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Scaling DTC Brands Starts in the Back Office

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Today, most new fashion brands are born online. Selling directly to consumers in this way allows these upstarts to hone their aesthetics, find their audiences and operate with limited production runs. But once they gain traction in the DTC model, growth often requires them to expand into other channels. Just look at the legion of labels leaping from online to physical stores, as well as a myriad of brands making inroads into wholesale.

It’s a formula Shahrooz Kohan has seen work time and again. “We’re seeing that multichannel brands are the ones that are growing,” he said.

That’s why the CEO of AIMS360, a provider of ERP software solutions for the apparel industry, says fashion startups need to remain open minded.

“One thing they often focus on is one channel but the apparel industry has a lot of distribution between boutiques, other e-commerce sites and retailers’ own stores and e-commerce channels,” Kohan said. “When we look at the statistics of the department stores, we see between 35 to 40 percent of products still are pushed through those channels.”

Adding channels of distribution adds opportunity but also complexity. Suddenly there are competing production timelines, simultaneous fulfillment needs and unpredictable cash flows. AIMS360 recognizes these demands and offers a suite of solutions designed to allow digitally native companies to capitalize on a range of sales options by getting their back offices in order.

Kohan said the AIMS360 suite provides a central database to handle the top challenges companies face when scaling:

1. Centralizing sales information

While selling through multiple channels provides a boost in sales and marketing reach, it also means juggling the flow of orders, inventory and accounts receivable information. Without a centralized system for tracking all of this data, it will soon become impossible for brands to deliver goods where they need to be—be it to their own stores, their retail partners’ warehouses or online marketplaces—on time.

“What it does is create an inefficiency that prevents a startup company from growing as it is almost impossible to successfully deal with multiple systems,” Kohan said. “Having multiple systems without a central ERP makes it difficult to scale the business.”

2. Streamlining product descriptions

Today’s consumer thrives on storytelling so product descriptions are more content rich than ever. Beyond sizes and fabric content, brands provide a wealth of information on the brand ethos, product origin and the people who made each piece. And all of that data must follow these goods wherever they’re sold. Providing this level of detail can be time consuming and even prohibitive for some companies. This is where automation comes in.

“The process can be mostly automated so that the ERP is the central hub where styles are created and the information gets pushed to each channel. This saves time and allows startups to target many channels with less manpower,” Kohan said.

3. Allocating goods

With each channel, demand on inventory increases—and not just on production volume. Brands need to have systems in place to determine which pieces will be used to fulfill seasonal deliveries, reorders, replenishment programs and DTC drops.

“AIMS360 has been implementing our intelligent allocation which is an automated allocation system which uses rules to decide what orders to allocate goods for fulfillment. With this, companies have been able to easily grow their businesses because they have met delivery timeframes for clients,” Kohan said.

4. Forecasting sales

Most DTC brands begin with small runs that they can confidently sell through in a short period of time. At that size, the risks are limited. If there’s a dud, the exposure that style represents is minimal. For runaway hits, the scarcity that comes with marketing limited editions only makes them hotter. And waitlists have the added benefit of clearly demonstrating demand. With wholesale layered on top, these businesses have a new challenge of deciding what to produce and in what quantities. That’s where forecasting can help.

“In addition to being unsustainable for the environment, production without forecasting creates a big problem,” Kohan said. “For startups, excess inventory a lot of times has to be sold at a loss, which dilutes the brand, and missing inventory is a missed opportunity. With forecasting, clients have been able to get closer to having exact inventory for demand, which optimizes profitability and growth.”

5. Producing to demand

The goal of adding channels is increasing sales. But increased demand means the entire supply chain must be prepared to produce more. As a result, brands must be aware of raw materials levels and factory capacity to ensure both wholesale and retail orders can be met on time.

“Finding out after the fact that you can’t get enough production done at your factory can drive away startups’ wholesale and retail customers,” Kohan noted.

AIMS360 is a cloud-based, fully integrated order and production processing system for fashion manufacturers, wholesalers, importers, and distributors. Learn more at AIMS360.com.

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