Minimising risk in fashion
Explain how Buyers and Merchandisersminimise risk when planning ranges for their fashion company.
Gabrielle (Coco) Chanel stated ‘Fashion does not only exist in dresses, fashion is in the air, it is brought in by the wind, one feels it coming, breathes it in the sky and on the pavement, it depends on ideas customers and happenings’ (Charles-Roux, 2005 p.11). The task of interpreting how the changing world is likely to impact the consumer’s desire for fashion products is difficult, and this is why fashion buyers and merchandisers turn to control tools.There are many control tools which a fashion company will use throughout its business structure in order to achieve maximum profit margins and to help minimise risk and to give themselves a strong competitive advantage over competitors. Control tools are a vital part of a fashion company in order for it to grow successfully and to remain competitive. Despite providing a number of advantages to a fashion company, control tools also present a number of disadvantages and limitations whereby they are only useful to a certain point , and this is when other control tools need to be put into the equation.
A key control tool used in the buying process is Range Planning. Range Planning involves compiling a commercially acceptable collection of garments within financial and design parameters, prior to production and delivery (Goworek 2007).The development of a range of products for a new season raises important strategic issues for fashion retailers about new products and markets. In any season there is always a balance struck between updated basics that will be repeated in some form, and completely new fashion products. A useful tool to help access the range of products for a season and to help minimise risk is the Ansoff product-market matrix. This planning tool helps distinguish the basic alternatives for increasing sales by manipulating product and market opportunities. It works well for the fashion industry where products are ever changing and new markets continually developing, hence this will help to minimise risk when planning ranges. Buyers and merchandisers should recognise the strategic alternatives indicated by the Ansoff Matrrix, and the differing implication of each to developing product ranges in a season (Watts, 1998). Essentially these alternatives represent different methods of increasing sales which will essentially help to maximise profits.
The difficulty fashion retailers face is where to strike the balance between the width of the range they offer and the depth of choice available in their range of products. ‘Range width’ refers to how wide a choice of products is to be offered to customers. Some fashion retailers e.g. Miss Selfridge, began selling clothing and accessories but have widened their product ranges to include jewellery, makeup and a whole host of other products reflecting the lifestyle needs of the consumer. The depth of a range refers to the choices of styles, colours, sizes and prices available to customers in significant numbers of units within production categories. When buyers and merchandisers are planning the range, they need to look at their target consumer to identify what product classification should be included and how many of each classification, this is to help minimise risk. Product Mix is an important element of Range planning. If assessed correctly, according to consumer needs and wants, the correct product mix will help to maximise profits. The advantage of having a product mix is that it can potentially increase the volume of sales, widening the range on offer helps to spread the financial risks which are potentially involved. In addition adding new ranges to the brand will help to diversify the fashion company and bring about new business opportunities and help to increase potential sales and profits. Having a broad product mix will also help to target new customers as well as creating and sustaining the interest of current consumers. Furthermore Product Mix is a key driver in the range planning process. The disadvantage of Product Mix as a control tool is an increased risk of stock markdowns if Product Mix on offer is too wide (Shaw, 2005).
When planning a range plan structure many retailers and buyers struggle to decide whether to continue with products which have sold well in the past but which are becoming ‘old fashioned’ such as the Laura Ashley pinafore daisy print dress (Shaw, 2005). A clear and up to date statement of the retailers’ market position and target customer, based on continuous research, will give the buyer confidence to be ruthlessly pragmatic over what to include and what not to keep in a range. This will help to minimise risk within the fashion company. When planning a product range, the Product Mix and classification plan are of vital importance; each product will have its own individual product life cycle (Doha, 2013). The product lifecycle of a product has four very clearly defined stages, each with its own characteristics, that mean different things for businesses that are trying to manage the life cycles of their particular products. These four distinct stages consist of: Introduction, Growth, Maturity and Decline. These four stages will vary considerably according to the type of product which is being sold, and whether it’s a classic, fad or fashion product.
