The fashion market has always prospered, through the constant change of trends and behavior, which are represented in the personal image of each style and design. This transmutation moves a trillion-dollar market, and with each seasonality, other novelties are launched that arouse consumer desires.
In the current post-Covid-19 time, the global calendar has been severely affected. All events, fashion shows, fairs, fashion showrooms have been canceled. Brands with collections ready for launches and orders from shopkeepers around the world, had to close their factories and shopkeepers at points of sale.
In this scenario of a sharp drop in the offline market, on the other hand, online sales considerably increased. Thus, all merchants who were not prepared and with sales processes digitized in B2B and B2C, are suffering losses that may be irreparable. These traders have had a huge contingent of stock stopped for months, so the solution to this situation is to liquidate to recover the investment in products, even though it is in a condition that they lose almost the entire profit margin.
Global growth of the online fashion market from January to May 2020
(Source: Emarketer by Klaviyo)
Therefore, from now on, brands cannot risk selling wrong and shopkeepers buying wrong. Detailed planning is necessary for the market to continue selling its products in a sustainable manner. We will approach these topics of purchase and sale management, objectively and in a practical way for both the industry and the tenants.
Purchasing and Sales Management
Supplier and product planning
Use the online wholesale channels that provide some advantages, such as unnecessary travel costs, weekly absences in the face-to-face management of your business, greater opportunity to mix brands and products for a well-planned purchase, sharing opinions with sellers and representatives who are in the front line with customers, secure means of payment, guarantee of receipt of products and etc.
Define in stock turnover analysis, which products have more and less output.
It is necessary to have well defined the products that give the highest profit margin.
The average ticket (TM), parts per service (PA), conversion rate (TC) are fundamental data, so keep this data permanently updated in your business routine.
Make a quantitative and qualitative ranking of the brands that sell the most.
Analyze what your audience has been buying, whether more expensive or cheaper parts.
It takes a lot of strategy to buy, and this requires a lot of data-based planning. You can no longer buy without any kind of concrete argument or justification. Because even if your company does not have a simple ERP system (back office), organize yourself with an excel spreadsheet.
Planning of launches by collection
Successful brands and shopkeepers operate with biweekly and / or maximum monthly launches. Because this way the product cycle is always renewed, and customers are satisfied that they usually find new products. Avoiding excessive stock, and with unnecessary deep grids.
When launching collections for the current scenario, brands and retailers must buy based on this fast turnover of inventory. Therefore, smaller and more frequent purchases of novelties are in line with contemporary behavior. Because scheduling a semiannual purchase and sale in this scenario, represents a great risk and no longer matches reality.
The multichannel or omni channel, changed the buying behavior more and more with a focus on digital channels. Therefore, your precise product selection is more focused on the ecommerce market, instagram shopping, marketplaces, etc. Not neglecting the experience at the point of sale offline of course.
Planning based on the ABC Curve
The ABC Curve is in practice how to apply resources appropriately. In which 20% of the effort is capable of generating 80% of the result, this fraction is also applied to inventory management. The best strategy for the 20%, continuous in the relationship strength of your sales team to carry out pre-launches, for those most loyal customers or VIP's, offering the best of the exclusive collection and providing the feeling of being special. Because the humanization of this service is what sets it apart from the mass competition.
To establish a strategy for selling online and / or offline, on multiple channels. Believing in the segment of 20% of the products that generate the most results is stimulating, but it is not always the most appropriate option if they are easily accessible products and similar to the competition. Because they are generic, they cannibalize prices, generating unfair competition.
Search for new brands, and new, more authoritative and exclusive product lines to balance the sales curve. Even if it requires more effort, competition will be less. Because you will be offering a "freshness" to your customer, who is fed up with commodity products. Among these, it is important to highlight the niches as ecologically correct, without the use of slave labor, organic, animal friendly and so on. There has been an exponential growth of consumers more aware and willing to invest in this lifestyle.
The long tail is already more used for retailers who advertise on marketplaces, that is, who serve the large mass. The bet here should be on products with a grade depth and competitive prices. It is necessary to constantly monitor the competition, to stay well in the search ranking.
Goal for resuming your business with the ABC Curve
Start by separating the items of greatest importance, which usually have the fewest.
Class A: corresponding to 20% of the total - usually items with search for around 65% in the period.
Class B: corresponding to 30% of the total - usually items with search for around 25% in the period.
Class C: corresponding to 50% of the total - usually items with search for around 10% in the period.
We project that the company "Brand Model" has 30 items in its inventory.
Employed Capital:
X = 0 to 70% of the cost of invested capital
Y = 70% to 90% of the capital cost invested
Z = 90% to 100% of the cost of invested capital
Frequency of use:
P = 12 month usage
Q = Use of 6 to 11 months
R = Use within 5 months
Risk Exposure:
1 = A single supplier represents max. 25% of purchase
2 = A single supplier represents 25% to 50% of the purchase
3 = A single supplier represents 50% or more of the purchase
Once the variables considered are understood, it is time to place them in a matrix and classify them according to CAPITAL EMPLOYED (XYZ), ANNUAL FREQUENCY (PQR) and RISK (123).
After completing the correlation matrix, we must adapt it to the ABC curve and organize it in blocks, as shown in the table below:
Adding items A and B, the volume of capital employed, 83% of the total, is concentrated in just 10 pieces. That is, 33% of the total items in stock. In the case of items classified as C, if we look at the item (q) and (r) - items with very low frequency, 1 in 12 months - we have an amount of 10% of the capital employed concentrated in 66% of the items.
"Power is taking action at that moment that could make you feel powerless."
Ginni Rometty, Executive President of IBM
Erica Borges, Founder of THE1 Showroom and THE GOAL