By Jose Luis Rodriguez, Guest Contributor

The fundamentals of fast fashion retail remain the same: continue the flow of fast-to-market fashion products, provide great value for money, have the best stores and locations, limit promotions, lower labor costs through customer self-service, and make your business processes fast and efficient.

Meanwhile, the exponential growth of digital commerce is creating new customer engagement challenges to fast fashion retailers in order to fulfill the needs and wants of multichannel consumers around the world.

Fast fashion retailers in Europe are responding rapidly to such challenges, but interestingly, adopting slightly different strategies from their US competitors, aggressively pursuing retail store expansion internationally to win market share and profitability in their core business, while still growing digital commerce.

Store Comparable Sales vs. Store Count

During the last decade the US retail market has experienced a massive transformation in the way retailers want to approach business growth and profitability. STORE COMPARABLE SALES and eCommerce explosion have driven fashion retailers to rationalize their store network and focus on developing new digital channels and more exciting shopping experiences to consumers.

Probably the hottest topic of US retailers today is Omnichannel Commerce. New customer service shopping options such as Buy Online Ship from Store or Pick Up in Store are in the top of the priority list of every single retailer in North America. Such new shopping options have increased store sales, customer loyalty, and store traffic. Omnichannel is also bringing new and clever ways to manage retail inventory more dynamically, re-inventing traditional models of allocation of inventory to stores and markdowns. However, implementing Omnichannel strategies requires significant investments and change management initiatives, therefore shifting capital expenditures (CAPEX) priorities from real estate store expansion to information technology and business process change.

The European economic crisis, the overvalued euro and the free fall of European consumer confidence and spending in recent years – all have led European fast fashion retailers to look for new frontiers through aggressive international expansion strategies primarily based on STORE COUNTS and franchising models, complemented with more conservative investments in digital channels. European retailers, in particular the fast fashion ICONS, are finding high street retail leases and space availability much more attractive today than few years ago and are jumping into best retail locations, including the US territory. Digital channels are important for European Retailers but relatively to retail sales the % of ecommerce continues to be low.

While meeting top executives from some of the most successful and largest fast fashion retailers in Europe and discussing their growth strategies for retail and digital commerce, I have discovered several patterns that are similar to most of them, which could support their conservative approach to omnichannel:

• Fast fashion retailers are still managed on the basis of their core store operation while ecommerce represents a marginal business operated as an independent channel;
• It is difficult for European retailers to slow down their store global expansion. Commercial models, financials models, internal organizations, supply chain processes, distribution facilities, information systems and business processes are architected to grow the core business through new store openings;
• Deploying omnichannel shopping options in the store complicates store and back-office operations, therefore requiring significant change management efforts that impacts people, processes and even the store concept itself;
• Fulfillment processes for omnichannel commerce should be designed holistically to support new processes, facilities, technologies and equipment for retail and ecommerce, both at the distribution center level and in the stores;
• Fast fashion low cost retailers have profitability challenges when selling through digital channels due to high pick/pack/shipping unit cost, personnel cost and higher return rates; and,
• Omnichannel commerce requires a significant overhaul of IT systems across all business processes.

European fashion retailers have pioneered and perfected the formula of fast fashion apparel at affordable prices. In fact, innovative digital flash sales concepts were born in Europe in the quest for maximizing consumer value by extending affordable fashion to top brands.

European fast fashion retailers have been growing internationally opening new stores at a very fast pace compared to US based retailers that are perhaps too focus on Store Comparable Sales and eCommerce. Europeans are capitalizing and winning market share even in US territory.

My point of view is that European fashion retailers should take a more holistic approach to omnichannel commerce, learning from US retailers that have pioneered the model, but adapting those models to the reality of their business and the needs and wants of the European consumer.

Equally important, US Retailers should learn from European fast fashion retailers on how to connect with the consumer, design lean low cost operations and expand globally and profitably.

Editor’s Note: Jose Luis Rodriguez is a guest contributor, and can be reached at jlrodriguezgonzalo@gmail.com.