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Op-Ed: Web Meets Brick-and-Mortar: Supply Chain Considerations

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As the retail shopping experience evolves, more and more fashion brands are considering how to leverage the best of the digital and physical worlds. Some have deployed display-only merchandising strategies, in which their stores serve as showrooms for seeing, touching and trying on apparel. Purchases are transacted through their websites and products are shipped to the home.

Here are a few real-world examples:
• Bonobos keeps fresh fashions on display in its stores in a variety of sizes and when it makes a sale, the merchandise is shipped directly to the consumer from the company’s central distribution center.
• Ellie Kai* started as a direct-to-consumer business model, selling through shopping trunk shows and its website. The “made-for-you” apparel brand that gives woman direct access to the design, manufacture and purchase of their personal wardrobe then opened two seasonal showrooms to increase awareness and forge closer customer relations. In the stores, new customers can size and sample the collection and arrange for their customized garment to be shipped to them in just three weeks. They can also purchase accessory items, such as cashmere shawl, to walk away with immediately. *Ellie Kai is an Alvanon mentee company under the Dr. Wang Mentorship Program
• Macy’s experimented with a different approach last year, putting only a sample size of swimsuits on display in its Manhattan Beach, California, store. It kept the larger array of sizes in the back room. “Shopper’s used an app on their mobile phones to alert Macy’s sales staff of the style and size they wanted to try on and that item was sent to a specified dressing room,” The Wall Street Journal reported in August 2015.

Where is this trend headed?

The retail shopping experience has to change, and visual merchandising needs to be elevated if retailers hope to hold their customers’ attention. Unfortunately, it’s still common to see racks stuffed with as much merchandise as possible, even though sales associates are fewer. The store essentially becomes a self-service destination.

But there are exceptions, like the shoe department at Macy’s Herald Square flagship store. There, as in most shoe departments, the inventory is in the back room and only one pair of a style is on display. But the salespeople don’t disappear into the backroom to find your size as in the past. Instead, hand-held devices connect them to runners who bring the sizes out for try-on, giving the salesperson more time to interact with and assist the customer.

In this way, the display-only model could enhance the visual presentation of product—as long as knowledgeable, engaged salespeople back it up. Yet it is hard to predict how deep this model will go because both stores and customers will always retain some sense of immediacy. A large percentage of apparel sales are impulse purchases. The shopper’s enthusiasm to buy a product could wane when she learns she has to pay for it and then wait to have it shipped.

A hybrid model may have a better chance for widespread success. For example, the retailer’s visual presentation is still sparse and clean, but instead of having only a single item on display, there are two or three sizes out and more core sizes stocked in the backroom.

Many fine specialty retailers, such as Massimo Dutti, take this approach now. Others may embrace this model, with the added twist that they offer an extended size range available for online ordering. Even though they could never afford the inventory cost and space to keep all of these sizes in every store, by stocking them at their central warehouse, they can accommodate very diverse sizes, shapes and statures of potential customers. They can expand their market coverage and grow their customer base at a very reasonable cost.

What does display-only mean for apparel fit?

The display-only model pressures fashion brands to improve fit consistency. Apparel is one of the only consumer products with massively large manufacturing tolerances. Cars, electronics, appliances, furniture, footwear, handbags, and even a box of cereal, have tighter tolerances built into their quality control processes. A clothing style with a one-inch grade between sizes usually has a manufacturing tolerance of one-half inch. That means a size 8 could actually fit like a size 10 or vice versa.

For the majority of retailers, there is at least a 50-50 chance that the garment available for try-on would not fit exactly the same as the garment that gets shipped to the customer’s home. This is one of the reasons that e-commerce apparel returns are still so high.

There are steps retailers and brands can take, to mitigate this problem. They can execute fit standards through their supply chain with meticulous care. Their technical, supply chain, production and quality processes need to be re-engineered to achieve tighter tolerances to ensure that a size 8 is really a size 8, each and every time. Some may think this goal is unrealistic given fashion fabric and manual assembly inconsistencies. However, strategies, processes and technologies exist today to enable more consistent and accurate size execution.

What are the supply chain, sourcing implications?

Showrooming strategies allow for greater logistics efficiency because more products are shipping to a single distribution center, rather than many individual stores. Yet the most significant margin impact is likely to be in leveraging sales data to more accurately plan production and inventory. There could be huge financial benefits thanks to higher sell-through rates, fewer markdowns and closeouts and greater inventory turns. Brands who reinvest those savings in the customer experience, especially in personalized service, will reap the largest rewards in the long run.

Moving to a display-only retail model will present some additional considerations for sourcing executives and vendors alike. Building product for a centralized inventory will likely reduce production quantities in the long run, even if a brand can leverage the strategy to increase sales. With more accurate forecasting, there should be more realistic production quantities. Buying smaller quantities will undoubtedly have some implications on price negotiations between sourcing teams and suppliers, but successful sourcing executives will leverage this to consolidate their supply base, upgrading product quality and consistency at the same time.

Because many companies over-produce today, only about 30 percent to 40 percent of the product that retailers buy gets sold at full price. With a display-only strategy, retailers and brands have the opportunity to produce quantities that they will actually sell. There are massive inefficiencies in our antiquated retail models today. If we can work smarter, it will not only be good for retailers’ bottom lines and consumers’ closets, it will be a huge step toward making fashion a more sustainable industry.

Ed_Portrait2_2016 (1)Ed Gribbin is president of Alvanon Inc., a consulting and technology firm serving the global apparel industry. Since 2001, Alvanon has leveraged data-driven knowledge to equip leading fashion retailers, brands, designers and manufacturers with world-class growth, customer satisfaction, product development and supply chain strategies. Gribbin can be reached at 212-868-4318 or ed.gribbin@alvanon.com.

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