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Analysis

How can retailers increase stock efficiency in a fast-moving fashion retail environment?

Retailers around the world are facing unprecedented challenges and many are struggling to contend with the need to balance consumer demand with profitability. At the same time, global events – from political upheaval to health crises – are forcing retailers to operate under more uncertain conditions than ever before. Consumers now expect to be able to get the goods they want almost as soon as they want them.

Whether that’s through fast delivery from online stores or in physical bricks and mortar shops, there is little tolerance for delay. In order to meet these demands, the classic retail adage has never been more relevant as organisations need to ensure they have the right stock in the right place at the right time, while contending with market forces outside their control which can quickly destabilise carefully laid plans.

While all retail sectors are under pressure from consumer expectations, fashion retail has a particular challenge on its hands which makes managing stock highly complex. While other segments can be somewhat certain of what will sell and when – larger quantities of BBQ products are required in supermarkets in the summer months, for example – the constantly changing lines in fashion means a lot of educated guesswork is at play all the time.

No fashion retailer can be sure which products are going to be most popular, or where, until sales begin. This challenge is combined with consumers’ increasingly omnichannel shopping habits, meaning a customer browsing online will expect to be able to find the same products in store for purchase, making stock efficiency even more important. With some customers switch to online for the first time out of necessity, what will the landscape look like in the coming months ahead and what will be the requirement for fast stock rebalancing.

On top of this, minimising markdowns is crucial, as it is important to protect the value of your brand as well as the bottom line. No business wants to be heavily discounting stock, if it can avoid it, so must walk the line between having the right goods in the right place at the right time and not oversupplying any lines or stores. Achieving this very fine balance requires some careful planning based on a sprawling array of variables. Traditionally these decisions have been made on assumptions and accurate trend analysis. If black skirts have historically sold well in Birmingham, one could assume that a similar item in the next collection will have similar success. But with fashions changing fast and traditional retailers under pressure from low-cost online stores, even the most informed assumptions can quickly be proved wrong.

Managing stock efficiently and minimising markdowns is one of the keys to profitability for retailers and data is key to success. Not all stores sell the same products at the same rate and predicting exactly what will sell and where is almost impossible. Instead, retailers need the ability to understand where stock is and how it is selling in real-time, in order to be able to address where there may be problems and rectify them. In some cases, this may mean moving stock from a store where sales are low to another where items are sold out, or it may simply mean ordering more for that one store. These decisions require insights to determine the best course of action. Will the cost of moving the stock outweigh the sale value? Will not moving the stock mean bigger losses from markdowns? How will lost sales through stock-outs impact profits? How do these decisions impact the customer experience and therefore brand loyalty if stock is unavailable?

While real-time visibility allows stock to be managed more efficiently, having the correct lines in store in the first place is what everyone is aiming for. While the speed of change in fashion makes this an extremely difficult feat, predictive analytics provides a much greater chance of getting it right. All retailers have vast amounts of data available to them about what has historically sold well, where, and when, which can be used to better predict what is needed and where on a granular level.

This needs to go beyond simply which lines sell, down into sizes, colours, patterns and so on in order to minimise left over stock and, therefore, markdowns. It is also imperative to have simple control over what should be included and excluded. With all of the current missed sales, data for forward planning will be extremely skewed. Your processes and systems need to be able to support managing multiple scenarios, with immediate capability to adapting the drivers of the analysis and provide clear communication across the business at the same time.

Combined together, real-time visibility and predictive analytics will help retailers manage their stock far more efficiently, but having flexibility is key. As previously stated, in fashion retail achieving 100 percent certainty about how each item will sell is almost impossible and having the flexibility to make changes where required is vital. If a pair of jeans sells out in two sizes in three stores, you should have the ability to allocate exactly those items in those sizes at any time to those shops. Without the ability to make changes after initial stock allocation decisions have been made, the same problems will occur all over again.

There is no doubt that a careful balancing act is at play in a fashion retail environment all the time, but with modern tools available retailers now have the opportunity to make more robust decisions based on the sales and stock updates taking place in real-time. In challenging times when retailers cannot afford to make decisions based on what happened yesterday, visibility and flexibility are key to profitability.


By Gavin Fallon, general manager for UK, Nordics and South Africa at Board International

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