Product lifecycle management is an important control tool within forecasting sales and seasons. It makes it possible to command the whole lifespan of a product and the information connected with it. Efficient product lifecycle management enables companies to compete successfully in international global markets (Stark, 2006). Product life cycle management is the activity of managing a company’s products all the way across its lifecycles in the most effective way. In so doing, it enables the company to take control of its products. If a company loses control of its products this can have disastrous effects. Therefore product life cycle management is a key control tool, for merchandisers and buyers. During the development of a product, it doesn’t physically exist, so during that phase of its life it’s difficult to control. PML helps to bring better products to market faster, and enable better support of customers’ use of products. It is important to bring a product to market quickly, otherwise the customer will choose a competitor’s product before yours get to market. An advantage for buyers and merchandisers of using the product lifecycle as a control tool is that it helps reduce the cost of a product. The product life cycle can be used by buyers and merchandisers to help minimise risk for their fashion companies by reviewing previous products’ lifecycles, where they peaked and where they started to decline. This can be used to an advantage to help plan the product life cycles of similar futuristic products which will help to control and estimate the life cycle of a product. It’s important to reduce product costs; otherwise consumers may stop using your product and use a competitor’s instead. PLM enables the value of a product to be maximised over its lifecycle. With accurate consolidated information about mature products available, low-cost ways can be found to extend their revenue-generating lifetimes. PLM gives transparency about what is happening over the product lifecycle; it offers managers visibility about what is really happening with products.. However the disadvantage of using the PLC is that the product lifecycle is just a theoretical model and the product lifecycle is not necessarily reflective of all fashion products.
Forecasting sales and seasons is a vital control tool which buyers and merchandisers have to implement in order to minimise risk with planning ranges for their fashion company.
Fashion forecasting looks at the financial contributions and the comparison of the seasons’ sales last year. Additionally fashion companies have to balance the customer’s choice with the need to achieve the best return of stock investment. The starting point for many fashion retailers is sales history, as it identifies what customers expect to buy from the business based on their current and past needs. Sales history may refer to last week’s sales, and as such also reflects customers’ current seasonal needs (Douglas 1997). There is much valuable information available to the buyer from the sales history of previous seasons. Patterns have probably been established of the type of fashion merchandise which the retailers’ customers have purchased in the past. Bestsellers from previous seasons need to be replaced with new yet equally profitable merchandise, The buyer needs to through ally analyse which factors contributed towards an items bestselling status (Goworek 2007).
Fashion season is an important element of the control tool ‘Forecasting sales and seasons’. Historically there have been two clearly defined and traditional fashion seasons, which are Autumn/Winter and SS. Easy (1995) explains that retailers have organised themselves around consumer demand that has traditionally been influenced by weather patterns. In the past there have been two clearly defined and traditional seasons and these are still firmly ingrained in our culture, even though they have increasingly less relevance to consumers and fashion businesses. With a greater emphasis on satisfying the fashion needs of customers’ changing life styles, fashion retailers have to buy more quickly and keep ranges focused on what customers want at particular times of the years, as opposed to satisfying two large period of demand, i.e. summer and winter. Another factor which has influenced customer demand is greater travel, as customers require clothing for a variety of climates and occasions out of season, e.g. swimwear in winter. In order to minimise risk fashion retailers have to buy more quickly and keep ranges focused on what customers want at a particular time of the year, as opposed to buying to satisfy two large periods of demand. In order for buyers and merchandisers to minimise risk is it vital that they also ‘buy’ in order to satisfy discreet ‘user occasions’. Increasing consumer demand is forcing retailers to retink product ranges around changed customer behaviour.
Product classification is a key element of Range Planning. It is vital for the merchandiser and buyer to forecast the product lifecycle of products with different classifications such as Fashion, Fad and Classic. The merchandiser plays a key role in working with the buyer to achieve the right balance of products within the seasons range. This is done by using a combination of sales history combined with forward sales and trend predictions. The amount of fashion and fad product in the Product Mix will determine the amount of flexibility needed. It is noted that the fashion style trend reviews begin many months in advance of a season.
Usually at the end of the previous season the buying and merchandising team will have undertaken what is known as a ‘seasons post mortem’. The advantages of undertaking a seasons post mortem is that it is a useful document for planning the future fashion direction of a fashion business and is helpful during the planning of a new season.
It is important to control the level of stock and type of stock that is in the business at any given time; this is carried out through fashion forecasting, and the examination of product categories to use in a season, such as Classic trench coats fashion or fads. The merchandise plan is an important control tool in order to minimise the risk of having too much ‘cost’ that risks being unsold (Shaw 2005). This relates to planning and profitability. It is vital to note that one of the most important goals in successful merchandising is to assist the process of achieving the planned level of buying profitability. ‘Buying profit’ can be defined as the difference between the cost price paid for the garment and the retail selling price in the shop. The mark up or profit made between the two prices can be explained by the following selling price equation. Retail selling price (RSP)-Cost Price (CP)=Gross Margin (or gross profit).
