GAP Recession Is Just A Sample. The Best Time For Foreign Fast Fashion Brands Is Over.

Foreign fast fashion brands cool down year by year. Is fast fashion "cold winter" coming?

The latest report of GAP, an external fast fashion brand, showed that in November 2019, the GAP group's revenue in the first 3 quarters of the year was $11 billion 709 million, down 2.07% from the same period last year, earning 535 million dollars, down 26.41% from the same period last year. This is also the seventh consecutive quarterly decline in GAP sales.

Data show that the first quarter of fiscal year 2019, Gap Group sales and profits have not reached analysts' expectations. The group's overall sales fell by 4%, while its three major brands, Gap, Old Navy and Banana Republic, fell 10%, 1% and 3%, respectively. Among them, comparable sales of Gap brands had the biggest decline in four years.

It is worth noting that Old Navy is the only brand that keeps growing in 2017 and 2018. It is the star brand and cash cow of Gap group, but it also declined for the first time in three years. The situation also did not improve in the two quarter. In the same quarter, Gap group's brand overall store sales fell 4%, net profit fell 43%.

Gap's single brand performance has recorded varying degrees of decline in almost all markets, including China. Old Navy performance continued to decline, sales fell by 5% over the same period last year, and there was hardly any growth in the Asian market with strong growth in China.

On the day of the announcement, GAP also announced two important decisions: the sub brand Old Navy (once the growth engine of the company), withdrawing from the Chinese market in 2020, and the group closing 230 stores in two years. The reason why GAP has such a move is nothing more than market pressure.

GAP at sunset

In recent years, GAP has become increasingly uneasy in China. It will soon become the first brand of four fast fashion brands GAP, H&M, ZARA and UNIQLO. But it is not easy to look at other fast fashion brands.

In 2019, there were 8 fast fashion brands including H&M, ZARA, UNIQLO, MJstyle, Muji, UR, C&A and GAP, adding 218 new stores in the mainland (excluding upgraded stores), a record low.

The trouble with fast fashion giants is obviously not so simple as the growth rate has been reduced. UNIQLO announced that it had closed 370 stores. GAP, H&M, Muji and other fast fashion giants have announced a temporary closure of some stores.

The decline of fast fashion industry in China seems to have become a foregone conclusion. Is the brand of foreign fast fashion coming?

Over the past 50 years, GAP has grown from a small shop with only four or five people to 3200 multinational chain stores with an annual turnover of over 13 billion and a multinational company with a market value of about $40 billion.

In 2010, when GAP entered China, domestic social media and e-commerce were developing rapidly. With the sharp smell of online dividends at the time, GAP first became the explorer of the earlier online and offline integration of online channels through ZARA and H&M.

Unfortunately, the identity of the first mover still does not bring any advantage to GAP. The problems such as weak brand, imperfect product description, incomplete online style, slow update and poor customer service attitude have made GAP fail to grasp the only first mover advantage in the Chinese market. GAP Tmall flagship store's 6 million 640 thousand fans, far behind ZARA's nearly twenty million fans, and even less than H&M less than two years online.

More importantly, GAP really lacks a memory point in the minds of users. If the user wants to buy the foundation, they will go to UNIQLO, buy fashion clothes to go to ZARA, want to buy cheap, go to H&M, and GAP can give users what? Once the "comfort, leisure" positioning and the price of the people, GAP has three advantages in the North American market. Now, time and space are changing, products are not fashionable enough, lack of design sense, do not understand young people's GAP, lose their advantages.

Gap, founded in 1969, is now 50 years old. As the first leader of fast fashion, Gap is catching up with the rising brands like UNIQLO, H&M and ZARA.

Gap, who is trapped in the midlife crisis, has a strong desire to make efforts to turn the tide.

For example, through the incubation and acquisition of Athleta, Intermix and children's wear brand Janie&Jack, the brand diversification strategy is formed; Gap group is also ready to move Banana Republic New York headquarters to San Francisco to open a new design center; in September this year, the brand also launched Style. Passport's online subscription service provides monthly rental services at a price of $85 per month, while providing free distribution, replacement and laundry services to stimulate growth and help brands create better emotional ties with young consumers.

In order to enhance its brand image, Gap group has been paying more attention to environmental protection and sustainable fashion in recent years. This year, it launched a revolutionary innovation, using water and indigo blue foam dyeing technology to produce denim, and the related products are expected to be listed in spring next year. In addition, Gap group also plans to achieve 100% from 2025 to buy cotton from sustainable sources.

The analysis points out that Gap has been bogged down in the mire of achievement for many years, and wants to change the growth situation in a short time, or even return to glory. Today, UNIQLO, ZARA and H&M are making use of the Internet and updated development strategies to expand and grow rapidly, which is no longer the original market environment.

The analysis also pointed out that the rapid expansion of GAP group led to its financial position in distress. After introducing a large number of executives and taking cost cutting measures, GAP group was still in a state of confusion.

GAP is just a sample of fast fashion brands, and many brands have basically stagnated or even withdrawn from the Chinese market.

The decline of fast fashion

In September 30, 2019, Forever21 announced that it had filed for bankruptcy protection in accordance with the eleventh chapter of the US bankruptcy law to restructure its business. Forever21 said it would close its 178 stores. In its prime, Forever21 has more than 800 stores in 57 countries.

In addition, the bankruptcy petition filed by Top shop parent Arcadia in the United States has been approved and will close 11 Top shop and Topman stores in the United States.

Even the giant ZARA in the fast fashion clothing brand of foreign countries is not so well off. During the sixteenth Spring Festival in China, ZARA was forced to "scale up shop". Recently, at least 41 stores in ZARA stores in Xi'an, Hangzhou and Chongqing were closed.

China is the second largest ZARA market in the world, next to the Spanish market. According to statistics, the price of clothes sold by ZARA in the Chinese market in the past two years has decreased by 10% to 15% on average. To a certain extent, this shows that ZARA's brand premium is decreasing in the eyes of consumers.

The analysis pointed out that the decline of fast fashion industry is inevitable. On the one hand, people's needs are gradually diversified. Naturally, more solutions providers are needed. The era of winning big and complete wins is over.