Fast fashion is described as the products which are priced low, produced quickly and become obsolete even faster (Joy, 2012). Some of the major players of this industry include Zara, H&M and Gap. These fashion clothing brands have been known to introduce styles every season. The main reasons behind popularity of these brands are the affordability and style factors. These companies source their products from developing countries where cotton is grown in abundance and therefore textile industry can thrive due to abundance of raw material.
Fast fashion is identified with quick replacements and low prices. People expect the styles to be cheap and affordable and therefore it is important for the retailers to manufacture goods in a way that they have to pay low labor costs, which is the most essential part of fast fashion supply chain. This business is labor intensive but luckily for the retailers that not very high skilled labor is required. This enable them to source their goods from countries which provide the services in low cost like developing countries of Asia, which are cotton rich and hold large number of uneducated people, willing to get employed at low rates. This handles two of their problems: cheap labor and raw material. (Mihm, June 2010)
Fast fashion industry has oligopoly structure in which production is highly fragmented. (PANKAJ GHEMAWAT, JOSÉ LUIS NUENO, 2006). Fast fashion producers are famous for gauging the customer response through various popular means and with the help of their efficient and specialized supply chain they are able to produce designs and made them available in market even before the original designs come in display. This quick supply chain model has helped the retailers where they do not have to spend much in intellectual property development and copying is legal. These firms are, however, criticized for exploiting the labor in developing countries by not sharing profits with the manufacturers of their products in fair ratio. Whatever they are charged by manufacturers, they charge 100% or even more than that to customers. Zara’s owner, Amancio Ortega, is the world’s third richest man. (Lambert, 12-1-2014) But none of the factories which do the labor work for Zara have earned even half as much revenues. Fast fashion firms exist to earn profits at the expense of quality, design creation and workers’ well being. While these owners enjoy lavish lifestyle and have billions of dollars in their bank accounts, workers who produce these products have to face severe working conditions where their safety and health are compromised, take the example of fire accident at a Bangladeshi factory where 1000 workers got killed.
Developing countries are not only exploited in terms of low wages but due to their low per capita incomes they have to let their children work in such factories as well. According to International Labor Organization 170 million children are engaged in child labor as of 2011-2012 (Moulds). Children are involved in every stage of fast fashion supply chain from production cotton seeds to harvesting and yarn spinning and that too in almost all developing countries. Race to the bottom has driven companies to find cheapest source of labor and that labor can be provided by poor developing countries.
Developing countries are not able to benefit from their position in the supply chain as they should due to trade duties and tariffs. According to a study conducted in order to study the limitations faced by countries in trade, if countries tend to improve their cross border administrative operations then world GDP would grow by 4.7% more than what is growing by now. (VALUE CHAINS AND THE DEVELOPMENT PATH, 2013). Developing countries are also limited by retailers who have all the power to decide which manufacturer to give order to. Manufacturers are dependent on exports for large revenues and this makes them accept any offer given by retailer because if they will not produce at that cost, someone else will.
WTO (World Trade Organization) exists in order to maintain check and control on trade on international level in order to avoid situations like exploitation of developing countries by developed ones. It provides special leniency to developing nations like GSP plus status given to Pakistan in 2014. These provisions enable poor countries to carry out trade without the burden of export taxes and duties and thus are able to pocket more revenues than usual. But this status is given on non-reciprocity terms, meaning developed countries award this status to a particular developing country for a specific time period but they cannot expect for something of the same sort in return. GATT (General Agreement on Trade and Tariffs) handle these terms for WTO.
[large]In some of the provisions extra time is also given to developing countries to fulfill their orders keeping in mind that they do not have continuous supply of resources as developed nations and for it becomes very difficult to adhere to the strict deadlines as they have to face power shortages, strikes, energy outbreaks etc. sometimes the provisions allow the countries to access more market and thus take advantage of more trading opportunities.
Apart from all the exploitations there are certain upsides to the developing countries as well. Textile and Clothing industries are a major contributor to incomes for selected countries. The contribution of T&C production to GDP differs by country but is up to 5% in Sri Lanka, 12% in Cambodia and 15% in Pakistan (Jodie Keane and Dirk Willem te Velde , 2008). They boost the exports of these nations and help in improving the balance of payment issues. With the help of this source of revenue these countries are actually able to carry out some development projects and thus improve the living standards of people.
However the exploitation of workers and especially children need to be stopped and effective measures should be taken to ensure equitable and fair distribution of profits. Therefore WTO needs to be more effective in its role of providing opportunities to developing nations and put minimum wage laws into action. This will allow poor developing nations to benefit from their core competence without endangering their lives and safety and this will also put a stop on developed countries getting rich at the expense of developing ones. Race to the bottom and competition to provide goods at the lowest rates have compelled companies to squeeze their profits from other members of supply chain. Governments should intervene and set the price limits at which things can be sold and bought so as everyone can benefit from this economic activity fairly if not equally.
Joy, A. (2012, June 20). Fast Fashion, Luxury Brands, And Sustainability. Retrieved from The European Financial Review: http://www.europeanfinancialreview.com/?p=4589
Lambert, M. (12-1-2014). The Lowest Cost at Any Price: The Impact of Fast Fashion on the Global Fashion Industry. Lake Forest College Publications.
Mihm, B. (June 2010). Fast Fashion In A Flat World: Global Sourcing Strategies. International Business & Economics Research Journal, 55-64.
Moulds, J. (n.d.). Child labour in the fashion supply chain. Retrieved from The Guardian: https://labs.theguardian.com/unicef-child-labour/
PANKAJ GHEMAWAT, JOSÉ LUIS NUENO. (2006, December 21). ZARA: Fast Fashion . Harvard Business School. Harvard Business School.
VALUE CHAINS AND THE DEVELOPMENT PATH. (2013). AID FOR TRADE AT A GLANCE 2013: CONNECTING TO VALUE CHAINS, 89-118.