Fruitless Sustainability in a Flooded Marketplace of Stuff

If we want to build a fashion industry that’s sustainably conscious, let’s start by producing a lot less goods. No amount of effort towards creating, sourcing, and using sustainable fabrics and production facilities will have a meaningful effect if the industry continues to over produce and retailers continue to overstock.

Sustainability + Overproduction Cannot Coexist

Think about these two things: First, the global garment industry produces more than 150 billion garments every year, yet there are roughly only 3 billion people who have the means to consume those goods. One billion people on the planet still have no access to drinkable water.

Second, most global brands and retailers carry more than 120 days of inventory in their stores, on their stockroom shelves, and in their warehouses. Meanwhile Walmart, which is about as big as all the other retailers combined, manages less than 45 days of inventory. The same is true of Amazon. Ford and GM keeps roughly 30 days worth of inventory.

Fashion should be a fast turning business. It currently turns about 2.7X a year. It should turn +6.0X a year. What would happen if the amount of inventory in stores and on-hand decreased from 120 days to less than 60? What would happen if the industry produced just 120 billion garments instead of well over 150 billion garments? You can be sure of these four things:

  1. Sales would improve
  2. Margins would expand
  3. Demand would increase
  4. Sustainability would be massively improved

Brands and retailers can do much, much more with far, far less. By aligning what is made with what can be consumed, the industry can make a giant dent towards sustainability. Plus the tremendously improved profits margins that will be gained can be put back into people, technology, and environments.

Merchandise Planning 101 is Fashion Industry Rule #1

If I were Dorthy and could click my heals together while saying “there’s no place like home, there’s no place like home” in order to get home from a terrible and tumultuous journey, I would say the following rule is exactly that scenario for ails of the fashion industry today. Fashion continues to struggle. Stores are closing. Brands are collapsing. No one is winning. And there’s certainly no yellow brick road.

As someone who deeply understands the benefits of what the science of fashion can do when combined with the art of what fashion should be, I fully understand and appreciate the efforts of what a capable merchandise planning MINDSET can do to help the industry today.

I say mindset because it is exactly that. Merchandise planning isn’t a people or a team so much as the mindset of a brand that wishes to build raving fans and succeed at making great product that consumers love. Merchandise planning is a mindset that a fashion business has throughout its organization, which is promoted and driven by a team of people with skills and ideas as necessary as the smartest CEO, the most gifted designer, the sharpest marketer, and the most capable of capable of all the tremendously talented and dedicated people necessary to make this industry thrive.

There are roughly 5 rules that I believe every merchandise planning team needs to embrace in order to be fully enabled and articulate. Brands and retailers that enable these 5 key rules are always high performers and outpace the industry sizably. I can think of only a few brands and one retailer that has a decent portion of these 5 ideals enabled at this time.

I will discuss the other ideals on later posts, but this first rule is critical. A brand or retailer’s departure from it has everything to do with how healthy or unhealthy that business is. This rule is to the fashion industry what calories are to your health. And while your body and health may require a different amount of calories than does your neighbor’s, if you consume more calories than are needed you will gain weight; if you consume fewer calories than necessary you will lose weight.

This rule is about calorie consumption and the fashion industry is morbidly obese. H&M alone has billions worth of unsold inventory according to this NYT article. While I think the article misrepresents the amount of unsellable merchandise for H&M, my own analysis of the fashion industry finds that there is easily $16 billion in excess, unsellable, unnecessary, and dead inventory in the industry right now. In fact the global apparel industry produces more than 150 billion garments each year for a consuming public that equals roughly 3 billion people. Do that math. It does not work. I wrote about this in 2016 in my post titled Wholesale Isn’t Broken, Just Poorly Managed.

Clearly the fashion industry consumes more calories than can be digested. Getting this first rule instilled in your mindset to be a merchandise planning organization is ground-zero to your path towards building a better business that out-paces, out-performs, and out-lasts all others.

Rule #1: SALES + MARKDOWNS = RECEIPTS

This is a pretty straightforward and simple rule that every fashion business fails miserably. It is without a doubt the first thing I look at when advising a brand and retailer. This rule is the single most important concept any business can understand in order to improve business immediately and materially. It is at the core of a merchandise planning mindset.

