Stock wastage has been highlighted as one of the big issues in the retail industry recently with the news that Burberry destroyed unsold clothes, accessories and perfume worth around £28.6m last year alone. In the past five years, £90m worth of unsold stock has been destroyed by the fashion house to protect the exclusive nature of the brand.
Production and inventory challenges include not knowing how much of each size, colour and style to make and distribute. In general, retailers produce similar levels of stock for all sizes to ensure fair coverage across a range. The problem is that retailers whose inventory is ill-informed can often find themselves with low sell-through rates and high volumes of discounted stock or, as in Burberry’s case, stock wastage.
Burberry isn’t the only brand that has an excess of unsold stock affecting its bottom-line. Richemont, the owner of luxury watch brands Cartier and Montblanc, has had to buy back around £430m worth of watches over the past two years. Wastage affects the whole industry and solving this challenge is key to staying competitive and achieving growth whilst maintaining brand equity.
Production and stocking problems often have knock-on effects. Customers that are offered promotions that only feature sizes that don’t fit, or styles that they are not interested in, leave those customers disappointed after an initial excitement after seeing an offer from a brand.
Disappointed customers may be forced elsewhere in search of the products that the retailer offered but couldn’t deliver. Trying to win those customers back will be a difficult and expensive task for any retailer, so investing in a positive customer experience and being able to deliver that experience to the individual is vital for retailers in a competitive market.
Data harmonisation, through the discipline of master data management, creates a single view of customers, stock and sales information to cut wastage through accurate sales data and forecasting. A master data management system connects existing data sources, like an EPoS, e-commerce site, WMS, and CRM system, and reinforces data disciplines across retailers to unify the data stored in these systems to create this single view.
Product and merchandising teams can use these powerful insights to accurately predict sales in particular the colours, styles, fit and sizing that their customer base actually wants to purchase. By understanding customers on an individual basis, and drawing on knowledge gained from the store EPoS and e-commerce systems, production teams know the right quantities of fabric to order to create the number of units that is actually required to manufacture. This leads to stock selling at full ticket price instead of being discounted or wasted.
For many retailers, teams operate in siloes – meaning that potentially valuable information collected in the store isn’t available for the production team, who may have their own data on sell-through rates that doesn’t accurately reflect the store front. Some products may be ordered in bulk by stores but when they arrive, they don’t have a high sell-through rate. Master data management solutions can resolve this challenge by breaking down siloes and ensuring every team across the business has access to the same relevant information.
There is no ‘one-size-fits-all’ approach to inventory management and each retailer will have their own challenges and goals. But retailers can predict sales with more accuracy when their customer data is true and relevant. Data harmonisation may sound like it is aimed at the IT department, but the benefits stretch across the whole business.
When implemented correctly, production and merchandising teams can see sales figures that show the sell-through rates for each style, colour and size and match future sell-through to historic trends. This ensures there is minimal residual stock at the end of a season, leading to maximised profit.