Some weeks ago I attended an interesting conference at Lund University named “Shopping Asia”. Among all the topics that were discussed, there were some interesting presentations on Fast Fashion. Fast fashion is a term used to express that designs move from catwalk to consumers very quickly in order to fully capture current fashion trends, enabling mainstream consumers to buy current clothing styles at a really low price. H&M, Zara, Forever21 are examples of company names that are associated with fast fashion.One thought that I got when listening to the talks was that there seems to be an ongoing race towards the bottom! A race that takes us from Fast Fashion to Insta Fashion (my term for really cheap clothes that the Instagram generation buys for Saturday night). It is like a second wave of fast fashion, where the journey from drawing board to shop floor is a day or two instead of several weeks.
What would the implication of such a second wave of fast fashion be for the environment and for working conditions (back home)? And what would the implications be for investors? On the first question I think it is likely that conditions will grow worse rather than the opposite. Bar a revolution, there does not seem to be anything that is able to stop the worsening of working conditions in the west. At the same time, it is possible that lower wages and insta fashion’s demands for local manufacturing could lead to more job opportunities in richer countries. And for the environment fast fashion seems like a very bad idea, for obvious reasons. The second question is possibly more interesting (for us). How will a potential race to the bottom, if it exists, affect us investors? Possibly, private equity investors and the likes will be able to invest in portfolios of insta retailers and be able to gain if the idea fully takes hold. For the rest of us, who do not have the financial muscles to buy entire companies the only hope is that listed firms such as H&M and Inditex will successfully adapt to a possible shift in the anatomy of the fast fashion industry. I think that could be one important point to scrutinize for any retail analyst. Or, if you are a firm believer in insta fashion, perhaps the Boohoo stock which is trading at 28 GBP, down from 70 GBP a year or so ago, is ripe to be picked? I wouldn’t know…..