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Retailers and suppliers are learning post-Covid lessons as “just-in-time” inventory planning gives way to “just in”.
Forecasting errors mean retailers get hit with overstocking and then get stuck with late-arriving product and get what shoppers don’t want.
Goldman Sachs chief consumer analyst Jason English He described the situation as “strong inventory declines” that would lead to “harder” clothing discounts, now that consumers are no longer interested in clothing that has sustained retail variations throughout the pandemic. “We do think Those Discounts will do in case to run Through year-End,” he said.
Retailers can pack some items for next season. But there are limits to how much, especially since merchandise is still coming in and there is only so much shelf space to store everything.
Sellers have a different problem. You can pull back into production or hold production in the hope that orders will pick up later. But then they need to know where to store it all and absorb the losses if those promised orders don’t materialize.
Fashion brands can stock up on staples by telling factories to delay production, but this creates problems for upstream manufacturers and suppliers. For now, novelty fashion is something of a guessing game that requires a good deal of luck. Retailers know they need something good to attract customers to stores, and up to a point they can cancel orders. Even without cancellations, sellers still face the curse of scare money when they complete their end-of-season sales.
Stanley Black & Decker cut its product line in half to cut costs. Chances are, the products are still relevant after one season. But the cautionary note here for retailers and fashion companies is the depth of device brand diversity that suggests consumer spending is nosediving. This creates another problem down the road – it’s prime time for retailers to close stores, which narrows the distribution channel of all the vendors in the game.
When Walmart cut its profit outlook last month, CEO Doug McMillon said it was showing apparel to encourage customers to shop. “He waits,” he said.[es] More pressure on the overall stock on the back half. Walmart is said to be changing some contracts with suppliers, such as adding new shipping fees in early fall, in an effort to cut costs. The retailer recently cut 200 corporate jobs.
Target was one of the first to move into the small furniture segment to adjust its inventory size in June. In a blog post that same month, CEO Brian Cornell said the company was taking steps to adjust post-Covid. With profits on the line, Target is delaying receipts on some items or taking ownership as needed. The discounter is asking sellers to order from the supplier’s U.S. warehouse instead of paying for shipping from China, Reuters reported. This targeting helps free up space to buy both in-time merchandise and items that may be out of stock. And even though suppliers complain about added cash flow burdens, most play it cool for fear of upsetting a major customer.
Fast fashion e-tailer Asos is delaying its fall collections. A source said the British e-tailer had canceled some fall orders. “It’s seeing a significant increase in response rates,” the retailer said in June. It was not immediately clear if the UK’s rising inflation was forcing them to make tough choices if the return increase was due to affordability issues – a problem vexing Asos – or if consumers had a change of heart.
VF Corporation, on the other hand, has established a supply chain financing program with most of the finished goods suppliers to ensure that it gets the goods to meet the needs of the consumers. As VF controls inventory a month earlier at the point of shipment than at the point of destination, it is also paying its suppliers sooner. As of September 1, Max & Dickie Parent will be adding payment terms with most finished goods suppliers. This ensures that the Vans owner is a preferred customer, while improved payment terms help suppliers manage their cash flow.
Fostering healthy supplier relationships is a corporate responsibility. At the time of the outbreak, Ralph Lauren confirmed that its suppliers, considered “critical stakeholders of the company,” were paid for both “finished goods and goods already in production.”
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