As the fashion industry endures a period of unprecedented unpredictability, responsiveness and adaptability will separate companies that successfully swim through the storm from those that sink.
With the situation changing almost daily and lengthening lead times, accurately predicting demand at the start of long production cycles has become a greater challenge. And between Covid-19 outbreaks in factories and shipping delays, it is now up in the air whether goods will be finished or make it to their destination on time. Once merchandise is made, planning out inventory allocation for fulfillment is now more complex since shoppers are switching between multiple channels.
The 2021 AlixPartners + Sourcing Journal Fashion in Focus survey report highlights how the existing fashion model falls short of meeting the current needs of the business. The survey asked executives to weigh in on how their businesses have been disrupted and how they shifted their strategies to overcome these hurdles.
Retailers are coming out of the health crisis with a better understanding of how to operate under unexpected circumstances. Whether they are overseeing sourcing or omnichannel operations, their risk mitigation strategies revolve around building in added flexibility.
In sourcing, one agility strategy is diversification and spreading out the supplier map. “Covid has reinforced that notion of the need for resiliency in supply chains, as we all experienced almost rolling blackouts from various countries around the world during the early stages of the pandemic,” said Doug Lindner, senior vice president sourcing and procurement at sock manufacturer Renfro Brands, in the report.
Diversification also helps to guard against logistical delays. Of all the supply chain changes that have taken place since the start of Covid-19, respondents say they are most affected by transportation issues.
A positive of the pandemic pressures on sourcing executives was the shift toward more digital collaboration with suppliers, which most respondents see continuing post-pandemic. Increasingly, samples were designed and reviewed remotely, and production was monitored virtually. About half of respondents indicate that their production efficiency has improved compared to 2019.
Production may be becoming more efficient, but it is equally imperative to get inventory levels and order sizes right. The industry’s tendency to churn out merchandise without considering actual demand left companies with massive mounds of overstocks early in the pandemic.
One way to guard against excess is shifting the buying strategy. “We have taken time to build our supply chain for flexibility, which enables us to reduce waste and make smarter buying decisions; we now buy our seasonal collections to sell out, so we don’t have to worry about overstock,” said Joel Jeffery, co-founder of cotton pajama brand Desmond & Dempsey.
Data has always been in demand, but companies are turning to more sophisticated methods for using the information they have.
Previously, forecasting and inventory planning tended to center on historical sales data, but mid pandemic, past performance became a less valuable indicator of future demand as e-commerce took off like never before and consumers flocked to loungewear. Respondents also pointed to a dearth of historical sell-through data as the biggest assortment planning challenge amid longer lead times. Instead, retailers are turning to alternative sources like product reviews and return feedback to predict and plan new collections.
“The race for data-rich insight further intensified during the pandemic, but many companies are still required to cover a lot more ground in terms of being able to make real-time decisions and improve their agility quotient,” said Murali Gokki, managing director at AlixPartners.
Data analytics is also driving strategic decisions at the retail level. For instance, as it expands its store fleet, Rue21 is using artificial intelligence to predict how a potential location would perform before opening. Data also comes into play for designing an optimal omnichannel shopping experience, with 74 percent saying they look to data from tests to improve conversion and engagement. Cross-channel services that took off during the pandemic—including curbside and in-store pickup—are expected to become a greater share of fulfillment, helping to deliver convenience to shoppers as well as add-on sales opportunities for stores.
“Omnichannel operations require us to engage with the shopper at any point of their journey, online or in-store, leveraging various technologies which require additional training for store associates to understand the end-to-end customer experience,” said Alberto Corral, vice president of marketing for digitally native apparel brand Untuckit.
Download the 2021 Fashion in Focus report for more on how the industry is adapting to pandemic pressures and strategizing for success in 2022 and beyond. Click here to get your copy.