Fashion Merchandising: Principles and Practice [Team-IRA] [2 ed.] 1352011107, 9781352011104

Table of contents :
SHORT CONTENTS
CONTENTS
LIST OF FIGURES
LIST OF TABLES
LIST OF CASE STUDIES,FOCUS POINTS AND PROFILES
Preface
Acknowledgements
Abbreviations
Introduction
PART I: INTRODUCTION AND CONTEXT OF THE FASHION MERCHANDISER ROLE
FASHION RETAILING
INTRODUCTION
RETAILING: FROM CONSUMPTION TO CONSUMERISM
INDUSTRY DEREGULATION
THE CHANGING PLAYERS IN THE RETAIL MARKET
SEEKING COMPETITIVE ADVANTAGE
FU RTHER READING
BIB LIOGRAPHY
FASHION, BUSINESS AND PRODUCT
INTRODUCTION
FASHION BUSINESS – A PARADOX?
THE ROLE OF PRODUCT WITHIN A FASHION BUSINESS
BALANCED PRODUCT RANGES
BALANCED BUDGETS
WORKING TOGETHER – BUYING AND MERCHANDISING
THE CONCEPT-TO-CARRIER BAG MODEL
AN INTRODUCTION TO THE BUYER AND MERCHANDISER ROLES
F URTHER READING
B IBLIOGRAPHY
THE ACTIVITIES OF BUYING AND MERCHANDISING
INTRODUCTION
BUYING AND MERCHANDISING REVIEW
THE ROLE OF THE FASHION BUYER
THE ROLE OF THE FASHION BUYER IN DETAIL – HANNAH MIDDLETON, MANAGEMENT CONSULTANT AND LECTURER
THE SKILL SET OF FASHION BUYERS
THE ROLE OF THE FASHION MERCHANDISER
THE ROLE OF THE FASHION MERCHANDISER IN DETAIL – Mary Anderson Ford, AquaRetail
THE SKILL SET OF FASHION MERCHANDISERS
FU RTHER READING
BI BLIOGRAPHY
ORGANIZING BUYING AND MERCHANDISING
INTRODUCTION
THE VALUE CHAIN
THE STRUCTURE OF BUYING AND MERCHANDISING
Assistant buyer
Buying administration assistant (BAA)
Assistant merchandiser
Allocator
Reorganizing the B&M structure
THE BUYER AND THEIR KEY CONTACTS
THE MERCHANDISER AND THEIR KEY CONTACTS
MEETING SCHEDULES – HOW B&M WORK WITH OTHER ACTIVITIES IN THE VALUE CHAIN
F URTHER READING
B IBLIOGRAPHY
PART II: FASHION MERCHANDISING
FASHION MERCHANDISING: THE PRENTICE DAY CASE STUDY
INTRODUCTION
PRENTICE DAY MENSWEAR CASE STUDY
INITIAL APPROACHES TO UNDERSTANDING A BUSINESS
UNDERSTANDING THE MACRO ENVIRONMENT
IDENTIFYING A PLANNING STRATEGY
F URTHER READING
FASHION MERCHANDISING: RESEARCH AND ANALYSIS
INTRODUCTION
RETAIL MATHEMATICS VERSUS COMMERCIAL ACUMEN
BUDGET ANALYSIS
PRODUCT ANALYSIS
SETTING A BUDGETING STRATEGY
F URTHER READING
FASHION MERCHANDISING: BUDGETING
INTRODUCTION
BUDGETS BECOME KPI BUDGETS
KPI BUDGETING – SALES TURNOVER BUDGETING
KPI BUDGETING – MARKDOWN SPEND BUDGETING
KPI BUDGETING – INTAKE MARGIN BUDGETING
KPI BUDGETING – STOCK TARGET BUDGETING
KPI BUDGETING – GROSS TRADING PROFIT BUDGETING
KPI BUDGETING – KPI BUDGET REVIEW
F URTHER READING
FASHION MERCHANDISING: OPEN-TO-BUY
INTRODUCTION
WHAT IS OPEN-TO-BUY?
CREATING AN OPEN-TO-BUY BUDGET
A REVIEW OF THE OTB AND BUDGETING PROCESS
THE WSSI – OPEN-TO-BUY PHASING
THE PRENTICE DAY CASUAL WEAR WSSI
F URTHER READING
B IBLIOGRAPHY
9: FASHION MERCHANDISING: RANGE PLANNING
INTRODUCTION
AN INTRODUCTION TO RANGE PLANNING
THE RANGE PLAN
THE OPTION DETAIL – QUALITATIVE AND QUANTITATIVE ASPECTS
CREATING THE OPTION DETAIL
A SUMMARY OF THE RANGE-PLANNING PROCESS
F URTHER READING
FASHION MERCHANDISING: SIZING, DELIVERIES AND ALLOCATION
INTRODUCTION
THE MERCHANDISER–SUPPLIER RELATIONSHIP
SIZE CURVES
INITIAL ALLOCATIONS
A SUMMARY OF THE PLANNING PROCESS
F URTHER READING
B IBLIOGRAPHY
PART III: FASHION MERCHANDISING AND THE MODERN TRADING ENVIRONMENT
MERCHANDISING: A GLOBAL PERSPECTIVE
INTRODUCTION
GLOBAL MERCHANDISING CASE STUDIES
PERSPECTIVES ON THE MERCHANDISER ROLE
F URTHER READING
B IBLIOGRAPHY
E-COMMERCE AND THE MERCHANDISER ROLE
INTRODUCTION
E-COMMERCE INTRODUCTION
E-COMMERCE AND BUYING AND MERCHANDISING
E-COMMERCE AND COMPETITIVE SHOPPING
F URTHER READING
B IBLIOGRAPHY
THE MERCHANDISER AND THE SUPPLY CHAIN
INTRODUCTION
SUPPLY CHAIN MANAGEMENT
THE FASHION SUPPLY CHAIN
PLANNING TOOLS TO SUPPORT THE SUPPLY OF PRODUCT
GLOBALIZATION AND THE SUPPLY CHAIN
F URTHER READING
BIB LIOGRAPHY
SUSTAINABILITY AND  PRODUCT MANAGEMENT (co-authored with Hannah Middleton)
INTRODUCTION
SUSTAINABILITY WITHIN PRODUCT MANAGEMENT
ENVIRONMENTAL IMPACTS
SOCIAL IMPACTS
THE MERCHANDISER AND SUSTAINABILITY
SUSTAINABILITY AND KPI BUDGETING
SUSTAINABILITY AND STOCK MANAGEMENT
THE CIRCULAR ECONOMY
SUMMARIZING FASHION MERCHANDISING: PRINCIPLES AND PRACTICE
F URTHER READING
B IBLIOGRAPHY
GLOSSARY
UK/EUROPEAN–AUSTRALIAN TERMINOLOGY GLOSSARY
Other terms relevant to the Australian retail environment
Index

Citation preview

Fashion Merchandising Principles and Practice SECOND EDITION

James Clark

Fashion Merchandising

Fashion Merchandising Principles and Practice SECOND EDITION

James Clark

© James Clark, under exclusive licence to Macmillan Education Limited 2021 © James Clark 201 5 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. This edition published 2021 by RED GLOBE PRESS Previous editions published under the imprint PALGRAVE Red Globe Press in the UK is an imprint of Macmillan Education Limited, registered in England, company number 01755588, of 4 Crinan Street, London, N1 9XW. Red Globe Press® is a registered trademark in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-352-01110-4 paperback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress.

SHORT CONTENTS List of Figures

xii

List of Tables

xiii

List of Case Studies, Focus Points and Profiles

xvi

Preface

xviii

Acknowledgements

xix

Abbreviations

xx

Introductionxxi

PART I: INTRODUCTION AND CONTEXT OF THE FASHION MERCHANDISER ROLE

1

  1 Fashion Retailing  3   2 Fashion, Business and Product 20   3 The Activities of Buying and Merchandising 40   4 Organizing Buying and Merchandising 57

PART II: FASHION MERCHANDISING

81

  5 Fashion Merchandising: The Prentice Day Case Study 83   6 Fashion Merchandising: Research and Analysis 94   7 Fashion Merchandising: Budgeting 112   8 Fashion Merchandising: Open-to-Buy 134   9 Fashion Merchandising: Range Planning 155 10 Fashion Merchandising: Sizing, Deliveries and Allocation 172

PART III: FASHION MERCHANDISING AND THE MODERN TRADING ENVIRONMENT187 11 Merchandising: A Global Perspective 189 12 E-commerce and the Merchandiser Role 208

v

vi

Short Contents

13 The Merchandiser and the Supply Chain 227 14 Sustainability and Product Management (co-authored with Hannah Middleton) 247 Glossary 265 UK/European–Australian Terminology Glossary  271 Index272

CONTENTS List of Figures

xii

List of Tables

xiii

List of Case Studies, Focus Points and Profiles

xvi

Preface

xviii

Acknowledgements

xix

Abbreviations

xx

Introductionxxi

PART I: INTRODUCTION AND CONTEXT OF THE FASHION MERCHANDISER ROLE 1

1

Fashion Retailing  3 INTRODUCTION    3 RETAILING: FROM CONSUMPTION TO CONSUMERISM    4 INDUSTRY DEREGULATION    7 THE CHANGING PLAYERS IN THE RETAIL MARKET    10 SEEKING COMPETITIVE ADVANTAGE   13 SUMMARY18 SELF-DIRECTED STUDY 18 Further Reading   19 Bibliography19

2 Fashion, Business and Product 20 INTRODUCTION   20 FASHION BUSINESS – A PARADOX?    21 THE ROLE OF PRODUCT WITHIN A FASHION BUSINESS    24 BALANCED PRODUCT RANGES   25 BALANCED BUDGETS   27 WORKING TOGETHER – BUYING AND MERCHANDISING    30 THE CONCEPT-TO-CARRIER BAG MODEL   30 AN INTRODUCTION TO THE BUYER AND MERCHANDISER ROLES    35 SUMMARY38 SELF-DIRECTED STUDY 39 Further Reading   39 Bibliography39 vii

viii

Contents

3 The Activities of Buying and Merchandising 40 INTRODUCTION   40 BUYING AND MERCHANDISING REVIEW    41 THE ROLE OF THE FASHION BUYER    41 THE ROLE OF THE FASHION BUYER IN DETAIL – HANNAH MIDDLETON, MANAGEMENT CONSULTANT AND LECTURER   41 THE SKILL SET OF FASHION BUYERS    43 THE ROLE OF THE FASHION MERCHANDISER    47 THE ROLE OF THE FASHION MERCHANDISER IN DETAIL – MARY ANDERSON FORD, AQUARETAIL    48 THE SKILL SET OF FASHION MERCHANDISERS    52 SUMMARY55 SELF-DIRECTED STUDY 56 Further Reading   56 Bibliography56

4 Organizing Buying and Merchandising 57 INTRODUCTION   57 THE VALUE CHAIN   58 THE STRUCTURE OF BUYING AND MERCHANDISING    60 THE BUYER AND THEIR KEY CONTACTS   69 THE MERCHANDISER AND THEIR KEY CONTACTS   71 MEETING SCHEDULES – HOW B&M WORK WITH OTHER ACTIVITIES IN THE VALUE CHAIN    73 CHAPTER AND PART I SUMMARY 78 SELF-DIRECTED STUDY 78 Further Reading   79 Bibliography79

PART II: FASHION MERCHANDISING

81

5 Fashion Merchandising: The Prentice Day Case Study 83 INTRODUCTION   83 PRENTICE DAY MENSWEAR CASE STUDY    84 INITIAL APPROACHES TO UNDERSTANDING A BUSINESS    87 UNDERSTANDING THE MACRO ENVIRONMENT   89 IDENTIFYING A PLANNING STRATEGY   91 SUMMARY 92 SELF-DIRECTED STUDY 93 Further Reading   93

Contents

6 Fashion Merchandising: Research and Analysis 94 INTRODUCTION   94 RETAIL MATHEMATICS VERSUS COMMERCIAL ACUMEN   95 BUDGET ANALYSIS   96 PRODUCT ANALYSIS  103 SETTING A BUDGETING STRATEGY   110 SUMMARY111 SELF-DIRECTED STUDY111 Further Reading  111

7 Fashion Merchandising: Budgeting 112 INTRODUCTION  112 BUDGETS BECOME KPI BUDGETS   113 KPI BUDGETING – SALES TURNOVER BUDGETING   115 KPI BUDGETING – MARKDOWN SPEND BUDGETING   120 KPI BUDGETING – INTAKE MARGIN BUDGETING   123 KPI BUDGETING – STOCK TARGET BUDGETING   126 KPI BUDGETING – GROSS TRADING PROFIT BUDGETING   129 KPI BUDGETING – KPI BUDGET REVIEW   130 SUMMARY132 SELF-DIRECTED STUDY 133 Further Reading  133

8

Fashion Merchandising: Open-to-Buy 134 INTRODUCTION  134 WHAT IS OPEN-TO-BUY?  135 CREATING AN OPEN-TO-BUY BUDGET  136 A REVIEW OF THE OTB AND BUDGETING PROCESS   139 THE WSSI – OPEN-TO-BUY PHASING   141 THE PRENTICE DAY CASUAL WEAR WSSI   143 SUMMARY154 SELF-DIRECTED STUDY 154 Further Reading  154 Bibliography 154

9 Fashion Merchandising: Range Planning 155 INTRODUCTION  155 AN INTRODUCTION TO RANGE PLANNING   156 THE RANGE PLAN   157 THE OPTION DETAIL – QUALITATIVE AND QUANTITATIVE ASPECTS   161 CREATING THE OPTION DETAIL  165 A SUMMARY OF THE RANGE-­PLANNING PROCESS   169

ix

x

Contents

SUMMARY171 SELF-DIRECTED STUDY 171 Further Reading  171

10 Fashion Merchandising: Sizing, Deliveries and Allocation 172 INTRODUCTION  172 THE MERCHANDISER–SUPPLIER RELATIONSHIP   173 SIZE CURVES  175 INITIAL ALLOCATIONS  180 A SUMMARY OF THE PLANNING PROCESS   184 CHAPTER AND PART II SUMMARY 185 SELF-DIRECTED STUDY 185 Further Reading  185 Bibliography185

PART III: FASHION MERCHANDISING AND THE MODERN TRADING ENVIRONMENT

187

11 Merchandising: A Global Perspective 189 INTRODUCTION  189 GLOBAL MERCHANDISING CASE STUDIES   190 PERSPECTIVES ON THE MERCHANDISER ROLE   201 SUMMARY206 SELF-DIRECTED STUDY 206 Further Reading  206 Bibliography207

12 E-commerce and the Merchandiser Role 208 INTRODUCTION  208 E-COMMERCE INTRODUCTION  209 E-COMMERCE AND BUYING AND MERCHANDISING   211 E-COMMERCE AND COMPETITIVE SHOPPING  219 SUMMARY225 SELF-DIRECTED STUDY 225 Further Reading  226 Bibliography 226

13 The Merchandiser and the Supply Chain 227 INTRODUCTION  227 SUPPLY CHAIN MANAGEMENT  228 THE FASHION SUPPLY CHAIN   230 PLANNING TOOLS TO SUPPORT THE SUPPLY OF PRODUCT   232 GLOBALIZATION AND THE SUPPLY CHAIN   236

Contents

SUMMARY245 SELF-DIRECTED STUDY 245 Further Reading  246 Bibliography 246

14 Sustainability and Product Management (co-authored with Hannah Middleton) 247 INTRODUCTION  247 SUSTAINABILITY WITHIN PRODUCT MANAGEMENT   248 ENVIRONMENTAL IMPACTS  248 SOCIAL IMPACTS  249 THE MERCHANDISER AND SUSTAINABILITY   252 SUSTAINABILITY AND KPI BUDGETING   253 SUSTAINABILITY AND STOCK MANAGEMENT   255 THE CIRCULAR ECONOMY  257 SUMMARIZING FASHION MERCHANDISING: PRINCIPLES AND PRACTICE   260 SELF-DIRECTED STUDY 263 Further Reading  263 Bibliography 264 Glossary 265 UK/European–Australian Terminology Glossary  271 Index272

xi

LIST OF FIGURES 2.1 The ten sequential steps of the concept-to-carrier bag process model 4.1 The value chain – primary activities 4.2 The value chain – support activities 4.3 The value chain and the retail concept-to-carrier bag process 4.4 A classic buying and merchandising office structure 4.5 B&M structure with buying and merchandising roles separated 4.6 An example of a buying, merchandising and distribution structure chart 4.7 The buyer and their key contacts 4.8 The merchandiser and their key contacts 4.9 The planning schedule of meetings 4.10 The trading schedule of meetings 5.1 The product hierarchy of Prentice Day 5.2 Prentice Day store layout 7.1 The sales planning pyramid 13.1 The Buyerplan tool 14.1 The value chain – primary activities 14.2 The circular value chain – primary activities

xii

31 58 58 59 61 67 68 69 72 74 76 85 89 116 232 257 258

LIST OF TABLES 1.1 Technological developments within product management 1.2 Differing retail format examples 2.1 Examples of fashionability attributes 2.2 Examples of pricing attributes 2.3 A profit and loss account example 2.4 A balance sheet example 2.5 The definition of each process step within the concept-to-carrier bag model 2.6 The concept-to-carrier bag process timings for a spring/summer season 2.7 The concept-to-carrier bag process timings for an autumn/winter season 2.8 An example of a two-phase concept-to-carrier bag model 2.9 The buyer activities of the concept-to-carrier bag model 2.10 The merchandiser activities of the concept-to-carrier bag model 3.1 The summary activities of the buyer 3.2 The detailed activities of the buyer 3.3 The summary activities of the merchandiser 3.4 The detailed activities of the merchandiser 4.1 The buyer and their key contacts in detail 4.2 The merchandiser and their key contacts in detail 4.3 The range meeting process 4.4 Completing the range meeting process 4.5 The trading meeting process 5.1 The Prentice Day 4P marketing mix 5.2 The Prentice Day SWOT analysis 5.3 Gross trading profit by product group compared with budget and the previous year figures 5.4 Prentice Day sales densities 5.5 Analysis tools of the merchandiser 5.6 Prentice Day macro environment research summary 5.7 Initial research summary 6.1 The concept-to-carrier bag model 6.2 The percentage mix calculation 6.3 The percentage variance calculation 6.4 Overall business shape analysis 6.5 Sales turnover analysis xiii

9 10 26 26 28 28 31 33 33 34 35 36 42 44 48 50 70 72 75 75 76 85 87 88 89 90 91 91 95 96 97 97 98

xiv

List of Tables

6.6 Markdown spend analysis 6.7 Stock level analysis 6.8 Intake margin analysis 6.9 Gross trading profit analysis 6.10 The rate of sale calculation 6.11 The sell-through rate calculation 6.12 The weeks cover calculation 6.13 The casual wear range 6.14 Range assumptions analysis 7.1 The concept-to-carrier bag model 7.2 Key performance indicators budget summary 7.3 Adding inflation growth of 2 per cent 7.4 Increasing the total sales turnover budget to 10 per cent growth on the year 7.5 Common-sense checking of sales budgets 7.6 Revised sales turnover budgets 7.7 Relationship between sell-­through rate and markdown spend 7.8 Previous year markdown percentage to sales summary 7.9 Markdown spend budgets 7.10 Intake margin percentage by product category 7.11 An example of the impact of debt on profitability 7.12 Minimum credible offer calculation 7.13 Resupply time stock calculation 7.14 Completed budget summary sheet 8.1 The concept-to-carrier bag model 8.2 Example of buying using a mark-up method 8.3 Open-to-buy monitor 8.4 Identify the sales budget percentage mixes 8.5 Apply the percentage mixes to the total opening and closing stocks 8.6 The open-to-buy monitor updated with opening and closing stock budgets 8.7 Completed open-to-buy monitor 8.7 Completed open-to-buy monitor REPLICATED 8.8 The WSSI 8.9 The draft WSSI for Prentice Day casual wear 8.10 The final WSSI for Prentice Day casual wear 8.11 Open-to-buy phasing by month 9.1 The concept-to-carrier bag model 9.2 The casual wear range plan 9.3 The casual wear range plan 9.4 The calculated casual wear range plan 9.5 Cotton T-shirt and raw silk print shirt product characteristics

99 100 101 102 103 103 104 104 107 113 114 116 117 117 118 120 121 122 124 126 127 128 130 135 135 137 137 137 137 138 143 144 146 149 151 156 157 158 159 162

List of Tables

9.6 The option detail 9.7 The completed option detail for casual wear T-shirts 9.8 Fashionability analysis 9.9 Unit buy analysis 9.10 Price analysis 9.11 Colour analysis 10.1 The concept-to-carrier bag model 10.2 Size curves at week 3 10.3 Size curves at week 6 10.4 Size curves at week 9 10.5 Size curves at week 12 10.6 The completed range plan for casual wear T-shirts 10.7 Size curve for the white basic T-shirt 10.8 Draft allocation plan 10.9 Final allocation plan 11.1 The strategic relevance of buying and merchandising within retail business models 11.2 Key relationships between B&M and other value system roles 11.3 Innovation impact on the B&M role 11.4 B&M activities within an omni-­channel environment 12.1 Multi-channel taxonomy 12.2 e-Commerce analysis tools 13.1 Buyerplan applications in detail 13.2 The concept-to-carrier bag and the Buyerplan tool 14.1 Revised KPI summary to include supplier funding 14.2 Retrospective discount approach to supplier funding 14.3 The concept-to-carrier bag and circularity

166 166 167 168 168 169 173 175 176 176 176 178 179 181 182 202 203 204 205 209 214 233 234 254 255 259

xv

LIST OF CASE STUDIES, FOCUS POINTS AND PROFILES CASE STUDIES 1.1 Burberry and their brand personality 6 1.2 Bra Wars 7 1.3 Zara and competitive advantage 14 1.4 Farfetch, Lyst and Net-a-Porter – new ways of business 15 2.1 Marks & Spencer – poor product planning and financial performance 29 4.1 Superdry – the importance of all value chain activities working together 59 11.1 Australia – Julie Dugandzic, RMIT, Melbourne 190 11.2 India – Gaggan Bhatia, Pearl Academy, New Dehli 193 11.3 The Philippines – Ana Pingol, Business Consultant, Manila 195 11.4 United States of America – Michael P. Londrigan, LIM, New York 199 12.1 The merchandiser and e-commerce – Adam Rose, Debenhams 211 12.2 The buyer and e-commerce – Zoe Hinton, London College of Fashion 215 12.3 Using big data and competitive shopping – Kristina Mills, EDITED219 14.1 People Tree – ethical trading in focus 251 14.2 The merchandiser and e-commerce – Joseph Kearins, IBM261

FOCUS POINTS 1.1 The changing consumer 1.2 Retailing in the twenty-first century 2.1 Fashion business 2.2 The role of product – the use of attributes 2.3 The buying cycle and fast fashion 4.1 Leading the buying and merchandising function - Heather Delaney, merchandising lecturer 5.1 The marketing mix 5.2 The SWOT 7.1 Sales turnover budgets and like for like 7.2 Sales turnover budgets – the importance of getting them right 7.3 KPI budgeting – the cake and its ingredients 7.4 What is stock turn? 7.5 KPI budgeting and retail operations 8.1 Open-to-buy – to release or not to release? 8.2 The WSSI – the whole story xvi

12 17 22 27 37 77 84 86 119 122 124 128 131 138 152

List of Case Studies, Focus Points and Profiles

9.1 The initial option plan and brand personality 9.2 Multi-­store range planning 9.3 The 80/20 rule 10.1 The importance of sizing within fashion 10.2 Allocation planning – the OOS percentage 13.1 Business-­to-­business online trading 13.2 The plethora of supply chain approaches 13.3 Blockchain – the next step in collaboration 13.4 GS1 UK, Supply chain standards and visibility 13.5 Supply chain capability

161 163 170 179 183 229 231 235 237 242

PROFILES 3.1 The role of the buyer – Sennait Ghebreab 3.2 The role of the buyer – Rachel Finch 3.3 The role of the merchandiser – Katie Nolan 3.4 The role of the merchandiser – Rachel Langdon 3.5 The role of the merchandiser – Lee Brazil 4.1 A day in the life of a buyer’s administration assistant – Victoria Schmierer 4.2 A day in the life of an assistant merchandiser – Charmaine Leong 4.3 A day in the life of a merchandise distribution assistant – Megan Jones 4.4 Merchandise distribution assistant – Nismah Siddique 4.5 A day in the life of a branch merchandiser – Charlotte Daly 12.1 A day in the life of an e-commerce merchandiser – Elise Thomas – beauty retailing 13.1 A day in the life of an international merchandiser – Rachel Moyse – fashion retailing

43 47 52 53 54 63 64 65 66 68 210 241

xvii

PREFACE The world of buying and merchandising in 1988 was very different to the one that exists today. I learned quickly about the processes and activities of a busy buying office, the first being that it was very loud. The buzz of telephones, fax machines and people blended together into a constant background noise, which seems lost in many of the buying offices of today. The most striking difference was that of waiting. My role as an allocator meant I had to go and collect sales and stock data printouts for review. Our allocation system did not work on a Monday, and stores had to send stock requests in the post. We had to queue up to send a fax or telex from the only machines able to do so. Contrast that with the retail business world of the twenty-first century. Online data are readily available, meaning that the concept of waiting to make a decision is rarely experienced. One of the benefits of waiting-­ time is the opportunity to think; today, the inevitable surge of data availability often feels as if one cannot see the core message. This ‘analysis paralysis’ is symptomatic of a loss of focus required to create that perfect product range and earn that life-changing bonus. The first edition of Fashion Merchandising: Principles and Practice was written to lay out not just the role and activities of the fashion merchandiser, but also demonstrate why I believe the role to be integral within fashion retailing. The approach to its writing was to identify the practical process and the principles that guide the role, to explain why that process is important, but also how it can add value within product management. This second edition has kept true to the spirit of the first. It differs significantly in Part III, which is focused on exampling how different business imperatives such as omnichannel operations and internationalization are impacting the core merchandiser role. Part III is written predominantly by industry practitioners to reflect their expertise in an ever evolving industry.

xviii

ACKNOWLEDGEMENTS This second edition has been written with the support of many people. At Macmillan International Higher Education, Isabelle Cheng and Milly Weaver have been supportive commissioning editors. Within the University of the Arts, I would like to acknowledge the support and encouragement of Rosemary Varley individually for supporting and facilitating much of my journey; without her help, this second edition book would not have been completed. Finally, I would like to thank again members of my family: Tim, Ann, Lucy, Percy, Mildred, John and Kathleen.

 xix

ABBREVIATIONS 4P B2B B&M BAA BTA C2B CR CRM

L LFL LFW M MCO MFA MIS MRP NGO OTB PO POS QR S SKU SOR SWOT

Marketing mix Business to business Buying and merchandising Buyer’s administration assistant Balance to achieve Customer to business Continuous replenishment Customer relationship management DC Distribution centre EBITDA Earnings before interest, taxes, depreciation, amortization EDI Electronic data interchange ESS End-of-season sale ETI Ethical Trade Initiative EU European Union GATT General Agreement on Tariffs and Trade GDP Gross domestic product IBS Incentive bonus scheme ICT Information and communications technology JIT Just in time KPI Key performance indicator

USP VAT VM WSSI XL XS

xx  xx

Large Like for like London Fashion Week Medium Minimum credible offer Multi Fibre Arrangement Management information systems Manufacture resource planning Non-governmental organization Open-to-buy Purchase order Point of sale Quick response Small Stock keeping unit Sales or return Strengths, weaknesses, opportunities, threats Unique selling point Value added tax Visual merchandising Weekly stock, sales and intake Extra large Extra small

INTRODUCTION Many people have met emerging professionals who have aspired to becoming a fashion buyer. A lot fewer have met aspiring merchandisers. Of those, many confuse it with the visual merchandising or supply chain disciplines. This is not surprising, as many of the role’s activities are hidden from view and not easily identifiable within the ranges within stores. In addition, the role is not a globally uniform one, and in different places around the world its title and activities differ. In North America, for example, the term ‘merchandising’ is more akin to the UK buying role, while in Asia, it sits more comfortably within the supply chain role. There have been many excellent resources created for the creative and buyer-led activities within buying and merchandising, but few for merchandising. Of those which do exist, many refer to merchandising activities within the context of a bigger subject such as retail management, or provide a review within a related specialism, most notably fashion buying. The fundamental aim of this book, therefore, is to provide a perception of the role, its relevance and place within fashion management. This is achieved from the perspective of the UK and provides a mix of discussion and application. As such, it will debate various topics and present an argument for a delineation of the merchandiser activities as distinct from those of the buyer, and then move on to a practical demonstration of the role. One characteristic of the fashion retailing industry today is the myriad of business models that exist, all of which differ in some way in their use of the buying and merchandising function. It therefore would be impossible to cover every possible nuance of the role and then comment on its use in differing businesses. In addition, it would be impractical not to have to make assumptions within the text to help make the practical demonstration concise. As full a review of the processes of the merchandiser has been made as possible, but this text cannot be authoritative. Those in the industry studying in further and higher education, and postgraduates, should find that the text provides a framework around which they can further develop their careers or studies. The exercises that have been created and are available on the companion website will also enable readers to try out their own planning process to see it at work. To facilitate all the above, this second edition book is divided into three parts: 1. An introductory discussion, justification and explanation of the fashion merchandiser role. 2. A fictional case study to demonstrate the role in action that follows a ‘concept-­to-carrier bag’ process model. 3. A set of summary discussions and industry practitioner-led case studies of influences that impact the merchandiser role in a global, 24-hour commercial world.

xxi

xxii

Introduction

To support the context of the role, Part I also includes a review of the fashion buyer role, and the support roles within a buying and merchandising department. Beyond that, the book concentrates almost exclusively on the fashion merchandiser, and so some chapters, in particular in Part III, are discussed within the remit of the fashion merchandiser role only. At its heart, this book presents a view on product management from the perspective of a highly numerate and logical standpoint. As the book unfolds, the reader is encouraged to relate this theoretical standpoint with the world around them, to make their own informed judgement of its relevance within their own individual set of professional or educational circumstances. Fashion Merchandising: Principles and Practice is supported with online resources for both lecturers and students (available from: www.macmillanihe.com/companion/ClarkFashion-Merchandising-2e). For lecturers – a range of lecture slides are provided that can be used to form the basis of a lecture programme. The slides follow the structure of the chapters for which they are relevant and offer discussion points and, in some cases, practical walk-through examples. The detail of some of these should be reinterpreted as required. For lecturers and students – a range of exercises are provided to support the case study provided in Part II. The case study has been written to show a process and to present ideas more clearly; the decision points have been simplified, but where relevant, the numbers used have been exaggerated. The exercises provided concentrate on re-enforcing the mathematical calculations but also offer discussion questions to allow interpretation of data.

PART I INTRODUCTION AND CONTEXT OF THE FASHION MERCHANDISER ROLE

Part I will set the scene for the demonstration of the activities of the fashion merchandiser and has been written to draw attention to the retail context which makes the rationale for the role so compelling. These first four chapters will dissect the factors that influence a retailer’s ability to secure a competitive advantage within a highly lucrative but risk-laden industry. It will draw attention to topics such as the retailing context, industry deregulation and technological advances to prompt thought about what makes it imperative for the role to exist. Part I will then go on to summarize the role of buying and merchandising, to pinpoint where the fashion merchandiser adds value to the process of product management. Finally, it will identify a definition of the buying and merchandising function, to in turn, discuss how the buyer and merchandiser role works alongside other areas of a fashion retail business. The one caveat to the accurate depiction of this role is that there is no single version upon which one can rely. Throughout this book, it should become clear that the very breadth of the fashion retail industry means that roles, processes and activities vary from business to business and sector to sector. At best, this first part will provide a generic review that takes key points and influences and discusses them to build an argument in favour of the addition of a distinct merchandiser role within a fashion retail business. This role that can be described as uniquely placed to bring a modicum of effective order and process to the fast-paced and volatile creativity of buying and merchandising. 1

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INTENDED LEARNING OUTCOMES 1.

An appreciation of the size and scale of the fashion retail industry.

2. An awareness of the influences that have contributed to the industry size and shape of today. 3. To have a summary understanding of the twin impacts of supply and demand developments within the industry. 4. To demonstrate competitive advantage and its relevance within product management.

INTRODUCTION The fashion industry by any measure is significant – it is large by value, employment and cultural influence. The tentacles of fashion reach almost every aspect of our day-to-day lives, fulfilling a functional need for clothing but also enabling personal projections of ourselves to the world. The business case for participating within such a diverse and multifaceted market is compelling, offering many commercial opportunities – different product types, distribution channels, markets, employment and of course wealth. It is also an innovative and ever evolving industry, influenced by the inevitable changes in culture, emergent trends and attitudes which rise and fall, eventually giving way to those that follow. To set the context of this book, this chapter briefly reviews the retail industry and comments on its characteristics, whilst recognizing the permanent state of flux which the industry is in. This will be done predominantly from a UK perspective to keep it in line with the definition of the fashion merchandiser role that forms the bulk of this book. The chapter will conclude by discussing the implications of developing an enduring competitive advantage; first, because a retail business needs a compelling reason for consumers to shop with it, and second, to simply ensure survival in a wonderful but challenging sector.

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RETAILING: FROM CONSUMPTION TO CONSUMERISM By its historic nature, as a distribution channel, retailing activities are located downstream in the supply chain. This position was originally borne out of local merchants who provided inventory, credit facilities and personal service (Christensen and Tedlow, 2000). This original high-­margin low-stock-turn retailing format has faced constant disruption since department stores first emerged towards the end of the nineteenth century (Christensen and Tedlow, 2000). Fast forward to today, and the development of further retail formats, such as multiples, discounters, out-­of-­town malls and, more recently, a new disruption, i.e. m-commerce, suggests that, whilst the act of retailing may not have changed, the routes to fulfilling the role have done, with different operational formats and success metrics becoming prevalent. Various aphorisms exist in connection to retailing. References such as ‘retail is detail’ or retailing is about ‘location, location, location’ are frequently exampled. In short, a one-size-fits-all definition is elusive. Peterson and Balasubramanian (2002) attempted to review the myriad of definitions by assessing 16 retailing ones. They noted that definitions often assumed retailing to be some generic form of store-­based fixed location selling, something that is at odds with today’s retail industry. Ultimately, they found that retailing is a set of activities that result in the sale of products to final users for private use. Further assertions come from Cox and Brittain, who reference the sale of goods and services for ‘personal, family or household use’ (2004: 3). Fri positions retailing

in broader terms, noting that it is a set of activities that ensure the ‘most advantageous proportion between sales, stocks, and profits. It includes not only the buying of goods, but the active solicitation of the patronage of consumers through aggressive promotion of sales’ (Fri, 1925: 1). Varley (2014) developed this position by asserting that retailing encompasses the distribution of appropriate goods or services in quantities that match perceived consumer demand. One retailer definition that stands out in particular to this author is: ‘Any individual, firm, or corporation that performs the last step in the ­marketing of goods from producer to consumer. He buys from wholesaler, commission merchant, or manufacturer and sells direct to consumer. To be significant as a distinct economic unit, the retailer must act as a purchasing agent for the community rather than as a distributing agent for manufacturers’ (Wingate, 1931: 28). This definition supports that, first, the retailing activities are located downstream, and second, these activities lie within the marketing concept as a value creator. Its greatest strength lies in the explicit reference to purchasing for the community, placing the end consumer and their human and social need at its apex. Following this definition theme, a more contemporary definition asserts that a retailer facilitates the sale of ‘suitable selections of product in small quantities through outlets close to viable groups of consumers’ (Varley, 2014: 6). This definition resonates with Wingate, as one can only offer suitable products if

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there is an explicit understanding of the consumer, their functional need and the likely scale of demand to generate shareholder return. If a successful retailer creates an emotional connection to a consumer group, then the ability to satisfy Wingate’s definition is supported. The emphasis on getting the right product to the right consumer and creating a connection is well placed. Fashion retailers compete not just with each other but also with other industries vying for the consumer’s disposable income. Consider today’s commercial pressures where the continued development of technology has had the effect of diverting consumer spend away from purchasing fashion product as an example of this. Similarly, other products such as holidays and leisure activities, such as sports and eating out, continually strive to tempt the consumer to spend with them. The concept of buying product other than just to fulfil an immediate need is not new. Consumerism developed from early civilizations, but the development of commerce and international trade from past centuries to today has driven us to aspire to ever greater wealth and status and, as a result, possessions. For the fashion industry, an obvious route to personal self-­ expression and creativity, the immediate benefits of consumerism have been aggressively pursued in the form of increased product ranges, diffusion brands and, as barriers reduced, international expansionist strategies to widen market reach. This development and expansion though could be a paradox. If fashion is based on creativity and individual self-­ expression, the resulting mass-market ranges in generic chain stores that capture

maximum sales and profit opportunities have de-emphasized fashion’s true unique selling points (USPs) of desirability, individuality and prestige. As fashion has moved towards mass production, and the value in individual products being distinct has diminished, new technologies have been able to negate this. The move towards fast-fashion business models, limited capsule collections and celebrity endorsements have all helped re-create aspiration and emotional connections within fashion retailing. The cohesion of these wider and more extensive influences on product pivots around a consistent message that the consumer sees, hears and feels. This contributes to the development of distinct business personalities with traits that resonate positively with current and potential consumers. Consistency among these personality traits encourages consumer relationships that are based on trust and uniform delivery of product, communications, retail environment and service level. Fashion product management therefore has a remit wider than matching demand through the provision of a suitable product. Wider brand-management approaches require broader skill sets, and as a result are increasingly open to spectacular failure should brand consistency and hence the emotional connection with the consumer not be maintained. This widening of success criteria has inevitably placed more emphasis on the relevance of targeted product ranges, creativity and art within product management, and the well-known and established buyer is thought central to their successful delivery.

