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Changing consumer preferences and the

need for speed are complicating the apparel

business along the entire value chain.

Here are the most important challenges.

1. Eliminating bad complexity:

Doing business, particularly in a fast-

changing, global and hypercompetitive

business like apparel, is necessarily

complicated. But that is no excuse for

creatingunnecessarycomplications. Bad

complexity might be designers who are

so lost in the creative clouds that they do

not take into account what consumers

are willing to pay for. Another example

is going out of your way to localize styles

for a specific marketeven though

consumer preferences are basically thesame. According to our research, the

bottom half of apparel articles typically

account for just 5% of sales; they

represents a ton of bad complexity.

2. Finding loyal consumers: Lots of

luck on this one. Emboldened by a world

of choice, shoppers are also displaying

a hybrid fashion sense. In every market

surveyed, we saw that consumers are

shopping at both the high and low end of

the market, sometimes combining itemsfrom both ends in a single outfit. And

this includes luxury consumers: There

is significant overlap between those

who shop at Dolce & Gabbana and also

at H&M, the low-priced fast fashion

flagship. Almost three out of four German

customers who shopped at Esprit in

2008 also shopped at much-cheaper C&A

and H&M. In short, they are ever less

loyal not just to stores, but to brands.

One way to draw in consumers is to be seen

to be, well, nice; being caught being dirty

or mean, at any rate, is a good way to lose

them. Consumers continue to say that they

want apparel companies to abide by their

implied social contract in terms of both

environmental and labor matters. Some

companies have placed more emphasis on

corporate social responsibility than others,

but most are taking actionsranging

from greener packaging and transport

to supporting organic cotton farmers .

3. Strengthening the supply chain:

Think globally, for a start. By that, we mean

that companies should ask themselves

the big, basic questions, staring with:

What is the best place to produce this

item? Surprisingly often, this doesnt

happen. Companies tend to go back to their

comfort zones; a French company is more

likely to look to, say, North Africa and an

American one to Mexico. Instead, apparel

players should take a category-by-category

perspective. If the category is cotton dress

shirts, for instance, the company should

Fast fashion: Navigating the global apparel market

Consumer and Shopper InsightsSeptember 2011

By Achim Berg

SOURCE: McKinsey

DISGUISED CLIENT EXAMPLE

Clear differentiation betweengood (value-adding) and badcomplexity (non-value-adding)

Transparency on complexityKPIs (article efficiencies,country overlaps, minimums,etc.)

Identification of root causes ofbad complexity

Continuous management of

trade-offs (e.g., economies ofscale vs. lost sales)

Volume

80

15

5

Sales

51580

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consider sourcing from places that are

big cotton producers, have efficient

fabric mills, and offer low-cost sewing

capabilities. Using these criteria, Egypt

or Vietnam, say, might be the best choice.

4. Adapting to next-generation

technology: Because everyone needs

clothes and they are sold in so many

different channels, the opportunities to

deploy interesting technologies is almost

unlimited. Electronic shelf labeling;

digital promotional displays; self-

checkout; sales kiosks all of these and

more could change how retailers relate to

their customers. So far, no one has taken

a clear lead in race for the top technology.

5. Finding the online market:

Shopping is not just about buying;

particularly in richer markets, it is

about excitement and companionship.Almost of third of German women

surveyed, for example, said that having

fun is part of a shopping day. In

Britain, more than half of teenagers

say they love shopping for clothes.

How does online shopping fit with

this trend? A McKinsey survey of

20,000 consumers in Britain, France,

Germany, Italy, and the US suggests

some answers. Not surprisingly, those

who like the shopping experience mostare among those least attracted to the

web. But the web strongly attracts two

very different types of consumers: 1)

fashionistas who want to be able to

shop somehow all the time (24-hour

fashion lovers) and 2) the time-pressed

optimizerspeople for whom shoppingis something of a chore, a task to be

completed as efficiently as possible.

The research shows that a significant

percentage of customers continue to want

a bricks-and-mortar experience, while

a similar number are happy to shop on

line. And these groups are not mutually

exclusive; most people do a little of both.

For companies that want to build their

online presence, then, one key is to draw

in the folks in the middle the bargain

hunter and the service seeker. Anotheris to figure out how to reassure the 14%

whom we categorize as the anxious

store shopper people who are nervous

about online shopping and want to

pinch and squeeze their purchases.

Yes, apparel is among the oldest of

industries; that does not make it old

fashioned or unchanging. Rather the

opposite: As trends turn over and

fashion becomes more important to

more people, it will be companies who

sense the future first who will do best.

http://csi.mckinsey.com

Achim Berg is a principal inMcKinseys Frankfurt office.

Uninvolvedshopper

Anxious store

shopper (14%)

Store-loving

loyalist (14%)

Price-oriented bargain

hunter (14%)

Involvedshopper

Traditional store user

Open to online experience

Time-pressed

optimizer (11%)

24-hour fashion

lover (12%)

Reluctant shopper

(21%)

Brand-focused service

seeker (14%)

Online shopping-

inclined segments

SOURCE: Experian; 2008 McKinsey survey of 20,000 consumers in France, Germany, Italy, UK, and the USA

Exhibit 2:

Segmenting apparel consumers