The convenience of low prices, low maintenance, low risk, and swipe, click, and delivery at the door is unrivaled for those under pressure to look on-trend.  For many, the enticement to fast fashion is irresistible.

Zeina Tarek, 21, frequently uses e-commerce giants like Shein because they are affordable, especially during economic uncertainty and rising inflation. 

“These platforms may not be the most ethical, but they offer the variety and prices that people my age can actually afford,” she says.

As fashion trends evolve, budget fashion giants are making inroads into markets worldwide, including the Middle East. With their affordable prices, trendy designs, and efficient supply chains, they pose a formidable challenge to traditional regional fashion brands. 

The fast fashion industry has witnessed a meteoric rise in recent years. It is expected to continue its upward trajectory, reaching $197 billion by 2028. Budget fashion giants like Shein and Temu have played a central role in this growth. Shein reported a record $2 billion in profits for 2023, with gross merchandise value hitting approximately $45 billion.

Shein and Temu are introducing new strategies in pricing, customer experience, and speed. Their success depends on their ability to adapt to evolving consumer preferences while managing regulatory challenges.

To remain competitive in today’s dynamic market, regional retailers must adapt these strategies and embrace innovative approaches to attract and retain customers.

CHALLENGES FOR REGIONAL RETAILERS

According to Karim Abdel Kader, Co-Founder and CCO of The Fashion Kingdom (TFK), ultra-fast production cycles pose a hurdle for regional retailers. Where a fashion budget giant might take ten days from fashion trend capture to product availability on their platform, it can take months for local brands and retailers to design, produce, and market their new collections. 

“Agility and speed are a real competitive advantage of their business model, which ensures the availability of on-trend styles for younger generations,” he notes.

Another advantage for fashion giants is data-driven product design. Budget players like Shein use trend-based data modeling, drawing on various data points—from current customer purchasing trends to viral social media products—to design and select their offerings.

“This data-driven approach ensures that the manufactured supply has demand and will sell with high sell-through rates. On the other hand, local retailers and brands rely on manual approaches for designing products and mostly rely on the fashion designer’s vision of the collection, which might not reflect the customers’ demand or interest. This leads to low sell-through rates and low turnover of inventory,” Abdel Kader adds.           

COMPETITIVE ADVANTAGES

Maya Azzi, Chief Brand Officer of The Luxury Closet, doesn’t see fast fashion as her company’s direct competition; however, she says regional retailers and marketplaces can differentiate themselves when competing with fashion giants.

Azzi emphasizes the importance of social media in distinguishing a brand and competing with larger brands. “Building a community and creating a brand that people are proud to support is essential,” she says. Limited budget pushes regional and local retailers to be more creative in reaching their audience, which includes discovering and nurturing local talent and fostering strong industry relationships.

Azzi explains that these relationships can help regional brands leverage influencer marketing effectively. “Staying close to the press and fashion industry is key. We’ve managed to feature celebrity closets without paying the celebrities. When you build a community and instill a sense of pride, you can attract celebrity support,” says Azzi.

Sustainability and ethical sourcing are crucial for appealing to a younger audience, especially in an industry known for generating substantial waste. 

Each year, 92 million tonnes of textile waste are produced, with the same amount of the 100 billion garments made ending up in landfills. This equates to a truckload of clothes discarded every second. If trends persist, fast fashion waste could reach 134 million tonnes annually by the decade’s end. 

The UN Framework Convention on Climate Change projects that emissions from textile manufacturing will surge by 60% by 2030.

Transparency Market Research notes that the rising demand for sustainable products drives the growth of the Middle East’s second-hand luxury goods market. 

Consumers today are increasingly conscious of ethical, environmental, and financial factors, leading them to purchase pre-owned luxury items like jewelry and clothing that offer the same quality and appeal as new products but at a fraction of the cost.

Azzi’s organization leverages sustainability as a key competitive advantage. By focusing on second-hand items, Azzi’s brand contributes to a more circular economy and reduces waste. This approach aligns with consumer values and offers practical benefits, such as affordability and unique finds. 

Tarek acknowledges that she often shops with fashion giants like Shein and Pretty Little Thing but consciously supports local retailers whenever possible. “I’m aware of the ethical concerns surrounding fast fashion, so I try to choose local and ethical options when I can. Shopping locally not only supports small businesses but also reduces environmental impact,” she explains.

Abdel Kader highlights additional competitive advantages that regional retailers can leverage and emphasizes the importance of maintaining a strong customer experience. 

“With fast fashion players, customers can wait weeks for their order to arrive. It’s important to note that customer loyalty is built on more than low prices and trendy styles. This can become a competitive advantage for local retailers and brands by providing better customer experience through next-day delivery, loyalty, and cash-back programs.”

Localizing fashion styles and collections can provide a significant advantage for regional retailers. Abdel Kader cites the Saudi Arabian market as a prime example, valued at $4.37 billion in 2024 and projected to grow at a CAGR of 11.62% through 2029. 

“Budget fashion giants like Shein often offer more revealing styles, which don’t fully align with the preferences of Saudi customers, who seek modern yet modest designs. By localizing fashion styles, regional retailers and brands can effectively fill this gap, gaining a competitive edge and boosting demand.”

He recommends using Egypt as a fashion production hub, with its well-established supply chain infrastructure, access to talent, and materials. 

“Local and regional fashion retailers and brands in the GCC could achieve 80% to 90% gross margins or even compete with Shein’s low prices—depending on their commercial strategy—by shifting their manufacturing hubs to Egypt.”

THE FUTURE OF REGIONAL RETAIL

Azzi envisions a significant part of the future for regional retailers in pop-up stores that offer luxurious experiences for local consumers and tourists. She also highlights the importance of maintaining physical stores to build customer trust.

Abdel Kader anticipates intensified retail competition due to budget giants’ continued dominance. He suggests that local and regional retailers will adopt a multifaceted strategy, leveraging their strengths in both online and physical retail. 

“This includes adopting technology by embracing personalization and AI machine learning tech-stack and use-cases as well as focusing on their unique value propositions by providing better customer experience and loyalty programs that differentiate them from budget giant players.”

This approach will improve the shopping experience and offer more competitive pricing, particularly valuable in today’s inflationary climate. However, the intense competition and economic challenges will require local and regional retailers to operate efficiently and maintain lean operations.

Fast Company Middle East’s Next Big Things in Retail Summit, which will be held on November 12 in Riyadh, will cover key topics in retail, such as experiential retail, traditional store optimization, and e-commerce strategies like social commerce and hyper-personalization. It will also discuss how design and innovation will play a role in reshaping the retail landscape. 

Delegates can register here.