As Covid-19 vaccination rates continue to improve in the U.S., more shoppers are looking to make up for lost time during the summer by kicking their spending into high gear. The National Retail Federation’s upgraded retail sales forecast, which anticipates sales to jump between 10.5 percent and 13.5 percent for 2021, is proof positive that consumers are engaging in “revenge spending” as they have more discretionary income at their disposal.
The uptick in spending has been beneficial for sales, but puts apparel retailers in the unenviable position of navigating through a supply chain that has dealt with port congestions since the 2020 holiday season alongside continually rising container shipping and raw material costs.
Angela Fernandez, vice president of community engagement at GS1 US, believes apparel retailers can still remain in control of three issues: modifying inventory management strategies to be more agile, investing in RFID tagging technology and using global data standards to have a real-time view of what’s available to sell in-store as well as online.
Fernandez noted that as elementary and high schools closed for the summer in May and June, families prepped more vacation plans, and kids returned to camps this summer after a break in 2020. These factors alone expanded the breadth of the type of apparel needed to be made available for purchase. And as consumers go into the July 4 holiday weekend, apparel is expected to gain a bigger share of overall spending, which could reach $26.9 billion, according to Coresight Research.
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“This summer, consumers have this new-found freedom to think ‘what new outfit can I buy for my first day back at work?’ or ‘Let’s get matching shirts for our first big vacation,’” Fernandez said. “Retailers are tracking how consumers search for the items they are going to spend [on] and may see a notable shift from terms like ‘cozy’ and ‘lounge’ to ‘wear-to-work’ or ‘wedding guest.'”
EDI, centralized data are keys to inventory management
When it comes to inventory management, Fernandez believes the apparel industry is still behind in setting up master data systems that centralize all the information of products across the supply chain so that they can be accessed at any time.
Retailers are still behind the eight-ball in further adapting EDI (electronic data interchange) platforms on a regular basis as well, she said. These systems are even more vital in the era of supply-chain bottlenecks, in that manufacturers overseas can deliver advanced shipping notices in real time that provide detailed information about a pending delivery.
Benefits from EDI include reduced costs, increased shipping accuracy and most importantly, a faster communication of order fill rates, giving a brand a better chance to reallocate goods in subsequent shipments and ultimately figure out how much product to expect from a sourcing country. This way, when rapid demand shifts occur, as they did during the pandemic, brands can opt to switch gears to an alternate source when necessary.
Unfortunately, “having that advanced notice of ‘what I was going to receive, and where’ just wasn’t as prominent as the industry expected it to be,” Fernandez said.
“It all points back to inventory management, but in different lenses—what I got, where I have it, so that I can kind of keep that continuity of supply, for my consumer,” Fernandez said. “But secondly, how do I make sure that that supply is coming in, and if it’s not there, how do I go and source from another vendor who might be an alternative for me that I haven’t thought about? A lot of companies are starting to look at how they are sourcing information. The third component goes back to that data system, so if I’m going to enhance what I can see in an automated way and not have to manually try to capture that in a longer term, and I’m able to understand where things are being sourced and coming in from and can have assurance that they will be there, then I need to make sure that I’ve got the systems to be able to support them.”
Apparel retailers can look at grocers for RFID inspiration
RFID has long been talked about as a loss prevention deterrent and has been leveraged across retail for inventory tracking purposes, but any retailer that has had these technologies deployed must now be looking for ways to extend their current use of it, Fernandez said.
Apparel retailers should be looking at case studies outside their industry, namely food retailers and grocers in particular, to better understand the movement of goods across the supply chain.
“There’s a lot of pilot activity happening right now just to track the movement, and some of them are food items,” Fernandez told Sourcing Journal. “Because of that visibility and because technology costs have gone down, that makes it a real opportunity for us to be able to track more goods throughout the supply chain.”
GS1 says that using item-level tagging delivers as much as an 80 percent improvement in shipping/picking accuracy and improves receiving times by as much as 90 percent. On the retail side, RFID can also reduce the reliance on safety stock that often permeates an online experience today.
“I’ve got 99 percent assurance that I know exactly what’s there, and can plan accordingly for that,” Fernandez said.
Standards deliver consistency in a time where supply chains need it
As the leader of the GS1 US Apparel and General Merchandise Initiative, an industry group that focuses on solving supply chain challenges, Fernandez understands the importance of standardization across the supply chain. In the case of GS1, standards are designed to provide consistency for all parties so that they can identify items at any point along the value chain, whether it be at the source, manufacturer, in transport, at a distribution center, in a retail store or even in the end consumer’s hands.
To apply these standards, GS1 creates Identification Numbers that can be used to distinguish all products (trade items), logistic units, locations, assets and relationships across the supply chain from manufacturer to consumer. For example, when a brand assigns a Global Trade Item Number (GTIN) and a unique serial number to every instance of a trade item, two otherwise identical units can be traced individually as they move through the supply chain.
“I need to be very expansive about how I’m describing the product, and we want to know a little bit more about our product today, especially now that some of them are falling into the sustainability area,” Fernandez said. “So how do I standardize that information, share it in a way my customers can understand it, and how can the retailers accommodate for it and bring it in their system to complete that?”
RFID ties back into this standardization process, especially since Electronic Product Code (EPC)-enabled tags can incorporate information including location, country of origin, the production date, and materials used. Additionally, they can provide traceability information for brands so that they know which pallets arrived first and which products are approaching their sell-by dates.
For the remainder of the summer season into back-to-school, Fernandez said more retailers unfortunately are still likely going to take reactive approaches as they get used to the shifts in demand, capturing only a “limited” focus on trends due to more operational concerns.
“I’ve got to make sure that I’ve got the staff available,” Fernandez said. “I’m getting back up to capacity also from a product perspective. I do think it’s probably going to take another 12 months for things to settle out a little bit. I think the top priorities will remain, but we’ll see them move around more depending on the demand each retailer may be individually experiencing from that consumer over the next 12 months.”