A new generation of

even faster fashion is

leaving H&M and Zara
in the dust
WRITTEN BY

Marc Bain

April 06, 2017

Zara and H&M are the world’s two largest fashion retailers. Not by
coincidence, they’re also the pioneers of fast fashion. Zara is able to
take a coat from design to the sales floor in 25 days (paywall), and
it can replenish items even more quickly.

In the past couple of decades, the two companies have steadily

trounced much of their competition, outdoing them on price and
speed to claim an ever-larger share of shoppers’ spending. But both
are being beat at their own game by even faster competitors.
British fashion retailers ASOS and Boohoo are able to conceive,
design, produce, and have clothing ready for shoppers on the sales
floor quicker than Zara and H&M, according to a research note
Goldman Sachs sent investors last month, and the two millennial-
focused, social-media savvy brands are enjoying the rewards. On
April 4, ASOS lifted its sales forecast for the year, expecting sales
to grow between 30% and 35%. Boohoo also recently raised (pdf)
its earnings forecast, predicting sales growth of around 50% for the
year. Unbeknownst to many, its shares rose more in 2016 than
those of any other Western European consumer-related company
with a market capitalization of more than $500 million.

Goldman Sachs charted the correlation between supply-chain lead

times and like-for-like (LFL) sales growth, and the results show just
how much speed matters. It allows brands to respond to the market
quickly, which means they can adjust their inventory to match
trends as they happen, and it keeps them from having to produce a
large amount of stock in advance that then risks not selling and
being discounted.

Speed
wins. (Screen capture of Goldman Sachs note to investors)

It helps that both ASOS and Boohoo are online retailers, meaning
they—unlike many of their fashion rivals—aren’t suffering from
an overabundance of brick-and-mortar stores whose sales are
being cannibalized by ecommerce. (Zara and H&M, after years of
rapidly expanding, have recently announced plans to ease back on
their rate of opening new stores to shift focus online.) And while
both ASOS and Boohoo are starting from a smaller sales base,
making it easier to achieve high growth, the analysts at Goldman
Sachs still argue that their roughly “four-week design-to-store
model is integral to their success.”

H&M is aware it’s falling behind, announcing plans recently to

invest in and rethink its supply chain. Most of its manufacturing
takes place in Asia in order to keep prices down, but it’s
considering moving more production closer to Europe, to countries
such as Turkey, which would let it get items to stores more quickly.
That proximity is key to the speed of its faster rivals. (Even
Japanese retailer Uniqlo, which emphasizes that it isn’t driven by
trends, has acknowledged that it needs to speed up.)

Both Zara and H&M saw a slowdown in sales growth this year, and
their margins are also under pressure, leading some to wonder
whether the fast-fashion industry is crumbling under the same
forces as other retailers. On the contrary, it’s getting even faster.

https://qz.com/951055/a-new-generation-of-even-faster-fashion-is-leaving-hm-and-zara-in-the-
dust/