What’s Causing the Margins to Shrink in Fashion Retail?

February 17, 2018

The fashion industry has undergone significant changes over the past few years. Today, fashion is much more than just functional clothes; it is an expression and extension of oneself. It is the same idea that is driving purchases in the fashion industry. An average person now owns more cloth than they used to a few years back. The increase is not only seen in volumes but also in variety, as people will have a collection for partywear, formals, casuals, beachwear, and sportswear. The rise of e-commerce has also contributed to the growth of fashion retail. Such impressive growth of the apparel industry has also brought about its fair share of challenges to the retailers. With so many apparel options available across thousands of brands, it becomes hard to predict customer preferences. The fashion retail industry is also facing challenges such as:  

Top Challenges in Fashion Retail

Growing consumerism

Consumers today have the option to choose from thousands of brands. They also have the option of using multiple channels – be it a retail store, e-commerce platform, or mobile commerce. Additionally, consumers demand variety and novelty. Consumers often demand apparels they see on media that is worn by their favorite celebrity. So, it is a challenge for brands in the fashion industry to provide new collections, SKUs, and product ranges in a short amount of time. Such pressures can create complications in the supply chain, product development, planning, production, and fulfillment.

overall customer journey, leading to sales.

Inventory management

Brands in the fashion industry usually roll out their new collection based on seasons. Most brands typically plan to roll out new designs for 2-3 seasons in a year, which results in a longer time-to-market. In today’s dynamic world, there can be a vast difference in consumer preferences in the space of few months. External factors also affect sales in the fashion industry. For instance, if the summer hasn’t been hot enough, apparel brands will slash their prices to get rid of the unsold stock. One of the biggest challenges faced by companies in the fashion retail industry is to exhibit agility and excellence in stock visibility, operations planning, and inventory intelligence.

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Sustainability and compliance

There have been multiple instances of international law violations and labor practices in the fashion industry. For instance, recently, workers have started leaving notes in Zara apparel stating they didn’t get paid for their work surfaced online and it went viral on social media. Additionally, there have been multiple instances where fashion brands were accused of using child labor, providing hostile working environment, and misusing natural resources. Apart from that, increasing wastage in the fashion industry has also been a topic for debate. Companies in the fashion industry have to navigate through all the sustainability measures and ensure compliance to maintain a positive brand image.

Discounting and competition

Fashion retail brands are increasingly reliant on discounting to drive sales. The discounting culture has been so widespread that customers are flooded with sale banners when they walk across a shopping mall. Additionally, fashion retail outlets are providing aggressive discounts on special occasions such as Black Friday, Christmas, and Cyber Monday. It is challenging for players in the fashion industry to maintain a healthy margin when competitors are offering heavy discounts.

For more information on challenges in fashion retail, logistics and supply chain problems in the fashion industry, and market overview of the apparel industry – Request more info.

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