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CASE STUDY 1.1: Burberry and their brand personality The difficulty for a business to deliver both fashion credibility and maximized profitability cannot be understated. Reliance on occupying a market, product type or distribution channel that has consistently delivered acceptable returns can in time lead to a business that is stale and increasingly irrelevant within its market. The maintenance of a brand and its place within an ever-changing fashion world depends on its ability to update, refresh or even reinvent itself. In the late 1990s, Burberry was perceived as a conservative heritage brand that sold trench coats with an in-house check design. Keen to move into the new millennium and to capture a bigger share of the growing trend towards designer labels, the business reinvented itself with a profile that tapped into the emerging culture of the new century. All too soon, though, the early success of the reinvention went wrong. The overemphasis of the Burberry check on baseball caps, accessories and non-apparel products led to the brand’s adoption by consumers whom the company was not trying to attract – hooligans and celebrities of dubious character. The appointment of Rose Marie Bravo as chief executive led to a rethink. Bravo recognized the strength within the heritage, history and Englishness of the brand which had once supplied the likes of the British Army and the upper crust. In 2001, Christopher Bailey was appointed as creative director to lead the brand’s fight back to both financial health and fashion credibility. The product was reviewed, with its archives scoured to reconnect the brand with its heritage. The prevalence of the in-­house check was pared back from overstated to understated to emphasize sophistication and luxury. This approach was extended to marketing activities, with early campaigns using models who reflected an aristocratic look,

further emphasizing the brand’s history, and more recently the brand has used new marketing tools to communicate to its customer base. This emphasis on connecting brand credibility to consumer was enhanced with the launch of its retail theatre, broadcasting catwalk collections to Burberry flagship stores, where shoppers use an app to purchase the pieces that take their fancy. This linking of product, marketing and retail to present a consistent personality across customer-facing activities is supported by a back-office function designed to support the requirements of the front office. Burberry completed a major overhaul of its information technology systems, including retail and warehousing software to improve operational efficiency and refine its distribution network, enabling the demands of quality product and customer expectation of product availability to be aligned more closely. Time though does not stand still. The brand again began to lose its way, and by 2018 when Marco Gobbetti took over as Chief Executive Officer and Riccardo Tisci as Chief Commercial Officer, there was significant industry interest into how the Burberry brand and operations would develop again. In early 2019 Tisci was discussing a new openness and democracy within the brand. This coupled with the resolution of its distribution issues, supply chain weakness and fluctuating brand perception; all reminiscent of the challenges faced by Bravo.

Activity Review five fashion retailers and assess how well they communicate their brand personality. Look for consistencies between product design, marketing approaches, retail store and online formats and added service values such as personal shopping or free delivery and returns. Which of the brands is the most consistent? Which is the least?

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INDUSTRY DEREGULATION Increased demand, as witnessed in market statistics and the seemingly limitless rise of consumerism, is one part of the recent story of the fashion industry. In terms of economics, to maintain a balanced industry, increased demand must be matched by increased supply. The deregulation of many commerce agreements has enabled that balance to remain in place, as product supply has been able to keep pace with ever growing demand. There have been consistent efforts by governments worldwide to manipulate trade to ensure this continued economic wellbeing. Since the Second World War, successive governments have nurtured world trade by engaging in a variety of initiatives designed to reduce or eliminate barriers to trade. These have been accomplished at many levels: between countries, groups of countries as a bloc (for example the EU) or through pangovernment organizations such as the General Agreement on Tariffs and Trade (GATT) and later the World Trade Organization (WTO) in 1995. A significant example, relevant to the fashion industry, was the ending of the Multifibre Arrangement (MFA). The MFA was agreed in 1974 and established a quota

system between countries that limited the export of textiles and clothing from lowercost developing countries to developed ones. It was originally established to allow a period of adjustment for the developed economies facing rising imports that were feeding growing domestic demand. The effect of the setting of artificial limits on the amount of export trade was estimated to have been costly to the exporting countries affected by the agreement, as it depressed their trade opportunities. The MFA was highly restrictive and expired in 2005. That year saw a surge in exports from China, which responded to the greater flexibility within the marketplace by increasing its production of textiles and clothing. It was reported at the time that concern about the pace of China’s increase in exports (items such as T-shirts had increased by 164 per cent year on year and pullovers by over 500 per cent) meant that developed countries would again limit trade with it. Ultimately, through negotiation, an orderly transition to the removal of quotas was established, with the final ones being removed in 2009, freeing businesses to fully exploit lower-­cost production, economy of scale and supply-chain flexibility.

CASE STUDY 1.2: Bra Wars In September 2005, the EU and China settled a near year-long dispute that had resulted in nearly 80 million Chinese-made clothes being held in warehouses and ports and not delivered to retailers and their customers. Describing the negotiations in Beijing as tense, Peter Mandelson and Bo Xilai described the final agreement as a fair and equitable compromise for both sides.

But how did this happen? Why was such a compromise required at all, when the aim of both the EU and China had been to build stronger ties? The origin of the dispute was in the ending of the MFA and its replacement by a new quota system that enabled greater volumes of trade to occur but did not totally remove the quotas on certain product types until 2009. In principle, it

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was a move forward and cemented further the growing trading relationship between China and the EU. Unfortunately, somebody forgot to tell the consumers of fashion that there was still a selective quota in place. An example of this was bras. In 2005, the average woman owned ten bras, and very few consumers could afford the prices of Rigby and Pellar or Myla. Instead they opted for the plentiful supply of cheap products made in countries such as China. This should of course have been of no consequence to the governments of the two countries. The problem though was that the consumers of the EU were obsessed with shopping, buying ever more bras, T-shirts, pullovers and every other kind of fashion clothing available to buy. Sensing opportunity to increase sales and profit margins, the  retailers diverted much of their ­buying

Deregulation does not have to be limited to international trade, and many initiatives have had a domestic focus. Within the UK, there has been a steady march towards the opening of the domestic market. Initiatives such as the 1964 resale price maintenance legislation removed agreements for retailers to sell products at set prices with their supplier. More recently, the 1994 relaxation of Sunday opening hours, which allowed retailers to trade on a Sunday, has increased trade and contributed to the reduction in retail prices to the consumer. The impact of this continued and on-­ going effort to open domestic and international markets has had several effects within fashion retailing. First, it has enhanced the sourcing process, allowing volumes to rise and cost prices to decrease. This has

budgets to China, so much so that within months of the new quota being introduced, orders and deliveries had surpassed the agreed levels, resulting in the excess products being impounded on the EU borders. To resolve the issue, China agreed not to export any more pullovers, trousers or bras for the remainder of the year and to count around half the blocked items against its 2006 quota. Economically, the seizure of goods was a failure. It hurt European retailers, dependent on cheap Chinese goods to keep the tills busy, and the consumer, who was unable to buy that 11th bra.

Activity Research the multifibre arrangement and the impact of its removal. Create a pros and cons list of the impact of its removal on the manufacturing and retailing of fashion.

enabled fashion businesses to increase stock availability, passing on cost reductions in the form of reduced selling prices, further encouraging market growth. Second, flexibility has been built into the supply chain, with sourcing strategies being able to turn on and off production in different locations depending on product trend and trading conditions. A third impact is that productquality levels have risen because of the intense competition to supply product to the consumer. In a similar vein, the reduction in technological limitations, swept away by continuous developments within information and communications technology (ICT), has supported the improved flow of stock through the global supply chain. A supply chain is the network of roles, processes and activities that together create, deliver and sell product. Within a

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globalized industry such as retail, where a product range may be conceived and sold in one location but sourced, manufactured, delivered and stored in another, the demands of integration and collaboration between the different roles are of vital importance.

There are many examples of how retail has put technological development to use in improving product management throughout the chain and maximizing sales and stock management within the evershortening product lifecycle. Table 1.1 presents some of these.

Table 1.1  Technological developments within product management Development

Impact

Data mining

The use of product catalogue data updated with sales and stock history in real time allows any product, store or supplier to be analyzed, so decision-­ making can be current and accurate

Integrated planning

The linking of processes either in one system or a collection of systems is an invaluable benefit of technology. All relevant roles within the fashion supply chain can see what the others are doing and the effect that each has on business success

Standardization and linkage

Linking systems together enables standardization of terminology and processes to improve efficiency in the flow of stock. Electronic data interchange (EDI) and then internet trading have meant that retailer and supplier have been able to link systems, processes and terminology

Tracking

The total tracking of stock through radio frequency identification (RFID) to automatically track and locate a product’s journey through the supply chain enables faster delivery processes and real-time stock location visibility, resulting in faster stock availability and customer service. It is beneficial as a value-added tool, as customers can use technology to track online or catalogue-­ordered items

Business reporting

This has been improved with the development of business reporting systems that allow product and financial data to be shaped into custom reports which can be shared throughout the supply chain

The development of capability within the supply of product demonstrates the sheer versatility required of retailers to be able to support the product management process. The vast amount of data available

to be collected, researched and analyzed coupled with the flexibility now inbuilt within a supply chain changes the dynamic of decision-making. It is now much wider than it ever was, requiring a multitude of

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skills to accurately interpret and recognize the stories that the data are telling the reader. A second impact brought on by the linkage within supply chains today is that control of the process is more professional, with a greater emphasis on collaboration and relationship building between supplier and retailer, and in turn between retailer and consumer. The ultimate benefit is the better matching of product supply to demand. This in turn has placed more emphasis on the management of the identification of historic and current sales trends, best anticipating optimum demand levels and hence profitability within product management, and the lesser-known merchandiser is thought central to its successful delivery.

 HE CHANGING PLAYERS T IN THE RETAIL MARKET Within all commercial industries there is a long history that has contributed to creating the business world as we know it today. Fashion is no different, and there have been many great success stories. There has also been much that has changed, and the evolution of new retailing approaches borne from the effects of consumerism and free trade has presented new business formats. Within the fashion retail market today, many distinct business models have evolved, all of which offer a different aspect of the shopping experience. Table  1.2 below gives a summary of different models, their USP and retailer examples.

Table 1.2  Differing retail format examples Business model

USPs

Retailer examples

Luxury

Fashion leaders, scarcity of product, status

Chanel Gucci

Department stores

Anchor store in location, wide product offer

John Lewis JCPenney

Multiple chains

Wide distribution and value for money

Gap H&M

Boutiques

Wholesale brands, high service levels

Barneys New York Flannels

Supermarkets and general stores

Simple designs and pricing. Ease of purchase

Tu at Sainsburys Target

Off price

Discounted prices across all products

TJ Maxx Outlet malls

Specialist

Wider choice within limited product type

Victoria’s Secret Arc’teryx

Niche

Offering an alternative approach – for example, ethical

Timberland MUD jeans

Catalogue

Home shopping not requiring a computer

Boden Ezibuy

Pure play online

Home or mobile shopping 24 hours a day

Asos Amazon

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Table 1.2 is striking because of the amount of options a consumer has, as in where and when to spend on fashion product. When this example list is then considered as a snapshot of the retail industry and the deregulated arena in which fashion brands operate, an appreciation of the fundamental challenge of retailing is amplified. The competitive risks of retailing fashion can be tangibly felt in the recent histories of brand failures such as Nine West, BCBG Max Azria, House of Fraser, American Apparel and Nasty Gal. Others such as Sears, Forever 21, New Look and Zachary the Label are in distress and undergoing radical re-structuring to better position themselves for the future. The cause of such change is multifaceted. The globalization of brands and their expansion into new markets have added commercial pressures. Similarly, the development of fast-fashion operations has benefitted nimbler, more agile manufacturers and retailers. However, it is the development of e-commerce and new business-toconsumer (B2C) relationships that has brought profound change to the structure of the high street. In the mid-1990s, as internet capability took hold, the perception was that it was a disruptive transformational technology and that incumbent bricks-and-mortar stores would be replaced by e-commerce first movers to provide superior retail services. Today, deep into the twenty-first century, incumbent bricks-and-mortar legacy retailers appear to struggle to compete for authority with the e-commerce influencer brands such as Farfetch and Etsy. It appears that the characteristics of disruption – societal change, newly adopted best practice and a changed set of relationships within the fashion industry – have come to fruition.

Referring again to the Wingate definition that emphasizes consumer-focused distribution, the first pureplay retail movers into the e-commerce arena such as Amazon operated with distribution tactics that provided a breadth of product offer that extended beyond a local high street along with a focus on a changed service proposition. This first iteration of internet inspired retail innovation and has since evolved as the market matured into newer formats, such as ‘click-and-mortar’ or ‘online-andmobile retail’ operations. Fast forward further to today, and the development of technological capability towards an omnichannel operation that has been defined as ‘the synergetic management of the numerous available channels and customer touchpoints, in such a way that the customer experience across channels and the performance over channels is optimised’ (Verhoef et al., 2015: 176) suggests that further evolution within retailing is upon us. This technological evolution has led to a proliferation of channels through which customers can interact. Shopping via multiple channels has become an accepted phenomenon with a seemingly relentless increased growth in channels (including third-party social media) by which retailer can connect to the consumer. This changing of the access that the consumer has to a retailer requires well-integrated channel strategies such as integrated promotions, product consistency, information systems that share channel customer, pricing and inventory data with a process that supports online or customer orders to be collected in store. Such integration into one holistic ‘uncontrollable’ consumer journey has implications within product management. The act of distributing product through

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retailing activities within an omnichannel operation includes a broader set of owned and third-party channels such as search display, emails, and referral sites that facilitate communication and interaction. These channels are accessed via various enablers such as laptop, mobile phone or tablet, and so the interplay between access tool, channels and focal brand becomes key. In effect, in an omnichannel environment, product management must not only support the emotional connection of a consumer through its flow of product but also inform and communicate across a wide spectrum of information points. As an omnichannel environment develops and the consumer journey becomes more complex, a new set of pressures is placed on retailers. First, the supply chain must be able to support the consumer journey from whatever point of contact that initiates the retailer/consumer relationship. Second, that relationship requires

accurate and timely information flows that will facilitate an ultimate transaction. Third, the ease with which consumers can move between competing retail offers to ‘compare and contrast’ the market places a new emphasis on range construction and the clarity with which it will communicate its benefits. Finally, any product chosen must be available in a shape, colour and size 24 hours a day. These new rules of the consumer journey impact the buyer and merchandiser. As the buyer role blends the emotional connection with the consumer and the merchandiser manages the flow of stock through a deregulated supply chain, so the two are blended together by the competitive pressures facing fashion retailing today. The width of considerations and assumptions that must be made to create a ‘perfect’ fashion range is multi-skilled, that is complemented by two minds working as one.

FOCUS POINT 1.1: The changing consumer By reducing the distribution costs for consumers, the retailer acts as a provider of service. This service mentality is greater than simply the provision of products to buy and includes offering easy access to products via information, enhanced shopping experiences and reduced time spent looking for and determining what to buy. This ‘consumer journey’ has been fundamentally changed by the proliferation of new information touchpoints such as retailer websites, social media channels, influencers, bloggers and vloggers. All this increased information means that a retail business faces changes to how product awareness develops and then how to capture demand via

the flow of product via an increased number of distribution channels. First, let’s consider the flow of information. Today, consumers funnel information to reduce the various information and purchase options by weighing up all the available data to make a purchase. However, the consumer journey no longer stops there, and with the generous returns policies that are now ubiquitous, there is a post-purchase journey whereby product evaluation and ultimate brand adoption are determined. For example, McKinsey has identified a four-phase circular consumer journey that encompasses an initial consideration of choices, an active evaluation of potential

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purchases, a closure point when a purchase is made and finally a post-purchase experience of using the product. This circular journey has a profound impact on the role of product within a retail business. Products must be able to communicate to consumers so that quick, easy purchase decisions can be made. They must translate into the visual world of Instagram and the written world of blogs. Finally, they must be distinct and encourage influencers to adopt them and act as brand advocates for the retailer. This breadth of requirements leads to the second aspect of the changing consumer behaviour: product supply. To be able to complete the circular consumer journey, then stocks of each product must be available at its third point: the closure point. If, after such a complex consideration and evaluation process, there is nothing to buy, serious harm can be inflicted upon the retailer reputation. This places an additional emphasis on ensuring that supply and demand are matched as well as is possible. However, this is not the end of the emerged consumer journey. Stock must flow to more than one point within the fashion supply chain. Consumers now have the choice as to how they take delivery of their new purchases, and so the closure point of the journey must also include different locations such as in store, delivery to home

SEEKING COMPETITIVE ADVANTAGE The previous sections of this chapter have presented summary thoughts on the retail industry and the influences that have contributed to the characteristics that it presents today and the resulting context within which buying and merchandising operate. One fact above all is starkly apparent: The

or delivery to a local pick-up point. This further complexity requires a logistical coordination that is highly intricate – as is the management of the final element within the journey: product experience. The rise of generous returns policies means that prior to final adoption and brand advocacy the retailer must now factor a complex returns process into the product management set of activities. As the consumer journey becomes more complex so do its decision points and where decisions become more complex; then so does the potential error rate within them. Therefore, the consumer has been offered and now expects a facility to return products at their discretion and ideally at no cost to them. This behaviour pattern appears now well established, and the reverse logistics required to support such activities are now firmly entrenched into the retail business model.

Activity Review the McKinsey consumer decision journey model and use it to build a flow chart of decision points and what type of information is needed by the consumer at each point to make a purchase and post-purchase decision. You can access the model at: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/theconsumer-decision-journey

critical mass of today’s industry has emerged over several decades, during which growing demand patterns have been matched with improvements in product supply. While the industry may not have been in perfect supply and demand equilibrium as shown by the farcical bra wars, the opportunities afforded by strong market opportunities mean that the focus within product management has moved

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beyond the philosophy of pile it high and sell it cheap to an era of targeted ranges that can communicate across a range of distribution channels. For the consumer, this all translates into choice, and lots of it! In a diverse and competitive industry such as this, there is inevitably a need for a fashion business to focus on achieving an enduring advantage over all its competitors. Through having a competitive advantage, businesses can become the first choice of consumers and, by being in this position, will gain a significant longterm advantage in the pursuit of customer loyalty and relative financial security in complex and uncertain markets. Porter’s competitive advantage model (Porter, 1985) argues that there are two routes to achieve a competitive advantage within an industry: either a product-­ differentiation route or a cost-­management one. A business that can differentiate itself results in the customer seeing a distinct value in and reason for buying its product, and by reviewing differing fashion business models it is easy to see this in practice.

Fast-fashion businesses, for example, were able to differentiate by offering new fashion collections faster and more frequently than the existing players in the marketplace. A second example, Asos, harnessed the opportunities of the internet to differentiate by operating as a pure player (a company that focus its resources on only one line of business) defined through a single distribution channel. Porter’s second route, cost management, implies that a business could aim to be the lowest-cost producer of product within its market segment. Therefore, it is perfectly acceptable that the costs for Gucci to produce a shirt should be very different (higher) than the costs of Primark producing a shirt, as the two businesses compete in different segments of the same industry. To gain a cost advantage, Gucci would, however, be more concerned with comparing its cost management with a similar business such as Louis Vuitton, while Primark would compare its cost management with a comparable competitor in its market segment.

CASE STUDY 1.3: Zara and competitive advantage The Cube is the central hub of the fast-­ fashion brand Zara and has, in its design and operation, contributed to the revolution in the design, manufacture and retailing of fashion led by the brand. By defying longestablished business practices within the industry, a truly global brand has evolved with a consistent and proven track record of success in terms of both financial and commercial strength. The contemporary term ‘fast fashion’ describes the effect of reducing the lead times of translating catwalk trends into physical

products ranged in stores. Fast-­fashion businesses such as Zara can translate trends into product in a matter of weeks as opposed to the months that the process used to take as recently as the 1990s. This reduction in speed to market has delivered to brands such as Zara a clear competitive advantage over older, more established rivals. The business model that has delivered this advantage is geared around the customer, and the organization has been constructed to reflect this. Recognizing that consumers appreciated design at affordable

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prices and that fashion by its nature is fluid and ever changing, Zara created a vertical business model where the design and production processes were kept in-­house. This meant that lead times were shortened, enabling product to be available in store before the competition. This business operation, headquartered at The Cube, delivered value additions to the brand and cost reduction. The shortened lead times enabled Zara to commit to production later than its rivals, meaning that the risk of emerging trends changing in that shorter timeframe was reduced. Ranges that were in line with fashion trends meant greater sales opportunities, allowing bigger production runs and so reduced unit costs. The shorter lead times also enabled Zara to offer a bigger choice in its ranges and so the ability to offer two to three times more options in any given season, thus reinforcing in the minds of consumers the fashion credentials of the brand. The increased product options available within Zara’s range naturally meant that the shelf life of each was reduced, and so allocations per store were reduced. The reduced cost of stock holding and a reduced need to

mark down excess stocks enabled Zara to benefit from a reduction in costs associated with creating and selling a product range. The clear competitive advantage enjoyed by Zara required a different approach in its business structure. The Cube  – as a central design, manufacture and distribution centre held together by astute use of ICT – created a seamless process that was also able to be reactive to emerging sales trends. Within store, for example, Zara can maximize the sales of best sellers despite limited production runs. The store’s employees are equipped with technology that enables them to order local bestsellers while they are still available. This ability to react to local demand further adds to the brand’s competitive advantage; by ensuring bestseller stock is available, trust in the brand is maintained, and the cost of stock holding can be managed effectively.

Activity Research the fast fashion operational model. Determine in your mind the benefits and drawbacks of fast fashion on creativity and design.

CASE STUDY 1.4: Farfetch, Lyst and Net-a-Porter  – new ways of business FARFETCH Farfetch, founded by Jose Neves, is a luxury fashion technology company that exists to support luxury fashion brands and boutiques retail to a global market via 10 million website hits a year and shipments to 90 countries. Its strategy is supported by a business model in which Farfetch works with leading brands and also provides global access to boutiques and designers that are ­ small independent traders. This approach

gives small, entrepreneurial fashion businesses access to multinational capability: optimum back office support functions, access to global data and, of course, a global market available 24 hours a day. Whilst the brand is relatively small  – its sales in 2017 were $900 million in an industry that turns over $250 billion – it does have a very clear sense of purpose and ­direction. Neves is quoted as remarking that Farfetch will target a small share of the market as

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long as it lives its values and fulfils its vision. These characteristics can be summed up in its approach to technology entrepreneurship. Rather than fighting a titanic battle for global domination (Amazon, Ali Baba), Farfetch looks to nurture the qualities of small business. By bringing global technology to small businesses, fashion can continue to champion small-scale, eclectic and truly creative design.

LYST Entrepreneurship that meshes technology and fashion is not unique to Farfetch; take Lyst as a further example. Lyst is a global fashion search platform used annually by 65 million fashionistas who can browse over four million products, meaning that the business offers the widest inventory in luxury and contemporary fashion online. Its model works on two principles: First, for consumers it is a search engine, curator and universal sales platform, and second, for its partners it is a product aggregator and an analytics and consumer intelligence provider. On its inception, Lyst aimed to mimic the search technology used by travel sites to aggregate and filter options for the user. The presumption was that a similar model could be relevant in fashion to identify bespoke options from a global stock inventory based on user history and preference. Its strength within technology, search engine capability and aggregation provide a further string to its bow. By facilitating the tracking of search engine data, Lyst has global information sets on how consumers search, what they like and what they purchase. The value within that information is like gold dust; imagine being a small-scale retailer with access to global data!

NET-A-PORTER A final example of a new business model is Net-a-Porter. As an operation, it follows the retail concept of being an intermediary within the value system that sources and stores products from wholesale brands and then sells them on to individual consumers at a profit. As such, its model as a bricks-andmortar retailer relies upon working capital to fund its activities, which carries the usual risks of poorly bought ranges to sell. Launched in London by Natalie Massenet in June 2000, Net-a-Porter has changed the way designer fashion is retailed. Luxury and designer brands were initially reluctant to embrace online retailing fearing that the brand experience would not translate well. Net-a-Porter, by developing a premium welllaid-out website presented in the style of a magazine along with its Porter magazine giving insight into catwalk trends and collections, was able to translate luxury service standards into a new retailing format. Above all though, Net-a-Porter has demonstrated the effective development of online retailing that merges consumer experience with product selection and fast fashion principles of weekly as opposed to seasonal product launches. It has also achieved sustained advantage by consistently focusing on innovation, whether it be new markets, product lines or categories. This innovation however has always maintained its guiding launch principle of a clear, attractive and functional website with high appropriate quality of sales and after-service.

Activity Research the three brands discussed. Compare their product ranges and consider what you think makes their businesses unique.

FASHION RETAILING

Whichever route is taken has a significant impact on product within a fashion business. A clear focus on adhering to its strategic-differentiation or cost-reduction route results in a business with unique and balanced fashion ranges that are relevant to the values held by its target customer and business model. The delivery of a product range in line with both fashion trend and

business model adds an extra dimension to product management. This multi-faceted, dynamic characteristic of product management requires multi-­faceted and dynamic skill sets. Such skills cross different specialisms and capabilities, which is reflected in two delineated roles to deliver effective retail product management: the buyer and the merchandiser.

FOCUS POINT 1.2: Retailing in the twenty-first century The activity of retailing has evolved since the days of the domination of local merchants that offered large stock inventories, credit facilities and a highly personalized service. Since then, retailing has evolved in tandem with the developments within economic activity to provide a broader scope of service standards. This evolution, or disruption, was first felt at the end of the nineteenth century with the development of the department store format, which offered a reduced personalization of service but a large product assortment of product types under one roof; the process of shopping was simplified. This simplification has striking resonance with the online retailing of today: large, long-tail approaches to product ranges but with a personal service limited to ease of transaction and logic-based relationship management. Retailing further evolved from the department store era into catalogue retailing, with Sears’ first catalogues appearing in the 1920s. Further, as the car became the normal method of transport, mall shopping developed. The car also facilitated longer journeys, and so out-of-­town malls and discount centres developed, leading to the migration away from high streets and local independents. Today, we are faced with further evolu-

tion in the form of internet retailing, whether it be from home, the office, the park or via desktop, laptop or mobile phone. So, what will retailing become in the twenty-­first century? Retailing, by the definition of Wingate, focuses on consumers. Therefore, any predictions must consider changing consumer demographics and their impact on our shopping habits. First, retailing lives or dies on a retailer’s ability to minimize the distribution costs of the consumer. These are costs such as time spent looking and evaluating a product to purchase, the opportunity cost of purchasing an item and even the psychic cost of poor experiences experienced within the shopping experience. An enduring trend is the desire of consumers for convenience that reduces these distribution costs. For fashion retailers, this broadens the service standard beyond simply having a great product range. Convenience also includes stock availability by size, a flow of product that rises and falls with demand patterns and a price proposition that is complementary to the financial cost which the consumer has incurred in seeking out a product. Second, as retailing grows increasingly technology-intensive, the expected ‘death of floor space’ has been predicted, as seam-

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lessly connected consumers assess a selection of virtual retailers or comparison sites for the best service fit. However, considering the emphasis placed on multi-channel strategies and the developments that ­allow bricksand-mortar retailers to broadcast a­ ppropriate marketing communications to consumers as they pass by their locations, then the move to an online mono-distribution channel should not be presumed. Multi-channel retailing presents a double-­edged sword for fashion retailing. On the positive side, an online presence provides a platform to capture worldwide demand, so spreading the risk of single-market operations. Greater demand creates new opportunities to expand and develop a product offer. On the flip side, is

that right for fashion? If fashion is about the expression of the self and personal style, does a global range created to suit as many people as possible really make sense? A second thought is: the more generic product ranges become, do they then become self-­ defeating? If there is no check on expansion, does the preservation of brand values and design handwriting diminish and wither away?

Activity Review the websites of several global retailers. Review one of their product categories (for example, women’s, men’s). Count how many products they range and compare this to a physical store in your local high street.

SUMMARY The escalating competitive pressures brought about by globalization, the easing of trade restrictions, technological supplychain advances and increased consumer wealth have facilitated the entry of new business models into an already crowded fashion retail market. In benign economic weather where the seemingly relentless rise of retail sales is matched by improvement in supply, many fashion businesses succeed. Some do not, though, and when good economic times turn to bad, many

more fail. Product management is central to the success of a fashion business, and in such a fluid industry, where success is not guaranteed, ensuring product ranges respond to consumer demand is pivotal. This, however, cannot be at any cost, and ensuring the product range is profitable to allow further investment in new ranges is central to the role of product within a fashion business. Managing these key deliverables lies at the heart of a good fashion range.

SELF-DIRECTED STUDY 1. Assess ten different retail businesses. Identify if they have a competitive advantage and define what you think it is. 2. Log on to several online retail websites. Assess how much technology is required to present the site, manage transactions, develop social-media ac-

tivities, deliver customer orders, handle returns and have a facility for you to communicate with them. Collate your findings and assess the number of skills and roles required to operate a successful online retail store.

FASHION RETAILING

FURTHER READING Dillon, S. (2011) The Fundamentals of Fashion Management. London: Ava Publishing

Varley, R. (2014) Retail Product Management 3rd edn. London: Routledge

BIBLIOGRAPHY Christensen C., Tedlow, R. (2000) Patterns of Disruption in Retailing. Harvard Business Review, Vol. 78, Iss. 1 pp. 42–45 Court, D., Elzinga, D., Mulder, S., Vetvik, O. (2009) The Consumer Decision Journey. McKinsey.com Available at https:// www.mckinsey.com/business-functions/ marketing-and-sales/our-insights/ the-consumer-decision-journey Cox, R., Brittain, R. (2004) Retailing an Introduction 5th edn. Harlow: Pearson Fri, J. (1925) Retail Merchandising: Planning and Control. New York: Prentice-Hall Peterson, R., Balasubramanian, S. (2002) Retailing in the 21st Century: Reflections

and Prologue to Research. Journal of Retailing, Vol. 78, Iss. 1, pp. 9–16 Porter, M. (1985) Competitive Advantage. New York: Free Press Varley, R (2014) Retail Product Management 3rd edn. London: Routledge Verhoef, P., Kannan, P., Inman, J. (2015) From Multi-channel Retailing to Omni-channel Retailing: Introduction to the Special Issue on Multi-channel Retailing. Journal of Retailing, Vol. 91, Iss.2, pp. 174–181 Wingate, J. (1931) Manual of Retail Terms. New York: Prentice Hall

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INTENDED LEARNING OUTCOMES 1.

To develop an appreciation of fashion and business definitions.

2. To present a discussion and examples of the role of product within a fashion business. 3. To introduce the concept-to-carrier bag model – a process of product management. 4. To articulate an understanding and definition of buying and merchan­dising.

INTRODUCTION The previous chapter recognized that there are many opportunities within the fashion retail industry. However, they come with ferocious competition, ­requiring the best possible response in the form of balanced and relevant product ranges to compete effectively. Within these parameters, two fundamental types of product characteristics – qualitative and quantitative – will be offered as being central to the delivery of competitive product ranges. From there, the chapter will begin a discussion of the buying and merchandising (B&M) functions as the guardians of these characteristics, which will be developed further in Chapter 3. Buying and merchandising can feel at times to be like rescuing a runaway lorry that is swerving at high speed along long and winding roads. The constant stream of data collation and decision-making to set a course of action and prevent diversions is typical of the day-to-day life within B&M.  Decision-making certainty is found in the various activities that together create a product range, and the buyer and merchandiser who together manage the complexities of taking a product concept through to creation, sourcing, manufacture, delivery and sale. This process is costly in terms of time, and there is significant room for error. All players need to be well organized with a planned approach. This o ­ rganization, planning and co-ordination are the

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subject of this chapter, which will first discuss the role that product plays within a fashion business and, second, provide a summary of the process of product management.

As a result, this chapter will present a theoretical concept-to-carrier bag process model to demonstrate the flow of decisions and actions that compose B&M. There are various generic models of this kind, but the one chosen here will help explain the B&M roles and processes and sets the scene for the detailed review of the merchandising function in Part II. As a result, the model has been interpreted within the context of the book subject and is not presented as authoritative.

FASHION BUSINESS – A PARADOX? As a starting point, if one considers the definitions of the two words ‘fashion’ and ‘business’, it is possible to emphasize succinctly the context in which the B&M function operates. •• Fashion: – ‘The prevailing mode or style, especially of dress; custom or conventional usage in respect of dress, behaviour, etiquette, etc.’ (OED 2018) Fashion is therefore fluid and ever changing. By being ‘prevailing’, current fashion is just that: current. What is in line with culture, style, taste and mood this season will not last and carries a limited timeframe in which to be relevant and in demand. While fashion trends will emerge and fade, some to be revisited in the future, the exact moment in which each fashion trend becomes the prevailing trend will never happen again. The opportunity that fashion offers is elusive and difficult to capture. While capturing and interpreting a fashion trend as it emerges are difficult, knowing at which point in time to let it go and move on to the next trend is harder still.

•• Business – ‘A person’s regular occupation, profession, or trade, an activity that someone is engaged in, a commercial activity.’ (OED 2018) The definition of business by contrast suggests something quite different. It is an activity that will generate a specific action: wealth creation. This action would be undertaken to generate an income, a benefit for an individual or group of individuals. It would be done either within a specified timeframe, or more likely with an implication that the wealth-creating activities will continue with an unspecified end date. Taking the two definitions, several key words come to mind that help describe and interpret each definition: •• Fashion – presumptive, uncertain, current, visual, emotional, subjective, creative. •• Business – long-term, financial, procedural, calculating, risk-managed, structured. The paradox of fashion business is that the appropriate merging of uncertainty while generating wealth is a difficult feat to perform. The ideal trading conditions of certainty, safety and managed risk that would enable a business easily to navigate the

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uncertain waters of fashion do not exist; there are too many variables to deliver a cast-iron guarantee that all decisions made will be accurate. The regular occurrence of end-ofseason sales and the multitude of enticements during a season  – such as one-day sales, gift with purchases and loyalty reward schemes to consumers – indicate how prone fashion ranges are to not fully satisfying consumer wants. Within fashion the risk of failure is very real: markdown, brand dilution, lost profit and potentially business closure.

Effective decision-making in fashion encompasses a wide range of variables, but when consistently achieved well, it ensures success both commercially and financially. It is the management of the natural tensions between these two elements and the finding of a balance between them which lie at the heart of a good product range and which in effect fuse the two competing definitions together to present a cohesive range to the consumer.

FOCUS POINT 2.1: Fashion business There are many strategic approaches to fashion business that have resulted in the establishment of different operational models within retailing. Whilst all different, all these approaches aim to manage the fashion and business paradox to create exciting opportunities for potential customers to engage with their brands. This focus point reviews some of the more imaginative examples of retailing that blends fashion and business beautifully.

ETSY The Etsy approach is an example of consumer-­facing collaboration with fashion. The e-commerce business has a focus on handmade and vintage products that takes the craft-fair principle and allows small-scale entrepreneurs the opportunity to use Etsy as a retail outlet. For creative entrepreneurs, creating an outlet within Etsy comes without charge. Etsy does however take a small-value commission on each product listing. These remain on site for up to four months if they remain unsold. All product decisions subject to contractual agreements rest with the seller, including the retail selling price. For this approach, Etsy considers itself the global

marketplace for unique and creative goods, connecting millions of worldwide buyers and sellers to keep commerce human. This operational model emphasizes the unique and creative, tying in well to the definition of fashion as an ‘of the moment’ form of self-expression. It also affords the widest possible product offer across a range of product types. As a business approach, it allows a flexible approach to stock management: small-­ scale operations without the need for significant upfront investment that would be required if the retail seller were to ‘go it alone’. There is of course a potential downside. A large and diverse product offer from multiple retailers trying to operate on a craft basis within a large global operation can lead to cultural differences. Etsy was challenged over its demands for retail sellers to offer free shipping to be competitive in the market, something that raised eyebrows, as large-scale business expectations on smallscale operators can often require some thought to work out well.

NORDSTROM LOCAL Described as an innovative concept, Nordstrom Local takes its position as a service

FASHION, BUSINESS AND PRODUCT

hub that starts electronically with a product purchase and moves to a physical space where a range of post-purchase complimentary services are available. These services housed within a showroom environment include The Trunk Club desk where male shoppers can order a new wardrobe or be sized for a tuxedo, tailoring services to adjust purchases and an area where manicures and pedicures can be obtained. The model operates as a hub for trying on and purchasing product that has been prior selected by Nordstrom’s online stylists, who select products based on a type of questionnaire that the customer completes. This, and the other available services, means that Nordstrom Local is a stock-free retail store that emphasizes the service proposition of retailing: local, service-minded personal shopping experiences. This highly personal approach challenges the prevailing metrics of retailing as a local stockist of products to one that is a local personal gateway to Nordstrom’s wider product offer. As such, accepted notions of good stock management and planning change, and so too does the risk associated with stock inventory. This also allows a deep personal relationship with the consumer to be developed, which provides the opportunity to facilitate a truly one-to-one series of engagements. As such, its implication for the approach to fashion buying is interesting – it supports width of offer but not at the expense of expensive stock levels.

RENT THE RUNWAY This online rental business has its roots in the hire of clothes for single use that can be returned. The concept allows customers to rent designer clothing for a short period of time at a price that can be as low as 10 per cent of its retail selling price. It offers a broad range of sizes, recognizing that sizing is particular to the individual. With this thought in mind, it also provides a backup size within

an order. In short, Rent the Runway’s mission is to change our approach to clothing ownership and empower us not to need to own another garment again. As an idea, this has a feeling of revolution and moves the retailing model away from a volume sales of the same product mentality to one where products are shared, hence reducing the need for continuous consumption. By renting out other brands’ products, it also avoids the complexities of the product management process of designing, sourcing and manufacturing its products. This is a key point, as its proposition is easy and simple: the timely provision of a product that is time critical to its customers. This raises an interesting point: its logistical capability. Fashion is time precious, and it is not just trends that have a limited lifecycle. The reasons to wear the clothes offered by rental businesses are similarly time precious, often measured in a few hours. Therefore, the business processes and logistics that supply product must be at an optimum level for a business like this to succeed.

