U.K. retailers are plagued by excess stock as weather woes, stagnating incomes and Brexit-fueled economic uncertainty continue to roil the high street, trend forecaster WGSN reported on Friday.
As retailers continue to ramp up their e-commerce strategies, volumes of new womenswear have grown 9 percent year on year (YOY), WGSN said. But a squeeze on household budgets as a result of mounting inflation—plus an uptick in consumers who are choosing experiences over stuff—have lowered demand for discretionary items like clothing and footwear.
“Quite simply, this has led to a significant overstock in the market this season” with overall product volumes growing 6 percent YOY, said Emma Griffin, an analyst at WGSN. “Witnessed across the board, the recent news of Burberry and Nike burning leftover stock only emphasizes this catastrophic issue.”
The abundance of inventory has translated into a flurry of markdowns, particular with footwear, which has seen discounts on new products leap 41 percent YOY as a result of sales slumps from poor weather, including the so-called “Beast from the East” that brought large swaths of Britain to a standstill with blizzards and bitter cold in March.
Retailers can cope within this “frenzied landscape,” said Griffin, by dialing down their assortments to align with the diminishing demand, such as in the case of digital natives like Asos and Boohoo, which favor a more provisional “test and repeat” model. This involves producing limited quantities of a wide variety of clothing and then escalating production for the top third of best sellers.
“By injecting smaller but better ranges, the risk of overstock is immediately reduced—giving room for retailers to experiment without a big investment,” she suggested.
Even more established department stores, like John Lewis, she added, are recognizing the need for a “more agile approach to new product” by broadening their open-to-buy budgets.
“This will give retailers the room to become more reactive to both internal and external influences each season faces—but this is a big investment as it dramatically changes the traditional ways of working,” Griffin said. “To ensure the right product is delivered at the right time however, this strategy is a must-do and will further reduce the need for markdowns.”
A sense of newness can be simulated, too, by rotating and repurposing existing product through online and offline merchandising. Asos and Zara, Griffin noted, are masters at giving old merchandise a fresh veneer.
“Styling these items alongside new pieces will refresh assortments, reigniting lost demand,” she said.