‘Survival of the fittest’ situation prevailing in US fashion industry

Akhi Akter       
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Many fashion brands in America have been diminished already and many others are preparing to close their stores for changing consumer habits. Fashion is matter of metamorphosis, day by day it takes new look and now the trend is very high. A fashion design, which a brand promotes last year, it could not suffice running year demand. In addition, the emergence of e-commerce and the decline of traffic at many shops are also shortening the life cycle for many fashion brands, American fashion analysts opined.

Before two or three decades ago, the situation was not like that and business was not expensive like recent time. The retail environment is completely going through a revolution, which enhance cost for brands including Southern California brands and Los Angeles Retailers brands. To meet the cost, bankruptcy rises in the sector. In 2012, three retail companies with liabilities of $50 million or more filed for bankruptcy, according to a study by consulting firm AlixPartners. Eight retail bankruptcies occurred in 2014, a number that had already been reached just six months into 2015, the last year analyzed in the study (although that still pales to 20 bankruptcies in 2008 during the height of the recession).

For the rise of fast fashion rivals, the attention span of consumers has also reduced. Now H&M and Zara have come on the scene, retailers that could do some delay to offer fresh fashion but they have lost the chances by this time. Now shoppers can jump online or go to fast-fashion stores that introduce fresh fashions on a weekly basis. On the other hand, less than 4% of every dollar is now spent on buying apparel, compared to 8% in the mid-1990s and 20% a century ago as the price of clothing is reduced. That has wounded brands catering to young shoppers. For example, Irvine-based Wet Seal is preparing to close its stores after filing for bankruptcy for the second time in February.

Survival of the fittest
Figure 1: ‘Survival of the fittest’ situation prevailing in US fashion industry

The fashion brands can reach potential customers directly on social media and sell product from their own websites, but it requires heavy investment to get attention, especially when companies are trying to attract investors by demonstrating fast growth, analysts opined. Nasty Gal, a once-hot Los Angeles firm, sold its intellectual property for $20 million after filing for bankruptcy in November.

It requires huge investment to open new fashion brands. They need starting capital between $500,000 to a $1 million, compared to $200,000 to $300,000 about a decade ago. Bankruptcy code of America changes in 2005, retailers that are forced to file for bankruptcy protection are also less likely to survive. Those changes shortened the period that retailers have to get approval for restructuring or a sale; companies only have 210 days to decide whether to hold onto or get rid of store leases. Therefore, the weakest players are cleaned out.

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