DOVER STREET MARKET This well-known London landmark is a store model described as a glorious ragtag assembly of creatives that reject homogeneity. Thought of as a concept store, these are outlets where new ideas and approaches are utilized to target a lifestyle type and hence broaden the types of shopping experience. The focus is on discovery and experience where products and design change on a regular basis to constantly reinvent a narrative. This necessitates a constant flow of ideas and presentation techniques within the space that is shared by the brands that are ranged within its retail outlets. The business has a collaborative, self-nurturing feel about it, where locality of offer is paramount as opposed to a rigid structured operating model. From a fashion perspective then, this affords the opportunity to work with a small

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curated stable of brands that change frequently. This keeps the offer fresh but also carries the risks of trial and error. It also places an emphasis on always looking forward and not becoming reliant upon an accepted way of buying or ranging product. From the business perspective, this approach carries a reliance upon collaborative practices that require a trust within process that is consistent across all planning approaches. It also carries some further risk as, if reliance upon the future to set a product strategy falters, then so too could the pillars upon which the business operates.

TJX As an off-price retailer, the TJX approach is to offer a constant flow of product at retail selling prices that are generally 20 per cent to 60 per cent below full-price retailers’ usual prices of comparable products. To do this, their fashion buyers are considered opportunistic and entrepreneurial, as they are constantly on the move looking for deals with a range of supplier types: from big brands to boutiques, designer labels, as well as up-andcoming labels. They source overproduction residue stocks, large store groups’ cancelled orders or discontinued products to range in their stores at the lowest possible discounted price and pass these savings onto the customer. This approach gives several benefits.

 HE ROLE OF PRODUCT T WITHIN A FASHION BUSINESS In general terms, it is the B&M role that is charged with the delivery of product ranges that will reflect the creative direction and wealth creation needs of a fashion retailer. This will place the understanding of the role of product in delivering these

First, from a fashion perspective, this constant search for opportunities results in a more fluid approach to product ranges where new products could arrive in store on a near daily basis, constantly refreshing the offer. With fashion consumption favouring agility and regular flows of new products, this is an even more regular delivery approach than Zara. Second, as a business approach, this allows TJX to keep stock inventory low and cash flow high, something that supports both its profit and loss and balance sheet ledgers’ health. For the consumer, this approach brings the benefit of cheaper clothes and accessories as well as plenty of opportunities to supplement existing wardrobes. The one drawback is that TJX’s buyers can often be limited in the availability of on-trend products to source and so be reliant on end-ofseason runs or less successful colourways with which to stock their stores.

Activity A mission statement is a formal summary of the aims and values of an organization, that is a short statement of why it exists, its fundamental values or philosophies, competitive advantages and aspirations. Create a series of mission statements for the above brands and assess how unique each one’s approach to business is.

dual requirements as central to the individual activities of the buyer and merchandiser. Therefore, their management of this asset is fundamental to the success of the function. Cohesive balanced product ranges that can offer value to the customer do not happen by chance. The iconic Burberry trench coat, or a heavily branded Superdry hoodie

FASHION, BUSINESS AND PRODUCT

or even a £5 T-shirt from Primark, all exist within a wider product collection. All pieces within a range must communicate to a target market, by reflecting its attitudes to fashion, trend and value for money. The products also must be functional, fit for purpose and reliable. Not all pieces need to be highly embellished or deeply interpretive of trend. The delivery of a commercial balance within the range to offer diversity of choice is paramount to its visual and creative role within a fashion business. Such qualitative aspects of product are ones that the customer uses to assess product suitability. For the customer, these aspects must match their desired end use at a price and quality that are acceptable to them. For the retailer, product is the opportunity to speak to the world and demonstrate its personality and values through a well-thought product proposition. This meshing of different qualitative aspects is in simple terms the remit of the buyer. The business also has another requirement of product, a quantitative one  – to make acceptable financial returns. The second role therefore is to be a wealth creator: generating profitable sales levels within the budgetary limits set for the life of the season concerned. The management of these quantitative aspects of the product range lies within the remit of the merchandiser.

BALANCED PRODUCT RANGES As the establishment of a product proposition that communicates to a retailer’s target market, it is worth giving this point further practical thought. The sum of the qualitative role of product is ‘to be a problem solver’ (De Chernatony and McDonald 2003: 4) and to satisfy the consumer’s need that motivated them to shop. A little black dress for a cocktail party, a pair of

tights to replace a laddered pair or a simple white blouse to match any number of skirts and trousers already in a wardrobe, all must offer an easily understandable set of solutions, the sum of which equal or exceed the consumer’s identified need. For fashion retailers, this presents difficulties; fashion is time constrained, the life cycle of trends can be short, and seasons are measured in weeks or months rather than years. A fashion range has a small window of opportunity to tempt consumers, and once closed its role is at an end. The range must be able to communicate to consumers easily and effectively. Varley emphasizes this point by asserting that ‘retailers capture their customers’ interest by the nature of their product range’ (Varley 2014: 10). This is the key creative role of product – to be a suitable mix of product types, prices and trend to communicate and entice a broad range of consumers, in so doing, acting as a solver of their fashion problems. Understanding that diversity to create product ranges that are an effective route to communication comes from using a hierarchy system of attributes that can be applied to products based on their problem-­solving capabilities. Attributes have become a vital tool in identifying the correct composition of a product range to match identified needs of the target customer. One such example is the fashionability attribute. This determines different rankings of fashion interpretation so that, when constructing a range, the buyer will ensure it comprises a suitable mix of fashionabilities which reflects the positioning of their business. As with most aspects of product management, different businesses use different names to describe the fashionability attributes, but Table 2.1 provides three types of example.

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The correct mix of each will vary by retailer and consumer types targeted. Highstreet chains such as Primark would likely target a greater percentage mix of core basic and fashion products, as their customers’ needs are simple and easy-to-­understand

products. A more fashion-­forward business such as a luxury or premium brand would place greater emphasis on fashion and highfashion products, as their target customer need is to purchase of-the-moment prestige fashion within their shopping need.

Table 2.1  Examples of fashionability attributes Fashionability

Definition

Product example

Core basic

Non-trend-­led and has wide customer appeal and sales volume

Basic T-shirt

Fashion

Product that interprets current trends for a target customer

T-shirt with trend-led trim

High fashion

Directional trend product ranged often for fashion credibility

Laser-cut T-shirt with slogan

A second example is the use of a price architecture attribute to plan a diverse mix of price points within a range. Table  2.2 gives an example of possible pricing

structures using a system known as good, better and best pricing. Again, the correct mix will depend on the business model and target customer type.

Table 2.2    Examples of pricing attributes Price

Definition

Product example

Good

Opening price points of the range

Basic T-shirt

Better

Mid-price points of the range to reflect trend and design

T-shirt with trend-led trim

Best

Top price points of the range to reflect directional product

Laser-cut T-shirt with slogan

The use of hierarchy planning to construct product ranges allows buyers to offer a mix of style/colours and prices, enabling the range to satisfy the widest range of potential problems for the customer – a core basic white T-shirt that has many uses at a good price can be matched with a fashion pair of jeans or skirt to be worn on separate occasions. In doing this, the range becomes

versatile and the customer is given options with which to use the style/colours available. Each option will be unique in its combination of qualitative characteristics, commercial strength and thus place in the range. These two attribute examples are the tip of the iceberg; there are many more possible routes to matching the product to the overall problem-solving needs of the

FASHION, BUSINESS AND PRODUCT

customer. Attributes such as end use (what the product will be used for – for example: everyday use, occasion wear or work wear) or fashion story (the fashion trend reflected in the option) are two further examples.

Whichever attribute is used, linking them to a perception of the target customer and their needs puts a significant emphasis on the buyer’s role and activities to deliver balanced product ranges.

FOCUS POINT 2.2: The role of product – the use of attributes With the development of powerful information technology, the ability to understand product performance and how each option contributes to business success or failure has been facilitated by the development of management information systems (MIS). MIS allow the capture of product data at the point of sale, which is then reported as sales and stock analysis against various defined attributes that are applied to each product record as it is created. For B&M, this has meant a far wider range of analysis possibilities to enable better and more accurate planning and trading decisions. In the recent past, product analysis centred on simple attributes such as product type, colour, size and location of stock. While useful, these are limited in providing an in-depth understanding of how the product range is performing. The ability to attach numerous attribute codes against products meant that any number of questions could now be posed about the range during the planning process to ensure the required balance of product; and once in store, comparisons could be made between that plan and actual selling results.

BALANCED BUDGETS No matter how unique and balanced a product range is, it must also support a second role of creating wealth for the

Today, propriety software systems have been developed to offer a greater scope within retail analytics. Analytics now has a multi-­ dimensional approach. First, actionable analysis takes insight and is translated into an action plan in real time. For example, where analysis indicates an overstock, then immediate markdown can be actioned. Second, forecast analysis allows recommendations of intelligent, personalized, predictive product suggestions. This is achieved through statistical models and machine learning to drive product recommendations via collaborative filtering, basket analysis and product affinity. Finally, the ability to understand consumer behaviour allows the identification and segmentation of customers by their propensity to buy, incorporating demographic, geographic, psychographic and social data to build more intimate and long-­lasting relationships.

Activity Review a product range in a retailer. Build a fashionability attribute table of its product range and assess how it shapes it ranges by core basic, fashion and high-fashion attributes.

business. To navigate towards this, all businesses operate within financial budgets that shape and direct the buyer to ensure that balanced ranges are also profitable ones. The ultimate responsibility for

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accurate budgeting lies with the finance team, who ensure that the businesses finances are transparent, accurate and follow all legal accounting conventions. Within financial budgeting there are two separate ledgers to do this. All income,

expenses and profits are recorded and managed through a profit and loss (P&L) account, while the business records its financial assets, liabilities and worth within a separate balance sheet. Tables 2.3 and 2.4 give generic examples of each.

Table 2.3  A profit and loss account example Sales turnover

£100,000

Cost of goods sold

£43,000

Trading profit

£57,000

Overheads costs

£42,000

Operating profit

£15,000

Interest and tax

£5000

Net profit

£10,000

Table 2.4  A balance sheet example Assets   – Debtors

£5000

  – Cash

£10,000

  – Stock

£40,000

  – Other assets

£5000

Total assets

£60,000

Liabilities   – Creditors

£20,000

  – Borrowing

£15,000

  – Equity

£15,000

  – Other liabilities

£5000

Total liabilities

£55,000

Net worth

£5000

In reviewing the P&L and balance sheets, the quantitative elements of the role of product within wealth creation become clear. The sale of product and associated costs such as supplier costs,

markdown activity and stock loss all drive fashion retailers’ gross trading profits. These in turn are used to support business overheads such as salaries, store and marketing costs. On the balance sheet, the

FASHION, BUSINESS AND PRODUCT

stock owned – or in other words, product that has been bought but is yet to be sold – sits as an asset of the business. This implies that the management of the financial capabilities of a product range directly influences business success and so is equally important to get right as fashion credibility and range balance. This point raises a further one: it would be wrong to dismiss the relevance of a companywide finance team in the budgeting process, as ultimately, they are the experts in managing P&L accounts and balance sheets. They are also the guardians of the debts

routinely taken out to fund the cost of purchasing product, and without their ultimate approval no product range would be bought. However, the natural remoteness of the finance team from the commercial realities of the market requires a quantitative financial dimension within product management to at least influence, and at most direct, the shape of relevant product budgets. To ensure that product budgeting decisions are appropriate and achievable within the context of prevailing trends and market conditions, that influence and activity are provided by the merchandiser.

CASE STUDY 2.1: Marks & Spencer – poor product planning and financial performance In April 2012, during a protracted retail recession, one of the UK’s largest and most influential retailers, Marks & Spencer, reported to the city its sales for the fourth quarter of its financial year. Since the late 1990s, the business had developed a reputation for having mixed fortunes with its financial results, and the 2012 set of results was disappointing. Headline like-for-like sales were down 0.7 per cent on the previous year, led by poor performance within its womenswear category. This result was, however, not the key headline that was reported in the financial and trade press. M&S chief executive Marc Bolland, in explaining the poor performance, admitted to a fundamental error in the business’s B&M function. The Daily Telegraph commented that ‘It stocked up for a more downmarket, cash-strapped shopper than it needed to, so increasing its stock of lower-margin togs. But it failed to buy enough of the pricier stuff they really

wanted  – and then lacked a supply chain quick enough to react to the demand’ (Osborne 2012). As a result, the business failed to satisfy the demand from its customers. Examples were given of knitwear where sales of 100,000 units could have been as high as 300,000, and ballet pumps where actual sales of 10,000 units were dwarfed by demand for 17,000 units. Bolland was quoted as saying that ‘That was a miss in our merchandising planning. We were bang on-trend, but we should have had a bit more of some of our lines’ (Jefford 2012).

Activity Regularly review the business sections of broadsheet newspapers. Assess which fashion retailers are considered successful and which are not. Use this information to build a picture of the evolving state of the industry.

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WORKING TOGETHER – BUYING AND MERCHANDISING With two clear roles for product, the complexity of successful product management takes a strategic as well as operational context. Quite apart from the processes of product development, the product must be profitable and on-trend and communicate to its target customers. There are also other, less obvious complexities. As brands develop personalities, restrictions are placed on the rules within which product range development can be carried out. Decisions such as display criteria, the mix of products or use of promotional markdown become more influential within the planning and trading of product ranges. The creation of a fashion product range is therefore multi-skilled, and the many decisions required within the process by both buyer and merchandiser must be made in tandem with each other. This is important as neither role can deliver its remit without the other. A buyer, for example, cannot buy a range without a buying budget, and a merchandiser cannot define the size of a product range without knowing which trends will require development into a larger mix within the range. To be effective, a chain of activities is required that link the roles together to deliver a cohesive product offer to the customer that is consistently in line with their expectations and those of the business. This linkage of activities means that the buyer and merchandiser do not and cannot work independently of each other and must fulfil their roles within the context of an orderly sequential process.

THE CONCEPT-TO-CARRIER BAG MODEL It should not be a surprise that fusing buyer and merchandiser together into a process results in one that is complex and broad in its activities. The co-ordination of matching product to a target market within the confines of a requirement to deliver profit requires organization and clarity as to how the differing activities work to link their thought processes and actions together. There are many ways of doing this, dependent on the business model applied. A luxury business may, for instance, place a greater focus on design, fabric and trim sourcing whilst a high-street volume retailer such as Primark may focus on efficiency, logistics and supply management. No matter where the emphasis is placed, all businesses will follow a sequential process around which a product range is created. This section presents one such process model which will articulate how the B&M roles contribute to the successful delivery of product. There have been many supply chain models devised to demonstrate the totality of the product management process. A ‘concept-to-carrier bag’ model used within this book is shown in Figure 2.1. It identifies ten sequential steps that take relevant product research to develop a product concept and turn that into a product range available for sale. It is a visual representation of distinct activities, and by design it is linear and takes no account at this stage of how or when the activities or indeed the roles that are responsible for them are carried out (Table 2.5). In doing so, the model neatly demonstrates a generic process, and so it is presented as a guide template to

FASHION, BUSINESS AND PRODUCT

1. Research 10. Carrier bag

2. Concept

9. Retail

3. Product development

8. Distribution

4. Sourcing

7. Warehousing

5. Manufacturing 6. Shipping

Figure 2.1  The ten sequential steps of the concept-to-carrier bag process model

Table 2.5    The definition of each process step within the concept-to-carrier bag model Concept-to-­carrier bag activity

Definition

1. Research

Undertaking and collation of relevant fashion research

2. Concept

Creation of product range concept and design direction

3. Product development

Finalization of concept as a product range

4. Sourcing

Sourcing of suppliers and manufacturers for the range

5. Manufacturing

Manufacture of the product range

6. Shipping

Shipping and delivery of the product range

7. Warehousing

Receipt of the product range, its allocation to store and storage

8. Distribution

The process of delivering initial store allocations

9. Retail

Display, sale, promotion and stock replenishment

10. Carrier bag

Purchase of the product by a consumer

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then further demonstrate the B&M roles and activities required within the process model. Within the model, the flow of activities starts with collating and sorting through a breadth of relevant information to identify facts that facilitate the concept and direction of the new range. With a direction decided, the model moves on to the practical interpretation of the concept through the development of product ranges, the sourcing of suppliers, manufacture and delivery of a physical range to the retailer. Beyond this, the model also identifies that the remit of B&M does not finish at that point but moves on to the allocation of product to different markets, support for the range in the form of packaging, display collateral, product information, stock replenishment and price management. It ends with the sale of a product to a customer who has identified the product as their own personal problem solver. As useful as it is, the model presented lacks a key element: the length of time it takes to be completed, and the process takes time from beginning to end. Take London Fashion Week (LFW) in September as an example. The autumn LFW is part of the buying season for the following spring season. When buying new ranges, buyers must have formulated product ideas (qualitative) and have financial budgets for the new range (quantitative). Within the concept-­to-carrier bag model, the research and concept activities that decide these

product ideas and budgets must occur in advance of September. Typically, these activities will begin as early as July. With a July date as the starting point for the first activities in the concept-to-carrier bag model, it is possible then to create a timeline identifying a critical path to research, plan, source, deliver and sell a fashion range (Table 2.6). For an autumn/winter season, the approximate timescales would be the same, beginning in December to January and concluding 12 months later (Table 2.7). Knowing the length of time that the process can take is important as both buyer and merchandiser must co-ordinate their activities to make sure the flow of decisions is in line with the product’s critical path rather than their own. Putting the product at the centre of the decision-­making process is sensible for several reasons: •• Different products will have different timescales within the concept-to-carrier bag process. An exclusive silk fabric with limited availability may take longer to source than griege cotton to be coloured later. •• Manufacturing of different products within the range will require co-­ ordination to ensure they can be delivered as one collection. •• Products will have different life cycles (when and for how long a product will be available). Core basics are likely to be available always, while fashion or high-­ fashion styles will be phased in at different times over the course of the season.

FASHION, BUSINESS AND PRODUCT

Table 2.6    The concept-to-carrier bag process timings for a spring/summer season Concept-to-carrier bag step

Definition

Approximate timing

1. Research

Undertaking and collation of relevant fashion research

July to August

2. Concept

Creation of product range concept and design direction

July to August

3. Product development

Finalization of concept as a product range

September

4. Sourcing

Sourcing of suppliers and manufacturers for the range

September

5. Manufacturing

Manufacture of the product range

October to December

6. Shipping

Shipping and delivery of the product range

October to December

7. Warehousing

Receipt of the product range, its allocation to store and storage

January

8. Distribution

The process of delivering initial store allocations

January

9. Retail

Display, sale, promotion and stock replenishment

February to July

10. Carrier bag

Purchase of the product by a consumer

February to July

Table 2.7    The concept-to-carrier bag process timings for an autumn/winter season Concept-to-carrier bag step

Definition

Approximate timing

1. Research

Undertaking and collation of relevant fashion research

December to January

2. Concept

Creation of product range concept and design direction

December to January

3. Product development

Finalization of concept as a product range

February

4. Sourcing

Sourcing of suppliers and manufacturers for the range

February

5. Manufacturing

Manufacture of the product range

March to April

6. Shipping

Shipping and delivery of the product range

March to April

7. Warehousing

Receipt of the product range, its allocation to store and storage

May

8. Distribution

The process of delivering initial store allocations

May

9. Retail

Display, sale, promotion and stock replenishment

June to December

10. Carrier bag

Purchase of the product by a consumer

June to December

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In addition to these examples, the development of improved supply chains as discussed in Chapter 1 has meant that product can be phased into stores during a season; product decisions therefore can be made at different times within the total model. Multiple phasing approaches where product ranges are regularly

replaced result in the buyer and merchandiser juggling multiple concept-tocarrier bag processes within an overall planning process. Table 2.8 demonstrates this for a two-product-phase season; for fast fashion, meanwhile, the model would become mind boggling in its potential size and complexity.

Table 2.8    An example of a two-phase concept-to-carrier bag model Concept-to-carrier bag step

Definition

Phase 1 approximate timing

Phase 2 approximate timing

1. Research

Undertaking and collation of relevant fashion research

July to August

November to December

2. Concept

Creation of product range concept and design direction

July to August

November to December

3. Product development

Finalization of concept as a product range

September

January

4. Sourcing

Sourcing of suppliers and manufacturers for the range

September

January

5. Manufacturing

Manufacture of the product range

October

February

6. Shipping

Shipping and delivery of the product range

October

February

7. Warehousing

Receipt of the product range, its allocation to store and storage

November

March

8. Distribution

The process of delivering initial store allocations

November

March

9. Retail

Display, sale, promotion and stock replenishment

December to March

April to July

10. Carrier bag

Purchase of the product by a consumer

December to March

April to July

FASHION, BUSINESS AND PRODUCT

AN INTRODUCTION TO THE BUYER AND MERCHANDISER ROLES The concept-to-carrier bag model can be further interrogated to summarize the buyer and merchandiser roles within it. These are presented within Tables 2.9 and 2.10. These tables provide summary descriptions of their activities undertaken at each stage of the model. A more detailed review follows in Chapter 3. The summaries demonstrate that both roles have relevance throughout the process and at each stage their activities support, inform or direct the other in the completion of their own tasks. A second point is the similarity in tasks. For example, the research process is the same: the review of past and present information, but the focus of the research is different. The buyer focus will be on the information needed to make qualitative product decisions, whilst the merchandiser focus will be on the quantitative ones. There is also commonality in the delivery of the activities throughout  – negotiations with key contacts, liaison with various common or role-specific stakeholders, and towards the end of the season the

joint learning by review and adjustments to ideas and preconceptions about customers, trends and initial product concepts. Product management ultimately relies upon the effectiveness of the relationship between the buyer and merchandiser roles to engage in dialogue to create a product range in which they have each had an appropriate level of input. That dialogue requires effort, an understanding of each other’s role, and a willingness to listen and debate as much as having a technical skill or personality trait. The complementary nature of the two roles results in a planning approach that is thorough but also questioning. The different approaches and skill sets mean that each segment of the decision-making process has an equilibrium between buyer and merchandiser that must be achieved before the next activity can be started. As both roles are clearly intertwined and cannot function fully without the other, it seems more appropriate to find a single definition for both that reflects the importance attached to the role of product, which after all provides the physical manifestation of a brand’s personality and the route to creating sustained wealth for its many stakeholders.

Table 2.9    The buyer activities of the concept-to-carrier bag model Concept-to-­ carrier bag step

Definition

Buyer activities

1. Research

Undertaking and collation of relevant fashion research

Review of past ranges, competitors, future product and cultural trends

2. Concept

Creation of product range concept and design direction

Articulation of research into a product concept, mood boards and product range ideas

3. Product development

Finalization of concept as a product range

Creation of option range plans, product specifications and price strategies

4. Sourcing

Sourcing of suppliers and manufacturers for the range

Negotiation and agreement with suppliers to produce products within cost and quality requirements (continued)

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Table 2.9  (continued) Concept-to-­ carrier bag step

Definition

Buyer activities

5. Manufacturing

Manufacture of the product range

The oversight of the creation of samples and bulk production

6. Shipping

Shipping and delivery of the product range

Liaison with suppliers to finalize product production and approve final production samples to allow shipment

7. Warehousing

Receipt of the product range, its allocation to store and storage

Final review of received product and authority to either release to allocation or return to supplier

8. Distribution

The process of delivering initial store allocations

Provision to retail stores of product information, training or look books for the season

9. Retail

Display, sale, promotion and stock replenishment

Review of current ranges, competitors and trends to make necessary changes to future production for the season

10. Carrier bag

Purchase of the product by a consumer

End of the successful season with the sale of the last unit of the range

Table 2.10    The merchandiser activities of the concept-to-carrier bag model Concept-to-­ carrier bag step

Definition

Merchandiser activities

1. Research

Undertaking and collation of relevant fashion research

Review of past ranges, competitors, future product and economic trends

2. Concept

Creation of product range concept and design direction

Articulation of research into a financial budget and open-to-buy budgets

3. Product development

Finalization of concept as a product range

Creation of option range plans and unit buys within open-to-buy budgets

4. Sourcing

Sourcing of suppliers and manufacturers for the range

Negotiation and agreement with suppliers to produce products within delivery phasing budgets

5. Manufacturing

Manufacture of the product range

Oversight of the status of orders compared with delivery phasing budgets

6. Shipping

Shipping and delivery of the product range

Liaison with the buyer to finalize product production and to allow shipment

7. Warehousing

Receipt of the product range, its allocation to store and storage

Creation of allocation plans for the product to be distributed to stores (continued)

FASHION, BUSINESS AND PRODUCT

Table 2.10  (continued) Concept-to-­ carrier bag step

Definition

Merchandiser activities

8. Distribution

The process of delivering initial store allocations

Oversight of the authority to allocate product to stores and the creation of replenishment plans

9. Retail

Display, sale, promotion and stock replenishment

Review of current ranges, competitors and trends to make necessary changes to future production for the season

10. Carrier bag

Purchase of the product by a consumer

End of the successful season with the sale of the last unit of the range

Using the discussions within this chapter, the core messages are that the components of the B&M roles out of which any definition must come are:

Taking the above together, the combined role of B&M defined for the purposes of this book is:

•• Strategic – the roles have a direct influence on achieving a fashion business strategy; •• Creative – they plan and create the qualitative characteristics of a physical product; •• Financial  – they plan and create the quantitative characteristics of a physical product; •• Operational  – they engage in operational activities to deliver, sell and trade a product.

‘A role that connects the creative and financial product requirements of a fashion brand through strategic range planning and operational trading that  optimizes a fashion business opportunity.’ It is with this overall definition of the B&M function that the next chapter reviews the buyer role and others and assesses their interaction with the merchandiser in their role.

FOCUS POINT 2.3: The buying cycle and fast fashion The concept-to-carrier bag model defines a linear process of taking relevant research and turning it into a delivered product available to purchase through a retail channel. However, like the myriad of other retail business models, while useful for exemplifying the buying cycle process, it is not definitive. The question remains: Is there a definitive process that is followed? In some ways there is and in some not. The intellectual

process will be broadly the same and follow the same logic as the process presented in this chapter, as after all, the concept of B&M to turn capital into product to retail and so turn it back into a higher-­valued capital is common across all business models. Where the differences in approaches emerge is in the execution of the physical process. Within a typical own-label buying cycle, the B&M department will own the entire

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planning process and buy in the skills involved in the manufacture of product from the suppliers from whom they will source product. In comparison, wholesale brands’ B&M departments will be presented with finished collections from which products to be ranged are selected, meaning little or no involvement within the sourcing and manufacture of the ranges that they sell within their stores. Different again are vertical fashion businesses which will own the skills and activities of manufacture in-house. What will be common across all business models is the focus on the outputs of the various buying cycles employed. The product that results from the buying cycle must reflect the brand and its personality; the fabrics and trim sourcing process in a luxury buying cycle is likely to be more complex and time consuming than that of a highstreet supermarket. However, perhaps the single biggest focus within the buying cycle is time; the advent of fast fashion and the success of brands such as Zara is testament to the importance of speed of supply within fashion retailing and the ground-breaking buying cycles that they possess.

The fast fashion model owes much of its principles to that of quick response (QR) supply chain strategies, which were developed to remove time and thus inefficiency from the manufacturing process of US textile businesses. Its principles expanded into the fast fashion concept to remove excessive time from the entire buying cycle from initial planning through to the sale of the last garment in the product range. Tactics to achieve this include the integration of new technologies, reductions in the presumed life cycles of product ranges, the recycling of silhouettes ­throughout a season and the simplification of the manufacturing process to enable entry to a new season with only small amounts of buying budgets spent, allowing multiple buying cycles throughout a season rather than just relying on one.

Activity Design a fast fashion concept-to-carrier bag process with 13 phases and assess how much shorter each step in the concept-tocarrier bag process becomes compared with the introductory model of this chapter.

SUMMARY The rationale for this chapter has centred on introducing concepts that inform the decision-making process of the merchandiser that will then be demonstrated in the second part of this book. By discussing the conflicting nature of fashion and business and emphasizing twinned qualitative and quantitative characteristics, the first evidence of separating the B&M function into the distinct roles of buyer and merchandiser has been established. The

concept-­to-­carrier bag model has shown that, through an ordered process, both roles are equally critical throughout product management, relying on each one’s different focuses to make relevant and balanced product decisions. What is still required is a fuller review of the roles within the context of the concept-­ to-­carrier bag process to identify suitable job descriptions for both players. This will be the subject of Chapter 3.

FASHION, BUSINESS AND PRODUCT

SELF-DIRECTED STUDY 1. Conduct a thorough competitive shop of a fashion retailer’s product range. Understand how you think the range has been put together. Review each option and define what you think the fashionability, end use and price attrib-

utes are. Is there too much or too little of a specific attribute type? Or is it a balanced range? 2. Consider the concept-to-carrier bag model. How might it be varied for an e-retail business?

FURTHER READING Grose, V. (2011) Basics Fashion Management 01: Concept to Customer. London: Ava Publishing

Varley, R. (2014) Retail Product Management 3rd edn. London: Routledge

BIBLIOGRAPHY De Chernatony, L. and McDonald, M. (2003) Creating Powerful Brands 3rd edn. Oxford: Elsevier Jefford, K. (2012) Marks and Spencer Sales Hit by Stock Shortages. City AM [Internet]. Available at http://www.cityam.com/article/ marks-spencer-sales-hit-shortage-stock Osborne, A. (2012) Marks & Spencer Chief Marc Bolland May Need to Prepare for Humble Pie Next Valentine’s Day. Available

at https://www.telegraph.co.uk/finance/ comment/alistair-osborne/9210318/ Marks-and-Spencer-chief-Marc-Bollandmay-need-to-prepare-for-humble-pie-nextValentines-Day.html Oxford English Dictionary (2018) The Oxford English Dictionary. Oxford: Oxford University Press Varley, R (2014) Retail Product Management 3rd edn. London: Routledge

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3

THE ACTIVITIES OF BUYING AND MERCHANDISING

INTENDED LEARNING OUTCOMES 1.

A review of the buying and merchandising role within a fashion retailer

2. An interrogation of the differences between own label and branded buying and merchandising 3. A summary of the buyer role within the concept-to-carrier bag model 4. A summary of the merchandiser role within the concept-to-carrier bag model

INTRODUCTION The concept-to-carrier bag model discussed in Chapter 2 demonstrated sequential B&M processes, around which a summary of the roles of B&M was defined. This chapter reviews the detail of the two roles, provides example job descriptions and, in the case of the merchandiser, the subject of this book, two current merchandisers present a short review of their own individual impressions of the jobs they do. One theme that has been consistent so far is that there is no one single type of fashion retail business, product range or B&M process. Not surprisingly, this means that there is no single method by which buyers or merchandisers undertake their roles. The contents of this chapter are by necessity generic to provide knowledge of the principles of the roles which can be interpreted in different ways throughout the industry. The roles will be discussed in line with the concept-to-carrier bag process using an own-label environment as its theme. Branded B&M follows a similar path for much of the process, and a short section will discuss key differences between the two.

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THE ACTIVITIES OF BUYING AND MERCHANDISING

BUYING AND MERCHANDISING REVIEW At the end of Chapter 2 the B&M function was defined as being: ‘A role that connects the creative and financial product requirements of a fashion brand through strategic range planning and operational trading that optimizes a fashion business opportunity.’ This definition puts B&M at the heart of a fashion retail business, having the power to affect its strategic direction via its product ranges, whilst the aggression with which those ranges are worked once in store impacts the company’s day-to-day operations. This dual impact is known within B&M as planning and trading, and as the review of the concept-to-carrier bag process below shows, both feed from one another in a continuous cycle of planning a range, trading it and then using the knowledge gained to influence future planning and trading. This dual approach also makes the buyers and merchandisers very versatile within their roles; over time their experiences turn them into much sought after, multiskilled retail professionals able to influence a business’s strategic direction.

 HE ROLE OF THE FASHION T BUYER Explanations of the role of the fashion buyer have been discussed many times. Jackson and Shaw assert that the role is ‘to ensure that the products bought for sale by the retailer are appropriate for the target market and can sell in sufficient quantities to achieve the profit margin expected by the business’ (Jackson and Shaw 2001: 13). Goworek concurs, writing that fashion buyers are ‘responsible for overseeing the

development of a range of products aimed at a specific type of customer and price bracket’ (Goworek 2007: 5). Finally, Varley considers the buyer as being ‘more concerned with the qualitative side of buying’ (Varley 2014: 23). Taking these and connecting them to the concept-to-carrier bag model allows a summary of the buyer activities in Table 3.1.

 HE ROLE OF THE FASHION T BUYER IN DETAIL – HANNAH MIDDLETON, MANAGEMENT CONSULTANT AND LECTURER Management consultants are often instrumental in the development of the roles of and activities within buying and merchandising. Here, Hannah Middleton provides details of the role of the buyer structured around the concept-to-carrier bag model and the skill sets of good buyers and finally insights into her role within the fashion industry. As a management consultant, I advise on the qualitative elements of product management for clients ranging from new emerging designers to retail businesses with up to 80 stores. In my experience over the past ten years, there are similarities in the challenges faced by fashion retail businesses. Frequently businesses are not clear about their target consumer. This is often because they haven’t collected enough relevant research, or they have failed to effectively analyze the research that they have gathered; their ranges therefore do not always align with the needs and wants of their target consumer. With increased competition and retail formats it is crucial that a modern fashion business can deliver a consumer-focused range as if they do not then there are plenty of other retailers for the consumer to migrate toward. This means that effective research as the first stage of the concept-to-carrier bag model, is crucial to set the planning agenda. Whilst most of the relevant qualitative research is gathered it

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Table 3.1  The summary activities of the buyer Concept-to-carrier bag step

Definition

Buyer activities

1. Research

Undertaking and collation of relevant fashion research

Review of past ranges, competitors, future product and cultural trends

2. Concept

Creation of product range concept and design direction

Articulation of research into a product concept, mood boards and range ideas

3. Product development

Finalization of concept as a product range

Creation of option range plans, product specifications and price strategies

4. Sourcing

Sourcing of suppliers and manufacturers for the range

Negotiation to produce products within cost and quality requirements

5. Manufacturing

Manufacture of the product range

Oversight of the creation of samples and bulk production

6. Shipping

Shipping and delivery of the product range

Liaison with suppliers to approve final production samples to allow shipment

7. Warehousing

Receipt of the product range and its allocation to store and storage

Final review of product and authority to release to allocation or return to supplier

8. Distribution

Delivering initial store allocations

Provision to retail stores of product information, training or look books

9. Retail

Display, sale, promotion and stock replenishment

Review of current ranges, competitors and trends to make changes to forward orders

10. Carrier bag

Consumer purchase of the product

End of the season and the sale

is true that research must be conducted throughout the cycle. Weekly sales figures must be analyzed, target customers met and understood, and regular reviews of the competition undertaken. Furthermore, in addition to a failure to fully research, many businesses fail to adapt their supply chain to ensure that it is fit for purpose. As consumers become increasingly trend aware, retail businesses must respond quickly to fashion trends. This requires a business to build agility into their supply chain. This gives the buyer the flexibility to respond to consumer needs

quickly. Often retail businesses and their buyers opt for the lowest cost suppliers who are often located far away and cannot deliver stock quickly. In managing their supplier base buyers must also give thought to what is of greater importance to the consumer: lowest cost production or agility in supply to ensure a quick delivery of emergent fashion trends? This decision point is the often unseen element of the buying role. The making of sourcing decisions to best blend low cost and agility of supply means buyers must think on their feet; cutting out parts of the design process, not

THE ACTIVITIES OF BUYING AND MERCHANDISING

making prototypes but instead adapting bestselling shapes and going straight to production, the partnering with suppliers to reserve production space or the changing of delivery methods to speed up deliveries of fresh collections. Applying this summary to the concept-­ to-­carrier bag model reveals in detail the complexity of the buyer role and how timing, commercial awareness and robust research skills combine to plan, develop and deliver a product range (Table 3.2).

 HE SKILL SET OF FASHION T BUYERS To deliver a targeted product range clearly requires various skills. First, the buyer must understand the product development process and the influence of fashion and cultural trends on product ranging, interpreting these into balanced ranges for a target market. Second, they must be able to articulate

this creativity through persuasion and negotiation with internal and external ­stakeholders to ensure all aspects of the planning and trading process are completed. Third, the buyer must be flexible and resilient to manage the inevitable changes of mind and unforeseen problems that occur. These could include a supplier not being able to manufacture a product at the cost price requested, an emerging trend requiring that a range’s creative direction be amended, the finance director requiring cost savings which require a change to budgets or a change in customer’s preference for a product or product category. The buyer’s skill set centres on their knowledge and understanding of product and creativity; however, they must also be analytical to understand the impact of their decisions on the commercial strength of a business and possess unlimited enthusiasm and passion for their industry.

PROFILE 3.1: The role of the buyer – Sennait Ghebreab Currently working as a luxury branded buyer for the Europe, Middle East and Africa markets, Sennait gained her experience working in wholesale, buying for major brands such as Burberry, Matthew Williamson, Joseph and Pringle of Scotland. At the beginning of the week, time is spent going through trade reports, analyzing sales figures and comparing actual performance against planned performance and departmental key performance indicators (KPIs)  – sell through, weeks cover, sales in value and units and stock levels. Key selling lines and poor performers are identified, and trading actions are discussed with the team. A decision is made on promotional

and markdown activity, repeat orders are placed and available open-to-buy (OTB) budget is released for spending. As the week unfolds, trading actions are implemented and followed-up. A successful fashion buyer needs to be analytical with excellent commercial awareness. It is vital that the buyer fully understands the identified target consumer and can spot fashion trends and new and emerging fashion brands. As a branded buyer, you need to have the confidence to work under pressure and to react quickly to the changing market. Being a good negotiator is key to maximising profits, helped by having a good relationship with the brands.

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Detailed activities

The buyer, and where appropriate their designer, undertake research activities prior to making decisions about the product range. This research has five elements to it:  – Reviewing the previous season’s range to identify how product categories, styles, colours and price points performed. This enables the buyer to understand not only the strengths and weaknesses of past ranges but also the direction of the business and the preferences of the target customers.  – A review of competitor product offers to build up a picture of their strengths and weaknesses and identify potential gaps in the market. This review goes beyond direct competitors; directional shopping trips to key retail locations such as New York or Milan are often undertaken.  – Knowledge of the trends emerging from cool hunters, influencers, haute couture fashion brands and editorials helps to build up ideas of what the world that surrounds the business is doing, so identifying what is either currently or likely to be in demand.  – Identification of key aspects of the target customer’s life such as their demographic, personal likes, dislikes, attitudes and lifestyle allows a portrait to emerge of who they are, how they live and their attitude to fashion.  – Awareness of macro-market trends such as overall economic conditions, future events – e.g. cultural, sporting or national – and announced plans of competitor activity will all have a potential impact on future demand.