Let’s be clear about two things here. Firstly, sales are only related to what consumers buy. This is a critical piece of the formula. If you are a wholesaler, these sales are in no way related to what you sell to a retail partner; those are called orders and they are recognized as receipts for the retailer and herein. Secondly, and most importantly, receipts are the value of the goods you deliver and make available for sale to your consumers at their full retail value (MSRP). Kapish? Sales are what consumers consumer and receipts are what you deliver and make available to be consumed.

The amount of goods you make available for consumption less the amount goods consumed reasonably thereafter will absolutely equal the value of the reductions you took to have those goods consumed. If you don’t clear them, they pile up. If they pile up, you don’t have that cash to use elsewhere. It’s like steaks in the fridge. You can buy 20 steaks to eat in one week, but you won’t. You can put some of those steaks in the freezer, but they won’t taste as good; some will be discarded in the trash six months from now when you clean out said freezer. As importantly if not more so, because you paid for all those steaks today, you may not be able to buy the milk you need tomorrow. (The author of this article would like to point out that he is vegan and that steaks are not in his fridge or freezer.)

A better way to think about Rule #1 is: RECEIPTS – SALES = MARKDOWNS!!

Now don’t be fooled into thinking that this rule doesn’t apply to your business. Don’t start to rationalize little head games to drives sales that cannot be delivered. The merchandise planning mindset knows that you can do much more with far less.

If you are a retailer, don’t think you can return these unsold goods back to your wholesale brand and be whole; you won’t. Your valuable store personnel will spend way too much time doing paperwork and packing boxes then engaging with consumers and building fans. Likewise, if you’re a vertical retailer without a wholesaler to fall back on, don’t think you can transfer these goods to your outlet stores and be cleared of them; you can’t and they won’t. That’s lazy and ignorant thinking that is absolutely at odds with a merchandise planning mindset. What goes into a location, should go out of a location.

If you are a wholesaler, don’t think you can drive more goods into your retail partner to place on top of a consumption path that does not exist. Gross sales do not equal net sales. If you have to give your retail partner an allowance, net sales shrink. If your retail partner catches a cold, you get pneumonia. Furthermore, if you’re a wholesaler, don’t think you can bring back things that didn’t sell-thru at your retail partner. You might think you can sell it in then bring it back; that’s asinine. Even if you can bring it back then sell it to an off-price retailer, that’s really stupid. You paid to ship the goods to your retail partner; you bring it back; restock it in the warehouse; sell it again to a discount retail partner; then ship it at a huge discount to that retailer, which only clears excess stuff you created and then ultimately destroys your brand’s reputation.

Be smart and embrace a business mindset and acumen that is founded in utilizing the ideals of merchandise planning properly. Nothing about the conditions above makes sense and none of it is part of a mindset conducive to being properly merchandise planned.

HIGH MARKDOWNS = LOW PERCEIVED VALUE TO THE CONSUMER

HIGH MARKDOWNS = LOW GROSS MARGIN

LOW GROSS MARGIN = POOR INVESTMENT IN PEOPLE, PRODUCTS, ENVIRONMENTS, AND TECHNOLOGY

ALL OF THE ABOVE CONDITIONS ARE UNSUSTAINABLE

SUSTAINABILITY AND OVERPRODUCTION CANNOT COEXIST

The question the fashion industry needs to ask itself is “who’s fooling who?” The best thing any brand or retailer in the fashion industry can do to improve business significantly is to find the proper level of sales that can be reasonably generated without excessive markdowns and then set in stone the right amount of receipts necessary to drive those sales. This is your merchandise planner’s expertise. Use it judiciously.  

A Merchandise Planner is the fashion industry’s critical component in seeking clarity to an incredibly complex industry. Your brand has a lot of competition. Consumers have a lot of choices and other ways to spend their money. Fashion is a highly complex business. Your brand has to have a good assortment of goods available in a broad range of styles and colors, bought in many sizes, distributed with pin-point accuracy to many, many doors or locations, and flowed at times most conducive to generating sales to consumers who have many, many, many choices and opportunities to do otherwise.

Do much more with far less and incorporate a mindset that enables, encourages, and is conducive to your merchandise planning team members. Share your thoughts. If you have ideas, let’s hear them. If you know someone who could benefit from these discussions, send them this article and ask them to join the discussion. Likewise, if you find benefit from these posts, be sure to follow this blog.

Make people want your products this holiday season

santa

The holiday selling season is right around the corner. What happens between now and December 25th can either make or break a brand because this period often represents more than 20% of the entire year’s selling.

