The fashion cycle
Brands are stuck between excess inventory and discounts. According to analysts, the Great Recession of 2008 had a major impact on the consumer behavioral change. Following the financial damages caused
Brands are stuck between excess inventory and discounts.
According to analysts, the Great Recession of 2008 had a major impact on the consumer behavioral change.
Following the financial damages caused by the recession, brands had to depend on markdowns to clear out unsold inventory and get shoppers to purchase again.
Over the years, continuous discounting have trained the consumer to expect regular sale periods, such as Black Friday, Boxing Day, Singles Day and shop accordingly. Innovations in technology have contributed to the development of apps, websites for price-matching and coupons so that consumers can easily search for the best deal.
On the other hand, the effect of social media played a major role on shortening the fashion cycles. Consumers, having instant access to a variety of choices, have increased the demand for newness exponentially and amplified the competition among brands to retain consumers.
Prior to these shifts on purchasing patterns, fashion was a supply-led market as brands had full ownership on the products to sell in stores and their release schedules. Nowadays, demand represents the driving force for business choices within the industry.
“It’s in a brand’s interests to perfectly match supply with demand, to increase their overall margins and avoid excess inventory which they have to sell at or below cost.”
Brands are still struggling to efficiently satisfy consumer demand and as a result of that, overproduction and unsold inventory represent a consistent issue and endless discounting doesn’t fully resolve the problem. According to an estimate, in 2018 markdowns cost $300 billion to brands but only 3% to 5% would avoid discounting to minimize excess stock.
The rise of a global pandemic and its impact on our everyday life also led to significant changes in fashion. As a consequence of lockdown restrictions, shop were kept close, unsold inventory quickly piled up and brands cancelled orders for new collections as warehouses were already at full capacity.
While before the pandemic the average brand used to sell 60% of its stock at full price, 30% on 40-50% markdown and 10% through liquidation channel, such as outlet, after Covid-19, 60% of the stock is destined for sales.
There is not an easy way out from this cycle, however breaking the current state of fashion, slowing production and revalue available resources seem a good start towards a more conscious industry.
words and visual by Giulia Mummolo
Quartz (Marc Bain)
Forbes (Roxanne Robinson)
Vogue Business (Bella Webb)
Retail Dive (Daphne Howland )