The buyer will then use the information gathered to formulate a concept around which product ranges can be built. The range concept includes:  – An interpretation of relevant trends into mood boards to capture the inspiration behind the product range.  – The identification of range stories or themes that product ranges will be built around. This will include initial ideas of price point strategies, colour palettes, key product types and shapes for the season.  – The possible purchase of example products from directional shopping trips for design inspiration.  – The identification and modification of previous season’s best sellers.

Concept-to-­ carrier bag step

1. Research

2. Concept

Table 3.2  The detailed activities of the buyer

44 FASHION MERCHANDISING

The buying role throughout the sourcing process is one of negotiation and direction. The buyer is responsible for sourcing fabrics and trims needed in manufacturing. Depending on the nature of the product, concept of the brand and the target market, the buyer is to source the factories most suited to manufacturing the planned product range.

To ensure that delivered options match the technical and aesthetic concept of the range, the buyer, in conjunction with technical support from the quality assurance team, will:  – oversee fabric and trim testing (for quality and performance tests), lab dip approval (for colour matching), base fabric testing (tests the physical properties of the fabric such as composition, tearing strength and elasticity) and bulk testing (tests for colour fastness), garment labelling approval and size and fit assessments. At each stage of the process, prototype garments, pre-production samples (to check make and components) and post-production samples (to check the final manufactured garment) will require approval to ensure the supplier manufactures products to agreed designs, and that they adhere to various legal and trading requirements placed on the retailer  – negotiate payment terms, cost prices and delivery dates that are in line with margin and stock-phasing budgets and company policies  – raise purchase orders to confirm all product details, size ratios and delivery terms.

4. Sourcing

5. Manufacturing

(continued)

At this point the buyer, alongside the merchandiser, develops the range concept into an initial range plan. Range plans vary in scope but will generally list all the options to be ranged and against each one will list:  – an option description (often with sketch and fabric swatch attached)  – the trend or theme that it belongs to  – the fashionability level of the option (core basic, fashion or high fashion)  – supplier name and country of origin  – cost and selling prices and resultant intake margin percentage  – number of stores that the option will be ranged within  – unit buys for each option and calculated cost and selling values. This initial range plan will evolve over the course of this planning stage as ideas are developed and budgets decided. Some early product ideas will be developed and grow in importance, while others may be discarded. As the process moves on, prototype designs are created, and suppliers will submit mock-up samples, fabrications, trims, linings, cost prices, shipping details and delivery dates for approval by the buyer.

3. Product development

THE ACTIVITIES OF BUYING AND MERCHANDISING 45

Detailed activities

With the manufacture process completed and the product compliant with the technical, aesthetic and trading concept, the product can be shipped and delivered: In agreement with the merchandiser, the buyer authorises shipment of the product (following an inspection of the finished product) from factory, via its port of origin, to the retailer’s warehouse or distribution centre.

Once received into the warehouse or distribution centre, the buyer will, in conjunction with quality-assurance personnel, review the delivered product. This enables any quality issues or damage while in transit to be spotted and corrective actions to be taken. This could include an order cancellation, should the damages be thought unsalvageable, or a negotiation in cost price.

Once checked, the product is allocated to stores (physical or online), becoming the responsibility of the marketing and retail teams to promote and maximize selling potential.

The buyer contributes to the selling of the product by:  – providing product information, samples for the press office, visual merchandising guidelines, samples and styling information for look books, and if necessary, facilitating the provision of product training for sales staff  – constantly reviewing the performance of the product range and, where necessary, liaising with suppliers to manufacture repeat orders of options which sell well and cancelling or reducing the units supplied of options that have yet to be delivered should sales of similar options be poor  – discussing with the merchandiser suitable markdown policies for the end-of-season sale (ESS), where appropriate seeking markdown funding from suppliers.

As the products are sold at the end of the season, the buyer will review the entire process by:  – assessing the product range performance to make any required immediate changes to the next season’s range plans  – reviewing supplier performance to assess quality, delivery performance and ethics within the manufacturing process  – review feedback from stores and customers to influence future product range direction.

Concept-to-­ carrier bag step

6. Shipping

7. Warehousing

8. Distribution

9. Retail

10. Carrier bag

Table 3.2  (continued)

46 FASHION MERCHANDISING

THE ACTIVITIES OF BUYING AND MERCHANDISING

PROFILE 3.2: The role of the buyer – Rachel Finch Working for nearly 15 years as a buyer for mid-market own-label fashion retailers, Rachel has extensive experience in buying own-label fashion ranges. The fashion industry in recent years has seen many changes (introduction of the online market; artificial intelligence, augmented reality and the recent closure of bricks-and-mortar stores), and it has been important that buyers have adapted to these changes. As a buyer, Rachel works across many departments: with the fashion designer to develop and create a consumer-focused trend-led collection, with the merchandiser to plan the quantitative elements of the range, with the quality team to ensure a ‘fit for purpose’ collection, with store staff giving them the skills and knowledge to sell the range and with marketing and press to promote the collection. Activities for a typical week include the analysis of sales figures on a Monday, with a view to trading the department and to help broaden the buyer’s understanding of the target consumer. Through

 HE ROLE OF THE FASHION T MERCHANDISER Academics have provided differing perceptions of the merchandiser role. Jackson and Shaw describe it as being ‘total process of stock management’ (Jackson and Shaw 2001: 26), while Goworek describes it as ‘responsible for setting the financial parameters of a garment range’ (Goworek 2007: 9). Varley states merchandising as being ‘concerned with the quantitative aspects of buying, and [...] usually

analysis of sales, examining consumer behaviour, store visits, inspirational shops, attending trade shows, trawling social media and trend sites, the key looks for the season ahead are identified. To ensure a competitive advantage, thought always needs to be given to the identified target consumer and the marketplace. Visiting stores regularly gives Rachel and in-depth understanding of the consumer and helps in her understanding as to what is and is not working in the range. A buyer needs to be skilled in analyzing data, identifying fashion trends and problem solving. To facilitate working with many different departments, it is crucial that the buyer be a good communicator. The ownlabel role is more creative than the branded buying role and requires the buyer to understand fabrics and product construction. For a business to remain competitive, the own-label buyer is required to be creative, having a flair for identifying new trends appropriate to the target consumer, and yet to have commercial acumen.

responsible for estimating sales, planning deliveries and distribution of goods to the stores’ (Varley 2014: 25). Interestingly, there is little common ground within these three definitions to pull together a consistent theme. The definitions feel narrow, leaving the reader with unanswered questions; for example, the Jackson and Shaw one suggests a process that is relevant throughout a concept-to-­ carrier bag model but does not elaborate beyond stock management. Goworek,

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Table 3.3  The summary activities of the merchandiser Concept-to-carrier bag step

Definition

Merchandiser activities

1. Research

Undertaking and collation of relevant fashion research

Review of past ranges, competitors, future product and economic trends

2. Concept

Creation of product range concept and design direction

Articulation of research into a financial budget and open-to-buy budgets

3. Product development

Finalization of concept as a product range

Creation of option range plans and unit buys within open-to-buy budgets

4. Sourcing

Sourcing of suppliers and manufacturers for the range

Negotiation and agreement with suppliers to supply within delivery phasing budgets

5. Manufacturing

Manufacture of the product range

Oversight of the status of orders compared with delivery phasing budgets

6. Shipping

Shipping and delivery of the product range

Liaison with the buyer to finalize product production and to allow shipment

7. Warehousing

Receipt of the product range, its allocation to store and storage

Creation of allocation plans for the product to be distributed to stores

8. Distribution

Delivering initial store allocations

Oversight of the authority to allocate product and to create replenishment plans

9. Retail

Display, sale, promotion and stock replenishment

Review of current ranges, competitors and trends to make changes to forward orders

10. Carrier bag

Consumer purchase of the product

End of the season and the sale

meanwhile, suggests a much more narrowly focused role, while the Varley definition is the fullest, but that one too feels limited as it makes no definitive reference to product. As with the buyer role, Table  3.3 describes the merchandiser activities within the concept-to-carrier bag model.

 HE ROLE OF THE FASHION T MERCHANDISER IN DETAIL – MARY ANDERSON FORD, AQUARETAIL AQUAretail is a merchandising specialist recruitment agency that specializes in the merchandising world. AQUAretail was

THE ACTIVITIES OF BUYING AND MERCHANDISING

founded in 2013 and has extensive knowledge of the merchandiser role in all its shapes and sizes. Here, Mary Anderson-­ Ford, who has been recruiting merchandiser roles since 2005 and is now the owner of AQUAretail, provides details of the role of the merchandiser structured around the concept-to-carrier bag model and identifies the core skills required of merchandisers today. The merchandising role can be thought of as the poor relation to the buyer: less glamour and less power. A role that simply utilises Excel to process and order the buyers thoughts. That really isn’t the case at all. Twenty years ago, maybe. But as society’s demands as consumers force retail to evolve, the role of the merchandiser has become bigger and more interesting. A good merchandiser is no longer just a human abacus – they’re now a commercial manager, overseeing all areas of the product life cycle. It really is our lifestyles that dictate how retailers are changing. Shopping by post used to involve long queues at the post office, cutting out coupons and waiting for 28 days for delivery. Now we as consumers  – quite literally  – have the power of shopping in the palms of our hands. We can shop on the beach, order new trainers while on the bus or update our weekly grocery basket without anybody else noticing. And we want it all faster than ever before – waiting more than two days for delivery makes us impatient. This Need for Speed has forced retailers to adapt, and this new pace isn’t impacting the context of buyer and designer roles. Their role to select ranges, pick fabric and study what’s on the catwalk remains the same. It’s the merchandisers who need to

respond. To respond needs a clear idea of the starting point, what the merchandiser context and core role are. So, let’s look at merchandising in more detail  – the main thrust of the role, the personality and character traits that make a good merchandiser. In summary, merchandisers oversee the collections from a commercial perspective. It’s the role of the merchandiser to ensure that all product ranges and time periods have been carefully executed in terms of financial planning, stock management and profit delivery. This falls into two key phases – planning and trading. The planning phase of the concept-tocarrier bag is by its nature predictive (see Chapter 2 for a refresher of the planning cycle and timelines) and is undertaken in advance of product delivery to the retailer. The trading phase commences once the collections go on sale. Most merchandisers say this is their favourite part of the job  – they love reviewing sales performance every Monday and seeing if their planning predictions come true. The task of trading the range generally consists of ordering additional stock (“repeats”) when a product is selling well or putting items onto promotion to help it sell faster if it is not. This phase demands a lot of pace, as the demand must be responded to quickly to keep up with anticipated sales  – and capitalise on any opportunity to gain market share and make some money! Applying this summary to the concept-­ to-­carrier bag model reveals in detail the complexity of the merchandiser role and how timing, commercial awareness and tenacity combine to plan, develop and deliver a product range (Table 3.4).

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Table 3.4  The detailed activities of the merchandiser Concept-to-­carrier bag step

Detailed activities

1. Research

The research phase for merchandisers is all about poring over historical planning and trading data. Previous season’s winners and losers are studied to ensure that all emerging business trends are reflected in potential sales budgets. Of course, there will be ranges that get signedoff because of a new trend which had not previously existed – or a design in a colour which had not been in fashion the year before – but outside these variables, generally, the ‘science’ is reliable and proven. Analysis will take a detailed perspective, looking closely at the unit volumes, sizing and stock levels. There is a myriad of factors which are taken into consideration in doing this: The weather, an endless minefield attempting to forecast the unforecastable (a rainy July or a balmy October can have a significant impact on sales turnover); wider influences on the planning period ahead such as planned events, such as the World Cup, or political and economic influences such as economic forecasts; global political shock; or simply consumer sentiment to the world around them.

2. Concept

At this second stage, the buyer and merchandiser work closely together on formulating the ingredients of the product range. For the merchandiser, this is undertaken by calculating appropriate financial budgets to enable the finalization of the product range. These are reviewed by the finance department to ensure that the business can support the developing product range. Product budgets will be created mixing past financial history with strategic initiatives and product trend data into a realistic plan from which a buying budget can be identified for the buyer, while finance can assess the impact of the product’s contribution to the profit and loss (P&L) and balance sheet.

3. Product development

As the range is reaching its completion, the buyer and merchandiser put the finishing touches to the collections – for the buyer, this means focusing on the look of the range and selling prices, whereas for the merchandiser, it means checking the range plan is comprehensive. This activity includes the calculation of unit buys for each option and calculating cost and selling values to ensure the correct unit amount is bought for each option, supporting its expected commercial strength, size ratio and period of availability within distribution channels.

4. Sourcing

This element of the life cycle is largely the responsibility of the buyer, but the merchandiser will work on delivery plans, phasing of deliveries to the retailer. This is done by the creation of a master delivery schedule to track deliveries of new ranges. (continued)

THE ACTIVITIES OF BUYING AND MERCHANDISING

Table 3.4  (continued) Concept-to-­carrier bag step

Detailed activities

5. Manufacturing

As the manufacturing process starts, the merchandiser will have direct timely contact with suppliers throughout the manufacturing process. Identified issues and changes to delivery dates can all be reviewed against stock budgets and are agreed or negotiated if not suitable to the retailer.

6. Shipping

As the manufacturing process come to an end, the merchandiser will, within the master delivery schedule critical path, track deliveries. They will liaise with logistics regarding the movement of stock and with the warehouse on anticipated arrival dates and ensure that initial allocations of stock are created in time to ensure each store receives timely and correct stock packages to move onto the shop floor or website.

7. Warehousing

Upon arrival in the warehouse, the merchandiser will update stock records to show that stock is no longer in transit and is able to be released to stores. Initial allocations will be confirmed based on deliveries received, and any outstanding order will be chased up or cancelled.

8. Distribution

Once the stock arrives in-store or online, the trading phase of the concept-to-carrier bag model can commence. Popular ranges can be reordered, and those less-popular lines can be given an extra push by applying a promotion to them (2-4-1s, 3 for £50 or other such promotions). And of course, a change in weather – or celebrity endorsement – can be all that is needed for an item to go from slowseller to bestseller. These trading activities occur continuously over the season on a daily, weekly or monthly basis.

9. Retail

An additional and more common element today is that of returns management. Returns carry vast additional costs to the retailer. This subject is one that needs careful management. First, the merchandiser needs to understand why products are being returned, and second, how they can re-introduce this stock back into the distribution and retail phase for re-allocation, promotional markdown or return to supplier.

10. Carrier bag

All trading activities are designed to allow the range to sell out as best it can. Inevitably the predictions of the planning phase do not always work out as intended. There is a constant information flow to discuss the financial performance of the range, with the buyer and finance assessing the impact of end-of-season targets being met. As the season moves to its end, the focus turns to managing the remaining stock items that have not been sold. The end-of-season sale is a major event for many retailers and is constructed to liquidate as much dead stock as possible within the confines of any requirements placed on the merchandiser by the finance team.

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 HE SKILL SET OF FASHION T MERCHANDISERS By nature, merchandisers are numerate and commercial. In addition to that, they are logical and rational; they tend to be excellent at recalling detail, and this almost photographic memory serves them well. But it is far more than that; there is a temperament that merchandisers have in common too. They all have a careful balance of being both assertive yet calm – they are the diplomats of the retail head office team. They need to both caress yet control the creative juices and demands of the product teams. The perfect merchandiser of course also has a nose for fashion and trends – just as to balance the perfect buyer having a good understanding of commercial market pressures too. An ability to be totally objective and dispassionate is also important. Strong communication skills and an ability to present a position clearly and with a well-formulated argument are important. The more senior a merchandiser becomes, the greater the requirement to expand their profile; presenting to the board of the

directors for example. This kind of presentation  – often in highly pressurized environments – calls for incredible composure and the ability to think on one’s feet and keep a cool head. Persuasive techniques and powers of negotiation are often required, along with the ability to compromise to ensure the appropriate decisions are reached. One interesting aspect of the merchandiser personality has evolved in recent years. Whereas historically the role attracted mathematicians and finance professionals into merchandising, that is no longer always the case. Over the years more scientists  – those with degrees in chemistry or physics used to working with datasets  – have proved to be perfectly placed to work in merchandising. Further to this, with an increasing ability through technology to understand consumer behaviour patterns, those from academic backgrounds such as sociology, psychology and geography are increasingly becoming relevant as prospective merchandisers.

PROFILE 3.3: The role of the merchandiser – Katie Nolan We work with all other areas of the business such as wholesale, e-commerce, franchise/ international, supply chain and many more, but our day-to-day relationship is mainly with the buying and design teams. We work with them to develop the range and analyze sales and stock history to help provide a structure as to how to buy the new season’s range. This is often by phase or selling period and built up to a total structure to make

sure our budgets fit within the budgets we have been set by management. Once the range has been signed off, the team works to ensure it all comes into the business on time. Without any product, you will not be able to meet the sales turnover budgets set by management. The main day of the week is Monday, with most of the team getting to the office at 8 am to prepare and study trade reports

THE ACTIVITIES OF BUYING AND MERCHANDISING

and documents. There is then a flurry of activity, as we all analyze the previous week’s sales figures and prepare a trade pack for the trade meeting, where we discuss sales performance, highlight key drivers/slow performers and discuss and sign-off any proposed actions such as markdowns or repeats to be booked. As the week unfolds, the various actions are implemented and followed-up. There are many key skills required in merchandising  – accuracy and numerical abilities being one of the most important. Not all merchandisers are naturally gifted mathematicians, and we all learn to pick up tricks along the way (such as Excel is your friend and never go to a meeting without your calculator). There are lots of soft

skills needed to be a good merchandiser. You need a huge amount of drive and passion – it is not always fun, there will be late nights before meetings, and you will not always love every single person you work with. But if you get a rush from a resultorientated mindset and get excited seeing the sales figure rush through, then you will remember why you are doing it. The job is very rewarding, and you have the chance to make a real difference in most organizations, whether it is identifying areas of growth in a size curve you currently offer or highlighting a potential new product area or trend to go into. Merchandising gives you the chance to make a stamp on the high street, albeit a little one most of the time.

PROFILE 3.4: The role of the merchandiser – Rachel Langdon The role focusses on the management of offering and selling a balanced and blended assortment of a mix of special buys and oldseason stock. There is a careful balancing act to be done between selling terminal stock whilst protecting the company’s image and ethos. Just like a core merchandiser, there is regular analysis of performance recognizing opportunity and risks and tailoring promotional activity accordingly. An outlet merchandiser must therefore show innovation and quick thinking, supporting their buying partners in achieving a commercial and balanced offer. Constructive analysis is regularly needed to shape future assortments and guide investments to maximize margin and keep terminal inventory down. To do this, you need an ability to make trade decisions; identifying promotional

opportunities is also key. Reviewing and flexing promotional activity on a weekly basis will ensure the business is managing stock efficiently. As an outlet merchandiser, you get to make quick impactful trading decisions, and to see an outcome almost instantly is hugely rewarding. A sense of creativity is needed, with new promotional approaches constantly called-for by the business. You also get to be involved in range building, as special buy ranges usually have their own identity, giving them their own stamp and recognition. The downside is having to absorb excess stock from the full price side of the business, which can detract from the performance of special buys, pulling down financial success and taking up space on the shop floor. Sizing availability can be an issue on

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excess old stock – once the key sizes have gone, the remainder can be difficult to sell down and can lead to frustration for customers. Mondays in this arm of merchandising also revolve around reports and analysis, followed by a trade meeting to propose relevant actions for the week. However, in an outlet business, it is important to make fast-paced quick decisions to capture the full opportunity of the week ahead. A close review of inventory is a must therefore – if possible, by store level – to understand individual weeks of supply. A weekly review of promotions is also required to understand what styles need protecting and what

needs to be driven harder to turn through the stock. All actions discussed need to be implemented and communicated to stores on Monday, to ensure they are set up and ready to go on Tuesday with the trading actions for the week. In addition to the essential commercial awareness all merchandisers have, an outlet merchandiser needs to be a self-­motivated individual with excellent organization skills, alongside a willingness and ability to multitask. A flair for creativity is key  – you must be able to suggest new promotional ideas and concepts to drive business. Finally, is an ability to cope and thrive in high-pressure situations.

PROFILE 3.5: The role of the merchandiser – Lee Brazil In the luxury world, the merchandising department follows the complete and multifaceted life-cycle of product; from conceptto-carrier bag. Unlike a typical high street operation, luxury products often follow more routes to market (online, market place, wholesale, franchise and retail), ensuring the customers’ experience of the brand is seamless at every touch point. All-in-all there is added complexity to delivering the right product to the right place at the right time. The beautiful design is a real positive for those working in this market. Luxury products use the finest materials and most traditional craftsmanship techniques and are made in factories that respect inter-­ generational skill sets  – where employees are valued, respected and looked after by their employer. Luxury products also strive to be responsible, sustainable and environmentally aware of the impact they make on

people and the planet. Luxury manufacturers are also at the forefront of innovation, improvement and change and are not scared to push boundaries. It is this exciting proud stance that acts as a real motivator for employees and customers alike. Whereas products lead the way, luxury brands are often slow as organizations when it comes to decision-making (reacting to customers, for example), which is a significant negative of the industry. The pace often means ever-changing needs are not met quickly enough, and brands struggle to attract new customers or new generations by doing the same old thing. Things are changing  – digital is more significant than ever, and with that comes speed and agility. Negatives of the industry are directly felt by the merchandising teams because they are so pivotal and entwined in so much of the business processes.

THE ACTIVITIES OF BUYING AND MERCHANDISING

A typical day is dictated by the month or week within the calendar. Whilst reporting on sales, stock, intake, sell-through and the traditional merchandising metrics run each morning, weekly and at month-­end, everything aside from trade reacts seasonally, if not annually. Mondays are often the day of reflection on the previous week and the moment where departments will come together, share successes and challenges, check-in against over-­arching projects and the time lines associated, solve problems and unite partnerships. Doing this is routed in understanding trade, critical paths of the business and seasonally associated calendars/moments in the year. Days are long, multi-tasking and reactive; there is always more to do. The perfect personality has the usual list: multi-tasker, hard worker and the skills and abilities to liaise, recognizing that although merchandising is fundamental, it is a part of a business that thrives working in partnership with the rest of the company. Often that means being friendly, nice, helpful and

positive. Being happy to go above and beyond your remit is a fantastic attribute to have. Numeric, analytical and quick, a flair for problem solving and passion for product is the best combination of skills a merchandiser can have. A broader, more varied degree is beneficial to follow a luxury career path. It is important to gather a wide understanding of business practice and a means whereby you can explore and understand both commercial and creative sides of the industry, even if you do not put them into action daily. There is a requirement to understand why customers are purchasing but also, and often more importantly, why they are not purchasing. For this, partnering and holding strong relationships with in-store teams are vital. Training and development happen daily, no matter your experience or position. Being open to learning and evolving within an organization is unbeatably constructive. One skill no merchandiser can live without… Excel, Excel, Excel.

SUMMARY What becomes clear when reviewing B&M, their activities within the concept-to-­carrier bag model and then the three profiles is that the creation of a product range is as much about finance and science as it is about fashion trend and art. The merchandiser role, as an important influence within a fashion retailer, gives it a clear role within the concept-tocarrier bag model, whilst its decision points are as much strategic as they are operational. The merchandiser, like the buyer, cannot work alone and indeed should not; they do

not possess enough knowledge to singlehandedly plan and trade a product range. The role is by its activities separate to that of the buyer but also not part of the finance team. It sits in the middle of the two and adds a unique skill to retail buying and fashion businesses. The final chapter in Part I will take this final thought and review the place of B&M within a retail structure before proceeding into Part II and the practical demonstration of the merchandiser role.

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SELF-DIRECTED STUDY 1. Presume you are a fashion buyer and undertake the research and concept stages of the concept-to-carrier bag process for your favourite brand: a. Create a small 12-option (style/ colour) range plan. b. How easy was it to create a range that you feel is right for the brand? 2. Follow the same process again but this time for a brand that you would not normally shop with:

a. How easy was it to understand the brand and its customers? 3. Presume you are a fashion merchandiser: a. How might you assess the financial value of the product ranges? b. What information do you think you would need to help you decide their financial value to a business?

FURTHER READING Koumbis, D. (2014a) Fashion Retailing: From Managing to Merchandising. London: Ava Publishing

Koumbis, D. (2014b) Fashion Buying: From Trend Forecasting to Shop Floor. London: Ava Publishing

BIBLIOGRAPHY Goworek, H. (2007) Fashion Buying. Oxford: Blackwell Jackson, T. and Shaw, D. (2001) Mastering Fashion Buying and Merchandising Management. Basingstoke: Macmillan

Varley, R. (2014) Retail Product Management 3rd edn. London: Routledge

4

ORGANIZING BUYING AND MERCHANDISING

INTENDED LEARNING OUTCOMES 1.

An introduction to the value chain and its application within a fashion retail business.

2. A discussion of the structure of the B&M team. 3. The identification of the key contacts of buyers and merchandisers. 4. The use of planning and trading meetings to inform B&M decision-making.

INTRODUCTION This chapter reviews the structure of the B&M function and its place within the wider retail business. Organizational hierarchies are not necessarily the most exciting of topics, but they do facilitate the efficient, effective strategic and operational management of business. They are relevant within the identification of how the different functions that compose the business operate together to achieve its set strategic and operational objectives. Organizations must be structured to optimize trading activities, and there has been much academic thought given to this topic. Michael Porter provided seminal work in the development of the value chain concept, and this will be reviewed within the context of fashion retail to identify the importance of B&M but also to help identify the key contacts who work with buyers and merchandisers during their duties. The chapter concludes with a discussion of the various planning and trading meetings that buyers and merchandisers hold to enable them to undertake the roles.

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THE VALUE CHAIN A concept-to-carrier bag model, as a linked set of sequential steps, is in effect a simple supply chain. Its effectiveness in supporting the flow of product ranges and wealth creation is central to the delivery of the aims of a retail business but also the expectations of the target customer. A  truly inspirational and dynamic fashion range will never make it to a shop floor if the supply chain process cannot deliver it on time!

Inbound logistics

Operations

Michael Porter recognized that an end­ uring competitive advantage is achieved through all the activities within a supply chain operating to ensure that each delivers optimal value benefit to the business. In ­ accepting that product management is part of a chain of activities, Porter’s 1985 text Competitive Advantage introduces the ‘value chain’ (Figures 4.1 and 4.2) as a set of activities that an organization carries out to create value; is a useful tool to discuss the various internal and external stakeholders that contribute to retail product management.

Outbound logistics

Marketing and sales

Service

Figure 4.1  The value chain – primary activities

Infrastructure

Human Resources

Technology development

Procurement

Figure 4.2  The value chain – support activities

Figures 4.1 and 4.2 show that the value chain comprises nine activities, five of which relate to product management. Despite its generic presentation, its template shape can be interpreted within the wider fashion

context, so helping to identify the totality of the process of creating balanced product ranges by superimposing the principles of the value chain onto a generic retail concept-to-­carrier bag process.

ORGANIZING BUYING AND MERCHANDISING

Inbound logisitics

Operations

Outbound logistics

Marketing and sales

Service

Activities that coordinate the components of a product

Activities that create a product

Activities that coordinate the delivery of a product to the customer

Activities that inform and sell a product

Activities that provide services that support the sale of a product

Design – the process of research, design and selection of ideas for the range and the sourcing of appropriate fabrics, trim, labelling and suppliers

Suppliers – the process of product approval, sampling, sizing and manufacture and preretailing of product

Suppliers, logistics – the process of planning delivery, shipping, delivery, warehousing and allocation to retail

Marketing, retail selling –the process of communicating and selling key trends, themes and products

Retail selling –the process of providing services to enhance the retail and purchase of fashion product

Figure 4.3  The value chain and the retail concept-to-carrier bag process

In review, Figure 4.3 allows two conclusions to be drawn. First, the B&M role does not work alone within product management, and effective delivery of a product concept to store relies on an alignment between a range of roles and their activities. Good practical examples of this could be that there is no sense in the buyer creating a product offer that comprises 1000 style colours if the retail shops can only accommodate 500 style colours or alternatively if a

buyer decided to source suppliers in China without being aware of whether the logistics function is able to manage the delivery of product from that location. Second, using Porter’s accepted definitions, finance is not primary within the value chain, meaning the quantitative merchandising activities within B&M become crucial to connect finance into the process, so reinforcing the merchandiser role’s relevance and expertise within a retail business.

CASE STUDY 4.1: Superdry – the importance of all value chain activities working together Supergroup was founded and developed by two men – Julian Dunkerton and James Holder  – who merged their differing skills and life experiences to launch a truly unique and exciting brand. Once established, the business grew fast and found its own special niche within the fashion industry. However, some doubted the genius behind the label

as shown later when, reviewing Superdry for her column in the Daily Telegraph, Mary Portas commented that her experience ‘makes me wonder whether Julian’s super brand was a stroke of genius or a stroke of luck’ (Portas 2010). The news in April 2012 that Supergroup shares had plunged 33 per cent after its third

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profit warning in six months emphasized the importance of support functions contributing to the delivery of business success. The third profit warning came because of arithmetic errors and stock delivery timing issues in wholesale division, as well as lower margins in its retail business. The arithmetic issue was a simple human mistake, but misjudging wholesale customer actions is perhaps a reflection of poor management. The meteoric rise of the brand had led to structural problems within the business, as City analysts in London noted as rafts of share price downgrades were prepared. The brand  – whose clothes are a favourite of celebrities such as David Beckham  – has grown fast, and the number of styles available has grown significantly. In 2008, the autumn collection comprised 700 styles, and by 2011 this had grown to 2500. The brand introduced a short order service in 2011 to further expand its market share, but many stockists were growing concerned about spasmodic deliveries,

 HE STRUCTURE OF BUYING T AND MERCHANDISING Taking forward the principles of the value chain and its sequential activities, this section reviews how B&M can be structured to enable it to deliver its remit and work effectively alongside other stakeholders in the value chain. With different fashion businesses placing differing emphases on activities within their value chains, the top-level structures that influence the hierarchy within B&M will be different. Some will head their B&M function with a B&M

growing competition from nearby House of Fraser concessions and company-owned stores, as the business’s relentless expansion continued. Concerns that the business support functions could not fully support the brand were heightened in October 2011, with the issuing of a first profit warning by the group, when the implementation of a warehouse IT system upgrade left its stores short of replenishment on core styles. This poorly executed upgrade was estimated to have cost Supergroup £9 million in lost profit, when the newly installed system authorized the delivery to store of products in sizes small and extra-large only. Supergroup described this as ‘an unwelcome temporary setback’ (Goldfingle, 2011).

Activity Use the value chain model to define a flow chart of primary activities within a fashion retail business and consider how all the ­activities in the chain rely on each other.

director who will be responsible for all the activities of their teams. Others may have a commercial director whose remit expands to include other functions such as supply chain or retail operations. The exact nature of the directorship that B&M operate under will be driven largely by what is right for the brand to ensure, as Porter discussed, that optimal value is generated for the business. Whilst the organizational hierarchy of the B&M function itself is not uniform throughout the industry, a classic structure of a B&M function is presented below in Figure 4.4.

ORGANIZING BUYING AND MERCHANDISING Buying & Merchandising Director

Head of Buying & Merchandising

Merchandiser

Buyer

Assistant Merchandiser

Assistant Buyer

Buying Admin Assistant

Allocator

Figure 4.4  A classic buying and merchandising office structure

The buying and merchandiser director will oversee the activities of a function across a defined product group; for example, a department store may have up to five directors to cover womenswear, menswear, childrenswear, beauty and homewares. In a fashion multiple such as a womenswear retailer, directorships may be split by product type  – clothing, accessories and lingerie. The number of directorships will be dependent on the size of the business, and one director may cover more than one distinct product group. The B&M director role is strategic; usually sitting on the board of directors, they will be influential in the setting of the business strategy and its delivery by the B&M teams. They also act as a high-level link within the value chain and work closely with other directors such as finance, marketing or retail operations to ensure

accurate and timely decisions can be made across all roles within the business. In their role they are supported by a head of B&M, who will support day-to-day operations by directly managing the individual buyers and merchandisers and feed down information from the director to the teams and vice versa. Again, dependent on the size of the business, there may be one or more heads of department reporting to the director; and where there is more than one, they would be divided by discrete product group. In beauty, for example, there may be a head of perfumery and one for body and bath. The B&M teams will work together as one, headed by a buyer and merchandiser, each with their own teams below them. Leaving aside the roles of the buyer and merchandiser which have been discussed in Chapter 3, the responsibilities of the remaining team members are detailed below.

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ASSISTANT BUYER This role works closely with the buyer at all stages of the concept-to-carrier bag process and often will be given responsibility of a specific product area to buy. They will be involved in the research and development of a product concept and then oversee the sourcing and manufacturing process on a day-to-day basis. The assistant buyer has the role of an implementer: approving lab dips and other technical aspects of product, managing the sampling process, reviewing range plans for balance by attribute and overseeing the purchase orderraising process. With experience, an assistant buyer will often take the lead in absence of the buyer, making decisions on the aesthetics and commerciality of the product with support of the technologists’ technical knowledge. The assistant buyer plays a key role in managing the critical path and liaising with all parties involved in the weekly critical path meetings. The assistant buyer has a key role in terms of checking information is correct; from overseeing the buying assistant’s workload to checking that product information is accurate whether this be price, labelling or packaging. Accuracy, attention to detail and the ability to problem-­solve are key skills that they must possess. The assistant buyer role is significantly different if the business model follows that of branded buying. In this case there is no need for the product development elements within the role, and this is replaced by working closely with branded partners.

This facilitates the business relationship by putting together product information, ensuring that the brand values of the supplier are upheld through display guidelines and the marketing and retail of the product range are appropriate. BUYING ADMINISTRATION ASSISTANT (BAA) The BAA role is the entry level into a buying career and is focused on managing the heavy administration created by the buying role. The BAA will ensure range plans are fully updated and their details are input onto category management systems to generate purchase orders. Once orders have been placed, they ensure sampling is completed by the suppliers within the time requirements of the concept-to-­ carrier bag model. After ranges have been delivered, they will often provide weekly analysis of performance to the team and pull together the best and worst sellers to present at relevant meetings. The BAA role involves a high level of data management, and thus accuracy and attention-to-detail skills are extremely important; for example for the creation and presentation of competitive shop information. The BAA role is varied and has exposure to additional responsibilities as the BAA becomes more experienced, such as critical path management and being given a part of the product range to buy with support of the assistant buyer. Being able to work under pressure and using initiative are key skills to possess.

ORGANIZING BUYING AND MERCHANDISING

PROFILE 4.1: A day in the life of a buyer’s administration assistant – Victoria Schmierer My key task as a buyer’s administrative assistant was to enable the buying assistant and assistant buyer to focus on range planning to create a good range offer and order placement by taking care of related administrative tasks. This involved aspects such as sample management, organization and coordination of lab dips (a lab dip is a swatch of fabric test dyed to check it matches a specified colour) from suppliers and organizing the range plans in Excel by inserting images and product information. Since my team worked on multiple own brands, product development was a key part of our daily work, and we received new samples daily. I supported the fitting process by taking structured notes to enable our garment technician to send in-­depth feedback to our suppliers. After just two months in the role I took on additional responsibilities and updated our daily bestseller report with data provided by the merchandisers. I loved this task as it gave me a feeling of which articles were performing and what our customer preferences in nightwear and lingerie looked like across different markets (we delivered to most European countries). A second role that I really enjoyed was the joining of range planning meetings, where the fashion knowledge of buyers merged with the commercial knowledge of the merchandisers. My observation in these meetings was that often the feedback

ASSISTANT MERCHANDISER The assistant merchandiser, like the assistant buyer, works closely with their line manager, the merchandiser, and will often be given their own product area to plan and trade. The assistant merchandiser collates and

loop between buying and merchandising was delayed, and the buyers ended up over investing in high-fashion lingerie, although our customers were mainly buying basics. I later created a project out of this observation which researched the cross-functional, cross-­team communication flow in a multi-­ brand setting. Overall, the BAA role challenged me to be more organized and to put more attention to detail. Moreover, I learned that hard work, sometimes on ‘less exciting’ yet very important administration tasks, forms the basis for smooth operations across B&M.  Eventually I was even given the opportunity to support our buying admin assistant in the order raising process. Being given the trust to place orders of 40,000 pairs of socks was exciting! I believe that the own-brand BAA role can be very interesting if one has a real passion for product and all steps involved in building a final range. It exposed me to the complexities of the buying role and the challenges that it brings. In my role I also developed a real appreciation of the merchandiser role, their commercial insight and how they work together with the buying function. This re-enforced in my mind that the speed of fashion and the complexity of the buyer and merchandiser roles really do need to be cohesive and work together in creating a successful fashion range.

presents relevant information to create budgets for the range and the range planning process. The activities of merchandising have a high degree of linkage between them, and so often  – once key planning decisions have been made  – the assistant

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merchandiser will create the various planning documents and manage their use and accuracy. The assistant merchandiser will take the lead with the trading of the product range by reviewing business performance, identifying rebuy and cancellation opportunities and managing the flow of product into the business. Part of this trading activity will be to propose products to be marked down either on a rolling process through

the season or at the end in the final clearance sale period. Throughout their activities, the assistant merchandiser works closely with their assistant buyer counterpart, jointly managing their product range and building the buyer–merchandiser relationship at this early stage. The assistant buyer would take an active role in critical path and delivery meetings, being able to advise in the absence of the merchandiser.