Want to know how to be successful as a brand or retail of fashion products? Do this…

MAKE PEOPLE WANT YOU PRODUCTS. It’s your choice, it’s in your control, and you do that by setting your stores and channels up to TURN INVENTORY FAST. The faster you turn, the more consumers WANT your products. Forget about sales and margins–see how fast you can make your doors and channels turn.

Getting the right goods in the right locations at the right time is a brand’s ultimate endgame. Executives and leaders focusing their efforts on marketing and promotions, and not spending 2x that time using data to figure out how much of which products need to be set up and ready to go in every door across your distribution network, are going to suffer greatly. It’s what we mean by the shit hitting the fan.

It’s like this: working out in the gym and eating healthy food is awesome, but it means little if you eat too many calories. It’s also important to fuel your body with the right calories at the right time. You have to have your calories under control if you want to be healthy and active. Likewise, you have to have inventory under control and deliver it in the right amounts to the right locations at the right time.

Doing this means knowing exactly how much and which products are being distributed to what doors through your own retail stores, as well as your wholesale partners. Just because you sold a bunch of goods to a wholesale partner, doesn’t mean they know what they’re doing with it. If product doesn’t stick, it comes back and kicks you in the head. A successful brand makes sure the right amount of the right goods are going to every door and location in its entire network. Do the work.

Getting involved in marketing campaigns and product conversations are fun. Traveling around the country to see how products are displayed is important. I get it. Everybody enjoys doing that. But getting your inventory right is what’s going to make you successful or not. Fast sell-thru’s ensure high gross margins, which mean you are fit, lean, healthy, athletic and highly competitive.

 

 

The 1 trait high-impact people and brands do that others don’t

merlin-charlesdarwin

There’s a lot of conversation about the things successful people or businesses do that other may not do as well. Just spend some time perusing the business leadership section or self-help books on amazon.com and you’ll find plenty of books about the subject as well. The classic traits are being innovate, authentic, creative, a leader, curious, driven, and so on. Those are all important, but I find one trait rolls all of them into one.

This is a trait I clearly remember being driven into us as a small team helping to build the Tommy Hilfiger brand in the 1990’s from $70 million to $1.5 billion. It’s something I certainly think Steve Jobs did. And if you look at Google, Facebook, and other Earth-shaking brands out there today you’ll see they do this as well. But sadly it’s a missing character from many businesses today. It clearly sets the leaders apart from the followers.

I’ve found that many brands are innovative and create products or campaigns that are interesting. I’ve met many strong leaders and I’ve certainly met a lot of driven people, but the clearest sign to me as to whether or not a person or business will be successful is one simple trait–RESPONSIVENESS. People and businesses that are responsive do really well. Those that don’t, struggle at best and fail more frequently than not.

In the simplest of terms, being responsive means you’re on top of things. You and your teams call people back immediately. Emails and texts are returned instantly. You follow-up vigorously. You seek out ideas, new talent, and opportunities. You make shit happen. Responding is numero uno!

That doesn’t mean you respond to everything from everybody. It would be maddening to filter through all the junk emails and phone solicitations. It was Steve Jobs that said “deciding what not to do is as important as knowing what to do.” But you can’t make that decision if you don’t respond to what’s out there. How would you know what’s possible?

Being responsive means that if an intriguing idea comes your way, you jump on it. If your boss, colleague, friend, or other trusted source tells you to call someone or do something, you do it. Not later. Not tomorrow. Not sometime next week when you catch your breath. Don’t put it on your to-do list. Do it right freaking now. That’s what movers and shakers do. Being responsive is a guarantee you’ll be successful.

More to the point: if you roll up all the classic traits of a successful person or business like being innovative, curious, driven, and creative, none of that can be achieved if you’re not enthusiastically responsive.

Nothing ventured, nothing gained. You have nothing to lose and everything to gain by being responsive to people, ideas, and change.

 

Consultants vs. Advisors

thinky-w560-h375

There seems to be a negative connotation with consultants in the fashion industry.  Many fashion brands seems to think that they’ve got everything figured out just fine.  Truth is that’s probably a good sign that they don’t.

Thinking you have everything figured out is sort of like talking about an economic bubble. As a rule of thumb, if no one is talking about a bubble, then there’s likely a bubble.  On the other hand, if a lot of people are talking about a bubble, then there probably isn’t.  Like many things in life if you’re aware of something, then you’re likely being proactive and thereby preventing that thing from doing you more harm than necessary.

