Inventory And Fast Fashion: How Far Is The Fast Fashion Road Of Clothing Industry

Fast fashion doesn't sell

There is a joke in the clothing industry: even if all the clothing factories in China are shut down, the clothes in stock are enough for the people of the whole country to wear for three years. Clear inventory, can be said to be the biggest headache for clothing owners.

But 45 years ago, a Spanish guy came up with a brilliant solution: fast fashion

Hundreds of young designers follow the trend of fashion week in Milan, Paris and Tokyo every day. From design to board making, and then to production and delivery, a batch of new styles can be put on the shelves as soon as one week. Fast and fashionable, this is the first step to speed up the pace of sales, the second step is to strictly control the production of clothing.

In this way, the inventory rate of fast fashion industry can be reduced to 15% - 20%, while the inventory rate of traditional top-level clothing and general public clothing can reach as high as 40%.

Therefore, when Zara, H & M, gap and other fast fashion brands entered China, they not only won the pursuit of the majority of consumers, but also caused a large number of local clothing brands to follow suit.

For a time, fast fashion has been invincible in the global market.

However, more than 40 years later, fast fashion has gradually failed: unsalable, loss, discount, clearance. In recent years, the fast fashion industry is staging a Dunkirk Retreat:

China's domestic brands such as MetS Bonwe were the first to struggle, then H & M, Zara and gap continued to shrink the market, while Topshop, new look and Forever 21 successively withdrew from China.

In 2020, a virus that keeps all Chinese people closed will make the fast fashion people who are "only fast but not broken" have to step on the brake.

As the saying goes, Rome wasn't built in a day. In the context of the global economic downturn, this year's epidemic is only a driving force. As early as 20 years ago when Ali and Jingdong were born, fast fashion people should have expected the situation today.

Why do you say that?

The first is fashion. Fast fashion is the business of young people after all.

More than 20 years ago, with the opening of the country, the young people of that generation naturally advocated the trend of Europe and America. The millennials, who grew up in an open market economy, are now more interested in national trends. Over the past few decades, European and American fast fashion brands have been following suit in Milan, New York and Paris. Naturally, they have gradually become divorced from Chinese young people.

The second is the inequality between quality and price.

Although fast fashion mainly focuses on civilian routes, in China, compared with Taobao, the price of offline fast fashion still has no advantage. For many years, netizens can tear two pieces of clothes into black ones

When a piece of clothing has no unique advantages in terms of style, quality and price can not catch up with Taobao's popular items, and consumers are not stupid, they will not be keen on shopping.

Finally, the inventory problem.

Zara's most proud inventory reduction method relies on the global unified sales data system, which can quickly analyze the tastes and preferences of consumers in various countries, so as to adjust the pace of production and promotion. What's interesting is that the big data mastered by China's e-commerce platform is obviously more abundant and perfect than a single brand.

When Taobao brand merchants can access this data and rely on China's strong manufacturing strength to carry out supply chain management, Zara's unique competitive advantage will no longer exist.

Therefore, it can be said that, in terms of price, style, clothing quality, or inventory management, European and American fast fashion brands are completely defeated in the face of Chinese e-commerce.

Where are the clothes that can't be sold?

Generally speaking, it takes only three years for a garment to be sold from the factory.

Among them, it is best to sell on the shelves in the current season, and can only be discounted after the season. The old stock that will not be sold in two or three years before 2020 will be sold.

At this time, we can only think of a way from the perspective of the market: first, sell in the first and second tier cities, and then move them to the third and fourth tier cities and rural areas in the past quarter, and then we can't sell them in the future, so we can only package them and transport them to less developed countries such as Southeast Asia and Africa.

The further down, the lower the price.

The city beauty mentioned in the announcement in May this year that it is still cleaning up the inventory before 2017 and plans to sell it to Southeast Asia by weighing at a price of 0.50%.

It is worth noting that the average price of urban beauty underwear is only 80 yuan, and it is sold at a price of 0.5% discount per kilogram. That is to say, an underwear is less than 4 yuan, which basically can not cover the cost.

In order to avoid products falling into the situation that no one wants to lose money, all businesses will try their best to clear the inventory.