PROFILE 4.2: A day in the life of an assistant merchandiser – Charmaine Leong My role as an assistant territory merchandiser (ATM) was to look after our franchise partners from a merchandising perspective and serve as the link between them and our booking teams. Every day was different, and the only repeated things we had to do weekly were Monday reporting and other occasional reports. Mondays were of course important, and I would often come in early to run sales performance reports to send out to all the relevant stakeholders. These reports were necessary in helping us troubleshoot stock and sales issues and discuss new merchandising projects over conference calls with partners later in the day. A key feature of my type of merchandising activity was category planning. This came in a form of a document we worked on with partners to complete for each product department (e.g. girls wear, boys wear etc.) every season. This tool split partners’ open-to-buy (OTB) budget by different product types in each department, which was then used to calculate an optimum number of options and line buys. There were many things to take into consideration when planning these buys, both in terms of width and depth, such as space planning, customer preferences, the number of available options etc. It was truly an

art to understand and master it all! After we were done with these planning documents, they would go to our booking teams for them to book stock to fulfil the buying budget. After the completion of the category-­ planning phase of each season, many activities were to monitor the booking process and shipment dates to ensure that our partners’ requests were met and stock reached them on time. This might have been done on a broad top line level or at a store or departmental level. If I detected any major discrepancies, I would work with my line manager and our booking teams to find out what the issues were and rectify them before it was too late! Sending the right product at the right time was essential in particular for weather sensitive markets. In general, as the link between our franchise partners and the booking teams, my team was the one in the business that best understood our international partners internally. That means that we had to work to represent and balance their interests with Debenhams’ own interests. So, in addition to merchandising-related tasks, there was a significant amount of stakeholder management and communication skills required to be successful on the job.

ORGANIZING BUYING AND MERCHANDISING

ALLOCATOR The allocator is managed by the assistant merchandiser and implements both their and the merchandiser’s decisions. Like the BAA, the role is heavily administrative, with responsibility for liaising suppliers to deliver stock, maintain all stock management records and flag any potential issues that may result in stock targets being missed. The largest part of their role is to ensure that

the allocation process is complete by inputting allocations into the relevant stock management system, allocating replenishment stock to stores and managing stock allocations for specific events such as new store openings. Finally, the allocator supports the assistant merchandiser in data analysis and preparing and distributing the weekly trade reports, as they also manage all the files and records of the merchandising team.

PROFILE 4.3: A day in the life of a merchandise distribution assistant – Megan Jones Each day, above all else, I must send out the sales data from our department for the previous day to the rest of the team to review and assess. This early intelligence alerts us of any opportunities or risks to our achieving our budgeted sales plans, also allowing the merchandiser and myself to assess work priorities for the day ahead. We all as a team must get in early on Monday mornings to put a weekly profit, sales, stock and product analysis pack together, so a detailed analysis can be made of how we performed the previous week, which we can then discuss as a team and with category management. Often, decisions are made because of these meetings such as making changes to deliveries or repeats and cancellations to outstanding orders. These decisions help me to manage one of my key documents – the delivery schedule. The delivery schedule gives me an up-­to-­ date assessment of recent deliveries, upcoming deliveries and any new orders that have been raised and approved by the buying team. The flow of stock into the business is of vital importance, and I can assess stock budget requirements against what is likely to happen. This knowledge allows me to decide which suppliers to chase to deliver and support if there are any problems with the supply chain team. Beyond this practical element to deliv-

ery management is the customer relationship aspect. Deliveries must be on time to meet live on-website deadlines, which is when new products are launched to the waiting customers, who could be literally anywhere in the world. This element to my role means that I must have a close relationship with the logistics team, so I always meet with them at least once a week, often daily, so we can discuss and catch up on any updates or issues. The other role that I love to work very closely with is the buyer’s assistant, and life would not be the same without him. For example, in the weekly trade and trends meeting  – where we show what our best and worst selling lines are  – the BA shows the products, and I explain the sales and stock data of the products. The other area where we work closely together is the use of search engine optimization (SEO) to ensure that our products rank highly when searched by the global customer – I monitor where in the rankings the brands I am responsible for are when searched on Google. I spend a lot of my time over the course of the year trying and keep them and the business at the top of the searches. It is exhausting, but the thought that something I have done could mean an order being placed by a customer anywhere in the world gives me a real buzz!

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PROFILE 4.4: Merchandise distribution assistant – Nismah Siddique The role of a merchandising admin assistant (MAA) is a bit of analysis, a bit of planning and a whole lot of supply chain management. No two days are ever the same despite the daily main tasks not largely altering. Every morning, without fail, I send the team the previous day’s sales data. Highlighting which styles are doing well and which styles are not. As well as this, I send them a comparison of the forecasted sales versus the budget for the week and actual figures from last year which gives a more holistic view on the department performance. By allowing the team to have these data to review and analyze, we can spot opportunities and threats and come up with an appropriate action plan to execute. Being an MAA, you truly understand the term ‘Monday madness’, but there is a method to the madness. Trade packs are created and distributed to the team and directors; these include a detailed analysis of last week’s sales and stock performance for the department in comparison with the company. These packs are essential for the team meetings in the afternoon, where we discuss outstanding orders and potential promotional lines. During these meetings, as we go down the lineprint per style I update the team about any intake or delivery issues for the next two weeks and suggest potential solutions. Here we also focus on which products need to be re-­bought, which deliveries should be pushed to be early or cancelled and which need to be extended. After the team meeting, the jun-

ior merchandiser and I sit with allocators to feedback where styles should be allocated and how. Being part of the largest and most tradeable department in the company means that the delivery schedule and communications with suppliers need to always be a priority. The delivery schedule (DS) is an MAA’s bible; it has everything for the current season: deliveries, purchase orders, ex-dates and orders for wholesale and international teams. In addition, it helps us to monitor our OTB, visually see when stock is coming into the business and allows me to advise the logistics team at the distribution centre (DC) how much space we would need for deliveries in the next two weeks. While working on the department, I also introduced a delivery slippage tracker, which combined DS data and any information we had from suppliers. This was done to give the team, especially buying, a view of what stock was coming in on time and in full. As a merchandiser, it is essential that the right products are at the right place to be at the right time; if this is not happening, we are losing key sales. By having a slippage tracker we were able to re-assess our lead times with certain suppliers to try and combat delivery slippages. Seeing in person how the department reacts to tradeable trends and creating reports to monitor sales and deliveries makes every day interesting and makes me look forward to the next. Most people think the job is just number crunching, but it is so much more than that!

ORGANIZING BUYING AND MERCHANDISING

REORGANIZING THE B&M STRUCTURE The classic B&M structure presented is of course not the only organizational structure employed by fashion retailers. Large complex businesses may create a split in reporting structures between B&M by having separate heads of B&M (Figure  4.5). Organizing the B&M function in this way allows both buyers and merchandisers to

be focused on their roles and work within an environment of specialists. This can mean that they are able to manage larger business units of perhaps several product types, as their roles are narrower in definition. The obvious disadvantage of this is that it can encourage a silo mentality to develop, where decisions are made within a narrow context unaware of or not considering other activities in the value chain.

Buying & Merchandising Director Head of Buying

Buyer

Head of Merchandising Assistant Buyer

Buying Admin Assistant

Merchandiser

Assistant Merchandiser

Allocator

Figure 4.5  B&M structure with buying and merchandising roles separated

A second more extreme example of the above separation of roles is where stock management and allocation are hived off into a third role of distribution. With easier and more effective mobility of stock, an increased focus is placed on branch merchandising, a form of micro-­ merchandising where stock is able to be  allocated with short lead times or ­easily moved from one store to another. This greater stock efficiency requires an

individual focus, leading to the removal of the allocator role and a reduction in the scope of the assistant merchandiser role to a greater focus on planning. This approach has strong business benefits but again may promote silo mentalities and, at times, confusion between buying, merchandising and distribution as to the correct priorities within stock management. An example structure chart of this hierarchy is shown in Figure 4.6.

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FASHION MERCHANDISING Buying & Merchandising Director Head of Merchandising

Head of Buying

Merchandiser

Buyer

Assistant Merchandiser

Assistant Buyer

Head of Distribution

Distribution Manager

Distributor

Figure 4.6  An example of a buying, merchandising and distribution structure chart

PROFILE 4.5: A day in the life of a branch merchandiser – Charlotte Daly The branch merchandising team are responsible for stock once it has been received and is ready to trade. We create the initial allocations of stock, trade the stock throughout the season ensuring that the right stock is in the right place at the right time and support the branches with any stock-related issues. It is a fascinating variety of merchandising, where you use detailed insight of individual towns and regions to understand the collections that would best suit the shoppers and therefore optimize the profit potential. We study the sales figures from a more detailed perspective than the top-line view a core merchandiser would adopt and then

trade the stock to ensure it is all in the best possible location to achieve as higher sales as possible. We analyze trade and check that product availability is maintained. We grade the stores and allocate according to those profiles and use these profiles to build packages for new store openings too. A real benefit of working in branch merchandising is the ability to work across multiple functions of the business  – we work closely with core merchandising, logistics, retail operations and visual merchandising. We are constantly communicating with the store teams, checking for feedback on the collections, and make commercial decisions

ORGANIZING BUYING AND MERCHANDISING

based on the information we receive. However, there is a frustration we often remark on, which is that we miss not being involved in the product buying decisions (i.e. what is being bought, how many units and where the stock is being ranged to). As is the case across head office, Monday mornings are predominantly spent running analysis on the week’s trade  – running line print information, store performance, stock availability etc. The teams will then get together to discuss trade, and this is where actions will be discussed and issued out. Branch merchandisers will try and get manual stock pushes complete by the end

 HE BUYER AND THEIR KEY T CONTACTS The key contacts of the buyer are presented in Figure  4.7 and are summarized into six roles. Before summarizing each, it is worth noting that using value chain

of Wednesday to allow the stock to get back into store for the upcoming weekend. The rest of the week will be used for more analytical allocations and planning for the upcoming week. We will also work in line with the promotional calendar to ensure we are building in time for upcoming promotions and seasonal markdowns. If a new season launch is coming up, allocations will be phased across the week to manage dispatch levels to stores. Branch merchandisers must be excellent at relationship building and have a proactive attitude. They need to be organized and be able to prioritize workload and have the confidence to work across multiple functions.

definitions, all the roles are regarded as primary activities. A second point is that contact with the roles is spread throughout the buyer’s concept-to-carrier bag process, from the very beginning to the very end when product ranges are in store and available to buy.

Design

Suppliers

E-commerce

Buyer

Quality Assurance

Marketing

Retail Operations

Figure 4.7  The buyer and their key contacts

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There are some general themes which can be used to demonstrate the six key relationships of the buyer (Table 4.1). Table 4.1  The buyer and their key contacts in detail Designer

The buyer will work with the designer to match trends and moods to the product concept that has been devised in tandem with the merchandiser. The designer may work across several product groups, having the benefit of ensuring that a single design handwriting across these groups results in a cohesive offer to the customer.

Supplier/ production

The buyer will source suppliers to manufacture the product range, and it is not unusual for strong long-term relationships to be formed. The buyer will liaise with the supplier on a continuous basis through the design, approval, sampling, manufacturing and delivery processes. The operational working relationship must be well managed and with mutual respect. This relationship could be with an external supplier or internally if the business has an in-house production team. Often the in-house production team could mean liaising directly with an overseas production office in the location of the main product countries.

Quality assurance and garment technologist

Quality assurance (QA) will confirm a product’s suitability from a garment construction, legal and practical perspective, and will heavily influence the design of product. QA works with both buyer and supplier through the sampling process and, once product is delivered, will also ensure that deliveries are in line with approved specifications.

Retail operations

The relationship between buyer and retail operations is perhaps the least defined of all. The buyer could, for example, organize and facilitate product training for store staff or develop point-of-sale materials for stores or possibly create visual merchandising guidelines. In some businesses, the buyer may also be involved in deciding how product ranges will be laid out in store or website. A relationship that in some business may be close and strong, such as in business with a smaller number of stores. Stores may be grouped within the business to have direct contact with the B&M teams to provide a more first-hand viewpoint of communication between what the consumer wants and how the buying teams can support this with their product ranges. The relationship would be supported with regular visits to the stores throughout the season. (continued)

ORGANIZING BUYING AND MERCHANDISING

Table 4.1  (continued) Marketing

With the importance attached to brand communication to the outside world, the marketing department will work closely with the buyer to understand the product, its strengths, its value to the business and how the customer responds to it. This relationship is based on communication; the buyer must inform the marketing team about the direction of the range, while marketing must update the buyer on the reaction to it. They would have weekly meetings to discuss seasonal strategies including promotions that the marketing team could support through effective communication to the consumer. They would work together to create campaigns that support the sales of the product range through effective presentation and communication to the consumer. It is an important relationship that, with effective use, can support the delivery of the department KPIs through successful communication of the buyer’s product direction and vision for the range.

E-commerce

The buyer works closely with teams that create the e-commerce site and print catalogue if applicable. They will have regular meetings throughout the season to discuss product selection, page layouts and schedules. The buyer will provide samples for photoshoots and ensure sampled product is representative of the final production. The teams work together and agree the presentation of the product to ensure that it illustrates the buyer’s vision for the collection and outfit built in the way that they had originally envisaged. Product selection and support of the department’s best sellers, volume lines and new product lines need to be clear to ensure sales can be driven through the e-commerce and catalogue channels.

There is one other key contact that the buyer has and which  – as detailed in Chapter 3  – forms the deepest and most important relationship of all: the merchandiser. They rely 100 per cent on each other. Failing to build a mutually respectful relationship can be hugely damaging to the product range, the business and each other.

THE MERCHANDISER AND THEIR KEY CONTACTS Apart from the buyer relationship, the merchandiser also has key contacts with whom they liaise on a regular basis. Figure  4.8 outlines what those relationships are.

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Finance

Suppliers

E-commerce

Merchandiser

Marketing

Logistics

Retail Operations

Figure 4.8  The merchandiser and their key contacts

Like the buyer, the merchandiser has six key contacts, but interestingly in this case one of them, finance, is a support activity of the value chain. This point is worth noting, as it adds another dimension to the idea that the role acts as a bridge that connects buying to finance. In communicating with finance, the merchandiser is feeding upwards to the business vital financial information that allows the planning of

support activities such as warehousing and human resources to be budgeted and implemented. This link between primary and support activities is probably the single most compelling rationale for the role of the merchandiser. Beyond the relationship that they have with the buyer, this link is therefore strategically the most important one that the merchandiser fulfils (Table 4.2).

Table 4.2  The merchandiser and their key contacts in detail Finance

At an operational level there is a deep working relationship between the two. The finance team communicates down the chain to the merchandiser any financial requirements that the business has – growth targets, stock management requirements etc. The merchandiser meanwhile will communicate up the chain their views of the financial strengths and weaknesses of the proposed product range. This top–down bottom–up planning approach allows both sides to understand the requirements of the other, allowing any differences of opinion to be discussed and resolved. (continued)

ORGANIZING BUYING AND MERCHANDISING

Table 4.2  (continued) Suppliers

This relationship tends to be operational in nature, as the strategic relationship with the suppliers rests with the buyer. The merchandiser will ensure deliveries are on time and able to be worked through the warehouse as efficiently as possible. The same will apply for repeat orders. The merchandiser will also provide forecasts for future orders on core basic products that flow between seasons, allowing the supplier to plan production efficiently.

Logistics

The efficient flow of stock is the responsibility of the logistics team, and this process is fraught with potential difficulties, so the merchandiser provides accurate stock flow forecasts to enable the most efficient use of their resources. Allocation plans must be communicated in good time by the merchandiser, as must intelligence updates about any delays to deliveries that may need to be accommodated.

Retail operations

The merchandiser will update the retail teams on delivery information, allocation quantities and summaries of sales performances so that best sellers can be promoted. As part of the planning process, they contribute to the creation of sales turnover budgets, which will act as the sales targets that store teams will work to. A good knowledge of the stores and a good working relationship with the retail operations teams ensure that these sales targets are realistic and achievable.

Marketing

This relationship is probably the loosest of all as much of the operational liaison is between buyer and marketing. The merchandiser will influence the choice of products that will be chosen for marketing use by providing the marketing team with details of the value of products to them – how much has been bought, how many stores have been ranged and which ones will feature heavily in the end of season sale.

E-commerce

This is a new relationship that crosses many functions and at its heart are data. With new sources of data from online stores, social media, browser rankings and analytics sites, the merchandiser has a much bigger pool of granular data that can be analyzed. Chapter 12 gives fuller details of these, but in summary, data analysts manage the end-to-end process for online product set up and lifecycle using automation and humans to ensure product page content is optimized.

Pulling together the nature of the relationship between the merchandiser and their key contacts together  – such as the buyer  – shows there is a mix of strategic and operational links and activities. Key to these is ease of regular communication and discussion, which takes the form of informal chats at desks or of more formal planning- and trading-themed business meetings, a discussion of which forms the next section.

 EETING SCHEDULES – HOW M B&M WORK WITH OTHER ACTIVITIES IN THE VALUE CHAIN It is natural that, for a total process that can take up to one year to complete, there will be reason to hold meetings to discuss issues as they arise. Many of them are ad hoc or part of the operational activities of product development. Meetings between

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the buyer and supplier for fit sessions to review samples are examples of these and will be undertaken as and when they are required. However, throughout the process there are two overriding formal meetings: the first type is regulated by the range meeting process that covers the period between the research activities through to the distribution ones; the second comprises the trading meetings which start at the distribution activity and occur through to the end of the concept-­to-­carrier bag process, the end of the season. As the planning cycle can be lengthy and subject to much change, regular

Range meeting 1

Range meeting 2

planning meetings are required. A benign economic environment at the beginning of the cycle may suddenly change to a malignant one, requiring a change in planning presumptions, or a trend may suddenly emerge that merits a place in a product range in development. The range review process is therefore designed to bring some order to the planning process but also to offer opportunities for reflection and review of the work completed to  date to ask whether decisions made are still valid or not. The schedule is split into up to five meetings and is laid out in Figure 4.9.

• Research - discussing initial ideas that will guide the shape of the planning process

• Concept - The first draft of the size and shape of the concept for the product range

• Product development - Finalisation of the product concept and review of early Range meeting 3

designs and range structure

• Delivery - Final presentation of the product range for sign off by B&M director and Range review and sign off

executive team

• Distribution - Presentation of the completed product range to retail teams at the Store presentations

commencement of the season

Figure 4.9  The planning schedule of meetings

The first three planning meetings will be led by the buyer and merchandiser. The assistant buyer and merchandiser will support in the preparation for the meetings, contributing where relevant their own

information and analysis. The usual audience will comprise the head of B&M and the design and QA teams, and together will review the planning process in these meetings (Table 4.3).

ORGANIZING BUYING AND MERCHANDISING

Table 4.3  The range meeting process • The buyer presents predicted trends and moods that are felt to be relevant to the

Range meeting 1

business. Early ideas for colour palettes, silhouettes and fabrics emerge, and, if a branded business, the discussion assesses which brands are likely to be on-trend and actively courted. The merchandiser presents initial budget proposals based on projected economic strength, guidance from the finance team and their gut feel that led to their creation. At its end, the head of B&M will confirm if the team can progress to Range meeting 2 • The team meets again to review the more detailed planning that has resulted in a product

Range meeting 2

range concept. Discussion will be had about the size and shape of the range, the number of options to be ranged, how much will be bought of each and which suppliers will be manufacturing them. The merchandiser will present a draft budget that reflects the detailed product concept and a calculated OTB. The output from this meeting is confirmation of the product concept and proposed budgets to allow the first orders to be placed • This final range meeting between the original members of the planning group recaps on

Range meeting 3

any changes to plans since the last meeting and reviews early samples of the product range provided by suppliers. In this meeting the first of a finalized buying budget will have been spent with the agreement of the finance team. In a branded product range, this meeting will finalize the brand matrix which details the distribution of brands to stores and the buying budget to be spent on each

At this point the buyer and merchandiser will work to complete the planning of the range and prepare for the last two

planning meetings, which occur just before the beginning of the new season (Table 4.4).

Table 4.4  Completing the range meeting process • This meeting is the opportunity for the buyer and merchandiser to present their finalized

Range review and sign-off

product range to the executive group of the business for approval. The various directors of the business are given a preview of the collection and its direction, along with its budgets and value to the business. This allows directors of the business to assess how their own teams can maximize the range when it goes on sale

• The final planning meeting is between the buying team and retail store staff. This is led by

Store presentations

the buyer, who will present the product range or brands to stores, discuss the inspiration behind the product and give tips on display and delivery timings. The merchandiser will be on hand to discuss allocation quantities and, if relevant, sales budgets and timings of promotional activities

Timings of the planning meetings will vary depending upon the overall timings of the concept-to-carrier bag process that the retail business operates. However, in general, as shown in Figure 4.9, the meetings will occur at the point when the research, concept, product development, delivery and distribution stages of the model occur. By contrast to the planning period, the schedule of meetings during the trading period is far more intense. There is at least one weekly meeting that involves the B&M

team, each of which has immediate outcomes that need actioning as quickly as possible. The pace of trading the product range provides the equivalent of an adrenaline rush; instant decisions, sudden changes to priorities and much negotiation to ensure the opportunities of that day can be maximized. With potentially frenetic decision-making, the meeting structure is designed to give time to pause and consider the most suitable next steps. There are three regular meetings that are held, and these are detailed in Figure 4.10.

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• Retail to carrier bag - Monday morning trade review to assess performance and set trading Weekly product review

agenda for the week ahead

• Retail to carrier bag - Review of product performance to date and reforecast of expectations Monthly gross profit review

End of season review

for the balance of the season

• Carrier bag - Review of season and review of lessons learnt for the season being planned

Figure 4.10  The trading schedule of meetings

The meetings are led by the buyer and merchandiser, and they present trading updates to both the B&M director and

head of B&M. The focus of the meetings is detailed in Table 4.5.

Table 4.5  The trading meeting process • These are held every Monday morning without fail and review the previous week’s

Weekly product review

performance to the budget set and the previous year. Comparisons are made between product groups to assess which are performing well and which are not. The buyer will present the best and worst sellers from the range and an immediate plan of action for the week ahead will be agreed • This meeting is dominated by the merchandiser, who will present the business’s performance

Store presentations

to date against the budgets that had been created during the planning process. This is used to assess the emerging financial trends and the likely trading performance during the remaining weeks of the season. To do this accurately requires some skill, but the output of it is an informed assessment of impacts on the budgeted gross trading profit and the stock position at the end of the season. With forward visibility of this nature, any corrective actions or changes to the remaining product to be delivered can be agreed by the team

• This final meeting of the season reviews where the business ended at the end of the

End of season review

season against its original qualitative and quantitative concepts agreed at the beginning of the planning process. At this final point, nothing can be done to alter the performance of the product range as it fades into history, and the meeting is in effect a post mortem of what happened, designed to inform the best course of action for following seasons

With a regular flow of key planning and trading meetings, the burden of which is shared equally between buyer and merchandiser, the control mechanisms to

ensure well-timed and accurate decision-­ making are in place. An explanation of how those decisions are made will begin in Part II.

ORGANIZING BUYING AND MERCHANDISING

 OCUS POINT 4.1: Leading the buying and F merchandising function - Heather Delaney, merchandising lecturer With complex organizational structures, activities and contacts, managing the buying and merchandising function is quite a task! Here, Heather Delaney, visiting lecturer, provides insights into how good time management, information flows and precision thinking facilitate the development of a successful product range. Creating product ranges is a fantastic role that blends the creativity of product development with the analysis of product performance. Seeing a range come to fruition from initial concept to a finalized range in store, with customers purchasing or even spotting your product on the public, is highly rewarding and satisfying. Effective time management and being organized are two of the most important skills to have; you are constantly having to juggle workload and prioritize tasks for yourself and your team. Key to the role is being able to analyze and interpret data and look at the product range with a commercial viewpoint to understand the consumer and their purchasing behaviours. The consumer is complex, and often a retail business can have multiple consumers, therefore it is essential to understand who they are, their needs and how a range of products will satisfy their needs. As a result, there is a need for an eye for detail to dissect the range from a product perspective as well as understanding the financial analysis. The combination of these two skills determines the recipe for role success and how to continually achieve the creation of commercially viable product ranges. The role environment is therefore a faced-­paced one, and you must be adaptable and flexible in your approach to work, since unexpected deadlines often occur. Due to the nature of the trading business,

you must be able to withstand change and continual moving targets yet be able to plan and work towards set deadlines as you move throughout the concept-to-carrier bag process. To help with this, the ‘buying calendar’ defines the timing of meetings and decision points, and it is the role of both buyer and merchandiser to be key players in leading these meetings. It is therefore extremely important that you build strong relationships with your key business partners and team, since these relationships will be the ones that support you in creating a successful product range. As buyers and merchandisers, you will be presenting the final product range in formal sign-off meetings to the leadership team, therefore it is important that you are able to communicate effectively with senior management. The leadership team of the business will expect you to develop a planning and trading strategy that supports the product range, thus critical and creative thinking when developing the product range is important. It allows you to look holistically at the range; dissect the information presented whether that be sale performance, trend analysis, economic patterns, competitor or market information; and then formulate this into a wide ranging strategy. In short, it is a challenge that touches upon a broad range of commercial skills.

ABOUT HEATHER DELANEY Heather Delaney is a visiting associate lecturer at London College of Fashion, specializing in fashion buying and product development. Heather has a keen interest in circularity and the slow-fashion movement and how the global fashion industry can adapt its policies and practices to protect the

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planet whilst maintaining a profitable business. Heather has an extensive background in retail, having spent almost fourteen years in the industry across various retailers. Predominantly in Childrenswear, Heather has bought for luxury and high street brands. Heather was responsible for running the European Childrenswear division at Ralph

Lauren PFS EU for several years, delivering multi-million Euro growth for the business. Prior to this, Heather worked with factories and suppliers developing product for Mothercare, working across multi-product and category departments. Link in with her at https://www.linkedin. com/in/heather-delaney-7972a758/

CHAPTER AND PART I SUMMARY This chapter completes Part I of this book. Part II will concentrate on the role of the merchandiser and present a detailed stepby-step review of their concept-to-carrier bag process. Before that, though, what has Part I discussed? Fashion is a big business and subject to constant evolution either by accident or design. This makes it an exciting but very competitive industry. To survive, levels of professionalism amongst its stakeholders have risen to combat the increasing risk of being left behind as the industry develops still further. As this chapter alone has shown, the route to successful product management is multifaceted and involves

many stakeholders within the retail value chain, one of whom is the merchandiser. The role of the merchandiser is well hidden. Consumers buying product are unaware of how the merchandiser has contributed to the process of product management, but contribute they have, and in a unique way that adds real value to business success. The concept-to-carrier bag process has shown that there is a place for the merchandiser, and this chapter has reinforced that view by adding texture to the argument that the role acts like a bridge connecting two potentially opposing forces: buying and finance. The importance of the role is proven; the detail will come in Part II and the next six chapters.

SELF-DIRECTED STUDY 1. Review the chapter and devise job advertisements for a fashion business looking to recruit a merchandising team. 2. Review Chapters 1–4 and write a short 1000-word review of the B&M function. Outline the key differences between the buyer and merchandiser roles.

3. Research the value chain and list all the roles that contribute to the creation of product range. Which of those you have identified would fit within ­primary ­activities and which are support ­activities?

ORGANIZING BUYING AND MERCHANDISING

FURTHER READING Koumbis, D. (2014) Fashion Retailing: From Managing to Merchandising. London: Ava Publishing

Meadows, T. (2019) How to Set Up and Run a Fashion Label. London: Laurence King

BIBLIOGRAPHY Goldfingle, G. (2011) SuperGroup Supply Chain Glitch ‘Shows Risks of Rapid Expansion’. Available at https://www. retail-week.com/fashion/supergroupsupply-chain-glitch-shows-risks-of-rapidexpansion/5029904.article

Portas, M. (2010) Shop! Mary Portas at Superdry. Available at http://fashion.telegraph.co.uk/news-features/TMG8140569/ Shop-Mary-Portas-at-Superdry.html Porter, M. (1985) Competitive Advantage. New York: Free Press

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This second part will outline the activities of the merchandiser, by providing a practical demonstration of the role. This will be accomplished using a fictional case study used to discuss  – but more importantly  – example the role. A case study has been chosen as appropriate as it can anchor each of the merchandiser and link them together through both text and numerical exampling. Exampling the role of the merchandiser is notoriously difficult for two reasons. First, their activities are hidden from public consciousness and cannot be visually exampled in the same way as those of the buyer. Mood boards, pen portraits, fashion shows can all be found within the public domain to demonstrate good or bad buying. However, for the merchandiser, their outputs – budgets, OTBs, phasing plans etc. – are viewed as confidential by businesses. Second, it is easy to become bogged down in numerical data and examples of calculations rather than focusing on their importance. A case study that flows between chapters will provide both the context in which the role operates and provide a linked process within the numbers to show how they each rely on one another to be created, and the value that they bring to product management. The approach will introduce Prentice Day, a fictional retailer and, as a starting point, presumes that it is at the beginning of planning for a new season product range. Inevitably, a fictional case study will mean that some given presumptions

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will have to be used to set the scene, as well as an element of oversimplification of scenarios to allow a flow to the chapters. The process laid out is not authoritative but a guide; not all businesses will follow it exactly or accept its outputs as being appropriate. What Part II will offer is an example of a seamless process with each chapter flowing into the next, and in doing this it uses the shape of the concept-tocarrier bag process outlined in Part I.

5

FASHION MERCHANDISING: THE PRENTICE DAY CASE STUDY

INTENDED LEARNING OUTCOMES 1.

Introducing the Prentice Day case study used throughout Part II.

2. Using initial research tools – gross trading profit and sales density analysis. 3. Understanding the relevance of macro environment research. 4. The relevance and benefits of a merchandiser’s planning strategy.

INTRODUCTION This chapter will introduce the Prentice Day case study that will be used over the next six chapters. The information presented within it sets the scene and uses various analysis tools to build an initial picture of the subject of the case study. To ease the journey ahead, assumptions have been made that in a reallife scenario might not be fully appropriate; however, the aim is to present ideas in such a way as to enable a quantifiable output to be articulated within each chapter. For the case study, a menswear retailer was chosen, as this product category lends itself to clear product groups. The retailer is truly fictitious, bearing no known resemblance to an existing business. A business the size and scale of Prentice Day would be highly unlikely to have distinct buyer and merchandiser roles; however, to enable this second part to concentrate on demonstrating the merchandiser role, it is presumed that the two roles exist. By the end of the chapter, a business scenario will have been explained, with initial planning decisions made. As the chapters unfold, each will be cross-referenced back to this chapter, and as the case study develops, this will help with digesting the data still to come.

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 RENTICE DAY MENSWEAR P CASE STUDY It is 1 July and another spring/summer season is ending. The planning process for a new spring/summer collection to launch in the following January is about to start for Prentice Day, a small family-owned menswear fashion business. The business trades from one store located on Oxford Street, in

the heart of London’s West End. The business has traded for many years and is well established, with a loyal customer base that comprises men who work locally looking to buy simple and easy-to-­understand product. The store also benefits from the many tourists and out-of-town shoppers who regularly make their way to the premier shopping district of London, drawn by its many well-known retail businesses.

FOCUS POINT 5.1: The marketing mix The marketing mix was developed by Neil Borden in the mid-­twentieth century to act as a marketing tool to ensure that a business and its product offer are in line with the expectations and financial capability of a target customer. Mixing together the 4Ps (product, price, place and promotion) into a consistent product and marketing strategy ensures that a business is easily understood

The business has traded well, and its success has been the result of attention being paid to ensuring its marketing mix is balanced and continually updated (see Table 5.1). The owners place emphasis on understanding their customers, making continual changes to the product offer as required. This is achieved by creating product ranges that are formed from not only detailed research of fashion trends but also analysis of each range’s financial performance to determine the best product strategy for forthcoming seasons.

by customers and marketing strategies are effective. Over time, the 4Ps are giving way to the 7Ps  – the original four components plus physical presence, people and process. These extra components have become more relevant as retailing has moved further towards a service-­orientated brand experience.

Despite this, the owners of the business were disappointed by the reaction to the product offer for the spring/summer season just concluding. The product offer was organized within the business into a three-­ level hierarchy, designed to  create cohesive product ranges that could easily be translated into defined store layouts that made best use of floor space. The product hierarchy followed a  classic ranking approach, with the three  levels being defined as follows (Figure 5.1):

FASHION MERCHANDISING: THE PRENTICE DAY CASE STUDY

Table 5.1  The Prentice Day 4P marketing mix Product

An exclusive own-label product of co-ordinated easy pieces that attract men aged 20–35 years. The range takes key fashion trends and interprets them into simple-­ to-­understand basic and fashion styles

Price

The pricing policy reflects the customer perception of quality product and exclusive designs. The price policy places Prentice Day in the same price bracket as Next and Gap

Place

The store is located within the Plaza on the east side of Oxford Street, London. The store benefits from its prime location and is particularly busy during lunch breaks on weekdays, when office workers shop, and all day at the weekend

Promotion

The store does not advertise itself and is reliant on a well-laid-out store, personal selling to customers and twice-yearly end-of-season sales

Hepworth menswear

Accessories

Casual wear

Formal wear

Trousers

Shirts

T-shirts

Core basic

Core basic

Core basic

Fashion style

Fashion style

Fashion style

High fashion

High fashion

High fashion

Level 1

Level 2

Level 3

Figure 5.1  The product hierarchy of Prentice Day

•• Level 1: Product group – e.g. casual wear •• Level 2: Product type  – e.g. trousers, shirts, T-shirts •• Level 3: Attribute – e.g. fashionability Within this hierarchy, the buyer felt that the range had a competitive and cohesive mix of accessories, casual wear and formal wear. Over the course of the season, the casual wear product range performed well and almost sold out, while formal wear

seemed slow and required markdown to reduce stock levels in the end-of-season sale (ESS). The accessories range – a small additional product offer providing an incremental sales opportunity – was too small to be of any real consequence to the success or failure of the clothing ranges. The main disappointment, however, was the product range’s failure to meet its financial key performance indicators (KPIs). The KPI

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budgets were considered very easily beatable, and overall trade in Oxford Street was buoyant; the owners had expected to end the season in a stronger financial position. A strong financial position was needed. The development of the West End of London with new competitors meant that Prentice Day needed to generate good gross trading profits to support its overheads and enable investment in the store to keep it in line with its new larger, stronger

competitors. These formidable new competitors had introduced new retail concepts such as lifestyle shop fitting and the use of new point-of-sale techniques such as digital signage as ways of enticing customers away from small independents. In addition, the continued growth of online retailing was luring loyal Prentice Day customers to broaden their fashion purchasing beyond the little menswear shop upon which they had previously relied.

FOCUS POINT 5.2: The SWOT The strengths, weaknesses, opportunities and threats (SWOT) analysis tool is used to identify the macro and micro situations a business faces at any one time. The micro, or internal strengths or weaknesses, are summarized and analyzed to then influence the macro, or external opportunities and threats that the business faces. It is important that a SWOT has a ranking within it, so the bullet-point summaries

Concerned by the disappointing reaction to the product range at a time when the best possible profitability was required, the Prentice Day owners spent time reviewing the business and articulated their thoughts in a SWOT, which is detailed in Table 5.2 below. Recognizing research value, the owners of Prentice Day requested that the SWOT be incorporated into the new season planning process by the buyer and merchandiser. For their part, the merchandiser knew that to create a successful planning strategy

used to communicate to the reader should be written in priority order. This gives a sense of scale for the buyer and merchandiser and helps them to prioritize their workload. SWOTs can be dangerous, though. They are of the moment, and the factors that influence them can change at a moment’s notice – they need regular review and updating.

that would reflect the SWOT’s data, three initial steps would have to be taken. These were: 1. To obtain an initial understanding of the strengths and weaknesses of the product range. 2. To consider the likely trading environment that the business would face in the season ahead. 3. To develop a merchandising-­ specific planning strategy to guide the decisionmaking process.

FASHION MERCHANDISING: THE PRENTICE DAY CASE STUDY

Table 5.2  The Prentice Day SWOT analysis Strengths

Weaknesses

The store is established and well known within its trading location

The product range is not providing a suitable financial return

There is a loyal customer base for core basic product types

Customers consistently complain of issues with size availability within T-shirts

The product ranges follow in-demand trends

A strong focus on product management is not mirrored with a focus on product budgets

The supplier base is flexible, with short lead times, and so can support changes in product mixes

The lack of a transactional website is not liked by loyal customers

Opportunities

Threats

Challenge B&M to ensure sales, profits and cash flow improvements for the new season

Customers are increasingly cost-conscious and do not tolerate price increases well

Reshape the total product offer in line with demand patterns

There are new stores planned to open on Oxford Street which could poach customers

Develop a better sizing strategy for T-shirts

Online trading is relevant to our customers and may reduce footfall further

Grow and develop strong product types such as core basics

While London trade is strong, the rest of the UK and the world are less strong

INITIAL APPROACHES TO UNDERSTANDING A BUSINESS Before commencing detailed research activities, the merchandiser will undertake a short summary review of business performance to obtain an initial feeling of its strengths and weaknesses. This is achieved by reviewing two business metrics: •• Actual gross trading profit •• Sales densities The ultimate success criterion for any product range is its gross trading profitability. It is these profits that will support the business overheads and ultimately provide

capital to invest back into the business. Table  5.3 identifies the three product groups within Prentice Day: accessories, casual wear and formal wear ranges. Each has delivered cash gross profits which combined add up to £35,005. The table compares these achieved gross trading profits with their equivalent budget and previous year figures. The table tells the merchandiser that casual wear not only outperformed its gross trading profit budget but almost made up the deficit recorded by the formal wear product group. Accessories, while small in its cash profit contribution, did perform in line with budget and, like casual wear, recorded profit growth against the previous year.

