It is no secret by now that consumers, especially millennials and younger generations, increasingly desire products that are more convenient, up-to-date with currents trends, and reasonably priced. That is especially evident in the fast-paced and dynamic fashion retail industry, as shown by “fast fashion” and its effects on the entire business.
The term fast fashion is defined by retailers that attempt to mimic current fashion trends as quickly as possible—at a price that general consumers in the clothing sector can afford. Companies are able to keep up with fluctuating trends and produce the products in a cost-efficient manner through the use of extremely advanced supply chains and dedicated market research.
The Rise of Fast Fashion
The move towards fast fashion was initially lead by innovation-focused companies like Zara (IDEXY - Free Report) and H&M. These European brands were able to revolutionize the fashion retail industry in the early parts of the 21st Century and become household names.
An example of a company that has more recently been able to take advantage of the trend towards fast fashion is lifestyle brand Urban Outfitters (URBN - Free Report) , which is known for catering to a mainly young adult demographic through hip and stylish merchandise. The stock has soared since this time last year, with prices climbing up over 150% to its current position at around $44.
One of the key drivers in the company’s progress has been its ability to accurately adapt to the newest fashion trends, and it is only expected to continue doing so in the future, according to analysts. Increased analyst bullishness is one part of why Urban Outfitters currently holds a Zacks Rank #1 (Strong Buy).
Another recent victory for fast fashion was Japanese company Uniqlo partnering with tennis legend Roger Federer. The $300 million deal made headlines due to the shock value of someone as well-known as Federer leaving sports apparel giant Nike (NKE - Free Report) for the lesser known Uniqlo.
The tennis star’s new sponsor doesn’t even focus mainly on sports like Nike does, but instead would be labeled as a fast fashion brand that tracks the world’s latest trends. Although it may not be a major hit for Nike right now, the move showed the power of fast fashion and its potential for even greater growth in the future.
Traditional Retail’s Response
Caught right in the middle of the fast fashion and online shopping storm are traditional retailers that have been staples in the clothing sector for a long time, including Nordstrom (JWN - Free Report) and Kohl’s (KSS - Free Report) .
In order to survive, these major companies are forced to make decisions on how to respond to the changes in today’s retailing and clothing landscape. It comes with no surprise that both companies have already made moves in attempts to maintain their positions in the industry.
On Tuesday, Nordstrom laid out a new five-year growth plan that was clearly influenced by the fast fashion movement. The plan centered on boosting the company’s e-commerce presence as foot traffic at malls has continued to decline. However, the announcement was mainly met with negative reactions due to the costs associated with implementing all of the initiatives. It seems as if the company may have adjusted to consumer trends too and will now have to fight to catch up.
While it’s still unclear as to how Nordstrom’s initial moves will play out, its apparel retailing counterpart, Kohl’s, struck gold with its own solution. The company signed a deal with Amazon (AMZN - Free Report) in September of 2017, and the massive partnership has paid off big time, with the stock rising 64% since the move was announced. Kohl’s teaming up with Amazon tremendously bolstered the retailer’s evolution towards becoming more convenient and faster.
There is no denying the shift towards clothing that is easily accessible and consistent with the latest fashion trends. Investors should take note of fast fashion brands, like Urban Outfitters, which are perfectly suited to the new fast-paced environment in retailing.
On the other side, Nordstrom, Kohl’s, and similar traditional retailers should be looked at with greater caution as they continue to deal with how to adapt to fast fashion. These companies will have to pursue innovation and continue making strategic initiatives to stay at the forefront of retailing. Clothing retailers like Kohl’s that make successful changes should see growth, while others could be left behind.
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