After being forced to temporarily close its stores for months, fast fashion is pulling away from its overextension in brick-and-mortar retail to focus on online sales.
Increasingly, e-commerce is where fast fashion’s dollars are going, with the biggest players prioritizing online at the expense of offline for the foreseeable future. Inditex said in June that it’s investing $3 billion in its online store over the next three years. H&M’s CEO Helena Helmersson said in an earnings call on Oct. 1 that the company would be putting freed up resources from store closures into improving its supply chain, namely to “increase the availability of inventory and the speed of deliveries.” However, she didn’t say exactly how much the company is investing in e-commerce.
H&M announced on Monday that it will be closing 250 stores in the U.S. next year — the retailer had 5,000 global stores as of March. And in June, Inditex closed more than 1,200 Zara stores. That’s 5% and 12% of their total stores, respectively. Express had already planned to close stores this year, but the pandemic accelerated those plans; its shut down 100 stores since March.
All of these brands have struggled since the pandemic began. H&M saw a 50% drop in net sales in the second quarter of the year and a 19% loss in the third quarter. Meanwhile, Zara’s sales in April were just 28% of April 2019 sales, and it had a net loss of $465 million between February and April.
But both fast fashion giants have slowly clawed their way back to profitability, even if sales haven’t recovered completely. By the beginning of September, Zara’s monthly sales were at 89% of 2019 sales, and it has since become profitable again, as has H&M.
Ad position: web_incontent_pos1
Both brands attributed the vast majority of their recovery to the strength of online sales. Zara’s online sales jumped by 74% from February to July. In the same quarter that H&M’s net sales dropped by 19%, online sales jumped up by 27%. Zara is now diverting inventory from its closed stores to online order fulfillment.
Notably, the pull away from brick-and-mortar retail varies by geographic market. For example, Zara is closing many of its stores in Europe and Asia, while leaving the U.S. and the U.K. retail fleets intact. Meanwhile, Uniqlo, another fast fashion brand that has seen online sales catapulting to 30% of all revenue, is downsizing its physical footprint everywhere except China, where it plans to triple its store presence.
H&M did not disclose where its 250 stores would be closing, and an executive from the brand wasn’t available to comment on this story. A spokesperson for the brand did tell Glossy that, “It is too early to give more information about this than what is shared in the report. This is part of our continuous store portfolio optimization, and it differs from market to market. The figure is on an aggregated level, and we cannot go into details on concrete numbers or markets at this point.”
Ad position: web_incontent_pos2
“Our physical stores remain incredibly important, and we want to ensure that we have the right stores in the right locations,” the spokesperson added. “We see that the physical stores and online are complementing each other to meet customers’ needs and giving them the experiences that they are clearly showing us they want to have.”
Putting more focus on online sales puts these companies in more direct competition with their online peers like Boohoo, which has suffered less thanks to not having any stores in the first place. Boohoo, despite a scandal in August around its treatment of factory workers, has seen its profits rocket up by more than 50% since the pandemic began. Revenue for the six months ending in August this year surpassed a billion dollars for the British brand.
The pandemic has shown that everyone in the fast-fashion sector will need to refocus and reinvest on e-commerce in order to stay competitive.
“More than 14,000 retail locations across the U.S. have permanently closed, a number that will undoubtedly continue to rise, making it crucial for businesses to invest in technology to optimize their online strategies,” said Kayla Marci, market analyst at Edited.
