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Inventory hold-up posing a challenge for fast fashion companies

"While fast fashion brands such as Michael Kors Holdings, Ralph Lauren and others are vying for bigger share of the holiday market, their main intent isn’t increasing sales but winding up with less of unwanted merchandise. Hence, inventory stock-up is one of the major concerns for these companies. And to circumvent this, brands are using increasingly sophisticated tools to track apparel and accessories through the supply chain, which aims to avoid the typical post-Christmas fire sales."

 

 

Inventory hold up posing a challenge for fast fashion companies

 

While fast fashion brands such as Michael Kors Holdings, Ralph Lauren and others are vying for bigger share of the holiday market, their main intent isn’t increasing sales but winding up with less of unwanted merchandise. Hence, inventory stock-up is one of the major concerns for these companies. And to circumvent this, brands are using increasingly sophisticated tools to track apparel and accessories through the supply chain, which aims to avoid the typical post-Christmas fire sales. 

Inventory hold up posing a challenge for fast fashion

 

The reducing number of departmental stores and their non-stop discounting proposition is posing  another set of threat tocompanies. Even with discounts, brick-and-mortar stores are unable to attract customers are they are increasingly preferring online shopping, with smartphones becoming the preferred means of commerce. On top of that, omnichannel retail is posing another set of concerns as customers, for instance, may buy an item online and then return it to a store.

David Bassuk, Co-Head of retail practice at AlixPartners LLP, points out every Monday morning, retailers typically hold a manager meeting to look at the sell-through rates, or the percentage of the total inventory sold, for the past week. During the holiday period, they meet daily – and decide if they should use promotions or increase their markdowns to stay on track with their inventory.

Managing inventory well

There’s a lot of speculation about whether retailers are really able to manage inventory properly in the world of omnichannel. John Idol, CEO, Michael Kors, has pledged to cut the number of days with big promotions by as much as 65 per cent this quarter. Research predicts smarter promotions will set up retailers and fashion brands for a better 2018. The industry also has closed thousands of stores this year, helping supply better match demand.

Tapestry Inc, owner of the Coach and Kate Spade brands, uses historical seasonal sales data to build its stock allocation plan for each store. And it has the capability to restock its retail stores as many as three times a week during the holiday season, said spokeswoman Andrea Resnick. High-end department stores and specialty retailers have started tagging their products with radio-frequency identification sensors, which casinos have been using for their gambling chips, to track inventory in real time. As another safeguarding perspective, Simeon Siegel, an analyst at Instinet LLC, said that it’s probably safer to stock too little than too much. But that means companies will have lower sales growth when they begin to rebound.

 
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