"Shift to sustainability could cut 30 per cent of fast fashion's profit"

The fast-fashion industry is facing a massive challenge if analysts at major bank UBS are to be believed. In the following five to ten years, the consumers’ increased focus on sustainability could cause large corporations such as Zara, H&M and Primark to lose up to 30 per cent of their profits.

Worst case scenario

Fast fashion does not have the most environmentally friendly image. The model of moving quickly through new collections of large volumes of clothing at low prices has certainly not done the companies in question any harm, but consumer’s attitudes are changing.

This is what UBS analyst Victoria Kalb writes in a report, which Fashion United covered. If the “worst-case scenario” took place, she predicts a 30 per cent drop in profits would incur over the next 5 to 10 years. “The cumulative effect of consumers buying fewer items, but continuing to buy items they consider more sustainable, could prove profound,” says Kalb.

Cancel culture

At its worst, with fast-fashion players having their collections produced at high speed in low-cost countries on the other side of the planet, it has long been apparent that the industry has a larger carbon footprint than shipping and aviation combined. At present, price is still one of the most important factors influencing customers’ buying behaviour. However, UBS is now warning companies regarding the risk of the accelerated shift towards a bigger focus on sustainability.

Within the current “call-out culture” (pillorying companies on social media) or “cancel culture” (boycotting big chains), this increased attention to sustainability involves very high risks. 

The industry’s agility does not outweigh consumer behaviour

Nevertheless, the industry is constantly reinventing itself by producing more locally and using more sustainable materials. At the recent RetailDetail Fashion Congress, several players already mentioned that sustainability is gaining importance, but stress that sustainability can be reconciled with the fast-fashion model that can respond quickly to new fashion trends. 

However, UBS is hesitant about whether this will suffice: “While we believe companies can adapt to shifts, we see changes in consumer behaviour as more powerful than companies’ ability to respond to them,” it sounds ominous.