“In the world of fashion retailing, where shopping is fast moving online and stores try to keep inventories closely matched to sales, even a small stack of unsold clothes can be a bad sign.” – The New York Times
The news circulating about H&M’s colossal pile of unsold merchandise simply reminds us of the risks fast-fashion retailers face to deliver trends at quicker-than-lightning speed consumers demand.
Although at the unfortunate expense of H&M’s affected profits, here are three invaluable lessons retailers can take away from the big, pile of unsold inventory getting so much press lately:
The Cost of Investing in the Wrong Inventory
The first and most obvious lesson from this headline is how much missing the mark on your inventory plan can actually hurt.
$4 billion worth of unsold clothes.
That’s a lot of inventory—which, in any merchant’s eyes, translates to some pretty big missed opportunities. Yet, H&M isn’t the only one on the overstock struggle bus.
Retailers throughout North America lose about $123 billion in revenue from overstocks each year.
Talk about some serious guap pouring down the drain because your initial buy quantities completely missed the mark. On the same note, being overstocked with the wrong inventory leads to missed opportunities in inventory stock that would have sold otherwise, as retailers also lose $238 billion worth of sales due to product unavailability.
The numbers don’t look good, and planning for the optimal inventory only gets harder for retailers as the pace and unpredictability of demand speeds up.
As Online Sales Grow, Retailers Must Find Ways to Keep Up
Clearly, many of the current difficulties retailers face to predict consumer demand is rooted in the growth of e-commerce.
“Online apparel sales accounted for 27.4% of overall U.S. apparel sales last year, up from 23.5% in 2016 and 20.7% in 2015, according to the most recent Internet Retailer Online Apparel Report published last week.” – Retail Dive
The fact of the matter is this: customers don’t view retail in channels (i.e., the physical vs. digital).
As a result, predicting where a customer is going to place an order becomes increasingly difficult to prepare for, and placing the right stock in the right place holds more weight than ever before.
In addition to ensuring the right product is available in-store and online, it’s a logistical nightmare to keep up with delivery expectations for orders placed online efficiently and profitably.
For this reason, optimizing inventory decisions with the appropriate data and analytical insights can make or break margins.
Accuracy is Just as Important as Speed
Retailers are under immense pressure to move faster across all areas of the merchandise, planning, and allocation process—with speed ultimately driving success.
While we live in an ultrafast fashion world, the accuracy of merchandising decisions is just as important as speed. Merchants must rely on the appropriate data and analytical insights in order to drive investments in the right style, class, or category—with a clear picture of customer demand ultimately influencing every major retail decision.
The solution to keeping up with the e-commerce environment and making the right inventory investments across your stores will depend on how data is leveraged. If leveraged effectively with the proper advanced analytics tools, retailers can uncover accurate, actionable insights to ensure the right product is delivered to the right place, at the right time.