Specifically, there are four main ways to clear inventory in the industry.

The first one is public promotion.

At the beginning, the brand will make use of the national legal holidays for special offers. Later, Ali and Jingdong created the double 11 and 618 shopping carnivals. Later, pinduoduo launched 10 billion subsidies. Now, the discount and promotion of merchants can be achieved 365 days a year.

When many people complain that businesses have turned all festivals into shopping carnivals, which has changed the flavor of traditional festivals, the idea of the merchants is: there is no way, the inventory is too much to digest.

In addition to starting from festivals, some businesses will also set up online and offline channels such as factory direct stores and brand discount stores, which are specially used for tail goods sales.

Although this way can cover a large number of consumer groups, but in the long run, it will gradually damage the brand image and its normal price system. Therefore, general brands will use it carefully, and high-quality brands will not discount easily.

The second way is private purchase.

As the name suggests, businesses will choose to carry out special sales within the enterprise, or jointly with other large enterprises, and generally do not disclose it to the public. The number of participants in this way is limited. In addition to improving employee satisfaction and maintaining a good relationship with cooperative brands, it can not digest too much inventory.

The third way is more extreme, that is to choose direct destruction.

According to foreign media reports, H & M burns 12 tons of unsalable clothing every year. From 2013 to 2018, it destroyed 60 tons of clothing, including 30000 new jeans for children and women.

Compared with fast fashion, luxury brands are more willing to choose this way of inventory clearance. In addition to LV and Hermes, burberry was exposed to have destroyed 250 million yuan worth of clothing, accessories and cosmetics in 2017. These clothes bags, which were originally sold for tens of thousands or hundreds of thousands, were all burnt to ashes after being cut into pieces.

In addition to the purpose of brand protection, some businesses choose this extreme way because they are not willing to bear high storage fees. For this reason, in 2018 alone, Amazon platform directly destroyed more than 3 million unsalable goods.

The last way is to entrust a third party to clean up the inventory.

Offline, outlets is the main position of discount promotion in the first and second tier cities. What many people don't know is that outlets originated in the United States and has a history of half a century, and outlets itself means discount.

Since outlets entered China around 2000, many local clothing groups have begun to focus on the concept of "outlets". In 2019, Shanshan Ole, a subsidiary of Shanshan Group, was acquired by vipshop, which also focuses on big discount.

In the vast low-level cities and rural markets, the ways and means of dumping tail goods are more extensive, and the price is also lower.

It is worth noting that e-commerce has been developing for 20 years in China. In addition to traditional e-commerce giants such as Ali, Jingdong and pinduoduo, a segmented e-commerce market focusing on solving inventory problems is also growing rapidly.

100 billion "inventory e-commerce" market

"They are all good brands, with 30% discount every day." From "the elder sister who rides the wind and waves" to "20 is not confused" to "30", vipshop has made full use of its sense of existence in major programs this year.

Vipshop is the originator of China's inventory e-commerce industry.

In 2008, vipshop was just launched. At that time, the biggest curiosity of netizens was, "why is vipshop so cheap?"

The price of a Lee's denim jacket is around 800, and the daily maximum discount is 8.8%. However, at vipshop, the discount of 40% is direct, and you can get it in the early 300's. The price is simply "unbelievable".

Behind this is the e-commerce special sale mode of "famous brand discount + time limited rush purchase + genuine product protection" initiated by vipshop.

In 2012, founder Hong Xiaobo told global entrepreneur that vipshop was inspired by a French website. At seven o'clock one morning, he found his wife crouching on the website to grab discount clothes. The feature of the website is that it includes global famous brands, with regular discounts every day. The vipshop model came from this.

Unlike the French website, vipshop, in addition to selling luxury goods, later focused more on popular fashion brands - the most heavily overstocked clothing category.

What we have to mention is the way vipshop cooperates with the brand: consignment.

In the early days, vipshop sold luxury goods directly from the brand side, and the clothes that could not be sold eventually became vipshop's own inventory, "with great cash pressure". After the transformation of popular fashion, vipshop's positioning is to help suppliers "consign", which can't be sold and can be returned.

