Michael Kors Holdings, and Ralph Lauren Corp. are some of the top fashion brands who are in a high-stakes battle this Christmas. Unfortunately, success will not go to the company that sells the most, it will be the company that closes inventory with the least amount of unwanted goods. Inventory management is tough business. Big brands are increasingly using sophisticated software to track apparel and accessories through the supply chain this holiday season. The key is to improve profit margins, even if it means losing some revenue, say experts.
The decline of department stores has worsened the problem, in recent years, with their unending discounting that is hurting the perceived value of brands such as Polo amongst others. That’s increased pressure on brands this holiday season. On the first day of every week, retailers conduct a manager meeting to look at the sell-through rates, or the percentage of the total inventory sold, during the last seven days and decide if they should continue promotions or increase their markdowns to ‘get rid of’ inventory.
The rise of omni-channel marketing, including ‘seamlessly’ e-commerce, has its share of problems when say customers may buy an item online and then return it to a brick-and- mortar store. Michael Kors and other upmarket brands are still using discounts to drive sales. But they’re aiming to be more targeted with their promotions. Michael Kors Chief Executive Officer, John Idol has announced plans to reduce the number of days with big promotions by as much as 65 per cent this quarter.
Building an impression of scarcity is the key for high-end brands. Research firm Edited which supplies the world's leading fashion retailers with the retail analytics they need to have the right product at the right price, at the right time discloses that ‘Toward that end, Michael Kors lowered its number of stock-keeping units by 12 per cent this month.’
In the week leading up to Black Friday, the number of marked-down apparel and accessories was up threefold when compares to the same period in 2014, as per EDITEDs data, which tracks the websites of America’s 19 largest retailers. Retailers have mainly been dependent on past sales and loyalty data to predict trends. In an era of big data, they’re relying more on analytics and artificial intelligence to maintain inventory more efficiently.
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, said Simeon Siegel, an analyst at Instinet LLC. He says lean inventory is like being on antibiotics, a painful but necessary part of getting healthy again.
