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Why Are 54% of Retailers Planning New Buys with Old Data?

Fashion is equal parts art and science, and aligning the product portfolio to the needs of the customer—when and where they want it—is tricky business. Unfortunately, when it comes to looking forward, too many brands insist on looking backward to plan ahead, and also aren’t taking advantage of the many digital tools at their disposal.

According to the Sourcing Journal + AlixPartners 2022 Survey Report Fashion in Focus: New Norms and Paradigm Shifts, not only are 54 percent still using historical data to plan new buys, but 50 percent are still using manual methods like Excel spreadsheets.

Sourcing Journal + AlixPartners 2022 Survey Report Fashion in Focus: New Norms and Paradigm Shifts, 2023

Considering the treasure trove of predictive analytics and other fashion-targeted Saas (Software as a Service) systems on the market, this low-tech mindset isn’t just archaic, it’s slowing down progress. Consumer attitudes and shopping behavior are changing faster than ever before, making old data obsolete, while a highly disrupting pandemic has made YOY data even less reliable.  

“We live in a digital age that has given consumers the power to tap into trends and purchase inspiration from an infinite number of sources,” said Sonia Lapinsky, the Fashion Practice Co-Lead at consulting firm AlixPartners. “For retailers, that means loyalty needs to be constantly earned, even with their most ‘loyal’ customers. Retailers that fail to stay ahead of consumers on their digital journey run the risk of getting caught in a cycle of ‘buy, markdown, repeat,’ and watching margin dollars flow down the drain.”

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Technology is essential for future planning and ordering, and smart companies are taking advantage. Fit-tech company Volumental, which has scanned 35 million feet in footwear retailers across 45 countries, offers retailers granular sizing data for smarter assortment decisions. “Through the analytics dashboard we provide our customers, they can see size distribution per region down to the store level that allows them to optimize merchandising, as well as go back to their vendors for more precise assortments in the future,” said Volumental co-founder and CEO Alper Aydemir.

There is no singular approach to getting product assortments just right, and brands and retailers often use opposing strategies.

Sourcing Journal + AlixPartners 2022 Survey Report Fashion in Focus: New Norms and Paradigm Shifts, 2023

According to the report, more than half of the companies surveyed increased the size and breadth of their production line in the past two years, either to expand offerings to existing customers and/or entice new ones. Those in this “something for everyone” camp expanded sku breadth with added colors, sizes, or even whole new categories like sustainable capsules, inclusive/adaptive offerings, loungewear, footwear, genderless fashion and more.  On the flip side, 30 percent pared down their offerings for a more focused positioning with more targeted collections in efforts to avoid misfires and markdowns.

“As a 1995 movie character wisely said, ‘More is not always better, sometimes it’s just more,'” said Lapinsky. “While merchants strive to balance the art and science of solving for assortment breadth and depth, a slew of new toolkits, AI powered predictive analytics, and actionable insights are available to up their game. To top that, developing a more robust rapid test capability should help validate their big bets.”

Lululemon is a success story in the expansion camp. After the women’s activewear line turned heads when it expanded into men’s in 2014, Lululemon doubled down on expansion and entered a whole new market—women’s footwear. The launch was a runaway success—receiving Best Women’s Specific Shoe by Runner’s World—and Lululemon is now planning men’s running shoes for 2023.

Footwear giant Caleres, however, initiated an “edit to win” strategy across its diverse brand portfolio (Franco Sarto, Naturalizer, Ryka, Veronica Beard), shaving off 10 to 15 percent of brand sku count “to enhance productivity and lower costs, while building on the successful in-demand products that consumers want,” said CEO Diane Sullivan. The company is even looking to cut skus by an additional 10 percent to right-size inventory.

Whichever approach brands and retailers take, it must be done with data gleaned from listening—and ideally, talking—to the customer. Disappointingly, only 42 percent report they are using consumer insights and feedback that should be essential to any development process.

The inventory pileup

Stories of inventory excess dominated the headlines at the end of 2022, with many lessons to be learned going forward. Of respondents, 58 percent increased inventory as a buffer against potential supply chain issues, while 42 percent wanted to avoid out of stocks. Either way, many ended up with more merchandise than they needed, all leading to a heavily discounted Q4.

“It is about time the industry stops resorting to adding buffers as a means of addressing disruption [attributed to as the biggest reason for the inventory build-up],” said Lapinsky. “Disruption is here to stay and countering it will require upgrading the processes, partnerships and toolkits to have a more responsive and dynamic inventory management system.”

Sourcing Journal + AlixPartners 2022 Survey Report Fashion in Focus: New Norms and Paradigm Shifts, 2023

Sourcing Journal + AlixPartners 2022 Fashion in Focus Survey Report: New Norms and Paradigm Shifts is broken down into four crucial segments: Digital First, Focused Product Assortment, Productivity Mindset; and Sustainability and Social Stewardship.

To download the full report, click here.