In this way, vipshop will go light and focus on marketing to help suppliers solve more inventory problems.

According to the first "Research Report on China's online limited time special sale market" released by iResearch in 2014, vipshop occupies 38.1% of China's special sale market.

With the explosive growth of vipshop, the inventory e-commerce industry began to be lively: qiaowujingyu, jushang, Jiapin, Jumei Youpin, Shangpin, Miya and volupi were born one after another. Traditional e-commerce platforms also began to lay out clearance channels, such as vipshop's Huahai warehouse and Ali's taoqing.

In 2015, pinduoduo was born. Everyone knows that pinduoduo has opened the sinking market and caught Ali and Jingdong by surprise. What no one noticed was that pinduoduo's social e-commerce model also brought inventory e-commerce into the second half.

Here we need to distinguish several major e-commerce models:

C2C means selling to individuals by individuals; B2C is selling by businesses to individuals; the game of inventory e-commerce should go one step further to the upstream industry chain, and S2C means selling to individuals by large suppliers; after the intervention of social e-commerce, inventory e-commerce ushered in the era of 2.0, namely, big supplier distributor individual.

It is worth noting that the dealers here are actually individual purchasing agents. "One click sharing, entrepreneurship at home, Baoma part-time" is its main feature. At present, Jingdong's Fenxiang e-commerce, Taobao and 1688 are all learning from this kind of play.

In the era of inventory e-commerce 2.0, AI inventory has become the industry leader.

Compared with vipshop, with the same famous brand discount, AI inventory gives up the "limited time rush" game, chooses community distribution, and uses the way of activating private traffic to let the inventory penetrate the lower market.

The latest news is that, less than three years after its establishment, AI inventory has more than 2 million registered shop owners, and has helped more than 10000 brands sell more than 250 million products.

According to the calculation of iResearch, the market scale of the whole inventory e-commerce industry in 2018 is about 20.5 billion, including 13 billion of s2b2c inventory e-commerce, which is expected to reach 150 billion in 2022, with an annual compound growth rate of 84%.

As a result, e-commerce is about to rise.

The future of inventory e-commerce: the best way to die

It is reasonable to exist and reasonable to disappear. The rise and fall of an industry has its internal logic.

Whether it is the collapse of fast fashion or the rise of inventory e-commerce, there are Chinese e-commerce behind it. The underlying logic of e-commerce is actually the information transparency brought about by big data.

Why don't you sell the tradition quickly?

Because consumers have found more and better choices in the e-commerce platform, new brand businesses have also found more efficient ways to do business on the e-commerce platform.

Why does inventory e-commerce evolve to 2.0 era?

Because more and more people are changing from buyers to sellers to participate in the e-commerce industry in person.

The impact of this is that more and more people will be aware of the inadequacy of the entire industrial chain.

According to the data of the National Bureau of statistics, the finished product inventory of China's supply side industry from January to April 2018 was 4 trillion yuan. Among the 12 industries with the largest de stocking pressure, clothing and apparel ranked the seventh, with the finished product inventory rate of 14.62%.

Why to say that the ideal future of inventory e-commerce is to die?

In the short term, the industry ceiling of inventory e-commerce is the inventory scale in the current market, and in the long run, it is the speed of the national supply side reform.

At present, Ali, Jingdong and pinduoduo are promoting flexible customization in factories, opening the demand data of the consumer side to the production side.

It is not hard to predict that in the future, at least in the clothing industry, e-commerce will not only promote the de stocking of finished products, but also promote the de stocking of raw materials in the upstream, so as to strangle the excess capacity before production.

This is a general trend in line with sustainable development.

It is worth mentioning that among many fast fashion brands, the reason why UNIQLO has been able to reverse the trend is that it has abandoned the so-called "fast fashion" and turned to focus on basic models and cost performance. At the same time, we will expand the target consumer groups, from young people around 20 years old, to the whole age group from the upper to the lower 100 years old and the new born.

In the future clothing industry, in addition to UNIQLO style cost-effective basic models, more competitors will compete differently in the market segments.

With the mature use of e-commerce big data, the "old and difficult" inventory problem in the clothing industry may usher in a better solution.