WSSI is an important control tool which is used every day in the life of a buyer and merchandiser. Throughout the year, it is vital for the merchandiser and buyer to build stock levels in anticipation of trading peak periods such as Christmas and high summer. The WISSI is very good at helping the buyer and merchandiser plan forward stock intake into the DC. Every Monday sales figures are awaited in order that buyers and merchandisers can identify fast selling lines that need repeat buys to ensure that they are kept in stock. On the other hand it is also the Monday figures which reveal the worst sellers that eventually will require having their prices marked down. Thus the WISSI helps to manage and control risk. The WISSI is one of the most valuable reports used by the buyer. It includes sales and inventory levels by style for the previous week. The WISSI acts as an overall control mechanism to ensure that the flow of stock and money in the business is happening efficiently. WSSI is an important control tool for buyers and merchandisers because it importantly works alongside the delivery schedule. It lists the week and the day when the suppliers have been requested to deliver the garments to the DC. Being aware of exactly what is going to be delivered is also of key interest to shop and promotional management functions of the organisations; this can help manage risk and provide a competitive advantage for the fashion company. One of the key merchandising activities controlled by using the WISSI is the aspect of line level price alteration that regularly occurs within all fashion businesses. Ideally at the start of the season, the buyer and merchandiser aim to create a price structure that relates to the type of customers to whom they are selling. Prices must also be competitive to ensure they are in line with major competition.
Overall WISSI acts as the central merchandising management document within fashion retailing; it is only part of a wider range of planning documents. It is unashamedly an internal financial control document which is a summary of all the trading activity within the department and ultimately the entire business.
There are disadvantages of WISSI as a control tool. Taken out of context, it can be a meaningless page of figures. It requires careful interpretation, using experience to manipulate both it and the buying, if the department is to succeed. It is important to remember that fashion is not formulaic; merchandisers try to use it in a formulaic way, producing it without understanding. Therefore it is important that merchandisers and buyers do not react too quickly to sudden good and bad sales patterns; reaction to the WSSI must be both considered and careful.
Overall the important of understanding the workings of WSSI should not be underestimated. Using this control document the merchandiser has considerable advantages and is able to keep weekly updates of past, present and likely future performances of the department and management to regularly check their performances against the original plan. More importantly it acts as a decision-making tool to help the business decide what action to take on an ongoing regular basis. This will more importantly help to minimise risk and help to maximise profits.
To conclude there are a number of control tools which buyers and merchandisers can use in order to minimise risk and maximise profits when planning ranges for their fashion companies. There are considerable advantages of using a number of control tools in order to gain competitive advantages over similar fashion companies and competitors and to help increase profit margins. Fashion companies will strategically use a combination of control tools in order plan ahead to give themselves the greatest chance of success. For a fashion company to succeed it has to “reflect the needs and the desires of a generation at a particular point in time. It has to be of the moment, but with eternal values that will always be recognised” (Menkes 2001)
References:
Ahmed Doha, Ajay Das, Mark Pagell, (2013) "The influence of product life cycle on the efficacy of purchasing practices", International Journal of Operations & Production Management, Vol. 33 Iss: 4, pp.470 – 498
Charles-Roux, E. (2004_. The world of Coco Chanel. Friends Fashion Fame. London:Thames and Hudson, p.11
Douglas C. West, (1997) "Managing Sales Forecasting", Management Research News, Vol. 20 Iss: 4, pp.1 – 10
Easy,M.(1995) Fashion Marketing. Oxford: Blackwell Science.
Goworek, H (2007). Fashion Buying. London: Blackwell. p44-45.
Hines.T, et al.(2007)Fashion Marketing: contemporary issues. Routledge; 2 edition (2006)
Jackson.T, et al.(2000)Fashion Buying and merchandising management# Gerald Watts, Jason Cope, Michael Hulme, (1998) "Ansoff’s Matrix, pain and gain: Growth strategies and adaptive learning among small food producers", International Journal of Entrepreneurial Behaviour & Research, Vol. 4 Iss: 2, pp.101 – 111
Stark, J (2006). Product Lifecycle Mangament 21st Centuryhttp://cdncache-a.akamaihd.net/items/it/img/arrow-10x10.png Paradigm for Product Realisation. London: Dordrecht : Springer 2006. P 4-5
