In U.S., Mango Nips at Rival H&M's Heels

By Jennifer Hopfinger H&M may have introduced fast fashion to American consumers, but the retailer's European rivals, known for offering cut-rate, constantly evolving assortments of designer-inspired fashions, are fast on its heels. Spain's Mango is the third such retailer to shake up the U.S. landscape with cheap-chic fashions and quick-to-market merchandise, behind H&M, of Sweden, and Spanish rival Zara.

Barcelona-based Mango, which operates nearly 1,000 stores across 85 countries, opened its first U.S. store last May at South Coast Plaza, in Costa Mesa, Calif. The chain has since opened 11 more, in Chicago; Dallas; Las Vegas; Los Angeles; Miami; Orlando, Fla.; San Francisco (two stores here); Seattle; Washington, D.C.; and San Juan, Puerto Rico. And it plans to open an additional eight this year, including an 8,000-square-foot flagship in New York City this fall. The U.S. stores operate under the MNG by Mango name.

The stores are set to open in major metropolitan areas, where Mango's style is likely to be well received, says Jose Gomez, vice president of international business development. Mango targets women 18 to 35, and both its casual and its dressy lines range in price from $20 to $250. "Our style is for the young urban woman who knows the latest trends and with little direction can create her own look," Gomez said. "Our collections are coordinated, so we can dress a woman from 8 a.m. to midnight." "Fast fashion has revolutionized American apparel retailing," said Howard Davidowitz, chairman of Davidowitz & Associates, a New York City-based retail consulting and investment banking firm. "Speed is the heart and soul of the apparel chain business, because who has something first matters a lot in fashion. Consumers want the newest thing, and they want it now."

Mango says it can move items from the design stage to the stores in three to six weeks, depending on the complexity of the merchandise, which is considerably swifter than the industry average of nine months. But please don't call it fast fashion, pleads Gomez. "It reminds me of fast food, and that has negative connotations," he said. "I call what we do 'speed to market.' We have fresh products in our stores every week. And we're not just delivering one piece here, another there - we're actually creating whole new styles on a regular basis."

Fast-turnaround retailers are able to refresh their inventories more quickly for several reasons. First, they tightly control production and distribution, often keeping these functions in-house, or at least outsourcing them to a lesser extent than many U.S. retailers do. They also produce items in smaller batches, creating scarcity that prompts customers to make snap purchasing decisions to get the items they want. And by clearing out limited quantities quickly, the companies can respond immediately to the latest fashion trends and stock the next must-have items.

"Fast-fashion retailers have single-handedly changed the mind-set of the American shopper," said Jane Hali, vice president and director of retail and merchandising consulting at Coleman Research Group, New York City. "Americans used to wait until items went on sale to buy them because stores had such large quantities of each item. Now shoppers know that the item they want isn't going to be in the store for very long, and they better buy it now, because it's not going to be there the next time they come in."

Affordable prices also help encourage frequent repeat business. "The clothes are inexpensive enough that customers can keep coming in, keep spending and keep up with all the latest trends without blowing their budget," said Faith Hope Consolo, chairman of the retail leasing and sales division of New York City-based Prudential Douglas Elliman. "As a result, this segment of the market does tremendous volume."

H&M entered the U.S. in 2000 and now has about 100 stores here. The chain operates some 1,200 stores throughout 23 countries and generates annual sales worldwide of $7.87 billion. Zara runs about 3,100 stores across roughly 70 countries and generates $8.15 billion in yearly sales. But though Zara came to the U.S. in 1989, it has expanded more slowly than H&M; currently, it has 24 stores here.

The fast-fashion retailer likely to enter the U.S. next is British women's apparel chain Top Shop. With about 300 stores in the U.K., Top Shop says it plans to open its first U.S. store in New York City in the fall. The store will measure somewhere between 60,000 and 90,000 square feet.

To be sure, U.S. retailers are starting to react to the fast-fashion trend. Target and Wal-Mart sell their own cheap-chic brands, created by well-known designers. Others are trying to boost their speed to market, but most of these are not doing this anywhere near as quickly as H&M, Mango or Zara.

Mango opened its first store in 1984, in Barcelona. The company now has some 600 stores in Europe, about 250 of those in Spain. The chain is the second-largest exporter in the Spanish textile sector, behind Zara's parent, Inditex. Last year Mango posted about $1.65 billion in sales, up nearly 10 percent from 2005. The chain generates roughly 75 percent of its sales outside Spain. On average, it opens about 150 stores per year. Unlike H&M and Zara, Mango is privately held.

Though Mango has expanded steadily around the globe and has operated stores in Asia, Africa, South America and even Canada and Mexico for years, it took its time in coming to the U.S. "The U.S. is a very competitive market, probably the most competitive market in the world," Gomez said. "We were simply not ready."

After deciding three years ago that the company finally was ready, finding the right locations was the next challenge. "We want to be in the best malls and in the best spots in those malls," Gomez said. "We don't want to compromise on the type of location. But the best malls are always in high demand. To break your way into them takes time, and we're willing to wait."

Mango's U.S. stores will range from 4,000 to 8,000 square feet (5,000 square feet on average). In Europe Mango stores measure between 8,000 and 10,000 square feet, with some being as large as 20,000 square feet. Gomez says the decision to locate primarily in malls rather than street-front locations is the main reason for the size discrepancy. "Most of our locations in Europe are larger street-front stores," he said. "We are targeting some street-front locations in the U.S., but America has more of a mall-based shopping culture, so that's where we need to be."

Mango has a mix of franchised and corporately owned stores. The chain says it is aiming for a ratio of 70 percent franchised and 30 percent company-owned stores in most markets. Currently, seven of Mango's 12 U.S. stores are franchises. Franchising is one way for a private company with limited capital to expand, Davidowitz says. The downside is that this can lead to inconsistency and quality-control problems that can damage the brand. Mango says it can mitigate that risk by maintaining some company-owned stores. "The corporately owned stores give us a direct connection to the market, and we can see firsthand what's going on and what problems we're encountering," Gomez said.

Further, the chain says, it sends supervisors to every franchise every three weeks to analyze operations. "We really micromanage our franchises so the customer is unable to tell if it's a franchise or a corporately owned store," Gomez said.

This retailer may be fast, but it's certainly not loose.