Fashion retailers are currently experiencing a steady and continuing decline in online sales, as post-pandemic shoppers show preference for in-store experiences. 

According to the Office for National Statistics (ONS) online sales for retailers fell by 2.2% in September 2023, following a fall of 0.9% in August. However, its latest October results found a slight increase in online sales by 0.8%.

Etailers in particular are feeling the burn, and none more so than Asos which reported an 11% decline year on year of group revenue to £3.54bn in its latest full year results, for the year to 3 September.

Buried within Asos’ full year results was a strategy decision to scale “test and react” to 10% of its own brand. It also said it had “significant operational progress”, citing the “test and react” pilot for its high fashion products. 

What is test and react?

Test and react is a process in which a retailer will buy shallow and test how consumers react to the product, with a mind to reorder larger amounts. 

It is currently most recognisable through Chinese etailer Shein, which dubs its model large-scale automated test and re-order (LATR), but the general concept has been the foundation of many fashion retail strategies.

One former supply chain and logistics director explained: “It [test and react] has been around within a lot of companies [such as Zara and River Island] for years, and most businesses started out testing and learning about bestsellers on the shop floor.”

While Asos’ approach is in its infancy and positive results are yet to be seen, online juggernauts Boohoo also rely heavily on this model, according to Peter Williams, former Boohoo chairman (2014-2019), and current chairman at circular fashion hub Advanced Clothing Solutions. 

“Boohoo pioneered this [model] in the UK,” said Williams. “They were well established and could afford to take the risk and go bold.”

However, Boohoo reported losses in the six months to 31 August, with a fall of 17% to £729.1m compared to the same six months to 31 August the year prior. Whereas Shein, the newest disruptor in online fashion, has reached record sales in the UK. Sales hit £1.12bn in the 16 months to 31 December 2022 and pre-tax profits stood at just under £12.2m.

How does Shein do it?

One suspected reason for Shein’s success in a volatile online market is its access and ability to gather data, according to Daniel Bobroff, co-founder at Intawear, a company which connects fashion brands to games makers to style virtual characters. 

“When they look for fashion trends, what they [Shein] are essentially doing is scraping the web,” said Bobroff. 

“They are using a variety of technologies to identify trendsetters and movements in certain types of garments, so there’s an awful lot of data they are processing and scraping on a regular basis in order to identify what consists of an item popping.” 

He added that this is simply a “digitally evolved” approach to test and react where in the past it was more manual, describing Shein’s model as “on steroids”. 

Three considerations when adopting test and react

Data 

Data and the infrastructure to accurately harness it is the first part of the battle for any retailer with aspirations to adopt, or scale-up its test and react capability. 

Ken Price, CEO at online menswear shirt label Blake Mill, commented: “Clearly the fashion industry has relied on basic data analysis for decades, if not centuries. The key point is that the industry now has much more data available to help with more effective decision making and they should leverage it to maximum effect.”

He added that Zara-owner Inditex has been a “pioneer” in usage of data in fashion. “Their feedback loop from store to design, buying, merchandising and fulfilment enables them to maximise efficiency and sales at massive scale,” said Price. 

Indeed, Bobroff agreed as there are “very few industries that have access to so much consumer data as retail does”, but he said knowing which data to use and having the in-house skillset to leverage it are different beasts. 

“Working out whether some of these [digital test and react strategies] will work takes you very close to machine learning/AI [artificial intelligence] and in order for those to work, you don’t necessarily know the kind of data you need at the outset,” said Bobroff. 

“If you want to do it at Shein’s level you need time, money and the tech skillsets at your disposal, but it doesn’t mean that lower levels wouldn’t work – but they won’t be as impactful and effective.” 

Design and development

The former supply chain and logistics director said the test and react model relies on having a “great design team and supply base” in the beginning. 

“You would then want to have the capability of having both fabric and production available and all of those elements would need to be close enough to the customer to reach them,” she said.

“If you want to react quickly then consider how close you need to be production wise to the customers you serve to be able to have a long-term model.” 

Fabric and product type 

The former supply chain and logistics director added that certain fabrics are easy to do create “quickly” and would be better suited to test and react. 

“Bags and footwear have a high craft involved, [as well as] a long lead production and it’s difficult to replicate that quickly, but if you think about woven dresses and knitwear, you tend to be able to replicate those quickly,” she said.

“But you shouldn’t be fooled that customers want badly made, cheap stuff. You could get away with that for a while but that’s not a long-term game plan.” 

She also pointed out there are sustainability issues with this type of fast fashion model but added that it can reduce waste as companies can focus on what the customers want, as it would initially only purchase a small amount of a product and will only produce more if it sells.

“[This means] you have a more accurate customer demand forecast which enables you to buy the right quantity to not over consume and reduce waste into landfill,” she said.

Test and react, while originally undertook on the shop floor, has now evolved beyond imagination within the digital space. While not all retailers are seeing results with this model, those with the data, infrastructure and budget could soon leave those who are unable to progress in the dust.

However, it is unlikely others will stand shoulder-to-shoulder with Shein. Richard Lim, CEO at Retail Economics, concluded: “[It forms] a general trend in the industry for retailers to adopt a more flexible agile and reactive operating model, and part of that is to be able to shorten the length of supply chains and quickly react to consumer trends.”