Challenges of the Fast Fashion Industry 2020
Fast fashion is the term used to describe clothing designs that move quickly from the catwalk to stores to meet new trends, according to Investopedia. People love fast fashion for its trendy and inexpensive attribute.
Let’s see the state of fast fashion industry in 2019. Inditex, UNIQLO, Hennes & Mauritz (H&M) and GAP are the four best sellers in fast industry by 2019. The biggest brand of fast fashion industry, Inditex, has racked up more than 3 billion Euros (3.3 billion USD) in net profit by 2019, revealing from its annual report. Other renowned brands such as UNIQLO, H&M and GAP have also made 252 billion Yen (2.3 billion USD), 13 billion SEK (1.3 billion USD) and 351 million USD profit each in 2019.
It seems that fast fashion industry is still profitable by then. However, when the fast fashion giant Forever 21 filed for bankruptcy in September 2019, everyone was astonished. Great challenges are underlying in this industry especially when it comes to year 2020.
1. Fierce competition
Fast fashion was coined in fashion retail and became extremely popular in the early 2000s. Retailers aimed to increase profit by focusing on key elements of the supply chain with an emphasis on increased manufacturing speed at a low price.
As the manufacturing of clothing products were mainly outsourced to Asian countries, most retailers didn’t have to cost too much on building factories or plants. The entry barrier was low in the past. However, after 20 year’s growth the life cycle of the fast fashion industry has entered in the maturity period, with big brands built inside the industry, entry barrier is higher than ever before.
And the internal rivalry is also fierce: in order to satisfy rapid changing demands from the customers retailers need to update their product continuously. The business will be easily impacted once the retailer can not catch up with the speed.
2. Threat from Manufactures
Another challenge is the criticizes on the low wages and terrible condition of workers in fast fashion industry. According to research by Global Labor Justice, female garment workers in H&M and GAP supplier factories in Asia have faced exploitation and mistreatment that includes abuse, poor work conditions, low wages and forced overtime. Things are getting worse after the outbreak of COVD-19. With shops closed down and shoppers forced to stay indoors, demand for new clothes have collapsed. Some retailer can no longer pay the supplier for any of the clothes it had ordered, including ‘stocks already handover’. Clothing manufacturers in Bangladesh, the second-largest exporter of garments in the world, have, since the crisis began, lost out on more than $3bn in payments for T-shirts, shoes and designer dresses already produced or sourced, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Elizabeth L Cline, an author on labor rights and environmental practices in the fashion industry, argues that outsourcing has enabled retailers to distance themselves from risks in the supply chain. The manufacturers do not have the power to object even if the retailers refuse to pay for orders.
In Vietnam, south-east Asia’s fastest-growing big economy before the pandemic, companies in the garment industry have already started “disappearing”, says Hoang Ngoc Anh, acting general secretary of the Vietnam Textile & Apparel Association.
It is not hard to imagine that only a few of the manufacturers can survive after the pandemic, which will directly have the negative impact on the retailer side. On the other hand, the ones who survive may learn lessons from the great loss and protect themselves from account receivable issues in the future. And with fewer competitors in the supplier-side, they will have more bargaining power towards the retailers. Will they continue to endure the low wages and terrible condition as they used to?
3. Environment Problems
When we check on the fabrics of fast fashion products, one of the most common material is polyester. Polyester is widely used in fast fashion industry due to its low-cost, versatility, and wrinkle-free properties. However, polyester is synthetic petroleum-based fiber. More than 70 million barrels of oil are used to make polyester each year. What’s more, every time they are washed in domestic washing machines, microfibers from synthetic fabrics are released into our waterways, eventually polluting the river, lake and ocean.
It is not only the producing procedure of polyester that made negative impact on the environment, when these clothes get thrown out, it ends up in landfills or burning making secondary pollution to the environment. Popular companies like H&M are producing more than they can sell, with $4.3 billion in unsold inventory. Since 2013, 12 tones H&M clothing has been burned per year in Denmark alone.
The environment problem has raised high attention in the society, consumers start to think about the connection between the fast fashion and pollution issues. Many of them say they would definitely or probably change their consumption habits to reduce their impact on the environment.
How to change?
To cope with the challenges, the fast fashion industry should reconsider the value chain of the industry itself.
First, legislation between manufactures and retailers need to be built up to protect the workers in manufacturing industry. What’s more, trade credit insurance should be highly emphasized on the trade between manufactures and retailers which can at least cover some of the loss when the retailers are not able to pay for the orders.
Second, it is time for fast fashion companies to change their way of thinking from ‘fast’ to ‘sustainable’. Younger generations are taking notice of what fast fashion is doing to the environment and have taken their spending power elsewhere. It is shown that in 2018, $128.5 billion was spent on sustainable goods. Fortunately, some companies are already heading to this way.
UNIQLO has adopted a sustainability mission statement, "Unlocking the Power of Clothing". The company takes action on producing more sustainable jeans and recycling the clothing that customers no longer wear. H&M, on the other hand, sets up resale and rental platform to reduce waste of the clothing. Despite of its environment scandal in the past, it’s good to see H&M is making effort to improve the situation of fast fashion industry.
It is really hard to predict the future of the fast fashion industry especially under the shadow of COVID-19 pandemic. However, the lockdown also gives us a short break to consider if we have done anything wrong without notice in the past, if we can take this opportunity to revise the strategy and get well prepared, it would be easier for the fast fashion companies to survive in the game.