eCommerce: Online Fashion

Online Fashion Market in Spain & Portugal: Fast Fashion Takes the Lead

Spanish fashion is closely linked to Inditex, particularly its flagship brand, Zara, which operates globally. To gain insight into the fashion market in Spain and Portugal, we will explore key players, the genesis of fast fashion, and the factors contributing to its remarkable success.

Article by Patrick Nowak | February 06, 2024

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Fashion in Spain and Portugal: Key Insights

  • Fast Fashion Origins: Inditex is credited with pioneering the fast fashion model. This approach focuses on swiftly producing trend-driven clothing, surpassing traditional retailers in terms of affordability and speed in introducing new styles to the market.

  • Key Players in Spanish and Portuguese Online Fashion: Shein and Zara lead the ranking of the most successful online fashion retailers in Spain and Portugal. In Portugal, four out of the top five online fashion stores adhere to the fast fashion model. Meanwhile, in Spain the influence of Amazon, El Corte Inglés and Zalando is more pronounced.

  • The Fashion Paradox: The success of fast fashion in Spain and Portugal can be attributed to their economic circumstances and proximity to production facilities. On a universal level, the success is based on a phenomenon called the "fashion paradox", which includes the demand for low prices and the perception that styles are more trendy.

Spain and Portugal are home to some of the most popular fashion brands in the global industry. In particular, the conglomerate Inditex (short for Industria de Diseño Textil) comes to mind, which manages the brands Zara, Pull&Bear, Massimo Dutti, Bershka, and Stradivarius, among others.

As these brands are commonly referred to as operating under the fast fashion business model, this insight takes a look at the connection between fast fashion and the online fashion markets in Spain and Portugal.

So, what exactly is fast fashion? And why is it relevant when talking about the Spanish and Portuguese eCommerce markets?

Fast Fashion: Definition and Origin

Although fast fashion is a hot topic these days, the concept itself is not new. It was introduced in the 1960s by Spanish entrepreneur Amancio Ortega Gaona, whose first business venture evolved into today's Inditex.

The introduction of fast fashion into global business activities has changed the market in a lasting way, and there are factors in Spain and Portugal that contribute to the success of fast fashion. But before we get too far ahead of ourselves, here are the key aspects that distinguish the fast fashion business model:

  • Vertical Integration: Supply is synchronized with customer demand, leading to a more accurate picture of which items are worth stocking and which are dead stock. This results in more efficient use of manufacturing and logistics capacity.

  • Rapid Design Cycles: Inditex has pioneered a significant reduction in the time it takes to bring new designs to customers. Whereas shoppers used to have to wait around half a year for designers to launch their new styles, fast fashion companies like Inditex use the vertical integration and local production facilities to reduce this period to around five weeks. This rapid production cycle is what ultimately gave the business model its name and disrupted the industry.

  • Competitive Pricing: Instead of setting prices based on production costs, fast fashion brands first estimate how much consumers are willing to pay for their competitors’ products. The final price is then set at a lower margin, followed by a search for manufacturers capable of providing these products at a cost that leaves ample room for profit. Needless to say, this strategy has created long-term benefits for both customers and retailers, offering affordable pieces to a large segment of consumers around the world.

Why the Business Model Is Under Scrutiny

With Inditex's introduction of this model based on speed, affordability, and trend-driven production, many fashion retailers have jumped on the bandwagon. While there are benefits to fast fashion, including the ability for consumers of all income levels to afford the products, recent reports collectively point to the detrimental effects of this business model.

As low-cost, quick to buy and quick to discard products reflect a lower value of purchases to consumers, they are more likely to dispose of items after a few uses or never wear them at all.

Another aspect is the disregard for workers' rights and fair compensation in the industry. As collections need to be produced as cheaply as possible, the easiest way for brands to cut costs is to avoid paying workers a living wage.

Read below to see how this applies to Spain and Portugal.

Key Online Fashion Players in Spain and Portugal

One things these two markets have in common is the prevalence of fast fashion brands. The online platform of Spanish homegrown brand Zara ranks second in Spain and first in Portugal, with 2022 online net sales of US$486 million and US$114 million, respectively.

