Thanks in part to a strong economy, apparel retail seems to be on the road to recovery. While the adversity the sector experienced was painful, it was also beneficial in that it prompted the industry to find ways to evolve faster.
And as store strategies have changed and priorities shifted, wholesale orders began to fluctuate, too. In some instances, small, frequent orders have been the trend, whereas in others, retailers are bulking up the amount of goods they’re bringing in.
For more than a year, retailers have been focused on their stock levels, with some like Kohl’s redesigning their floors and planograms to reflect their decisions to scale back. After finding success with less product, the company is rolling out its Standard to Small initiative, which shrinks the selling space in existing doors, to 500 locations. At Macy’s, being leaner has given the department store the ability to be more opportunistic in its buys, providing fresh looks for shoppers more frequently.
The tactic of buying fewer pieces at a time and reordering based on performance has been a go-to for the majors lately, according to Peter Maerevoet, global CFO of financial solutions company Tradewind.
“[Orders have] decreased over 10 percent over the last two years but it’s a trend that’s been going on for the last few years,” he said.
Department stores like Kohl’s and Macy’s have recognized that sometimes less is more, according to Maerevoet. “There’s a general trend going on toward leaner on-floor inventory levels and easier, faster replenishables because a lot of the big retailers, they want to drive faster turns,” he said. “They don’t want to get stuck with a lot inventory, and they want better profitability and that usually drives but more frequent orders.”
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As with most things, Maerevoet said the rise of e-commerce has played a role here, too. He’s noticed that the more business a company does online, the smaller their orders need to be for one reason: “You don’t need to fill a store and a fixture.” In other words, instead of trying to round out an assortment for in-store shoppers, online retailers can order only what they need.
In addition to the need to lighten their inventory loads, Maerevoet credits some brands and retailers with evolving their processes. “Levi’s and Gap, I know they’ve invested a lot into end-to-end planning, and they’ve become a lot more efficient,” he said.
Still others, he said have overcome the industry’s preoccupation with first costs to recognize that working closer to home might increase cost of goods sold but it pays off in agility and speed.
In addition to rethinking where they’re producing, some companies are taking a closer look at who they’re partnering with on the production side, and they’re slimming down there too. Maerevoet said he’s seeing more companies pursue this strategy as a type of insurance.
“That for sure will increase because a lot of brands, they want to know who they buy from and want a long-term relationship, and they don’t want to have any surprises so they want to make sure that there’s a stable delivery flow at the right price,”Maerevoet said. “There’s not a lot of appetite for risk.”
This concentration on a few key vendor partners is the reason why textile and apparel consultant Robert Greenspan said from his perspective, order sizes are on the rise.
“There are fewer retailers in business today, and they’re buying from fewer manufacturers so what that means is their orders are bigger, especially the major department stores,” he said.
Greenspan said he’s seen “sizeable” orders for the chosen few manufacturers for the last five years at least. On the other hand, some vendors have been squeezed out by this strategy. “If you’re not their No. 1, No. 2 or No. 3 supplier in that department or for that product, you probably have a problem,” he said, adding sales is just one indicator of who makes the cut. “Sell through is part of it, markup is part of it, profitability, quality, timeliness of delivery and the ability to respond quickly and change fast and have new product.”
And now with the threat of tariffs looming as the U.S.-China trade war persists, Greenspan said you can add that to the list of considerations. Already the uncertainty has the industry looking for contingency plans, he said.
“You just can’t just leave one factory and go to another and think everything is going to be the same, you have to start slow, build a relationship, see the quality of their work and timeliness, but it can be done,” he said. “Most apparel manufacturers and importers have already started sourcing in different countries.”