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Table 5.3  Gross trading profit by product group compared with budget and the previous year figures Spring/ summer season

Actual gross trading profit

Budget gross trading profit

Trading gross profit % variance budget

Previous year gross trading profit

Gross trading profit % variance previous year

Men’s accessories

£4125

£4125

0%

£3850

+7%

Men’s casual wear

£18,823

£13,813

+36%

£12,864

+46%

Men’s formal wear

£12,057

£17,750

−32%

£16,250

−26%

Total gross trading profit

£35,005

£35,688

−2%

£32,964

+6%

Sales density, by contrast, measures the efficiency of use of retail space to generate sales. It is useful in identifying where particular product groups are over- or underperforming against the business average. Acceptable density values vary by business model type, but a general rule of thumb is that businesses will aim to achieve as high a sales density as possible, meaning that the maximum sales turnover is being generated on the store space available. Its calculation is very simple and uses two variables: sales turnover and floor space employed. •• Sales turnover/floor space employed = sales density •• £250,000/1000 square ft = £250 sales density Accurate density analysis requires that the two components be accurate to be effective. Recording accurate cash sales turnover is a standard activity within a retail store, but the management of floor space can be more difficult. While the total size of

a store may not change, the use of space within it often does, and so the use of density analyses requires an accurate measurement of the division of floor space between product groups. The Prentice Day store was small in comparison with the large multiple businesses such as H&M trading nearby. The store was 1500 square ft in total (150  m2), of which 1000 square ft were used as trading space. Figure 5.2 shows the store and its existing layout. Table 5.4 identifies sales density analysis generated by each product group within the Prentice Day store. It shows that accessories drive the highest sales density – it may be a small cash product group, but its retail execution appears highly efficient. Casual wear too outperforms the £90 average sales density, while it falls to formal wear to significantly underperform, suggesting its space allocation in store is too big to justify its contribution to sales turnover.

FASHION MERCHANDISING: THE PRENTICE DAY CASE STUDY

Back office and stockroom 500 square foot

Accessories 75 square foot

Casualwear

Formalwear

325 square foot

600 square foot

Entrance

Figure 5.2  Prentice Day store layout Table 5.4  Prentice Day sales densities Spring/summer season

Actual cash sales turnover

Floor space employed

Sales density

Men’s accessories

£10,000

75 square ft

£133

Men’s casual wear

£40,000

325 square ft

£123

Men’s formal wear

£40,000

600 square ft

£67

Total sales density

£90,000

1000 square ft

£90

With two analyses reviewed, the merchandiser has an overall feel for the strengths and weaknesses in the product range, which are clear in message and go some way to explaining the detail within the SWOT analysis. Formal wear is weak and the main cause of the disappointing overall financial performance. Casual wear appears very strong, with its performance supportive of the buyer view that customers prefer it. Accessories, while thought of as an add-on product range, may be worth further review – its financial performance is

good, and its sales densities are in line with the powerhouse that is casualwear.

UNDERSTANDING THE MACRO ENVIRONMENT There is a tendency to view merchandising as being introspective, always reviewing and checking internal financial data, whilst the extrovert buyer travels the world looking for inspiration and fresh ideas. There is some truth in this view. An introspectiveonly role will not provide a rounded

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approach to understanding the context within which data are reviewed and acted upon. Reliance on a past season trading history is limiting, and the conditions that came together to influence the previous season are unlikely to occur the same again. An assessment of forward forecasts of the macro environment facing a business highlights external influences that could impact the quantitative aspects of the product range, just as trend and cultural influences could impact upon the qualitative ones.

The relevance of macro data will vary by market sector and business model type and size, but relevant knowledge offers a fresh perspective and gives a realworld context, adding flavour to what the budgetary numbers suggest. By recognizing that macro environment research will  vary by business type, it is possible to  identify some common analysis tools and their relevance to the merchandiser at this point in the planning process (Table 5.5).

Table 5.5  Analysis tools of the merchandiser Competitor trends

Competitor trends data that link product ranges to financial strength can provide vital intelligence to a business. Which competitor holds the greatest market share? Which competitors are growing their share, and which are facing a decline? This different dimension to competitor trends allows the planning process to consider the power and influence competitors have within the market, so identifying opportunities or limitations that the fashion business has in attracting consumers to their stores

Economic trends

Prevailing economic trends significantly impact the budgeting decision-making process. Reviewing indices such as gross domestic product (GDP) growth, inflation forecasts and specific forecasts for individual market types provides a feel for the risk within the market, growth opportunities and forewarning about possible inflationary pressures. The well-researched response by many fashion businesses to declining disposable incomes caused by the aftershocks of the 2008 financial shock in lowering average selling prices indicated their strong grasp on the realities of the macro market

Product trends

Product trend analysis is a natural research area and is used to identify not just fashion trends but also the financial size of the market, growths against previous years and/or specific trading periods (e.g. Christmas or Valentine’s Day). The changing landscape of trading patterns such as the emerging Black Friday discount period in the UK or the effects of consumer spend moving from fashion to lifestyle enrichment means that benchmarking performance against a wider commercial context gives true insights to a retail business’s performance within the market, rather than relying simply on internal financial data

Price and volume trends

Price and volume trend analysis reviews the relationship between market value and unit volumes. A growing market in value is not always an indication that all is well within a product segment. The continued growth of discount fashion ranges and intense competition has often meant that any market growth has come from unit volume growth, implying that selling prices and hence intake margins are under pressure. Understanding this relationship is clearly vital in the setting of retail selling prices and suitable financial budgets

FASHION MERCHANDISING: THE PRENTICE DAY CASE STUDY

The depth to which such macro data are reviewed varies, and in the case of a small single-store business, wide ranging national data could have less resonance than data which are related to its specific

market – in this case London. The Prentice Day merchandiser, after reviewing a wide  range of data, summarized their findings, and these are presented in Table 5.6.

Table 5.6  Prentice Day macro environment research summary Competitor trends

The development of Oxford Street will increase competition

Economic trends

Retail sales growth in London is forecast to be at least 10 per cent

Product trends

Casual wear is on-trend and predicted to continue growing market share next year

Price and volume trends

Strong retail sales growth is forecast to be driven by unit volume growth rather than increasing retail prices

IDENTIFYING A PLANNING STRATEGY Without undertaking a comprehensive review of the product range, the merchandiser is already equipped with rich data which can act as a set of signposts directing their future decision-making. Such signposts are invaluable, as they can give shape

to the analysis when confronted with a potentially detailed and labour-­ intensive review. Taking each element in turn, a picture of the key themes and messages from each is built up, and from there priorities emerge. Table 5.7 summarizes the findings from the research undertaken by the merchandiser up to this point.

Table 5.7    Initial research summary SWOT summary Prentice Day has strength in the core basic product offer – Is there potential to develop this? The supplier base is flexible – Changes can be made to the product hierarchy as appropriate There is an issue with T-shirts that requires investigation Gross trading profit summary Casual wear is performing very strongly – What is causing the strong gross profit performance? Formal wear is the opposite – What is causing this? Accessories are in line with expectation and do not appear a priority Density analysis summary Accessories are the strongest product group, which conflicts with the gross profit summary Formal wear appears to be over spaced and so have too many options in the product range (continued)

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Table 5.7  (continued) Macro environment review There is growing competition in a buoyant retail market Growth is driven by volume growth rather than price increases There is a clear opportunity with the strong growth forecast within the London economy

Reviewing the table, the first signposts to guide the planning process can be summarized into an initial planning strategy. From the summary, three key foci emerge: 1. Gross trading profit: All gross profit levers must be reviewed and under­stood. a. There is wild variation in gross profit by product group which needs to be understood and corrected. 2. Product: The performance of the product range needs to be understood. b. What is the correct mix of product groups for next year? c. Attention needs to be paid to T-shirts and accessories to understand their potential.

3. Competition is strong. d. Prentice Day is strong in core basics which work well in a volume-­driven trading environment. e. What is the true potential of core basics? Where does its strength lie? f. Unit buys by product group need review to rebalance the range towards casual wear and possibly accessories. This defining of a planning strategy direction will shape thoughts and actions. This quantitative planning strategy is also useful for the buyer, as within it there will be precious information on possible priorities for them to consider in advance of more formal discussions when finalizing the product range for the new season.

SUMMARY This chapter has acted as a prologue to Part II of this book. As such, it has set the scene and established a shape for the merchandiser activities to be reviewed over the remaining chapters of Part II. The concepts introduced, while simplified for the purposes of the text and ease of discussion, are industry-standard. The skill, as with the other chapters in Part II, is in the interpretation, knowing what to look for and spotting inconsistencies in data.

A second requirement at this point is to have an open mind. As humans we tend to remember anecdotes and conversations, and it is very common to strongly believe an event or action over the course of a season as being definitive in the ultimate performance of the product range. Time and time again, good research proves many of these beliefs wrong, and so open minds lead to open research and effective reflection and understanding of what really happened.

FASHION MERCHANDISING: THE PRENTICE DAY CASE STUDY

SELF-DIRECTED STUDY 1. Create a 4P and SWOT analyses for a national retail fashion brand of your choice.

c. Review the competitors of your brand and note their strengths and weaknesses.

a. Using Mintel and Verdict research understand the macro environment facing the brand.

d. Research trade and national press for details of your brand’s financial position.

b. Undertake a full comparative shop review of your chosen brand.

2. Create a planning strategy for the brand based on your research.

FURTHER READING Hebrero, M. (2016) Fashion Buying and Merchandising: From Mass Market to Luxury Retail. Create Space Independent Publishing: London

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FASHION MERCHANDISING: RESEARCH AND ANALYSIS INTENDED LEARNING OUTCOMES 1.

An appreciation of the process of analyzing key performance indicator (KPI) budgets.

2. An appreciation of the process of analyzing product performance. 3. A demonstration of how to draw conclusions from analysis. 4. A demonstration of the creation of a financial product strategy for Prentice Day.

INTRODUCTION The presentation of a research and analysis approach clarifies the merchandiser role as a bridge between the established and well-understood buying and finance roles. The financial and product awareness of the business possessed by the end of the research process is an invaluable resource. It can help both buyers and finance to make holistic fact-based decisions rather than mixing facts with a liberal dose of anecdotal thought. This chapter will develop the Prentice Day case study to review and analyze budget and product data, concluding with the formulation of a budgeting strategy. Each chapter, including this one, will start with a reminder of the concept-to-carrier bag model to set the scene. This chapter then starts at the beginning of the model: the activity of research and analysis (Table 6.1).

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FASHION MERCHANDISING: RESEARCH AND ANALYSIS

Table 6.1  The concept-to-carrier bag model Concept-to-­carrier bag step

Definition

1. Research

Undertaking and collation of relevant fashion research

2. Concept

Creation of product range concept and direction

3. Product development

Finalization of concept as a product range

4. Sourcing

Sourcing of suppliers and manufacturers for the range

5. Manufacturing

Manufacture of the product range

6. Shipping

Shipping and delivery of the product range

7. Warehousing

Receipt of the product range and its allocation to store and storage

8. Distribution

Delivering initial store allocations

9. Retail

Display, sale, promotion and stock replenishment

10. Carrier bag

Purchase of the product by a consumer

RETAIL MATHEMATICS VERSUS COMMERCIAL ACUMEN Being the first activity apportions significant importance to the research process. Once a planning season moves towards defining a product concept, both buyer and merchandiser must be able to work on their individual tasks secure in the knowledge that they are working to a single vision and strategy. This can only be true where research has accurately informed the decision-making process, and so it must be skilfully completed by being mathematically correct but also commercially relevant. The former requirement is easy to deliver. The beauty of mathematics within fashion merchandising is that the variables within the calculations are limited in number, simple to carry out and big in

effectiveness. The commercial relevance of financial research is more difficult to articulate. Numerical analysis can focus too much on the absolute answer rather than what the true meaning is. A common example of this is undertaking research at the end of a season and reviewing data to assess where a product range ended up. Selling out of a product is good – sales presumptions maximized, markdown avoided and stock holding reduced are all good metrics  – but selling out also implies more could have been made of the product  – bigger unit buys, improved stock availability and increased sales. Using research not just to identify what happened but also to identify what should have happened is important. Using mathematics to identify facts but also to be a tool to question data is a more appropriate method of attack.

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To do this effectively, the merchandiser analyzes and assesses the performance of the product ranges throughout a fashion season: daily, weekly and monthly research highlights performance, and as a season progresses trends emerge, surprise reactions to products happen and lessons are learnt. With regular research, the inclusion of a formal review of the previous season at the start of the concept-to-carrier bag model must deliver specific benefits. First, a total review of all budget and option performance of a comparable season gives a good strategic summary of the direction of the business, giving signposts to future product concepts and their budget requirements. Second, it allows all relevant data to be reviewed at a single point in time, providing uniform research that gives a good sense of ranking the range into good, average and poor performances which then can influence the buyer and their new season buying strategy. This approach utilizes defined retail calculations, meaning that all analyses use a standard set of calculations, generating comparisons on equal terms, and no subjective favouritisms for a product type will cloud the judgements of either buyer or merchandiser.

BUDGET ANALYSIS The financial management of a product range is the core of the merchandiser role, and so understanding budget performance is an appropriate place to start the research process. Budget analysis within B&M is most effective when it is used to signpost direction, posing questions that can be answered by a more detailed product analysis. The analysis reviews the budgets introduced in Chapter 2 and is summarized below: •• •• •• ••

sales turnover markdown spend intake margin percentage stock level (inventory).

Each one is reviewed throughout the product category hierarchy and is related to the initial gross trading profit and sales densities analyses previously completed. The analysis is guided by two standard calculations: percentage mix and variance. The mix calculation is used to identify the quantitative contribution of a variable within a collection of related variables and is useful to demonstrate each one’s importance. For example, if a jumper were available in two colours, red and blue, each colour would represent 50 per cent of the total (Table 6.2).

Table 6.2  The percentage mix calculation Style

Quantity

% Mix

Calculation

Red

1

50%

(Red jumper/Total number of jumpers) *100 = 50% or (1/2) *100 = 50%

Blue

1

50%

(Blue jumper/Total number of jumpers) *100 = 50% or (1/2) *100 = 50%

Total

2

100%

FASHION MERCHANDISING: RESEARCH AND ANALYSIS

The variance calculation is used to identify positive or negative changes in size between two related variables. In the example below, stating that jumper sales

turnover is 33 per cent above its budget gives an easy-to-understand sense of scale to the success of the product type (Table 6.3).

Table 6.3  The percentage variance calculation Product

Actual sales

Budget

Calculation

Jumpers

£20,000

£15,000

((Actual sales – Budget sales)/Budget sales) *100 = 33% or ((£20,000–£15,000)/£15,000) *100 = 33%

In the Prentice Day case study, the budget analysis will cover: •• a spring/summer season of 26 weeks’ duration between 1 January and 30 June •• all three product categories ranged within the store  – accessories, casual wear and formal wear.

With the starting point set, the first activity analyzes the overall shape of the range by understanding each product budget contribution to the total business by using the percentage mix calculation. This summary is presented in Table 6.4.

Table 6.4  Overall business shape analysis Actual sales turnover mix

Actual markdown spend mix

Actual stock mix

Actual gross trading profit mix

Men’s accessories

 12%

  4%

 22%

 12%

Men’s casual wear

 44%

 24%

 17%

 54%

Men’s formal wear

 44%

 72%

 61%

 34%

Total

100%

100%

100%

100%

Table 6.4 presents a rich source of data to the merchandiser, which is summarized below: •• Sales turnover – Casual and formal wear are equal in size (44 per cent of the mix), while accessories represents a small but still significant 12 per cent mix. •• Markdown spend  – Formal wear accounts for 72 per cent of all markdown spend. This concentration of markdown

implies its ranges were weak and needed price reductions to stimulate demand. •• Stock – All product categories stock holding mixes are out of line with sales mixes, suggesting that none is being bought in line with sales potential. Accessories and formal wear both appear to carry excessive stocks, whilst the casual wear stock mix at 17 per cent is far lower than its sales mix, implying stock shortages.

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•• Gross trading profit  – The mix of profit generated demonstrates the success of casual wear. Of all profits, 54 per cent came from its casual wear products. Accessories mix was in line with sales, but formal wear generated just 34 per cent of gross trading profit, well down on its sales mix. The owners are correct in their thinking that accessories are a smaller part of the product mix, however, it contributes 12 per cent to sales turnover, which is not insignificant. The bigger implication of the mix analysis is the influence of casual wear within

the business. Its sales and profit mixes are high, but its markdown and stock mixes are low, implying it is not being bought to potential. Conversely, formal wear appears to be overbought, with high stock and markdown mixes compared with casual wear. Following the initial mix analysis to obtain a sense of range balance, each product budget is reviewed comparing actual data with the following variables: •• budget set for the season •• the previous year. The first budget reviewed is the sales turnover budget shown in Table 6.5 below.

Table 6.5  Sales turnover analysis Actual sales turnover

Sales turnover budget

Men’s accessories

£10,000

£10,000

0%

£9500

+5%

Men’s casual wear

£40,000

£33,000

+21%

£31,500

+27%

Men’s formal wear

£40,000

£50,000

–20%

£47,500

–16%

Total sales turnover

£90,000

£93,000

–3%

£88,500

+2%

This analysis highlights that: •• Good –– The only product category to exceed  its sales turnover budget was casual wear at +21 per cent above expectation. –– Accessories and casual wear sales turnovers both exceeded the previous year cash figures. At +27 per cent, casual wear sales growth was very strong. –– Accessories and casual wear were the reason that sales turnover in total at £90,000 was +2 per cent greater than the previous year.

Sales turnover % variance to budget

Sales turnover previous year

Sales turnover % variance to previous year

•• Average –– Accessories sales turnover met its sales turnover budget. •• Poor –– Formal wear sales turnover of £40,000 was –20 per cent below its budget and –16 per cent below the previous year. –– The poor formal wear sales turnover meant that sales turnover in total was £3000 lower than budget, representing a –3 per cent underperformance. Accessories appears to be a stable product category that has performed in line with

FASHION MERCHANDISING: RESEARCH AND ANALYSIS

original expectations. This stability makes the product category worth retaining, as it offers relatively risk-free sales turnover to the business. Casual wear appears to be highly successful. The sales turnover analysis supports the SWOT analysis, which described casual wear as running out of stock. Formal wear, however, has performed poorly, and the analysis backs up the perception that

customers do not understand or like the formal wear range. As informative as it is, the sales turnover analysis cannot be relied upon in isolation to set a product strategy. Sales performance can be highly influenced by markdown. Markdown is reviewed next to assess the depth of its influence on business performance. Table  6.6 presents the markdown budget analysis.

Table 6.6  Markdown spend analysis Actual markdown spend

Budget mark-­down spend

Men’s accessories

£1000

£1000

0%

£1100

–9%

Men’s casual wear

£5250

£7500

–30%

£7750

–32%

Men’s formal wear

£16,000

£14,500

+10%

£15,000

+7%

Total markdown spend

£22,250

£23,000

–3%

£23,850

–7%

This table compares by product category the actual cash markdown spend that was needed to liquidate unsold stock at the end of the 26-week season. •• Good –– Markdown is a cost, and casual wear underspending markdown is a cost saving to Prentice Day. Actual cash markdown spend of £5250 was –30 per cent compared with budget. –– This meant that the total markdown spend of £22,250 was also below budget at –3 per cent. –– Both accessories at –9 per cent and casual wear at –32 per cent spent less

Markdown spend % variance budget

Previous year markdown spend

Markdown spend % variance previous year

­ arkdown clearing stock than the m previous year. –– The good accessories and casual wear markdown spend reduced markdown cost by –7 per cent compared with the previous year. •• Acceptable –– Accessories markdown spend was in line with budget. •• Poor –– Formal wear markdown spend of £16,000 was +10 per cent above budget and +7 per cent higher than the previous year.

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The underspend of a cost of sales item in the P&L account is good. It has though only been delivered by a very strong casual wear range only. All the budget provision for accessories was spent, and formal wear significantly overspent  – a reflection of its poor sales turnover. Reviewing the sales and markdown tables together implies that

significant rebalancing of buying budgets between the product categories is required. The merchandiser will next review the impact of sales turnover and markdown spend on the stock position at the end of the season under review. This is presented below in Table 6.7.

Table 6.7  Stock level analysis Actual closing stock

Budget closing stock

Men’s accessories

£12,500

£12,500

0%

£12,500

0%

Men’s casual wear

£10,000

£16,000

–38%

£16,000

–38%

Men’s formal wear

£33,000

£25,000

+32%

£27,000

+22%

Total stock at end of season

£55,500

£53,500

+4%

£55,500

0%

The actual stock holding valued at retail selling at the close of the season shows the effectiveness of the use of markdown to clear stocks to budget.

Closing stock % variance budget

Previous year closing stock

Closing stock % variance previous year

end of the season to be in line with the previous year at £55,500.

•• Good –– Stock holding below budget implies good stock management. Casual wear held −38 per cent less stock at the close of the season compared with budget and in comparison with the previous year.

•• Poor –– Formal wear stock holding of £33,000 was +32 per cent greater than budget and +22 per cent greater than the previous year. –– The result of poor stock management of formal wear total stock holding of £55,500 was greater than budget by 4 per cent.

•• Acceptable –– Accessories again was in line with budget and was also in line with the previous year stock holding. –– The casual wear and accessories stock holdings enabled actual stock at the

The product group trends identified by the sales and markdown analyses are further confirmed by the stock level analysis. One new message emerges that casual wear quite clearly ran out of stock. Formal wear, however, missed its sales budget and

FASHION MERCHANDISING: RESEARCH AND ANALYSIS

even with the use of excessive markdown ended the season grossly overstocked. Formal wear was overbought and unappreciated by customers, the effect being putting a financial strain on the business. One way of preventing poor trading from impacting upon business finances is to

manage the intake margin percentage so that it is as high as possible. Knowing this is useful as a check to prevent any budget analysis from pushing the new season budgets towards low-margin product types. In the case of Prentice Day, Table 6.8 presents an intake margin analysis.

Table 6.8  Intake margin analysis Intake margin % Men’s accessories

55%

Men’s casual wear

65%

Men’s formal wear

60%

Total

62%

Intake margin is expressed as a percentage and is the difference between cost price from the supplier and the selling price offered to the customer. The intake margin is declared exclusive of value added tax (VAT). •• Good –– Casual wear intake margins are above the average for the business. •• Average –– The average intake margin is 62 per cent. •• Poor –– Both accessories and formal wear intake margins are lower than the average. The compelling argument to develop the casual wear range is augmented by the strong intake margin achieved by the

product. Accessories offer a safe and reliable contribution to the business but carry a low intake margin. The 60 per cent intake margin delivered by formal wear is below the average, and so any opportunities to improve its finances  – through, perhaps, selling price reductions – will be limited, as reducing intake margin could put profitability at further risk. The overall impact of the product budget’s strengths and weaknesses on gross trading profitability is summarized in Table  6.9. For a fuller discussion of gross trading profit, refer to Chapter 5. Table 6.9 presents the gross trading profit delivered by the product ranges that was used to pay for the overheads of the business. It shows the ultimate effect each product category had on the financial strength of the business.

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Table 6.9  Gross trading profit analysis Actual gross trading profit

Budget gross trading profit

Trading gross profit % variance budget

Previous year gross trading profit

Gross trading profit % variance previous year

Men’s accessories

£4125

£4125

0%

£3850

+7%

Men’s casual wear

£18,823

£13,813

+36%

£12,864

+46%

Men’s formal wear

£12,057

£17,750

–32%

£16,250

–26%

Total gross trading profit

£35,005

£35,688

–2%

£32,964

+6%

•• Good –– Casual wear is the only product category that exceeded its budgeted gross trading profit. At £18,823, this is an increase of +36 per cent above budget. –– Both accessories and casual wear profits are higher than the previous year. –– The strength in accessories and casual wear has enabled total business profit of £35,005 to be +6 per cent higher than the previous year.

performance. Accessories, while small in the mix of product, did perform in line with budget and was consistent in achieving its budgets. Accessories are unique in that they represented stability and a safe, albeit unspectacular, product for the business. Reviewing each product budget individually, step by step, builds a picture of the business, its strengths and weaknesses, and in the case of Prentice Day, has highlighted the following conclusions.

•• Acceptable –– Accessories profit of £4125 is in line with its budgeted gross trading profit.

•• Accessories –– Safe and stable with no compelling reason to increase or reduce its sales mix. There is an opportunity to improve its stock management and intake margin percentage for the new season.

•• Poor –– Formal wear profit of £12,057 is –32 per cent below budget and –26 per cent lower than the previous year. –– As a result of formal wear being such a poorly performing product, the total gross trading profit delivered by the business was –2 per cent lower than budget.

•• Casual wear –– The very high sales turnover growth, low markdown spend and stock levels suggest that the product range was under-­planned initially and has much room to be expanded.

The ultimate success criterion for any range is its profitability. The excellent performance of casual wear across all KPI budget measures was of vital importance to the business. Casual wear not only outperformed its budgets, but the business relied upon it to make up for the poor formal wear

•• Formal wear –– The single reason that the business missed achieving its budgets. With low sales turnover, high markdown spend and excessive end-of-season stocks, that product range has failed and needs a radical re-think.

FASHION MERCHANDISING: RESEARCH AND ANALYSIS

PRODUCT ANALYSIS To understand the budget review result requires knowledge of the product range, its options and how each contributed to the overall position at the end of the season. For such a specific analysis to be successful, it must provide distinct information to interrogate the range’s strengths and weaknesses. Relevant calculations to support this are: •• Rate of sale – measures unit volume and helps understand the sales turnover budget analysis Unit sales for each product vary, and the rate of sale analysis identifies the average

rate at which each option sold whilst it was on sale per store. The calculation relies on three components: total unit sales of an option, the number of stores that ranged it and finally its life cycle  – the number of weeks that it was available in store. For example, presume a red dress sold 100 units, was ranged in five stores and had been available for ten weeks. The average rate of sale would have been two units per week in each store (Table 6.10). •• Sell through rate percentage – measures unit sales in relation to buy units and helps understand the markdown budget analysis.

Table 6.10  The rate of sale calculation

Red dress

Unit sales

Stores ranged

Life cycle

Calculation

100

5

10

(Sales units/Stores ranged/Life cycle) = 2 or (100 units/5 stores/10 weeks) = 2

The sell through rate calculation determines unit sales as percentage of the unit buy. Its calculation relies upon two components: total unit sales achieved and the unit buy.

Taking a grey pencil skirt as an example, if 200 units were bought by the buyer and it sold 150 units, the sell through rate would be 75 per cent (Table 6.11).

Table 6.11  The sell-through rate calculation Option

Unit sales

Unit buy

Calculation

Grey pencil skirt

150

200

(Unit sales/Unit buy) *100 = 75% or (150 units/200 units) *100 = 75%

•• Weeks cover  – measures relationships between stocks and sales and helps understand the stock budget analysis. The final and probably most universally used and understood is the weeks cover calculation. This is because it is probably the most versatile, quickest and easiest-to-­use

retail calculation within B&M.  It measures the rate at which an option will sell out at current unit sales rates. As an example, if a business holds 100 units in stock of a red shirt and is currently selling ten units of the shirt per week, it will sell out in ten weeks’ time (Table 6.12).

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Table 6.12  The weeks cover calculation Option

Stock units

Sales units

Calculation

Red shirt

100

10

Stock units/Sales units = 10 weeks or 100 units/10 units = 10 weeks

Each of the retail calculations offers simple approaches to analysis, but not intelligence as to why a range performed as it did. The budget analysis identified that casual wear, for example, was under-­planned, and the product analysis will identify the product types, price points and colours that enabled this conclusion to be drawn. The product review also gives a sense of the scale of opportunity and risk. For example, if analysis identified that all options sold erratically, with no meaningful trend established, this would suggest risk and a lack of stability in the range. Conversely, if all options sold equally well, with little extremes in the range, a conclusion may be drawn that the product range was stable, although unexciting in the way it was being bought by the buyer. A final reason to analyze option

performance is that it is exciting to see the results of all the hard work undertaken to create a product range. As the concept-tocarrier bag process takes up to a year, it is impossible not to feel an attachment to the range, and seeing it to its conclusion is always satisfying even if the range has not been as successful as hoped for. For this next analysis process, the casual wear product range will be interrogated to assess why the category performed how it did. The data will be presented in tables, and Table 6.13 begins with a presentation of the casual wear product range. The 17 options are divided into 3 product types (trousers, shirts and T-shirts) and then by attribute (core basic, fashion style and high fashion). The table details for each option:

Table 6.13  The casual wear range 1

2

3

4

5

Option

Product description

Option

Fashion attribute

Selling price

Stores ranged

Full-­ price sales units

Stock units remaining

Total buy units

1

5-pocket cotton chino

Black

Core basic

£50

1

130

 4

134

2

5-pocket cotton chino

Natural

Core basic

£50

1

117

 9

126

3

Combat jeans

Indigo

Fashion style

£70

1

 48

14

 62

4

Combat jeans

Light blue

Fashion style

£70

1

 44

18

 62 (continued)

FASHION MERCHANDISING: RESEARCH AND ANALYSIS

Table 6.13  (continued) 1

2

3

4

5

Full-­ price sales units

Stock units remaining

Total buy units

Option

Product description

Option

Fashion attribute

Selling price

Stores ranged

5

Punk jeans

Navy

High fashion

£90

1

Trousers total

10

9

19

349

54

403

6

Plain shirt

White

Core basic

£35

1

111

12

123

7

Plain shirt

Blue

Core basic

£35

1

125

8

133

8

Flower shirt

Green

Fashion style

£50

1

36

23

59

9

Laser-cut shirt

Yellow

High fashion

£60

1

7

11

18

279

54

333

Shirts total 10

Basic T-shirt

Navy

Core basic

£15

1

222

0

222

11

Basic T-shirt

White

Core basic

£15

1

216

4

220

12

Basic T-shirt

Green

Core basic

£15

1

220

2

222

13

Raglan T-shirt

Navy

Fashion style

£25

1

73

20

93

14

Raglan T-shirt

White

Fashion style

£25

1

59

23

82

15

Raglan T-shirt

Red

Fashion style

£25

1

54

28

82

16

Skull print T-shirt

Blue

High fashion

£35

1

10

25

35

17

Skull print T-shirt

Yellow

High fashion

£35

1

6

30

36

T-shirt total

860

132

992

Grand total

1488

240

1728

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FASHION MERCHANDISING

Reviewing the product range identifies that:

For example, the first option rate of sale is calculated to be:

•• Trousers –– The basic chino options had the biggest unit sales and almost sold out. The punk jeans sold the least number of units. There seemed to be a pattern of core basic, with opening price point products selling better than the other fashion attributes.

•• Five-pocket chino in black –– (Sales units/Stores ranged/Life cycle). –– (130 sales units/1 Prentice Day store/20 full price weeks) = 6.5 units.

•• Shirts –– Sales of shirts follow the same pattern established within the trousers product group. One key point to note is that the high-fashion laser-cut T-shirt sold less than half of its unit buy.

•• Trousers –– Rates of sale of the trouser options range from the highest of 6.5 units sold per week of the black chino to just 0.5 units sold on average of the punk jeans. The low rate of sale recorded by the punk jeans  – at less than one unit per week – means that in some weeks of the season no sales were made of this option at all.

•• T-shirts –– With eight options, this is the largest product group in the casual wear range. The basic T-shirts have almost sold out despite having more units bought of them than any other option. The high-­ fashion T-shirt sales were very poor compared with the unit buys made. This initial analysis identifies that the casual wear range comprises a mix of styles, colours and fashion attribute types and that it is reliant upon core basic opening price point options. Having established the shape of the range, the merchandiser will calculate the rate of sale for each option, shown below in Table 6.14.

The table has the rate of sale for each option, product group and casual wear product category total added to it and shows that:

•• Shirts –– On this measure, shirts again mirror the performance of the trousers product group, with core basic options generating high rate of sale, which reduces as each option becomes more fashionable. •• T-shirts –– While the same pattern emerges within T-shirts, there is a very pronounced difference in the rates of sale generated by the core basic T-shirts’ rates of sale which  – at 11 units for each option  – are the highest of all options in the casual wear range.

5-pocket cotton chino

5-pocket cotton chino

Combat jeans

Combat jeans

Punk jeans

1

2

3

4

5

Plain shirt

Flower shirt

Laser-cut shirt

7

8

9

Shirts total

Plain shirt

6

Trousers total

Product description

Option

Yellow

Green

Blue

White

Navy

Light blue

Indigo

Natural

Black

Option

High fashion

Fashion style

Core basic

Core basic

High fashion

Fashion style

Fashion style

Core basic

Core basic

Fashion attribute

Table 6.14  Range assumptions analysis

£60

£50

£35

£35

£90

£70

£70

£50

£50

Selling price

1

1

1

1

1

1

1

1

1

Stores ranged

279

7

36

125

111

349

10

44

48

117

130

Sales units

54

11

23

8

12

54

9

18

14

9

4

Stock units remaining

333

18

59

133

123

403

19

62

62

126

134

Total buy units

3.5

0.4

1.8

6.3

5.6

3.5

0.5

2.2

2.4

5.9

6.5

Rate of sale

84%

39%

61%

94%

90%

87%

53%

71%

77%

93%

97%

Sell through rate

(continued)

14.0

40.0

20.0

13.0

13.0

13.0

35.0

16.0

16.0

11.0

10.0

Average weeks cover

FASHION MERCHANDISING: RESEARCH AND ANALYSIS 107

Raglan T-shirt

Raglan T-shirt

Raglan T-shirt

Skull print T-shirt

Skull print T-shirt

13

14

15

16

17

Yellow

Blue

Red

White

Navy

Green

High fashion

High fashion

Fashion style

Fashion style

Fashion style

Core basic

Core basic

£35

£35

£25

£25

£25

£15

£15

£15

1

1

1

1

1

1

1

1

Stores ranged

6

10

54

59

73

220

216

222

Sales units

1488

Basic T-shirt

12

White

Core basic

Selling price

Grand total

Basic T-shirt

11

Navy

Fashion attribute

860

Basic T-shirt

10

Option

T-shirt total

Product description

Option

Table 6.14  (continued)

240

132

30

25

28

23

20

2

4

0

Stock units remaining

1728

992

36

35

82

82

93

222

220

222

Total buy units

4.4

5.4

0.3

0.5

2.7

3.0

3.7

11.0

10.8

11.1

Rate of sale

86%

87%

17%

29%

66%

72%

78%

99%

98%

100%

Sell through rate

9.0

7.0

48.0

40.0

14.0

12.0

12.0

3.5

2.5

3.0

Average weeks cover

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The rate of sale analysis is clearly communicating that expanding the casual wear product range should be targeted towards core basic options. The high-­ fashion options present a problem to the merchandiser, as with the rate of sale averaging 0.4, a question as to their rationale being in the range is inevitable. The next product analysis is the sell-­ through rate percentage. For example, the first option sell-through rate % over the same 20-week full price period is calculated to be: •• Five-pocket chino in black •• (Unit sales/Unit buy) *100 •• (130-unit sales/134 unit buy) *100 = 97% Table 6.14 has the sell-through rate percentage for each option, product group and casual wear category total added to it. •• Trousers –– The average sell-through was 87 per cent, with a sell-through higher than average recorded by the core basic chinos. The fashion style combat jeans’ sell-­through was in line with the trousers’ total, while the punk jeans were poor sellers, with a sell-through of just over half of the unit buy (53 per cent). •• Shirts –– The shirts sell-through of 84 per cent was marginally lower than the total for the product category of 86 per cent. The core basic plain shirts sell-through rates were very good, but the other options had much lower and disappointing sell-­through rates. •• T-shirts –– The core basic T-shirts sold out with sell-­through rates of not less than 98 per cent. Clearly more of these options could have been bought and

sold. The sell-­ through rates of the fashion styles were reasonable at over 70 per cent sold-­through, but again the high-fashion options sold poorly, both selling less than 30 per cent of their unit buys. The sell-through rate calculation is useful within fashion as it gives a simple single percentage assessment of the strength of each option. The implication of this analysis is clear. Within casual wear, the business needs to buy more unit volumes of core basic options and reduce volumes for fashion and high fashion. Finally, Table 6.14 presents the average weeks cover for each option, product group and casual wear category as a total. The average covers have been presumed by the author. •• Trousers –– The average cover for trousers is 13 weeks. The core basic options are the best at 10- and 11-week average cover. The high-fashion option of 35-week average cover means that there was enough stock to last longer than the full price selling season (35-week average cover versus 20-week season). •• Shirts –– The same pattern is shown in shirts. The poor average cover of 40 weeks for the laser-cut shirt is even worse than the 35-week cover for the punk jeans. •• T-shirts –– T-shirts’ total average cover of seven weeks is better than the average covers for both trousers and shirts. This reflects the too-low covers for the basic T-shirts (approximately three weeks per option). Covers this fast

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can easily mean that core sizes are not available, as stocks are limited. The average weeks cover analysis suggests that the excellent performance of casual wear is due to two factors. First, core basic T-shirts have clearly sold well, with average covers implying that stock was in short supply throughout the season. Second, the average covers of all core basic options in the product range were the lowest weeks covers recorded, indicating that future ranges should emphasize these products. Overall, the review and analysis of the casual wear product performance of the range have highlighted that: •• There was consistency in the performance of each product group. •• Core basic options performed the best, achieving the highest rates of sale and sell-through rates as well as the lowest average covers. •• Fashion styles within the range did not stand out as being of note and had average performances. •• Meanwhile, high-fashion styles across all measures performed poorly. Any product strategy for casual wear must therefore ensure that development and growth are directed towards the core basic option type, where opportunities for volume sales and managed stocks are possible. High-fashion options would seem to need to be reduced by reducing either the number of options or the units bought of each.

SETTING A BUDGETING STRATEGY The thorough and structured review of the performance of the Prentice Day product range now enables a clear and articulate

interpretation of the reasons for the financial performance of the business. With this knowledge, buyer and merchandiser can discuss a product strategy that needs to be developed for the new season. The buyer, too, through their own research and analysis, will have opinions about the strengths and weaknesses of the range and how new trends will affect them. By meeting and discussing these, they can hold a first ‘range review’ and, from there, agree the approach to be taken within the next step of their individual processes. Taking the analysis to date, the merchandiser will bring to the initial range review the following strategy proposals: 1. Recognize and protect the accessories product category. It may be difficult to manage, but it represents safe sales turnover and trading profit. In the world of fashion, such stability should be protected. 2. Casual wear needs budgets that reflect its strength and so should be proposed for expansion to the buyer. 3. Formal wear as an integral part of a menswear offer needs to be retained, but it must be reduced in the product mix to limit its influence whilst it is being restructured. The creation of a planning strategy is important. A strategy is in effect a plan of action, a statement of intent. Good strong analysis identifies both the statement of intent  – in this case, a realignment of the product offer towards casual wear core basics and the action needed to be successful – and development of unit buys that grow in the case of core basics while reducing fashion and high-fashion options. This planning strategy informs the merchandiser of the principles that should be adhered to during the budgeting process, but it also informs the buyer within their

FASHION MERCHANDISING: RESEARCH AND ANALYSIS

role. Initial ideas can emerge to support the change of business focus and suppliers sourced, and new terms agreed on the likely changes to the size of production

runs for different products. The importance of this first step within the concept-­ to-­ carrier bag process cannot therefore be overestimated.

