How Fast Fashion Brands Respond To Market Changes Under Global Epidemic Situation

Since 2017, the news of fast fashion industry has been frequent, and the news of China's market retreat and declining performance is common.

Fortunately, Zara and H&M have shown signs of improvement in the 2019 fiscal year. What are the effective measures taken by the two companies on the road to transformation? How will the international fast fashion brands respond to the global new crown pneumonia epidemic?

　　 Two big business rebound

Recently, H&M and Zara have released their earnings reports in 2019, and their performance has increased considerably over the same period last year. Since 2017, the performance of two fast fashion brands has been declining or shrinking. What are the notable changes after the adoption of a number of transformation measures?

H&M2019 reported that from December 1, 2018 to November 30th last year, the company's net sales amounted to 167 billion 760 million yuan, an increase of 11% over the same period last year, and operating profit increased 12% to 12 billion 489 million yuan over the same period, and the annual profit has been the first increase since 2015. Meanwhile, the 2019 financial year data released by Zara parent group Inditex group showed that the net sales of the group reached 28 billion 300 million euros between last February 1st and January 31st this year, an increase of 8% over the same period last year, and a record of net profit of 3 billion 600 million euros, an increase of 6% over the same period last year.

You know, before that, H&M had experienced eight consecutive quarters of pre tax profit decline, while Zara also experienced a trough of growth in performance and a sharp fall in share prices. Of course, not all fast fashion companies are getting better. For example, Gap sold 1% in fiscal year 2019, reaching $16 billion 400 million, and net profit fell 65% to $351 million over the same period. Cheng Weixiong, general manager of textile and clothing brand management and Shanghai Liang Qi Brand Management Co., Ltd., told the China Commercial Daily reporter that the brand of cover Pu's brand in the aspects of product style, supply chain and cost, and so on, was also quite different from the above two brands in meeting the needs of consumers.

　　 What did H&M and Zara do?

From the low to the current performance, what have H&M and Zara done?

According to the China Commercial Daily reporter, since 2018, H&M has moved the marketing scene to online, promoting the business of e-commerce on the global scale; in the Chinese market, the company has opened up the online shopping channel through the opening of Tmall flagship store. At the same time, H&M also launched the next day delivery service, and trial delivery service in some areas. Coincidentally, Zara also accelerated the pace of online channel layout. Last year, the group increased more than 100 online markets, and indicated that the online channel would be the key direction for the group.

The China Commercial Daily reporter noted that Zara and H&M chose the route of sustainable development in the process of transformation. Previously, H&M launched a discount e-commerce platform Afound, specializing in the sale of discount fashion products to solve inventory problems; pilot sale of second-hand and antique clothing; and leisure fish platform to launch the old clothes recycling plan. Anna Gedda, director of sustainable development at H&M group, said that the sustainable plan is to deal with the growing consumer concerns about the fast fashion environment, and the plan will continue to advance.

Compared with H&M, the sustainable fashion development route of Zara seems to be more thorough. Previously, the Inditex group announced that all its brand products were made of 100% sustainable fabrics before 2025. The group also promised that no garbage would be sent to landfills by Zara in 2025, and that 80% of the energy consumed by the headquarters, logistics factories and stores would be renewable energy.

Cheng Weixiong told the China Commercial Daily reporter that in the process of transformation, the two companies have their own advantages. Cheng Weixiong believes that Zara will respond quickly to the needs and trends of the consumer in terms of accessories, clothing manufacturing and product launch. H&M relies on the global supply chain in place. It also has advantages in terms of cost, price and style.

　 How to deal with fast fashion in epidemic situation

At present, the global epidemic outbreak and the international fast fashion brands all over the world have been hit hard. They have taken measures to reduce the negative effects of the epidemic.

In March 30th, H&M announced that it would suspend the delivery of new orders to Bangladesh's designated supply factories. Earlier, the H&M announced that it would cancel the dividend payment plan and start a temporary layoff plan, and did not rule out the possibility of repeating a large number of fixed jobs. In addition, H&M will use its huge supplier network to purchase personal protective equipment for hospitals in European Union countries. At present, there are 3441 stores closed in 5062 stores owned by H&M.

Zara said that as of now, the group has closed 3785 stores in 39 countries and regions worldwide. Earlier news shows that if the Spanish state of emergency continues until April 15th, the Inditex group is considering temporarily cutting about 25 thousand stores in Spain. In order to help the Spanish government solve the shortage of medical supplies such as respirators and medical protective clothing, Inditex group also plans to transform some of the fabric production lines into professional medical fabric production lines.

It is reported that UNIQLO has also temporarily closed 50 stores in the United States, and 10 European countries have 98 stores. Cheng Weixiong said that the current epidemic has brought a huge impact to the fast fashion industry. The revenue of the stores has been reduced sharply, resulting in the reduction or even cancellation of the orders. This further causes the pressure on clothing inventory in the two quarter of spring and summer, which will even affect the capacity planning and sales in the two quarter of this autumn and winter.

At the same time, Cheng Weixiong told reporters that in the face of the epidemic, all enterprises are in the same situation. Despite the gradual recovery of the domestic market, the international fast fashion brand is still a drop in the bucket. In addition to measures such as closing stores and layoffs to reduce costs, it is more important for fast fashion brands to maintain healthy operation of their own cash flow.