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Q&A: Why Apparel Retailers Need to Upgrade From Spreadsheets to Planning Software

In a world where yesterday’s trend is tomorrow’s old news, how can fashion brands keep up with the rapidly changing times and ensure stores are stocked only with the products consumers want to buy? Despite the proliferation of data sources companies can leverage, it’s what businesses do with all of this information that can make a difference—if used wisely.

This is where retail analytics comes in. Historically, the apparel industry has been slow to adopt new technologies, but we’re at a tipping point where those that fail to embrace the new realities are at risk of losing customers, sales—and relevance.

Tools like retail analytics could very well separate the apparel retail winners from the losers. With the speed of decision making constantly accelerating, retailers must execute quickly and with data-driven confidence.

As the executive vice president of supply chain management solutions firm Logility, Karin Bursa has witnessed firsthand the many waves of change buffeting the apparel and retail industries amid a new kind of consumer, the advent of transformative technologies and a shrinking supply chain.

Sourcing Journal turned to Bursa to find out what’s going on in the world of retail analytics and how businesses can benefit from these tools.

Sourcing Journal: How can retail analytics help apparel merchants stay ahead of demanding consumers, even as companies must churn out more collections more frequently than ever before?

Karin Bursa: The speed at which the apparel industry operates continues to increase at an exponential rate. The key is to present fresh, new merchandise to the consumer. Apparel merchants must know what consumers want, when and where they want it and then align their collections and assortments with these requirements. The ability to harness signals across both structured and unstructured data sources is critical to gaining new insights. By maximizing full-price sell-through, retailers can achieve better gross margins and boost ROI while making room for new items and accelerating the supply chain.

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SJ: What advantages do apparel retailers stand to gain by leveraging retail analytics to automate some of their processes?

KB: Many planners spend too much time executing routine activities in cumbersome spreadsheets. These data-intensive duties distract them from more strategic initiatives to drive the business forward. By leveraging analytics, retailers can accelerate their returns, improve margins on available products and reduce costly transfers. Analytics help them operate with speed and precision as they transform enormous volumes of structured and unstructured data covering multiple business scenarios. This increased visibility brings together product development, quality and compliance, merchandise, assortment, allocation and replenishment planning onto a single collaborative platform retailers can gain visibility from product concept to consumer across all channels.

For example, Groupe Dynamite, a Montreal-based vertically integrated fast-fashion retailer, quickly realized the results of automating its supply chain. To stay ahead of rapidly changing fashion trends and quicker selling seasons, Groupe Dynamite established goals to sell through its inventory in six to eight weeks and automate 80 percent of its store replenishment. This allowed the retailer to decrease its initial merchandise distribution across its network of stores from 70 percent to 50 percent, giving the business greater flexibility and better margins.

SJ: Margins always are a top concern and challenge among apparel retailers. How can tools like analytics be useful in driving profits?

KB: Fashion is a perishable product. You must bring merchandise to market quickly in the right quantity and sell through your collection before the next trend or season hits. Too much inventory erodes margins and fills markdown racks. Too little of a SKU or merchandise in the wrong place can lead to lost sales opportunities. Analytics drive visibility and a more accurate picture of demand, which helps drive the allocation process.

Innovative retailers use the science of planning to position initial allocations for a new season while holding back more inventory for a demand-based (pull) replenishment signal. Instead of allocating a push of 75 percent of their inventory, they may only allocate 50 percent to ensure all retail locations have a presentation of the collection. The remaining 50 percent can be distributed as needed based on near-term demand signals such as point-of-sale (POS) data versus the forecasted demand signal that was used for the initial allocation. This near-term demand signal has greater certainty and preserves the margins on those products. This reduces risk and margin erosion while improving the sell-through rate.

SJ: Tomorrow’s supply chain will need to be digital and connected, driven by machine learning, algorithmic planning and artificial intelligence. What will retailers need in order to thrive in this new tech-driven era?

KB: According to the most recent BRP Merchandise Planning Benchmark Survey, 46 percent of retailers still rely on spreadsheets or homegrown solutions for their merchandise planning and allocation. Spreadsheets present a serious risk to the business and result in a fragmented planning process. Retailers need to break down these traditional silos and utilize a single integrated platform for their business. Simply put, they need to be connected and get rid of these spreadsheets. By taking advantage of innovations such as algorithmic planning and machine learning, retailers can make smarter business decisions faster. This requires the right technology in place to help your personnel work as productively as possible.

For example, today’s machine learning solutions continuously analyze new data and past performance to improve decisions and recommendations. This can help augment current planning processes and automate routine functions that free up time to focus on more strategic activities. This is just one of a multitude of ways advanced analytics can help retailers drive future business.

SJ: What do you see as the biggest challenge fashion retailers will face in the coming five years?

KB: Today’s consumer is tech-savvy by nature and has access to more information than ever before. They expect online merchandise to be available in store and in-store merchandise to be available online. Simultaneously, the lines between retailers and brand owners are blurring as manufacturers open retail locations as well as direct-to-consumer channels. This challenges fashion retailers to create great in-store and online experiences to delight fashion-savvy consumers. Technology significantly augments the creative and experiential aspects of a great retail engagement.