SUMMARY This chapter reviewed both budgets and product analyses and demonstrated how data can be interpreted, but also how the various analysis types can relate to one another to build a compelling analysis of a fashion product range. With a linked and articulate analysis, the buyer and merchandiser can work towards agreeing a concept strategy for the new season, which in turn, feeds into their next activities within the planning process. A key point that the chapter discussed was the link between good mathematics and commercial acumen. This link cannot

be emphasized enough. Good analysis that adds up is important, but understanding the answers within a commercial context is paramount. At the end of the research process, the buyer will be able to begin to formulate design and product ideas, source potential suppliers and start to create first-draft range plans that will be refined later in the process. The merchandiser will meanwhile be able to create the budget shape for the new season and, from there, inform the buyer of the buying budget that is available for the season. Chapters 7 and 8 will review this process.

SELF-DIRECTED STUDY 1. Review the retail calculations to fully understand their calculation. If possible, use them to analyze product data of a retail business.

FURTHER READING Tepper, B. and Greene, M. (2016) Mathematics for Retail Buying 8th edn. New York: Bloomsbury Academic

2. Refer to the companion website for Prentice Day case study exercises.

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INTENDED LEARNING OUTCOMES 1.

A review of the KPI budgeting process within the concept-to-carrier bag model.

2. An example-led discussion of the KPI budgeting process. 3. A demonstration of the theory that lies behind the KPI budgeting process. 4. The review and discussion of the KPI budget summary for the Prentice Day case study.

INTRODUCTION The analysis of financial and product performance in Chapter 6 identified the financial and product strengths and weaknesses of Prentice Day. This chapter takes this research knowledge and develops it into product budgets. The budgeting process is perhaps the most challenging element of the merchandiser role; turning research into a set of product budgets that satisfy the twin demands of buying and finance takes time, with constant communication between the three roles. The merchandiser will need to articulate how the budgets will be shaped in line with commercial reality but also within the capabilities of the business’s financial boundaries. At the same time, the buyer will be feeding in their own research and strategy requirements, which will need reflecting within the finalized product budgets. This chapter is laid out to provide an overview of the linear process of budget creation. It does so by discussing each budget and uses a range of sources to build a budget summary sheet. By the end of the chapter, the practical demonstration laid out will flow into Chapter 8, which will take the created budget and develop it further into an OTB – the buying budget with which the buyer can proceed to buy product (Table 7.1).

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Table 7.1  The concept-to-carrier bag model Concept-to-­carrier bag step

Definition

1. Research

Undertaking and collation of relevant fashion research

2. Concept

Creation of product range concept and direction

3. Product development

Finalization of concept as a product range

4. Sourcing

Sourcing of suppliers and manufacturers for the range

5. Manufacturing

Manufacture of the product range

6. Shipping

Shipping and delivery of the product range

7. Warehousing

Receipt of the product range and its allocation to store and storage

8. Distribution

Delivering initial store allocations

9. Retail

Display, sale, promotion and stock replenishment

10. Carrier bag

Purchase of the product by a consumer

 UDGETS BECOME KPI B BUDGETS The importance of product budgeting cannot be overestimated. At its simplest, poorly planned budgets generate inaccurate buying budgets and so imbalanced product ranges. If too high, the buyer could over-range products, confusing the customer, and if too low, they will be unable to create credible ranges, risking customer migration towards better product offers elsewhere. Poorly planned budgets are a double-edged sword for the finance team, too. Inaccuracies can result in poor overheads planning within the P&L account, while management of the balance sheet could be affected by a lack of focus on the debt regularly used to pay suppliers. The budgeting process forms the bulk of Step 2  in the concept-to-carrier bag model and, as a result, is complex and often frustrating. To be accurate, the budgeting process needs a context in which it can be undertaken. This context is provided by the

initial research completed so far: the 4P analysis, SWOT, macro market analysis, gross trading profit and sales densities analyses (see Chapter 5). Context is also provided by the other two influences in the game  – finance and buying. Taking the finance role first, as guardians of the business’s finances, it needs a strong influence over the direction of product budgeting. The second guidance comes from the buyer. They will summarize their research into mood boards, pen portraits and initial product ideas. From there, they identify to the merchandiser their thoughts on upcoming product trends for the new season. The creation of product budgets touches the twin roles of product – creative direction and wealth creation. This key point demonstrates that the budgeting process is of strategic importance, and as a result, measures the effectiveness of product management in creating wealth for the business. In recognition of this dual role, product budgets are known as key performance indicators (KPIs), in effect meaning

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that the principle of product budgeting is as much about the attainment and beating of strategic goals for a season as about their financial integrity. To successfully navigate this time-­ consuming and often problematic process at the heart of the budgeting process, vital for

the merchandiser is the creation of five core product budgets: sales turnover (£), markdown spend (£ and percentage), intake margin (percentage), stock level targets (£) and gross trading profit (£ and percentage). These budgets and their relationships are presented below in Table 7.2.

Table 7.2  Key performance indicator budget summary Product category

Menswear Planning year

Previous year

% Variance

Notes

0

90,000

0.0

Taken from Chapter 6 concept-to-­ carrier bag: research

Markdown %

0%

25%

0.0%

Calculation: (Markdown £/Sales £)*100

Markdown spend £

0

22,250

0.0%

Taken from Chapter 6 concept-to-­ carrier bag: research

62%

0.0%

Taken from Chapter 6 concept-to-­ carrier bag: research

Sales budget Total sales turnover £ Markdown budget

Intake margin budget Intake margin %

0

Gross profit budget Gross trading profit %

0

46.7%

0.0%

Calculation: ((Gross profit £/ (Sales/1.20 VAT))*100)

Gross trading profit £

0

35,005

0.0%

Taken from Chapter 6 concept-to-­ carrier bag: research

Opening stock £

0

50,000

0.0%

Presumed by the author

Closing stock £

0

55,500

0.0%

Taken from Chapter 6 concept-to-­ carrier bag: research

Stock turn

0

1.7

0.0%

Calculation: (Sales £/((Opening stock £ + Closing stock £)/2))

Stock budget

VAT: 20%

The prevailing rate of value added (purchase) tax

FASHION MERCHANDISING: BUDGETING

To commence the budgeting process, the merchandiser has already identified from Chapter 6 that:

merchandiser guidance on the season ahead. For Prentice Day, the buyer concluded that:

•• The accessories product category needs to be protected; it represents safe sales turnover and trading profit. •• Casual wear is strong on all measures and should be expanded. Budgets should reflect this. •• Formal wear as an integral part of a menswear offer needs to be retained but managed to limit potential influence on gross trading profit.

•• Casual wear is on-trend for the new season and should be grown in the product mix. •• A redefinition of the formal wear range is underway, but to retain credibility as a menswear business, it should not be drastically cut back. •• Accessories are an opportunity, but as volumes are low, there is no real opportunity to grow intake margin. •• Selling prices cannot go up. The competition is fierce and so to retain existing margin means unit buys need to grow to give suppliers economies of scale and so maintain cost prices.

As an initial approach, this sets the scene, but forward guidance from the finance team gives additional information for the merchandiser. This is done by guiding the shape of the overall strategic direction  – without influencing the detailed process – by informing the merchandiser of the financial requirements of the business in the year ahead. The guidance can cover a wide range of variables. In the case of Prentice Day, the finance team have asked that the following be part of any product budgeting decisions: •• Overall market growth is good, with inflation at 2 per cent. The local conditions in Oxford Street are excellent. •• A minimum sales turnover budget growth of 10 per cent is needed to support future capital expenditure. •• Markdown spend budgets must be reduced. The company cannot afford the current cost. •• With heavy competition, there is no pressure to grow intake margins; however, they cannot decline. •• To control the balance sheet, any stock increases must be lower than sales turnover increases. The buyer meanwhile will add flavour to the budgeting process by giving the

 PI BUDGETING – SALES K TURNOVER BUDGETING The sales turnover budget holds the key to the KPI budgets, and there are various reasons why this is the case. The simplest is that it is logical to do so. If one considers the order of a P&L account, sales turnover is always presented first, and the costs that supported its delivery second. Within merchandising, the same rule applies. By defining the sales opportunity first, the remaining budgets can be built up to reflect and support anticipated demand. The second reason is that it is common sense to let the product and its strengths drive the budgeting process. A third – almost flippant  – reason is that it is natural to start with sales turnover. When creating a product range, one thinks of the product, the design and the creativity first. The mechanics of markdown or the required intake margin needed to support overheads rarely feature in that early thought process! To create the sales turnover budget, a pyramid approach takes the previous year

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season’s sales data, building onto it a logical approach to creating the budget, resulting in an optimal blue-sky budget at the top of the pyramid. The second approach applies commercial judgement and personal gut

feel, making allowances for real-life realities that may change expectations (for example known events which may reduce opportunities or a simple belief that the logical answer is not quite right) (Figure 7.1).

Optimal budget

Commercial judgement

Logic

Previous year actual

Planning year budget

Figure 7.1  The sales planning pyramid The process of applying logic to create a sales turnover budget begins with taking the previous year actual sales data and applying a like for like (LFL) growth

(for example an allowance for inflation), in this case adding a 2 per cent sales growth provision. This is shown in Table 7.3.

Table 7.3  Adding inflation growth of 2 per cent Previous year sales turnover

LFL growth – inflation at 2%

Accessories

£10,000

 £200

Casual wear

£40,000

 £800

Formal wear

£40,000

 £800

Sales turnover

£90,000

£1800

Growth to 10%

Common sense check

Planning sales turnover

Growth versus previous year

Growth versus two years ago

Note: Data calculation – Previous year sales turnover *0.02

This starting point is followed by making an additional sales growth presumption to ensure growth is in line with the guidance from the finance department to

budget for at least a 10 per cent growth on the year. The logical product category to grow is casual wear, and this is shown in Table 7.4.

FASHION MERCHANDISING: BUDGETING

Table 7.4  Increasing the total sales turnover budget to 10 per cent growth on the year Previous year sales turnover

LFL growth – inflation at 2%

Growth to 10%

Accessories

£10,000

£200

£0

Casual wear

£40,000

£800

£7200

Formal wear

£40,000

£800

£0

Sales turnover

£90,000

£1800

£7200

Common sense check

Planning sales turnover

Growth versus previous year

Growth versus two years ago

Note: Data calculation – Previous year sales turnover total *0.08

At this point, as the peak of the sales planning triangle is met, the merchandiser will review the budgets from a commercial aspect. This is done by assessing the evolving budgets against the previous two seasons to identify trends in the shape of the budgets using common sense. Table  7.5

below identifies the current situation if no further thought were given to this budget. Table 7.5 identifies that if the merchandiser were to finish the sales budgeting process at this point, there might be doubts as to the wisdom of the budgets created. For example:

Table 7.5  Common-sense checking of sales budgets Previous year sales turnover

LFL growth – inflation at 2%

Accessories

£10,000

£200

Casual wear

£40,000

Formal wear Sales turnover

Growth to 10%

Common-­ Planning sense sales check turnover

Growth versus previous year

Growth versus two years ago

£0

£0

£10,200

 2%

7%

£800

£7200

£0

£48,000

20%

52%

£40,000

£800

£0

£0

£40,800

 2%

–14%

£90,000

£1800

£7200

£0

£99,000

10%

12%

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•• Accessories – while there is no compelling reason to significantly grow this category, a growth of just £200 would suggest that there will not be room to make any significant enhancements to the product mix. •• Casual wear  – Common sense suggests that the growth focus is correct. The category ran out of stock in the previous year and is now on-trend. There may, however, be a question mark over the large +52 per cent growth compared with two years ago. •• Formal wear  – This is difficult to assess. Compared with two years ago, the product category would have a sales turnover budget that is –14 per cent lower and could be in danger of being wound down rather than repositioned. The questions posed above would be answered by discussion, and some ‘what-if scenarios’ would be worked through to quickly assess alternatives before deciding the correct route to take. As this common-­ sense check is made, various thoughts by the buyer will help to determine the commercial sense of the ‘blue sky’ budget,

whilst the finance team will add commentary on the potential risk to the business that the sales turnover budget would represent. For the purposes of this case study, we can assume that discussions with the buyer and finance resulted in the following decisions: •• Accessories – a further increase of £300 to the sales turnover budget would be a safe, risk-free approach to help develop the product range. •• Casual wear  – while the growths look large, the flexibility within the supplier base, the clear growth potential within the store’s location and past sales performance suggest that further growth can be planned. •• Formal wear – The most difficult decision of all. Persuaded by the buyer’s strategy, the need to be credible on the high street and the high number of working customers, it was agreed to grow formal wear back to the level of two years ago, adding £6500 to its sales turnover budget. These revisions are added to the sales budgeting spreadsheet in Table 7.6.

Table 7.6  Revised sales turnover budgets Previous year sales turnover

LFL growth – inflation at 2%

Growth to 10%

Common sense check

Accessories

£10,000

 £200

£0

 £300

Casual wear

£40,000

 £800

£7200

Formal wear

£40,000

 £800

Sales turnover

£90,000

£1800

Planning sales turnover

Growth versus previous year

Growth versus two years ago

£10,500

 5%

10%

£2700

£50,700

27%

61%

£0

£6500

£47,300

18%

 0%

£7200

£9500

£108,500

21%

23%

FASHION MERCHANDISING: BUDGETING

Table 7.6 identifies that the sales turnover budget for the planning season is £108,500, representing a 21 per cent growth on the previous year. At first glance, this percentage is large and well ahead of the minimum 10 per cent growth guidance from the finance team. The actual cash number growth of £18,500, however, is

more modest and has allowed for a reshaping of the product offer towards accessories and casual wear. A bigger concern could be that casual wear has grown too much, and if the trends suddenly change or the buyer is unable to negotiate an increase in supplier production, then the budgets may prove to be uncommercial.

FOCUS POINT 7.1: Sales turnover budgets and like for like  Glance through any financial or business press and you will find that, when reporting fashion company figures, business journalists always quote their LFL results. LFL measures true sales turnover growth as opposed to total growth and is regarded as a better index to assess business performance. For example, in the table below, a fashion business operates three stores (London, Edinburgh and Cardiff). Of the three stores, Cardiff started trading during the year being reviewed and so has no sales turnover data for the previous year. Store

Sales turnover this year

Sales turnover previous year

London

£150,000

£150,000

Edinburgh

£150,000

£150,000

Cardiff

£150,000

£0

Total value

£450,000

£300,000

In this example, total sales this year are £450,000, while in the previous year, they were £300,000, representing total sales turnover growth of +50 per cent.

On an LFL basis, a business will strip out any sales turnover performance that is not represented in the previous year figure. And so, in this example, to derive the LFL sales turnover performance, the analysis is undertaken exclusively on the Cardiff store. Store

Sales turnover this year

Sales turnover previous year

London

£150,000

£150,000

Edinburgh

£150,000

£150,000

Total value

£300,000

£300,000

In this case, the LFL sales turnover growth is 0 per cent. This is a very different figure to the +50 per cent shown in the total sales turnover figures.

Activity Review the financial press and build up a table for a collection of retail businesses. Make a note of their reported LFL. Does a pattern emerge linking LFL performance to commentary about their product ranges and competitive position?

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KPI BUDGETING – MARKDOWN SPEND BUDGETING What is the markdown budget? Is it what the customer sees in the form of a percentage off (such as 50 per cent off reduced to clear) or a buy-one-get-one-free offer? Or is it the planning of these offers? To a merchandiser, markdown is the exact opposite to its meaning to a customer, who sees it as an economic benefit. This benefit must be paid for, and it is the markdown spend budget that covers the cost. Within merchandising, markdown is therefore a:

•• cash spend – money spent on promoting or clearing product ranges •• cost  – it is a cost item that is a variable within the gross trading profit calculation •• variable cost  – markdown spend is directly influenced by the strength of the range and prevailing trading conditions. The impact of markdown and its cost calculation can be demonstrated below in Table 7.7. It takes the example of a shirt, of which 50 units have been bought in anticipation of selling them for £25, giving a total cash buy value at selling price of £1250.

Table 7.7  Relationship between sell-­through rate and markdown spend Step

Fashion style shirt Units bought of shirt

50

Selling price of shirt

£25

Total buy value

£1250

1

Units sold of shirt at £25

25

2

Sales value at full price

£625

(Calculation: 25 units multiplied by £25)

3

Units remaining in stock

25

(Calculation: 50 units bought less 25 units sold)

4

Remaining buy value

£625

(Calculation: 25 units remaining multiplied by £25)

5

Markdown of 50% on remaining stock

£312.50

(Calculation: £625 remaining stock value multiplied by 50%)

6

Sales value of remaining stock

£312.50

(Calculation: remaining buy value £625 less markdown value £312.50)

7

Summary Buy value

£1250

From Step 3

Sales value

£937.50

(Calculation: sales value at full price plus sales value of remaining stock)

Markdown value

£312.50

from Step 8

Markdown expressed as % to sales

33%

(Calculation: markdown value/sales value expressed as a %)

(Calculation: 50 units multiplied by £25)

FASHION MERCHANDISING: BUDGETING

Markdown to clear stocks is related to the full-price sell-through rate achieved prior to the decision to mark down. In Table 7.7, a full-price sell-through rate of 50 per cent has resulted in a markdown cost of £312.50. Therefore, the higher the sellthrough achieved, the lower the cash value of markdown spent. A second aspect is the markdown percentage to sales, which is shown in the case as being 33 per cent. This is an important ratio in markdown budgeting, as this figure represents the relationship between markdown costs and sales turnover (in this case, one-third of sales potential was lost to markdown). The higher this ratio is, the poorer the product range has sold; and in

any budgeting process, the eyes of merchandiser, finance team and business owners will fix on this percentage, as it acts as a judgement on the merchandiser’s faith in the future product range. To create the markdown spend KPI budget, the merchandiser will first calculate the markdown percentage to sales for the previous year. For Prentice Day, this analysis is shown in Table 7.8 and identifies markdown erosion of 25 per cent. The biggest cause of this value loss was formal wear, with a markdown percentage to sales of an unsustainable 40 per cent, whilst both accessories and casual wear value erosion were much lower, reflecting their strength within the business.

Table 7.8  Previous year markdown percentage to sales summary Previous year analysis Sales turnover

Markdown spend

Markdown % to sales

Men’s accessories

£10,000

£1000

10%

Men’s casual wear

£40,000

£5250

13%

Men’s formal wear

£40,000

£16,000

40%

Total

£90,000

£22,250

25%

Note: Data calculation – (Markdown spend/Sales turnover) *100

This allows the merchandiser to make markdown budgeting presumptions. •• Accessories – the stable nature of a product range implies it is safe to presume a similar markdown percentage to sales for the new season. •• Casual wear  – being on-trend and despite the large sales turnover growth budgeted, there is no evidence to suggest that a change in markdown ­

dynamic for the new season and a similar markdown percentage would be appropriate. •• Formal wear – a 40 per cent markdown to sales confirms rejection of the formal wear range. An improved range should imply a lower markdown cost. A markdown percentage to sales of 25 per cent would be a reasonable assumption to allow some scope for the buyer not getting it right!

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The merchandiser can now apply these presumptions to the sales turnover budgets as shown in Table  7.9. The resulting markdown spend budget is £20,480, which represents a 19 per cent markdown

to sales percentage compared with 25 per cent in the previous year. This is a big improvement; the markdown cost to the business is reducing and placing a reduced cost burden on the P&L account.

Table 7.9  Markdown spend budgets Markdown cash spend budget Sales turnover budget

Markdown spend budget

Markdown % to sales

Men’s accessories

£10,500

£1050

10%

Men’s casual wear

£50,700

£7605

15%

Men’s formal wear

£47,300

£11,825

25%

£108,500

£20,480

19%

Total

FOCUS POINT 7.2: Sales turnover budgets – the importance of getting them right Accurate sales turnover budgets are of great importance to a fashion business. By starting the budgeting process, they set the template around which the other budgets will follow. A good demonstration of this comes by reviewing the relationship between sales turnover and markdown spend budgets. Presume that a business has two product types  – core basic and high fashion  – and that each one has a sales turnover of £100,000

core basic product group will not require significant markdown to clear stock, as the product can carry through to the following season. The high-fashion product, by contrast, will need to be liquidated at the end of a fashion season and so inevitably carries greater risk of a higher markdown spend. The table below has a column added, reflecting two differing markdown spends for each product group. Product group

Sales turnover

Markdown spend

Core basic

£100,000

£5000

£100,000

£30,000

£200,000

£35,000

Product group

Sales turnover

Core basic

£100,000

High fashion

£100,000

High fashion

Total value

£200,000

Total value

Next, presume that each product group requires a markdown spend budget. The

Because the markdown spend presumption reflects the type of product, if the

FASHION MERCHANDISING: BUDGETING

£200,000 sales turnover were split differently between the two product groups, then logically the markdown spend budget would change too. Product group

Sales turnover

Core basic

£150,000

£7500

£50,000

£15,000

£200,000

£22,500

High fashion Total value

Markdown spend

 PI BUDGETING – INTAKE K MARGIN BUDGETING The intake margin budget expressed as a percentage measures the proposed difference between the cost price paid to a supplier for a product and the selling price paid by the retail customer, exclusive of any relevant VAT purchase tax. The higher this percentage is, the bigger the monetary difference within the cost and selling price equation, translating into greater profit potential. The calculation of any intake margin is very simple and uses three variables: the selling price/value, the cost price/value and the purchase tax rate. Take as an example the intake margin for a red shirt where the selling price is £75, the cost price is £20 and VAT is presumed at 20 per cent. The intake margin would be calculated as follows: •• An example of the calculation ((Selling price/1.20 VAT)–Cost price)/(Selling price/1.20 VAT) *100 = Intake margin

The manipulation of product range plans to contain high sales turnover budgets for core basic product enables a fashion business to support profitability. The low markdown spend that comes with this product group type enables fashion styles and high-fashion styles to be ranged and the potential markdown spend that comes with them counterbalanced.

Activity During a main sale period, review the mix of markdown between different fashionabilities. Does it vary by retail business? If so, why?

•• Calculation ((£75.00/1.20)−£20)/ (£75.00/1.20)) *100 = Intake margin % Or (£62.50−£20)/ (£62.50) *100 = 68%

The buyer, at this early stage of the planning process, is unlikely to be able to finalize any pricing. However, the merchandiser must make an educated guess as the intake margin % is a required component of the gross trading profit calculation. Therefore, the merchandiser will take the guidance provided by finance and apply that as an initial budget. In the case of Prentice Day, there is no pressure to grow intake margins, but it is important that they should not reduce. Therefore, the merchandiser applies the intake margins achieved in the previous year as their starting point (Table 7.10).

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Table 7.10  Intake margin percentage by product category Intake margin percentage Men’s accessories

55%

Men’s casual wear

65%

Men’s formal wear

60%

Total

62%

As the buyer begins the sourcing process and confirms cost prices, the merchandiser will review the actual intake margin achieved against this initial budget. If the actual intake margin falls below the budget figure, there may be a requirement for the buyer to renegotiate with suppliers. If commercial pressures such as rising raw material prices or heavy price competition mean that intake margins cannot be improved, the merchandiser will refer to the finance team to reassess overhead budgets.

FOCUS POINT 7.3: KPI budgeting – the cake and its ingredients Look through any business or financial section of a newspaper and invariably there will be a financial update from a fashion retailer. These trading updates give investors and potential investors not just information about the financial strength of the business but also its prospects in a competitive industry. Such updates, and the audience that they communicate with, seem far removed from the world of B&M, but they are closely related. Consider the role played by the intake margin percentage within trading updates. Usually expressed as a percentage, the higher this percentage, the bigger the monetary gap between cost and selling values to cover the business’s cost of goods sold and overheads. The question, though, is what is the right monetary gap? Different business models will presume a different gap depending on the segment of the market that they operate within. The table below lays out two different business models: the first generates a gross trading profit of £1900 by selling 10 units of a garment that retails at £250 with an intake margin of 76 per cent.

Units sold

10

Units sold

173

Selling price

£250

Selling price

£25

Cost price

£60

Cost price

£14

Intake margin

76%

Intake margin

44%

Sales turnover

£2500

Sales turnover

£4325

Cost of goods sold

£600

Cost of goods sold

£2422

Gross trading profit

£1900

Gross trading profit

£1903

Contrast that table with the second scenario, where a second business also generates a gross trading profit of £1900 but instead retails its product at £25 at an intake margin of 46 per cent. The factor that enables the same monetary gross trading profit to be achieved is the number of units sold. Profitability is not

FASHION MERCHANDISING: BUDGETING

the preserve of higher-priced brands, and volume low-price businesses can make as much profit as premium ones if they get the combination of selling price, intake margin and anticipated volume sales ingredients mixed correctly during the KPI budgeting process. Primark is a master at this route to profitability. Another KPI budget ingredient that can be mixed in different ways is the markdown spend budget. Markdown as a concept implies failure and negativity, and certainly the plethora of ESSs reinforces this viewpoint. However, markdown, whilst reducing selling prices, need not always reduce profit, too. The table below presents a scenario where a business generates £500 gross trading profit by selling 100 units a week of a £10 garment, which was bought for a £5 cost price. Sales units per week

100

Original selling price

£10

Cost price

£5

Sales value (Sales units*Original selling price)

£1000

Cost value (Sales units*Cost price)

£500

Profit (Sales value−Cost value)

£500

The second table presumes that a 10 per cent markdown is applied to the product, reducing the selling price to £9. On the assumption that unit volumes increase by 1.67

times, the business will still generate a gross trading profit of £500. Sales units per week (100 sales units * 1.67 multiplier)

167

Original selling price

£10

Reduced selling price

£9

Cost price

£5

Sales value (Sales units* £9 reduced selling price)

£1503

Cost value (Sales units*Cost price)

£835

Markdown cost (Sales units * £1 off)

£167

Profit (Sales value−Cost value−Markdown value)

£501

The markdown spend budget can therefore fulfil two functions within the KPI budgets cake. Its value must be enough to clear budgeted end of season stocks at appropriate markdown depths of 30, 50 or 70 per cent off, but it can also be used as a tactical tool to incentivize customers to buy products. If the right mix of percentage and sales unit multiplier can be found, markdown can also be a source of profitability!

Activity Review two retailers – a value or supermarket fashion retailer and a luxury or premium one. On average, how many units are on display per option? How great is the difference? What presumptions can you make about their intake margin budgets as a result?

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 PI BUDGETING – STOCK K TARGET BUDGETING Correct stock budgeting is vital to any fashion business. Get it right, and stock budgeting becomes the lifeblood of a fashion business, while getting it wrong can be its cause of death. The reason for this centres on the impact that the purchase of stock has on debt and cash flow within a balance sheet, meaning the activities of purchasing and management stock levels present a business conundrum. On one hand, it represents the opportunity to convert a buying budget into physical stock for sale to achieve a sales turnover budget. However, if the product range is rejected by the customer, stock represents a potentially costly

markdown risk that will eat into gross trading profit. Stock management is of equal importance to the finance team and the balance sheet. The purchase of stock by the buyer requires funds to be available to pay the supplier, and as stock is bought in advance of its sale, the implication is that this is done by taking out loans from a bank. Loans carry a requirement to be paid back with interest, and so the longer a business holds stock the more interest will be paid. Table 7.11 presumes that a bank loans a fashion business £2000 at an interest rate of 10 per cent. With this loan, 100 shirts are bought for £20 each, which are supplied and put on sale for £60 each, all of which are sold.

Table 7.11  An example of the impact of debt on profitability Units bought

Units sold

Cost price

Selling price

Profit

100

100

£2000

£6000

£4000

Loan

Interest

Interest cost

Profit

Profit less interest

£2000

10%

£200

£4000

£3800

The profit from the trading activity is £4000; however, the profit will be reduced by the interest required by the bank, which in this example would be £200. If this principle was applied to a business perhaps borrowing £200 million, the impact on profits, even if interest rates were just 1 per cent, would add a not insignificant £2 million to their costs. A second consideration is the age of stock held. Fashion is cyclical, with new trends emerging throughout a season, meaning that the newest stock is usually the most desirable. Excess stock of dying trends means that unsold stock becomes obsolete, no longer a business asset,

instead becoming a liability to clear through markdown and significant profit reduction. In deciding the correct stock budget, the merchandiser considers two elements to identify an optimum stock budget. These are the: •• display requirements of the product range •• resupply stock requirement. Knowing the capacity of stock that the Prentice Day store can display allows the  identification of a minimum amount of stock needed to project a credible store environment to the customer. This

FASHION MERCHANDISING: BUDGETING

‘minimum credible offer’ (MCO) approach to stock budgeting has three components:

•• The product range’s presumed average selling price – the average selling price of all the options of the range combined.

•• The linear footage of the store – the total number of shelves or fixture arms available to display stock. •• The number of units to display – the average number of units that all the shelves or fixture arms can accommodate.

Through a simple calculation, the merchandiser can work out the value of the stock needed for the display requirements of the range. In the case of Prentice Day, this is £45,000. Table 7.12 below shows its derivation.

Table 7.12  Minimum credible offer calculation Store linear footage

200

Created by the author

Average number of units per linear footage

15

Created by the author

Minimum credible offer – Units

3000

(Calculation: Store linear footage * Units per linear footage)

Average selling price of options

£15

Created by the author

Minimum credible offer – Value

£45,000

(Calculation: Minimum credible offer – units * Average selling price)

The MCO approach is of course just that – the minimum stock that a store needs to look filled to a suitable level. It would take just one customer to buy one unit and the store would fall below the minimum stock level needed. Therefore, there is a second element within stock budgeting: an allowance for the length of time that stock replenishment takes to be delivered to store. This second element is calculated using three components:

•• number of weeks a supplier would take to fulfil an order for stock •• sales turnover budget for the season •• number of weeks that the season will last The manipulation of these components into a stock resupply budget is displayed in Table 7.13. It shows how multiplying an average sales budget by the order fulfilment time identifies the value of stock needed to be available to support the MCO.

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Table 7.13  Resupply time stock calculation Number of weeks to fulfil an order

2.5

Created by the author

Sales budget for the season

£108,500

Sales turnover budget created in third section of this chapter

Weeks in the season

26

Number of weeks being planned

Average sales budget per week

£4173

(Calculation: Sales plan for the season/ Weeks in the season)

Resupply stock requirement

£10,432

(Calculation: Average sales per week * Number of weeks supplier takes to fulfil an order)

The stock target budget is therefore the sum of the two components. In the case of Prentice day this is: •• £45,000 display MCO Plus •• £10,432 resupply time = Stock level budget of £55,432. Assuming the merchandiser is happy with the resulting stock budgets, there is

one last check on the stock budgets: the calculation of stock turn. Its calculation is explained in Focus Point 7.4, but in short, stock turn measures the efficiency with which stock is managed. In the case of Prentice Day, the stock turn based on the calculated budget improves from 1.7 to 1.96, adding reassurance to the merchandiser that the stock budgets are in line with product and financial requirements.

FOCUS POINT 7.4: What is stock turn? The creation of opening and closing stock budgets enables the merchandiser to calculate stock turn (also known as stock turnover). The calculation for this is simple and divides the sales turnover budget by an average stock target budget. Using the KPI summary sheet completed in this chapter, the stock turn for the planning year is: £108,500/((£55,432+£55,432)/2) = 1.96 The £108,500 is the sales turnover budget, while £55,346 represents the opening and closing target budgets. To con-

vert these two stock budgets to an average, they are divided by two. The previous year stock turn was: £90,000/((50,000+55,500)/2) = 1.71 The question, though, remains what is stock turn and why is its calculation important? Stock turn measures the efficiency of a business in the management of its greatest investment: stock. With all investments there are costs, and in the case of stock, these costs (debt interest, insurance and storage costs, for example) can weigh on the profitability of a business. To maximize the investment and

FASHION MERCHANDISING: BUDGETING

minimize the cost, efficient stock management aims to support as high a sales turnover as possible, with the minimum of stock being owned by the business. The more frequently in a season that stock can be purchased, sold and new stocks be purchased is measured by stock turn. The higher the stock turn, the more efficient a business is at managing its flow of products to market and so the lower the cost to the business. For the Prentice Day case study, the higher sales turnover budget and lower stock target budget have resulted in an improving stock turn, moving from 1.7 to

 PI BUDGETING – GROSS K TRADING PROFIT BUDGETING This final step in the KPI budgeting process relies simply on calculating the gross trading budget. This budget is the profit that results from the KPI budgets created, upon which the business will plan its overhead costs. The gross trading profit calculation has four components. Three are derived from the budgets created during the budget process and the fourth is the purchase tax levy which is set by the government: •• •• •• ••

Sales turnover budget Markdown spend budget Intake margin budget Purchase tax (VAT) rate.

The calculation to work out the gross trading profit budget is: •• (Sales budget/VAT) * Intake margin budget = Sales budget at cost price

1.96. This final analysis tool demonstrates in a single figure the movement of the business into a stronger financial position and is perhaps the most important of all analysis types as a result.

Activity Get an idea of stock turns by different retailers. Review their company accounts and divide their gross turnover by their stock position at the end of a financial period. The result will not be 100 per cent accurate, but you will get an idea of how efficient they are in their stock management.

•• (Markdown budget/VAT) * Intake margin budget = Markdown budget at cost price •• Sales budget at cost price  – Markdown budget at cost price = Gross trading profit Using the calculation, the gross trading profit for the Prentice Day case study is: •• (£108,500/1.20 VAT) *62% = £56,057 sales at cost price •• (£20,480/1.20 VAT) *62% = £10,581 markdown at cost price •• £56,057 – £10,581 = £45,476 gross profit To express this figure as a percentage of sales, the following calculation is used: •• (Gross profit/(sales/VAT)) *100 •• (£45,476/ (£108,500/1.20 VAT)) *100 = 50.2% gross profit percentage With that, the KPI budget summary sheet for the new season can be completed with all the calculated budget information as below in Table 7.14.

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Table 7.14  Completed budget summary sheet Product category

Menswear Planning year

Previous year

% Variance

108,500

90,000

20.6%

Markdown %

19%

25%

–24.0%

Markdown spend £

20,480

22,250

–7.9%

62%

62%

0.0%

Gross trading profit %

50.2%

46.7%

7.5%

Gross trading profit £

45,476

35,005

30%

Opening stock £

55,432

50,000

+11%

Closing stock £

55,432

55,500

–0%

Stock turn

1.96

1.7

15%

Notes

Sales budget Total sales turnover £ Markdown budget

Intake margin budget Intake margin % Gross profit budget

Stock budget

VAT: 20%

 PI BUDGETING – KPI BUDGET K REVIEW The review of the budget summary sheet highlights significant changes to each budget compared with the previous year, explaining the collective impact that these have on gross trading profitability and stock turn. KPI budgeting is, in effect, the first factual evidence of the financial impact of the merchandiser’s B&M product strategy, meaning the various players can now start to firm up their own budgets and strategies. Finance now has key elements of the P&L balance sheet in place, around which overhead budgeting can be completed. The buyer now has information about the financial requirements of the product

range, allowing them to begin finalizing their product plans and embarking on supplier negotiations. For Prentice Day, a simple headline review of the KPI budgets tells the team that: •• Sales turnover growth of 21 per cent is led by an expansion of on-trend casual wear. •• The reduction in markdown spend both in cash and percentage to sales is led by changed product mixes towards on-­ trend products. •• Intake margin percentage is presumed to be as the previous year. This will need to be monitored during the range planning process.

FASHION MERCHANDISING: BUDGETING

•• Opening stock targets are increased by 11 per cent, but this growth is lower than sales turnover growth, resulting in an improved stock turn. •• The impact on gross trading profit is significant. The KPI budgets combined deliver £45,476 gross trading profit, a 30 per cent increase. Of course, in real life, it is not that easy. The KPI budgets may be rejected by the finance team, or the buyer may not be able

to deliver product ranges in line with the KPI budget strategy. The truth is that until the product is defined, KPI budgets flex and change to reflect new information, new business needs and the practicalities of life. As a theoretical concept, however, the description of the merchandiser role as being like a bridge between fashion and business, or buying and finance, is clearly demonstrated at the end of the product budgeting process.

FOCUS POINT 7.5: KPI budgeting and retail operations By its nature, KPI budgeting is expressed as numbers, currencies and percentages and should reflect the concept ideas of both the buyer and the merchandiser, enabling them to progress in tandem through the concept-­ to-­carrier bag process. With KPI budgets in place, there is a further activity that  – as a primary function in the value chain – can use the resultant budget shape to ensure that its role in product management can be executed: retail operations. The sales density calculation, introduced in Chapter 5 as a tool for assessing performance, can also be used to question and make changes to the allocation of space within retail stores. This helps ensure that the visual representation of a product is in line with the financial opportunity identified within the budgeting proSpring/summer season

Actual cash sales turnover

cess. The calculation is used to measure the sales achieved against the amount of store space given over to it, by identifying the projected sales density per distinct section of a store. With this information, the retail operations teams can assess the efficiency of the use of store space and, if in large stores such as department stores, how best to staff it. Taking the Prentice Day KPI budgets and applying the sales turnover budget to the existing store layout in the table below identifies that, whilst all product groups have increased sales densities, there is still an imbalance between the three product groups. Casual wear density is far higher than average and is accelerating away from both accessories and formal wear.

