Shop

weddingYet for the retailers themselves, fast fashion can be more of a mixed bag. The business model boasts incredible unit-level economics — stores cost little to open, and the inventory turns over incredibly fast, with new merchandise brought in weekly or even daily. Yet, with its focus on low prices, the model also encourages consumers to be more loyal to price than brand or shop, leading to a race to the bottom in which retailers must constantly lower prices — and see their margins reduced.

There’s also the question of where these cheap goods come from and under what conditions, and by whom, they’re manufactured. In the U.S., where consumers buy on average 64 new items of clothing each year, the fast fashion industry has come under scrutiny and been the subject of books such as Elizabeth Cline’s 2012 exposé, “Overdressed: The Shockingly High Cost of Cheap Fashion,” which chronicles the possible environmental and social damage fast fashion can cause.

May the cheapest skirt win.

For existing Australian retailers, there is a more immediate kind of damage to keep an eye on. H&M will compete directly with privately owned retailers such as Ice and Cotton On, and also with the likes of Country Road (ASX: CTY), as H&M offers similar office-appropriate outfits at far lower prices.

H&M stores also poses a threat to Premier Investments (ASX: PMV) which has lately seen success with its fast-fashion concepts Dotti and Portmans. That’s to say nothing of older, legacy retailers such as David Jones (ASX: DJS) and Myer (ASX: MYR).

If history repeats itself, and H&M performs as well as it has in other markets, these retailers are right to be shaking in their platform studded booties.

Looking for some investment ideas not in the fickle fashion category? look no further! Get two under-the-radar ideas now, including names, codes, and a full investment analysis in our brand new FREE report, Two Small Cap Superstars.

Tags:

Read Users' Comments (0)

Page 1 of 11