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Nextail CEO Says Smart Inventory Management is a Weapon Against Amazon

Recent reports that Amazon’s private-label apparel business is foundering made headlines and raised eyebrows. But with everything Amazon, slow sales of its owned clothing brands fail to paint the full picture of what’s really going on with Amazon Fashion.

Joaquin Villalba, an Inditex veteran and CEO/co-founder of apparel retail technology startup Nextail, shares one perspective on how apparel stakeholders should be thinking about strategies for competing with the largest online seller of clothing in the U.S.—and how smart inventory management could be the key to brick-and-mortar’s advantage.

Sourcing Journal: Amazon hasn’t succeeded in fashion—yet—but the company has the deep pockets and bottomless resources to keep at it until it succeeds. Do you think apparel retailers are at risk of becoming complacent and assuming their current advantage will continue unchanged?

Joaquin Villalba: Apparel retailers that continue to conduct business as usual are at risk—it’s important to adapt and be innovative. The retailers that will fare better are those that choose to incorporate new technologies and rely on data rather than intuition to make decisions. One of the reasons Amazon has been so successful is because it has, and uses, its treasure trove of data. Amazon has the resources to continue building, or in some cases like with Shopbop or Zappos, buy the expertise it needs to become leaders in fashion. Brands need to be agile and react to consumers to meet their needs as the landscape evolves.

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Nextail CEO Joaquin Villalba
Nextail CEO Joaquin Villalba

SJ: How does Prime Wardrobe factor into the road ahead for Amazon Fashion?

JV: Prime Wardrobe is taking a cue from companies that already offer a similar service to gather data directly from their customers—particularly subscription service offerings like Stitch Fix or Le Tote. As apparel retail is still an area where Amazon needs to gain traction, Prime Wardrobe will help Amazon refine their assortment and products, taking feedback from items that are ultimately not purchased in the box. Unlike categories like toys and electronics, apparel purchases are not usually driven by convenience—there tends to be a natural discovery phase in the product selection process which is heightened in-store through the use of innovative visual merchandising and human interaction. By removing the friction of online shopping, allowing customers to try before they buy—and conveniently send back items in a pre-printed return label—Amazon is aggressively looking at how to offer the most convenient shopping experience to boost interest in Amazon Fashion.

SJ: What is the biggest shortcoming among apparel retailers today and especially during the holiday season?

JV: Apparel retailers are at risk of not looking at the impact of overall inventory leading up to, during and after the holiday season. Concentrated demand leads to massive returns, and this is most evident during the holidays. For instance, after Black Friday, between 30 and 40 percent of items are returned; in many cases it’s online sales being returned to a store. This heavily thwarts stores’ inventory, which retailers often overlook before the holiday season, since they are more focused on getting advertising and promotions ready in time. Intelligent systems—including smart fulfillment that allows consumers to have products within hours by shipping it from nearby stores with overstocks of that item, or real-time inventory solutions—give retailers full visibility of their overall stock position to help maximize sales during key retail periods and avoid lost sales due to the misallocation of stock.

SJ: This stat just landed in my inbox this morning: “But roughly half (48 percent) of U.S. consumers said they can ‘see a future where traditional retail stores are not a big factor’ in how they shop—up 11 points from 2017 (37 percent).” What should apparel retailers prioritize in order to ensure their stores will remain relevant for shoppers?

JV: While half of consumers say they cannot see a future where traditional retail stores are a big factor, 80 percent of consumers still purchase in-store. Consumers may be conducting more “pre-shopping” activity like researching prices online, but often still choose to purchase these items in physical stores. Many retailers have been rethinking their stores as just a place for consumers to engage with products, in a similar way that consumers are changing how they engage with brick-and-mortar stores. Whether it’s creating social spaces like cafes and restaurants, offering fitness classes or curating panels that resonate with their core demographic, retailers are providing a more robust shopping experience. People want to experience brands at a deeper level, and physical stores are the only channel that can merge digital dimensions with human touch to provide immersive, 360 experiences. Retailers need to capitalize on this differentiator and invest in solutions that align with the way the consumer experience is evolving.