times and on-trend styles, and it’s no surprise that traditional retailers are reeling. And without serious cultural change; the only tools they have to respond are deep discounts, which teach customers to wait for markdowns or over-assortments, which run the risk of diluting the brand.
This is why speed to market is on everyone’s lips. Traditional retailers eye fast fashion with envy, and feel like they could stay in step with their customers if only they could move more quickly. But while faster is better, it’s only part of the puzzle.
The key to understanding why fast fashion is so successful is the concept of “clockspeed,” a term coined twenty years ago at MIT to describe the difference in pace between industries. From market dynamics to internal organization, the clockspeed of aerospace for example, is measured in years, while traditional fashion is metered in months.
Fast fashion leaders work in weeks, with a clockspeed attuned to the quickening pulse of fashion itself. More than just lightning lead times, their entire business models are oriented around agility; they scan the market for new trends, and build design and supply chain cycles that can respond rapidly.
While the most obvious end result is the ability to translate trends into stock on shelves more quickly than competitors, this clockspeed has compounded benefits. Although the market has become more volatile, traditional retailers still bet big on merchandising up to a year in advance, while fast fashion leaders spread that risk through rapid replenishment and variety. And when they do fail, they fail fast; leading retailers can respond to sales slumps or spikes in real-time, and use their in-built intelligence and agility to inform production in-season.
More than raw speed, this is the lesson of fast fashion. Whether you sell a few select styles, or keep up a steady, seasonless flow, agility is essential for matching the clockspeed of modern fashion – which shows no sign of slowing down.
But when it comes to getting agile, normal efficiency practices are not adequate. There’s a limit to how quickly even the most organized supply chain can prototype, manufacture and ship. And while some of the leading fast fashion retailers’ speed comes from close collaboration with their factories – with one-week final production cycles and two-day outbound logistics – they’re leapfrogging competitors’ lead times by months, not just days.
The majority of these retailers’ recipe for success is a matter of mindset: a willingness to change rapidly, share risks with suppliers and adopt innovative solutions. “Speed to market,” sounds catchy, but in today’s market real retail transformation means getting smart and leveraging the right technology to compete on culture and process.
Fast fashion is all about agility. More than just having lighting-fast turnaround times, leading retailers can respond in real-time to changes in the market and have oriented their entire cultures around the clockspeed of modern fashion.
In the original MIT paper that coined the term, success in a fast clockspeed environment is defined as the “ability to continually develop a series of temporary competitive advantages”. For fast fashion, which thrives on rapid refresh and replenishment, creating those advantages has resulted in a four-fold increase in profitability over other fashion models.
Traditional retailers, whose clockspeeds are measured in months rather than weeks, are now trying to leverage technology to achieve similar speeds and remain competitive. And independent research shows that cross-functional workflow capabilities and PLM-driven best practices can shave twenty-five weeks (or more) off traditionally long lead times. But as already series explained, speed to market is only part of the picture. Real retail transformation means matching your processes to the pulse of fashion and finding a PLM solution designed from scratch for the demands of a fast clockspeed environment.
Traditional PLM platforms are often cross-industry: skeleton frameworks that can fit different clockspeeds at the cost of expensive customization and long upgrade cycles. While these are adaptable, they fall short when it comes to the cornerstones of a solution specifically designed for the fast fashion clockspeed: data analytics and design library re-use; support for rapid iterations based on customer feedback; just-in time business methods and best practices; style-color-size product definition semantics; and flexible production and supplier collaboration capabilities.
And these are just the essentials; requirements will change over time as businesses respond to changes in the market and as the industry as a whole demands greater and greater operational agility. Day to day, that might mean postponing finished goods commitments until the last minute, shifting capacity from a less-popular style to a hotter one in-season and focusing on captivating customers by designing as close as possible to demand. In the longer term, it means choosing a PLM solution that works at the clockspeed of fast fashion, and a PLM partner who can keep up.
Stanford University research shows the potential of matching the clockspeed of fast fashion, and changing to a more agile culture. Companies can target profit increases of up to 28%, markdown reductions of 55% and improvements to market capitalization of 43%.
So whether it’s slashing lead times through PLM-driven planning or relying on PLM intelligence to postpone finished product commitments until the optimum moment, retailers who become more responsive to consumer demand will see results. And those results continue to drive us to design innovative solutions with a finger on the pulse of fast fashion.