Online Net Sales Generated in the Fashion Market in Portugal, 2022

Overall, the prevalence of fast fashion brands in the Portuguese online fashion market is quite evident, with four out of the top five players operating under this business model.

In Spain, on the other hand, the main fashion players are online stores offering a variety of fashion brands. These include Amazon with online net sales of US$486 million, Zalando with US$442 million and El Corte Inglés with US$376 million.

Online Net Sales Generated in the Fashion Market in Spain in 2022

Another competitor that stands out in both rankings is Shein, the online fashion retailer commonly referred to as an ultra-fast fashion platform. With online net sales of US$503 million in Spain and US$103 million in Portugal in 2022, Shein ranks first and second in these countries, respectively. 

With a strategy that leverages the same aspects mentioned above - vertical integration, rapid design cycles, and competitive pricing - Shein undercuts established fast fashion brands on price and overshadows them on volume.

Shein's meteoric rise took off in 2020, where it has significantly increased its global net sales. The strategy of traditional fast fashion retailers has become increasingly outdated in consequence, making them less competitive in the evolving fashion market.

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Why Is Fast Fashion So Successful?

A key success factor for fast fashion is affordability. By offering customers trendy styles that they can buy at low prices, making clothing accessible to younger users or those struggling financially is a key factor in generating sales.

Local production also accounts for its popularity in Spain and Portugal. As Inditex's country of origin, many of its manufacturing facilities are located in Spain. Due to low production costs and proximity, Portugal is also an important hub for manufacturers. Proximity to both markets facilitates distribution and improves marketing.

But beyond these two fundamental factors, there are other, more universal principles that explain fast fashion's success.

Economic Conditions Affect Consumer Spending

Spain and Portugal are countries with precarious economic conditions, reflected in high levels of income inequality and a high percentage of the population at risk of poverty, even among the working population. Although some progress had been made in the years before the pandemic, the Covid-19 crisis exacerbated structural dependencies and left many Spaniards unemployed, especially those working in the tourism sector. Youth unemployment was also exceptionally high, reaching 32.6% in Spain in 2020, according to the OECD

Inflation is another aspect that affects consumers ability to spend, especially in populations that were already struggling economically before prices soared. All of these factors likely contribute to the popularity of fast fashion brands in the Iberian Peninsula, but their prevalence is not limited to countries at the lower end of the economic spectrum. 

The Fashion Paradox: A Universal Phenomenon

The recent rise of Shein and the ultra-fast fashion model has reignited the discussion about the unsustainability of products and unethical treatment of workers in fast fashion. Although most consumers are aware of the negative consequences and care about the ethical side of their consumption, few do actually act on their stated attitudes, also known as the “attitude-behavior gap”. When it comes to fashion, researchers coined this the “fashion paradox.” 

The chart below illustrates the paradox.

Attitudes Toward Sustainable Fashion Among Gen Z and Gen Y in Western Europe

While more than 60% of European respondents to the Zalando survey said they were in favor of reusing and buying used clothes, only 23% to 25% also said they routinely bought secondhand or repaired their own clothes.

Distrust of Corporate Intentions

In addition, many consumers are skeptical about the true sustainability of brands. Greenwashing, the practice of companies claiming to be sustainable without actually being so, has made a significant portion of the population wary of these claims. Other barriers to sustainable purchasing include high prices and the perception that sustainable fashion products are less trendy. All these aspects tie into and reinforce the fashion paradox as defined above.

Building Trust and Offering Affordable Quality

The cases of Spain and Portugal in particular show us that despite widespread education and news reports about the negative aspects of fast fashion, consumers will still buy these products because they can afford them. Brands can compete in these markets by offering credible sustainable products at competitive prices, as there is a fairly large portion of consumers in Spain who are interested in sustainable products, as long as they can afford the price and the styles are on-trend.

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Fashion in Spain and Portugal: Closing Thoughts

Fast fashion has had a profound impact on the eCommerce markets of Spain and Portugal, relying on affordability, fast production cycles and local production facilities. 

However, its negative ethical and environmental impacts have raised significant concerns and initiated a critical discourse on the sustainability of this model. This calls for a new paradigm – one that balances sustainability with affordability and trendy designs.

Sources: InditexMSNBCOxfamReutersT&F