One of the largest challenges any business has is becoming inward-thinking and internally biased.  Teams get stuck thinking about what they “need to do” as opposed to “what can be done”.  This is why an outside view is often beneficial at times–to gain fresh perspective from an objective party that hasn’t been sucked into the inward-thinking that happens at even the best of companies.  There’s a lot of politics involved in what and how employees are motivated to think and to act.  An outside perspective is a good way to make sure you see all the options available to helping your business and teams succeed.

A strong consultant or advisor is someone or some group that has expertise a company may not have access to or needs to rethink.  Consultants typically come into companies to fix problems that are already broken.  An advisor, on the other hand, is typically an ongoing advocate to help prevent bad things from happening in the first place.  One is reactive. The other is proactive.  It is often the case that a proven consultant becomes a trusted advisor.

Innovative businesses and people always seek broad perspective.  If we only relied upon the insight and knowledge of our direct circle of friends and colleagues,  we’d miss the opportunity to learn and grow from new ideas and perspectives.  Worse yet, because we would never have gained that knowledge, we’d not be able to teach and give that knowledge to others.

 

No cogs allowed

manufacturing-assembly-line-in-china

As more and more companies struggle to find a path towards improved business and engagement with customers, one of the main things they have to consider is getting rid of a cogged system. You know what a cogged system is. It’s when someone does “this” and by nature protects “that”. It’s what almost all people were taught to be a part of. Get a good education, do good work, keep your job. Leaders embrace it. Employees protect it. The problem is it completely stunts the ability to find newness, innovation, synergy, and honestly a motivated team.

An un-cogged system, on the other hand, encourages people to try new ideas, find new talent, make a bunch of mistakes, learn before the competition, and drive people to think and create instead of process and do. It shouldn’t be possible that the only way to make something happen for a brand or business is to get approval from the CEO. Cogs by nature exist to prevent disruption or newness. They are the system of an assembly line. That’s why a clock or time piece remains accurate or other machinery crunches out predictable output. You need new ideas. People want to be artists. Why have cooks when you can assemble chefs?

If you want to innovate and become the future, get rid of your cogged system.

Zig when you think you should zag

P13_0173_a4

Photo: autoweek.com

I remember years ago when I bought my first real sports car. This was a car that could literally give you neck pain from its acceleration. It was a rocket on wheels, and honestly a lot more car than I knew how to control. Going zero to sixty was a thrill, but the most fun was it’s handling on turns. Unfortunately this was before a lot of electronics made car handling much more manageable for the average driver and the enthusiast like me alike. If you didn’t know how to drive this car, it would get out from under you easily–like an untamed horse.

Here’s what I quickly learned–what you think you should do is sometimes the opposite of what you ought to do. The natural tendency of most drivers going fast into a turn is to apply the brakes just before and into the turn. Don’t do that! I learned that the hard way by finding myself spinning around in circles. I thought it was the car, but it turns out it was me. Braking into a sharp curve from a high rate of speed changes the dynamics of the car. By doing what is normal, braking, you essentially shift the weight of the car forward on the front wheels, take weight off the rear wheels, and voila the back of the car becomes the front of the car–sometime several times in succession! And while this can be a lot of fun, it’s also scary as hell.

What I quickly learned is that you actually do the opposite. When going into a sharp turn, set your speed into the turn so you can ACCELERATE through the turn; brake before, accelerate through. Who the hell would think to do that? Perhaps a physicists or engineer, but certainly not me. Yet by accelerating through the turn, you improve the dynamics of the car by applying downforce on the car’s center of gravity, which lets you zip through the turn with great force and control. You zig when you think you ought to zag.

My description of physics in the above example is elementary at best. I also don’t recommend most people going out and trying this aggressively. There’s a fine line between accelerating too much and too little. If done correctly however, you are faster and safer–unless of course you want to crawl through the turn; in which case there’s no sense having a spiffy little sports car. It takes time and practice to become comfortable zigging when you think you ought to be zagging.

The point is that you need to apply this to many real-life circumstances. When you’re in a hurry, slow down. When you’re angry, breath. It works! Zigging instead of zagging is likewise critical for brands and businesses. If sales are bad, don’t take markdowns. If competition is aggressive, think smaller. When everyone is zigging, zag. And if everyone is zagging, zig!