Floor space employed

Sales density this year

Sales density previous year

Men’s accessories

£10,500

75 square ft

£140

£133

Men’s casual wear

£50,700

325 square ft

£156

£123

Men’s formal wear

£47,300

600 square ft

£79

£67

Total sales density

£108,000

1000 square ft

£108

£90

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This suggests that it may be appropriate to rebalance the floor space in store to make more of the casual wear opportunity and reduce the visual emphasis on the offtrend formal wear range. The second table below identifies the floor space mix if all product groups were to generate the average £108 density for the season  – note

Spring/summer season

Actual cash sales turnover

that as the density presumption for accessories and casual wear declines, their floor spaces rise, while it is the opposite for formal wear. By applying the average sales density to all product groups, each will be given space in store based on their sales potential. But is that the right approach to take?

Floor space employed

Sales density this year

Sales density previous year

Men’s accessories

£10,500

96 square ft

£108

£133

Men’s casual wear

£50,700

468 square ft

£108

£123

Men’s formal wear

£47,300

436 square ft

£108

£67

Total sales density

£108,000

1000 square ft

£108

£90

The answer is no. The floor space given over to individual product groups should consider more than just a financial element. Different products naturally require different footages: accessories, with its emphasis on wall displays and hung product, can generate very high sales densities; formal wear, meanwhile, with heavy suits and outerwear, can require to be over spaced relative to sales to accommodate the product range; And casual wear, with its less-constructed garments, can be versatile in the way it is displayed, and so densities can often vary.

The actual space allocated in store will be dependent on the size of the product range, its display requirements and the financial return that is expected from it. Focusing on one of the three without considering the others would not optimize the visual representation or the financial efficiency of the business.

Activity Research sales densities for different retailers. What pattern emerges between different sectors of the market?

SUMMARY In conclusion, the KPI product budgeting process is a route for using analysis and discussion to create product budgets, and it has been demonstrated by concentrating on presenting the budgeting process in

steps, with some flavouring of the process in the form of models to demonstrate the thinking process. This chapter has not (and cannot) explained a process for all business model

FASHION MERCHANDISING: BUDGETING

types. A fast-fashion business would have a different KPI budget shape to a luxury designer brand. The importance of each budget and the best route to its creation will vary by business, too. However, by presenting a process that covers most key

decision points, we have demonstrated that the product budgeting process within the context of the fashion merchandiser role is that of a bridge or link connecting the often-uncomplementary concepts of fashion and business.

SELF-DIRECTED STUDY 1. Review the financial press for articles about fashion retailers and their trading results. Review how the articles discuss and interrogate product financial

FURTHER READING Tepper, B. and Greene, M. (2016) Mathematics for Retail Buying 8th edn. New York: Bloomsbury Academic

data such as sales turnover, markdown spend, stock levels and gross margins. 2. Refer to the companion website for Prentice Day case study exercises.

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8

FASHION MERCHANDISING: OPEN-TO-BUY

INTENDED LEARNING OUTCOMES 1.

An appreciation of the rationale behind the OTB budget calculation.

2. An understanding of the calculation of OTB budgets and their management. 3. A consideration of the decisions behind the phasing of OTB within a season. 4. An introduction to the WSSI and its uses within stock management.

INTRODUCTION This next chapter focuses on the calculation used to derive an open-to-buy (OTB) buying budget and its use within retail stock management. As an output of the KPI budgeting process this activity is placed at the ‘Concept’ stage of the concept-to-carrier bag model (Table 8.1). The actual practical process to create an OTB budget is surprisingly straightforward; however, its theoretical context is more taxing. This chapter will spend time initially discussing this point. Finally, the chapter will move on to introduce the weekly sales and stock intake report (WSSI) and demonstrate its practical use to phase OTB budgets. Behind the practicalities and theoretical context lies a simple principle: that the derivation of OTB is very much like baking a cake. It comprises different ingredients that, when put together and mixed, create a cake which, once cooked, can be sliced in different sizes and shapes. However, also like a cake, it is not until it is sliced that one knows if the right balance of ingredients and care has gone into its creation and if its intended recipient, the buyer, will like it.

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Table 8.1  The concept-to-carrier bag model Concept-to-carrier bag step

Definition

1. Research

Undertaking and collation of relevant fashion research

2. Concept

Creation of product range concept and direction

3. Product development

Finalization of concept as a product range

4. Sourcing

Sourcing of suppliers and manufacturers for the range

5. Manufacturing

Manufacture of the product range

6. Shipping

Shipping and delivery of the product range

7. Warehousing

Receipt of the product range and its allocation to store and storage

8. Distribution

Delivering initial store allocations

9. Retail

Display, sale, promotion and stock replenishment

10. Carrier bag

Purchase of the product by a consumer

WHAT IS OPEN-TO-BUY? While the calculation and use of OTB may be straightforward, the logic behind its effective budgeting is less clear. The buying of product from a supplier is a transaction where the buyer gives a sum of money in return for receiving a product to sell on at a higher price to an end consumer. To facilitate this, a fashion business could manage

their stock purchases by buying individual products and applying a required mark-up to the cost price to derive a selling value, continuing to do so until a sales turnover requirement is fulfilled. This ad hoc and simple process initially seems a commonsense approach, as it presumes buying the best product available until a defined cash value is spent (Table 8.2).

Table 8.2  Example of buying using a mark-up method Option

Unit buy

Cost price

Buy cost

Mark up

Selling price

Option 1

100

£4.44

£444.00

2.6

£11.54

£1154.40

Option 2

100

£5.90

£590.00

2.6

£15.34

£1534.00

Option 3

100

£8.77

£877.00

2.6

£22.80

£2280.20

Total

300

Data calculation Buy cost (unit buy * cost price) Mark-up required multiplier to derive selling price Buy value (unit buy * selling price)

£1911.00

Buy value

£4968.60

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This approach has its merits and focuses purely on matching the best product within a financial parameter. However, the application of a single mark-up is limiting, as its starting point is cost price rather than the selling price. This implies a pushing of prices onto the consumer, rather than the retail market demanding appropriate pricing strategies. Within the modern fashion business context where the consumer has choices within their disposable income spend, the idea of setting a selling price based solely on a cost price is dubious at best. There is a second practical reason for valuing OTB at selling value. Chapter 4 identified that the B&M function works alongside others such as design, marketing and retail as part of the product creation and retail process. In their communication with other functions, all decisions need to be valued in a common currency. Targets such as retail bonuses, sales densities and increases in sales turnover on products featured in editorials are all measured at sales value. Within most functions, targets and budgets relate back to the potential sales turnover of a business, and so cross-functional communications are more effective when all activities  – including OTB management – reflect sales values as opposed to cost. The summarizing of the KPI budgeting process into the open-to-buy concept therefore has multiple business benefits. The use of selling value as its measure identifies the financial opportunity that the new season represents. OTB at selling value connects to the buyer comp shop activities and the setting of market-led selling prices. Finally, it can benchmark a business against its competition; a buyer or merchandiser will never know the cost prices that the competition pays for their

products, but they will know the selling prices that they set.

CREATING AN OPEN-TO-BUY BUDGET The review of the budgeting process identified clear parallels between the merchandiser and finance roles, as much of the language used and process followed to date has more in common with accountancy than product. OTB budgeting marks the beginning of the transition in the role away from finance towards product and range planning. With an OTB budget, the buyer can formalize their initial conceptual ideas into a finalized range, while the merchandiser will be able to contribute to that final shape and structure of the product range by the creation of its buying budget. Table 8.3 shows that as the OTB is related to KPI budgets, much of its data can be culled from the budgeting process already undertaken. All that remains is to identify the opening and closing stocks for each product category. This can be done by taking the sales turnover budget for each product group and using the percentage mix calculation to identify each one’s mix value. The result is then applied to calculate the opening and closing stock values for each product group (Tables 8.4, 8.5, and 8.6). The calculation of the OTB budget for the three product groups can now be worked out, and considering the effort to reach this point and the importance of the OTB budget, its derivation is simplicity itself (Table 8.7). The calculation used is: •• (Sales turnover budget + Markdown spend budget + Closing stock budget) – Opening stock budget = Open-to-buy budget •• (£108,500 + £20,480 + £55,432)  – £55,432 = £128,980

FASHION MERCHANDISING: OPEN-TO-BUY

Table 8.3  Open-to-buy monitor Product

Sales turnover

Markdown spend

Men’s accessories

£10,500

£1050

Men’s casual wear

£50,700

£7605

Men’s formal wear

£47,300

£11,825

£108,500

£20,480

Menswear total

Opening stock

Closing stock

£55,432

£55,432

OTB budget

OTB spent

Table 8.4  Identify the sales budget percentage mixes Product

Sales

% Mix

Men’s accessories

£10,500

9.68%

Calculation:((Sales/Total menswear sales) *100)

Men’s casual wear

£50,700

46.73%

Calculation: ((Sales/Total menswear sales) *100)

Men’s formal wear

£47,300

43.59%

Calculation: ((Sales/Total menswear sales) *100)

£108,500

100%

Menswear total

Table 8.5  Apply the percentage mixes to the total opening and closing stocks Product

% Mix

Men’s accessories

9.68%

Men’s casual wear

Stock budgets £5365

Calculation: (Total opening stock *Accessories sales mix)

46.73%

£25,902

Calculation: (Total opening stock *Casual wear sales mix)

Men’s formal wear

43.59%

£24,165

Calculation: (Total opening stock *Formal wear sales mix)

Menswear total

100%

£55,432

Table 8.6  The open-to-buy monitor updated with opening and closing stock budgets Product

Sales turnover

Markdown spend

Opening stock

Closing stock

Men’s accessories

£10,500

£1050

£5365

£5365

Men’s casual wear

£50,700

£7605

£25,902

£25,902

Men’s formal wear

£47,300

£11,825

£24,165

£24,165

£108,500

£20,480

£55,432

£55,432

Menswear total

OTB budget

OTB spent

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Table 8.7  Completed open-to-buy monitor Product

Sales turnover

Markdown spend

Opening stock

Closing stock

OTB budget

Men’s accessories

£10,500

£1050

£5365

£5365

£11,550

Men’s casual wear

£50,700

£7605

£25,902

£25,902

£58,305

Men’s formal wear

£47,300

£11,825

£24,165

£24,165

£59,125

£108,500

£20,480

£55,432

£55,432

£128,980

Menswear total

The final column on the spreadsheet is at this point blank. This acts as the working element of the spreadsheet and is updated with the value of buys placed by the buyer once the buying process begins. There is one further possible addition to the OTB calculation that has not been discussed so far: stock loss. This is the loss to a business from theft or stock that has got lost in transit through the supply chain. As its measurement applies to stock that has been bought, it is a cost to the business and is budgeted as such by finance. This cost is an

OTB spent

inevitable part of the trading process, but businesses place great emphasis on limiting it through rigorous stock management procedures. It can be argued that allowing for inevitable stock loss should be part of the OTB calculation, as stock lost to theft or mishandling cannot be sold. However, in well-run businesses, stock loss as a percentage of sales is low – perhaps 2 per cent as a maximum  – and its cost can easily be recouped, perhaps through the re-buy of best sellers once in season, cancelling out its potential part in the OTB calculation.

FOCUS POINT 8.1: Open-to-buy – to release or not to release? The benefit of having a defined OTB derived from a well-planned, thorough budgeting process is significant. The research and analysis used to create budgets mean that the OTB is factually based and objective. A second and perhaps more fundamental benefit is the security afforded to the buyer by knowing that the amount of money they are spending has a sanction behind it, approved by every relevant person within the

value chain, who knows not only that the money is being spent, but also its total value. To presume once the budgeting process is complete that the resultant total OTB budget concludes the process would be folly. Fashion buying is a speculative investment made within a highly competitive environment, and the ability to be agile in the spending of OTB is of paramount importance. Agility affords the ability to

FASHION MERCHANDISING: OPEN-TO-BUY

buy an initial product range offer, to which bestselling options through repeat orders or later-launched products can be bought later. The sensible approach is to identify the OTB for the season, releasing it in chunks to the buyer to spend. By releasing a certain percentage of the total OTB at a time, there is focus placed on financial and creative control. The business can react to any unforeseen trends or product offers that come to the market, which within a potential yearlong life of the season is vital. The next logical question to ask is: What is the correct percentage of OTB to release at a time? The answer is that the release of OTB must support two elements. First, the customer must be able to have a credible offer to consider, and so the releasing of OTB must be equal to or greater than the value of stock required for a display factor or fully sized product range. Second, it must be large enough to cover the length of time

 REVIEW OF THE OTB A AND BUDGETING PROCESS Using models, tables and linked thinking, the budgeting process has reached its conclusion. The OTB budgets created reflect the research, analysis and product budgeting process to date and so offer the roundest commercial view of how each product group within the business will perform. •• The analysis of each product group created a different strategy for each that is reflected in the size of each buying budget created.

it will take suppliers to be able to manufacture any repeat orders or new phases of products. Fast-fashion brands understand the OTB release concept well. Zara and their supply chain operations at The Cube can deliver new product ranges in two weeks and react to store manager repeat orders. This modern approach to fashion B&M has allowed a reduction in the value of OTB released at the beginning of the season to below 20 per cent of its total. This places a greater emphasis on later elements within the concept-to-carrier bag process, such as marketing and retail, to ensure small stock holdings in store can be cleared through quickly enough to enable a perpetual OTB release policy to flourish.

Activity Regularly visit a store known to be fast fashion in its operation over a period of two months. How many new product ranges are delivered within the period?

•• Differing product groups have different financial strengths and weaknesses that have influenced the size of the buying budgets. •• Individual KPI and OTB budgets for product groups allow financial performance to be measured and analyzed independently of one another. •• In large complex fashion businesses with different roles and activities, the common language of selling value has been maintained.

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By its nature, product budgeting requires a good eye for detail, method and interpretation; but budgets also must be relevant to both finance and the buyer and their demands. The connection to finance has been emphasized as the KPI budgets feed directly into business accounting. By contrast, the connection to the buyer and the product range to this point has been limited, and it should be recognized that within a real-life scenario, buyer and merchandiser will discuss and feed ideas to each other at all stages of the planning process. This dialogue will directly influence product budgeting as, through the discussion of ideas, the resulting OTB budgets will be more rounded and reflective of three minds rather than one. A second function of KPI budgets is that as control measures they provide the buyer with a safety net within which to make decisions. The setting of a line, beyond which lies a failure to derive an optimized gross trading profit, acts as a final arbitrator in decision-­making. However, the nature of KPI budgets means that they do not inhibit decisions that can lead to profits that exceed the original gross trading profit budget. A markdown budget need not be spent, and if the buyer finds a supplier willing to take back excess stocks or fund markdown activities, then there is quite rightly no mechanism within KPI budgeting to stop that being agreed. The most tangible output of the budgeting process is the OTB, which reflects the thoughts, processes and actions of the merchandiser to date. If worked through

effectively to the right level within the business hierarchy, an OTB budget acts not just as a control mechanism, but also as a facilitator. Its creation facilitates the buying of stock and the physical realization of the product range within a completed and agreed budgeting process. This caveat is important as, without agreement, the buyer and merchandiser act alone and without recourse should the resulting buy be poor. Budgets are not a panacea and they do not provide an all-­knowing remedy for all the questions posed when planning a product range. The control that they provide is achieved at the beginning of the planning process; as a result, they cannot accurately predict the decisions that will be needed during the later stages of the model. They require constant review and reworking as macro trading realities emerge and the buyer sources product. For the merchandiser, it can be frustrating to return to budgeting on a regular basis, but it is a necessary part of product planning. Too much change can mean that the focus of budgets becomes blurred; and if, ultimately, the biggest cause of change is the product itself, then questions must be raised about the integrity of the planning process overall. At some point, though, the purchase of product must be finalized, and whilst the merchandiser has been completing the budgeting process, the buyer will have reached a point where they are able to translate their own ideas into an option detail plan. As this process begins, any

FASHION MERCHANDISING: OPEN-TO-BUY

potential fallibility of the KPI budgets will emerge, as that option detail plan must operate within the confines of the KPI product budgets and resultant OTB.

THE WSSI – OPEN-TO-BUY PHASING The rise of the fast-fashion concept and its commercial success through regular injections of new ranges throughout a fashion season raises two points about the management of an OTB budget. The everevolving fashion trends, some of which can be anticipated and some of which cannot, require flexibility in the spending of OTB, and the identification of a total budget cannot be enough. Fast-fashion business models have also highlighted the importance of managing stock levels to be as low as possible to increase stock turn achieved over the course of a season. Drip-feeding stock into a business on a weekly basis as opposed to monthly or even just once a season means that the debt carried by a business is reduced, as are servicing costs such as interest. Beyond these strategic concepts, there are also good operational reasons for managing OTB in a business: the less stock held at any one given point means there is less space needed to store it and so the overheads on the P&L account can be managed better or reduced. To keep things simple, it would be very tempting to divide the total OTB by the number of delivery phases that the business felt was right to present enough

fashion trends to its customers. However, this would imply that all the separate phases were of the same value to a business, would all sell at the same rate, and that trading conditions throughout the season would be the same. These conditions would clearly not be the case, as shown by highly seasonal product categories such as swimwear, lingerie and outerwear. The phasing of OTB is therefore linked to anticipated demand patterns and the factors that influence it such as markdown spend and promotional activities. The management of all these varying factors is worked through by the creation of a weekly stock, sales, intake (WSSI) report. The WSSI is described as an ‘unashamedly internal financial control document’ (Jackson and Shaw 2001: 110) and is a pivotal document within B&M. The WSSI report  – or wizzy, as it can affectionately be called – has a frightening reputation preceding it, and as a result, on first sight, it is often feared and misunderstood. It can appear intimidating but is actually very simple in its concept and powerful as a decision-making tool. Once created, it is like a spider’s web sitting in the centre of the merchandiser’s world, controlling the phasing of product deliveries into a business. It does this by creating weekly sales, markdown and stock budgets, which in turn – by using the OTB calculation  – create weekly OTB budgets. The WSSI also links other activities within the retail value chain into the product management process by directly influencing the following:

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•• The chief executive and board of directors have a snapshot of exactly how the business will deliver its product and financial strategies across a season. •• The buyer will have a weekly OTB budget around which to create different product themes and stories over the course of the season. •• Finance – with weekly budgets in place, cash flow projections can be made to ensure that the optimum management of the P&L and balance sheet is planned. •• Logistics  – with weekly OTB budgets, the logistics team can plan the operational requirements of the business such as warehouse capacity management. •• Retail operations  – the WSSI and the range plan that follows it identify the size and shape of the product ranges over the course of a season, giving visibility of how store layouts may have to change over time. In practice, the WSSI is managed in many ways across fashion businesses, and at its most detailed, a WSSI could comprise weekly budgets for several product groups and by age of stock within that. The management of a WSSI to this level of detail is of relevance to large complex businesses, where the phasing of KPI budgets into many mini-WSSIs is a necessity to manage millions of pounds’ worth of OTB. However, for smaller businesses, a more modest

approach to WSSI management would be suitable – if only for one’s sanity! Whichever appropriate route to WSSI management is taken requires the document to be created, and Table 8.8 below presents a blank WSSI template. Reviewing its layout by row and column, the WSSI is shaped as follows. •• Rows 1. Weeks/months/season total  – these are the 26 weeks of the planning season with subtotals for each month and total KPI budget for the season. •• Columns A. Opening stock. B. Sales budget – the calculated weekly sales budget. C. Sales mix  – the historic sales mix by week used to calculate the sales budget. D. Markdown budget  – the calculated weekly markdown budget. E. Markdown mix  – the historic markdown mixes by week used to calculate the markdown budget. F. Closing stock  – the required closing stock budget at the end of each week. G. OTB  – the calculated OTB for each week. H. Promotional calendar  – a diary of planned promotional activities related to sales and markdown budget mixes.

FASHION MERCHANDISING: OPEN-TO-BUY

 HE PRENTICE DAY CASUAL T WEAR WSSI To create a WSSI the merchandiser will use the KPI budget data summarized in Table  8.7 and replicated below. The merchandiser will break the total KPI budgets

down into weekly budgets, usually using a historic weekly sales and markdown mix. For simplicity and to avoid repetition, the WSSI used to demonstrate the process will be that of casual wear only. This is shown in Table 8.9.

Table 8.7  Completed open-to-buy monitor REPLICATED Product

Sales turnover

Markdown spend

Opening stock

Closing stock

OTB budget

Men’s accessories

£10,500

£1050

£5365

£5365

£11,550

Men’s casual wear

£50,700

£7605

£25,902

£25,902

£58,305

Men’s formal wear

£47,300

£11,825

£24,165

£24,165

£59,125

£108,500

£20,480

£55,432

£55,432

£128,980

Menswear total

OTB spent

143

1

A

Week 1

Week 15

Week 14

Month 3

Week 13

Week 12

Week 11

Week 10

Week 9

Month 2

Week 8

Week 7

Week 6

Week 5

Month 1

Week 4

Week 3

Week 2

Opening stock budget

Weeks

Table 8.8  The WSSI

B

Sales budget C

Sales mix D

Markdown budget E

Markdown mix F

Closing stock budget G

Open-to-buy budget H

Planned promotional activities

144 FASHION MERCHANDISING

Season Total

Month 6

Week 26

Week 25

Week 24

Week 23

Week 22

Month 5

Week 21

Week 20

Week 19

Week 18

Month 4

Week 17

Week 16

FASHION MERCHANDISING: OPEN-TO-BUY 145

1

25,902

25,902

Week 7

Week 8

25,902

25,902

25,902

25,902

Week 10

Week 11

Week 12

Week 13

10,902

1522

Week 14

2028

2282

3550

Month 3

25,902

1521

25,902

Week 9

1521

6383

Month 2

1471

1471

2028

25,902

Week 6

1413

1413

25,902

Week 4

1318

25,902

25,902

Week 3

1167

Week 5

25,902

Week 2

1014

4912

25,902

Week 1

Sales budget

Month 1

Opening stock budget

Weeks

3%

22%

4%

5%

7%

3%

3%

13%

3%

3%

4%

3%

10%

3%

3%

2%

2%

Sales mix

Table 8.9    The draft WSSI for Prentice Day casual wear

0

1610

460

460

690

0

0

0

0

0

0

0

0

0

0

0

0

Markdown budget

0.00%

21.20%

6.00%

6.00%

9.10%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

Markdown mix

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

Closing stock budget

Open-tobuy budget

Mid-season sale – final offers

Mid-season sale

Mid-season sale

Loyalty event

Planned promotional activities

146 FASHION MERCHANDISING

25,902

25,902

25,902

Week 19

Week 20

Week 21

1522

25,902

25,902

25,902

25,902

25,902

Week 22

Week 23

Week 24

Week 25

Week 26

15,722

50,700

Month 6

Season Total

2535

2535

3045

6085

6441

Month 5

1572

1623

1623

1623

25,902

1623

Week 18

25,902

Week 17

1623

6340

25,902

Week 16

1572

Month 4

25,902

Week 15

5%

5%

6%

12%

3%

13%

3%

3%

3%

3%

13%

3%

3%

3%

7605

5995

958

766

1398

2873

0

0

0

0

0

0

0

0

0

0

12.60%

10.10%

18.40%

37.80%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

Summer sale last week

Summer sale

Summer sale

Summer sale launch

FASHION MERCHANDISING: OPEN-TO-BUY 147

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FASHION MERCHANDISING

With the weekly shape of the WSSI established, all that remains is for the OTB budget for the season to be phased by week. This is done using the OTB calculation introduced earlier in this chapter. •• (Sales turnover budget + Markdown spend budget + Closing stock budget) – Opening stock budget = Open-to-buy budget •• For Week 1 this would be: –– (Week 1 sales + Week 1 markdown + Week 1 closing stock) – Week 1 opening stock = OTB for Week 1

–– (£1014 + £0 + £25,902) – £25,902 = £1014 OTB •• For Week 2 this would be: –– (Week 2 sales + Week 2 markdown + Week 2 closing stock) – Week 2 opening stock = OTB for Week 2 –– (£1167 + £0 + £25,902) – £25,902 = £1167 OTB Review the final casual wear WSSI in Table 8.10.

1

25,902

25,902

Week 7

Week 8

25,902

25,902

25,902

25,902

Week 10

Week 11

Week 12

Week 13

Month 3

1521

25,902

Week 9

10,902

2028

2282

3550

1521

6383

Month 2

1471

1471

2028

25,902

Week 6

1413

1413

25,902

Week 4

1318

25,902

25,902

Week 3

1167

Week 5

25,902

Week 2

1014

4912

25,902

Week 1

Sales budget

Month 1

Opening stock budget

Weeks

22%

4%

5%

7%

3%

3%

13%

3%

3%

4%

3%

10%

3%

3%

2%

2%

Sales mix

1610

460

460

690

0

0

0

0

0

0

0

0

0

0

0

0

Markdown budget

Table 8.10  The final WSSI for Prentice Day casual wear

21%

6%

6%

9%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

Markdown mix

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

Closing stock budget

2488

2742

4240

1521

1521

1471

1471

2028

1413

1413

1318

1167

1014

Open-tobuy budget

(continued)

Mid-season sale – final offers

Mid-season sale

Mid-season sale

Loyalty event

Planned promotional activities

FASHION MERCHANDISING: OPEN-TO-BUY 149

1

25,902

25,902

Week 20

Week 21

1522

25,902

25,902

25,902

25,902

25,902

Week 22

Week 23

Week 24

Week 25

Week 26

15,722

50,700

Month 6

Season Total

2535

2535

3045

6085

6441

Month 5

1572

1623

1623

25,902

Week 19

1623

1623

25,902

Week 17

1623

25,902

25,902

Week 16

1572

Week 18

25,902

Week 15

1522

6340

25,902

Week 14

Sales budget

Month 4

Opening stock budget

Weeks

Table 8.10  (continued)

5%

5%

6%

12%

3%

13%

3%

3%

3%

3%

13%

3%

3%

3%

3%

Sales mix

7605

5995

958

766

1398

2873

0

0

0

0

0

0

0

0

0

0

0

Markdown budget

13%

10%

18%

38%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

Markdown mix

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

25,902

Closing stock budget

58,305

3493

3301

4443

8958

1522

1572

1623

1623

1623

1623

1623

1572

1522

Open-tobuy budget

Summer sale last week

Summer sale

Summer sale

Summer sale launch

Planned promotional activities

150 FASHION MERCHANDISING

FASHION MERCHANDISING: OPEN-TO-BUY

The WSSI, having identified a weekly OTB budget, ensures that there is now a mechanism to value each different product phase into the business over the course of the season ahead. The next step is to use this phasing to identify the number of options that can be bought within each phase, which will be the subject of Chapter 9 – range planning. In the meantime, what else can be learnt from the WSSI? One final thought about product budgeting and OTB management comes out of it. Table  8.10 presents a phased OTB, the commercial strength of which would depend on the business model concerned and its supply chain

capabilities. It does, however, present an interesting mix of OTB phasing which is worthy of attention. Table 8.11 simplifies the OTB phasing into monthly chunks and calculates the percentage mix for each. The first observation is that each month has a different OTB percentage mix, justifying the earlier discussion about needing OTB phases dictated by sales, markdown and stock phasing. A second observation is that the OTB mix also shows the impact of markdown periods on stock phasing. The months where there is markdown spend (April and June) also carry the highest OTB phasing, which is required to provide fresh, new collections to replace the discontinued ones.

Table 8.11  Open-to-buy phasing by month Month

Sales turnover

Mix

OTB

Mix

January

£4912

10%

£4912

8.4%

February

£6383

13%

£6383

10.9%

£10,902

22%

£12,512

21.5%

April

£6340

12%

£6340

10.9%

May

£6441

12%

£6441

11.1%

June

£15,722

31%

£21,717

37.2%

Total

£50,700

100.0%

£58,305

100.0%

March

One can also see from the OTB mixes a clear product planning strategy: regular phases of new ranges in January and February, with a larger, more authoritative injection of product as mid-season sales activity clears out fragmented earlier deliveries. These are followed by further regular intake in time for the summer sale and the large early deliveries of new transitional autumn ranges in July.

So, what is the moral of this chapter and the OTB story? Effective OTB management is more than just about achieving a sales turnover budget. Where commercial awareness of budgets and fashion trends can merge together, the delivery of new product can be as profitable as it is creative, so overcoming the natural paradox between the definitions of fashion and business.

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FOCUS POINT 8.2: The WSSI – the whole story The WSSI is often seen as a key training tool for assistant merchandisers before being promoted to merchandisers. This policy is well founded, as the WSSI is in many ways the glue that holds the entire merchandising function together, and appreciating its depth and relevance is vital for the planning process to be effective. The WSSI report’s great strength lies in its versatility. The principles that shape it can be applied with varying degrees of complexity that are suitable to the size and shape of the business concerned. The WSSI at its simplest is a tool that is used as a control document to manage stocks – by defining the weekly value of stock intake required based on agreed KPI budgets. Retail processes and fashion retail are unfortunately not quite as simple as that, meaning that the actual WSSI standard used within the industry is more complex than one might think initially. The first WSSI principle to note is its use of time. The KPI budgets that create a WSSI also form part of businesses’ P&L and balance sheet ledgers, and so WSSI conforms to accounting norms of 52-week financial years divided into discrete halves: the first half (weeks 1–26) and the second half (weeks 27–52). The start and end date of these discrete accounting periods is determined by the start and end of the business financial year and not the start and end of a fashion season. For example, the explanation of the concept-to-carrier bag process in Chapter 2 used January as an example start month for a spring season (Weeks 1–26) and July for the start of an autumn season (Weeks 27–52). However, if a business’s financial year started say in April, then the first half of the WSSI would run between

April and October, with the second half reflecting the November to March period. So, what is the result? Over the season, the OTB phased in through the WSSI must comprise different seasons’ collections, in turn meaning the WSSI must be made up of layers of different budgets set for different seasonality of stock. The second complicating factor is the product itself. If one considers a 26-week timeframe, the amount of product bought will vary in its creative direction: heavy winter coats would be relevant for only part of a winter period, while core basic product such as white T-shirts would be relevant throughout the year. A single top line WSSI, therefore, is not an appropriate tool to manage OTB, and so it must be subdivided into individual product WSSIs that reflect the product hierarchy of the business. The third and final complication refers to the size and complexity of the business being planned. The bigger and more complex the product range, the more B&M teams and so the more WSSIs being used. In a department store, for example, individual WSSIs must number in the hundreds and so will require co-ordination and strict management. Beyond these three factors there lies of course the little responsibility for the merchandisers to budget at many levels, all of which must add up to the overall business budgets on the P&L and balance sheet. So how complex could a WSSI be? Well, using a premium high-street womenswear retail brand with four product groups, there could be 16 seasonal WSSIs that need to be phased across 26 weeks which would give 416 individually phased OTB budgets to be worked out just for one financial half.

FASHION MERCHANDISING: OPEN-TO-BUY

Previous season

Formal

Current season Next season Continuity Previous season

Casual

Current season Next season Continuity

Total business

Womenswear

Previous season Diffusion brand

Current season Next season Continuity Previous season

Accessories

Current season Next season Continuity

If that brand also ranged menswear and childrenswear, then that number could increase to 1248 seasonal WSSIs. Across a full year of two financial halves, the number would increase to 2496. The scope of the WSSI is mind-blowing, but luckily it is such an important document that all B&M software systems that have been developed to help the planning pro-

cess include a program that lets the computer take the strain out of WSSI planning.

Activity Visit a department store and review the menswear section. How many distinct product groups are there? Work out, using the model above, how many individual WSSIs exist for the menswear department.

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SUMMARY This chapter has identified the open-to-buy components and how they work together to identify the amount of money available to buyers to spend on product. This has been done with one important qualification: that OTB is planned and calculated at selling value. This is important because it is consistent with all the analysis and budgeting completed to date and is the common language that unites all activities within the retail value chain. The relevance of OTB at selling value was also highlighted in the creation of a WSSI, where OTB is phased in over the course of season relative to the

SELF-DIRECTED STUDY 1. Review the Prentice Day case study exercises on the companion website.

FURTHER READING Tepper, B., Greene, M. (2016) Mathematics for Retail Buying 8th edn. Bloomsbury Academic: New York

BIBLIOGRAPHY Jackson, T. and Shaw, D. (2001) Mastering Fashion Buying and Merchandising Management. Basingstoke: Macmillan

sales, markdown and stock budgets that have already been identified as part of the product budgeting process. At this point, the buyer and merchandiser are now ready to move forward to the process of putting products into the range. To do this, the focus of the merchandiser role begins to change towards that of product, creativity and range planning. This will mean the buyer and merchandiser will work more closely together to articulate, using their own knowledge and plans, the creation of the product range for the new season.

9 9

FASHION MERCHANDISING: RANGE PLANNING

INTENDED LEARNING OUTCOMES 1.

An introduction to the range-planning concept and its value within B&M.

2. A review of the inputs into the range-planning process and the creation of a range plan. 3. Finalizing the product range using an option detail plan. 4. Understanding the benefits of range planning to buyer and merchandiser.

INTRODUCTION The creation of a product range and the styles, colours and prices chosen to be within is a significant part of the role of the fashion buyer, who creates their range by the merging of customer, cultural and fashion trends into a range plan. Once completed, their next step would be to source these products, buying in quantities that match the products’ potential and the OTB budget available. In a small-scale business with limited product ranges, buying product and creating supplier orders within an OTB are easily manageable. The greater the size and scale of the product ranges, option plans and number of stores to stock, the more complex this becomes, and the easier it is to lose sight of an overall size and shape of the range. Following a process where each option is bought one after the other without an overall target number of options could result in the buyer finding they have run out of OTB before all their desired range has been bought. Alternatively, if at the end of the buying process, there is OTB remaining, then the business may be at risk of not having enough stock to support the sales turnover and other budget presumptions. To prevent these possible imbalances, the merchandiser can offer a link between budgeting and option planning; that link being the range-planning process. This firstly determines how many options can be bought with the available

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FASHION MERCHANDISING

budget and secondly ensures that each option is bought to the correct demand level. The chapter will review this link as step 3, ‘Product development’ within the concept-­to-carrier bag model (Table 9.1). To do this, the calculated casual wear OTB budget from Chapter 8 will be applied in this chapter, to create firstly a range plan and secondly an option detail which is used to finalize the unit buy quantities for a product range. Table 9.1  The concept-to-carrier bag model Concept-to-­carrier bag step

Definition

1. Research

Undertaking and collation of relevant fashion research

2. Concept

Creation of product range concept and direction

3. Product development

Finalization of concept as a product range

4. Sourcing

Sourcing of suppliers and manufacturers for the range

5. Manufacturing

Manufacture of the product range

6. Shipping

Shipping and delivery of the product range

7. Warehousing

Receipt of the product range and its allocation to store and storage

8. Distribution

Delivering initial store allocations

9. Retail

Display, sale, promotion and stock replenishment

10. Carrier bag

Purchase of the product by a consumer

AN INTRODUCTION TO RANGE PLANNING Up until this point, the merchandiser role has been rooted very firmly in financial planning. Range planning finally sees the merchandiser link firmly with the buyer to develop the OTB budget into the language of product. This is done through both roles engaging together to create the season’s product ranges, which can represent the most exciting and nerve-racking aspects of

the planning process. It is exciting as the work already completed begins to turn into a physical range, but nerve-racking as any significant gaps in thinking will start to show from this point onward. These potential gaps in thinking are easy to spot by customers. Product ranges that are imbalanced between differing product types – too many dresses and not enough blouses for example – or are short of stock on offer, in particular by size, are signs of

FASHION MERCHANDISING: RANGE PLANNING

this. These imbalances can be caused by a poor working relationship between buyer and merchandiser, with differing strategies and interpretation of previous research leading to mismatches in the resulting product range. If one considers the complexities of both the buyer and merchandiser roles, it is easy to understand how potential gaps in thinking could occur. To have reached this point, the buyer will have been working with abstract ideas based primarily, though not exclusively, on prediction and feeling. Merging these ideas with the logical thinking of KPI budgeting does not come easily, requiring work to weld the two approaches together to ensure balance within a product range. Rather like a glove fitting a hand, range planning is the mechanism to check that the buyer’s proposed product range fits the calculated KPI budget shape and vice versa. The creation by the merchandiser of a range plan that identifies an ideal number of options that fits within the OTB fulfils this task; naturally, it is rare for an immediate fit between the two to happen. Often there follows a further period of discussion, negotiation and trading of ideas between buyer and merchandiser to reach a mutually agreeable course of action before

moving on to finalize the range plan. A more worrying situation is where the gap between the two is too large for a simple resolution, and this is usually the result of failures to interpret and understand the potential impact of each other’s activities, in turn meaning that the OTB budget presumptions could be invalid. If the buyer proposes to buy more options than the range plan has identified, then to fit within OTB budgets they would have to reduce the unit buy of each, putting availability of peripheral sizes and replenishment allocations at risk. Alternatively, if the merchandiser has overbudgeted for a product group, then to fill the OTB, the buyer may over-option (buy too many products), leading to confused product ranges in store and poor sell-through rates.

THE RANGE PLAN By the time the buyer and merchandiser reach the range planning process they will have collated, reviewed and interpreted a large volume of relevant data from the research and budgeting process to date. Table 9.2 below presents the relevant data from this process in the form of an example range plan.

Table 9.2  The casual wear range plan 1

2

3

4

5

6

7

8

9

Product group

OTB budget

Average selling price

OTB units

Rate of sale

Life cycle

Sell-­ through rate

Average unit buy

Ideal option plan

Trousers

£19,824

£0

0

5

0

80%

0

0

Shirts

£12,244

£0

0

5

0

80%

0

0

T-shirts

£26,237

£0

0

8

0

80%

0

0

Total

£58,305

£0

0

6

0

80%

0

0

157

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FASHION MERCHANDISING

Reviewing the table, it comprises the following columns: 1. The casual wear product groups. 2. The OTB budget for casual wear for the season – taken from the completed OTB monitor from Chapter 8. 3. The presumed average selling prices for the new range. 4. OTB units – the cash budget converted to units. 5. The rate of sale presumptions – analysis in Chapter 6 identified that the average rate of sale was 4.4 units. For this season, a raised average of six units will allow volume growth to help prevent selling out. 6. Life cycle  – the number of weeks each product range is planned to be prime on the shop floor. This will be dictated by the flexibility within the supply chain: the lower the life cycle, the greater the number of product ranges that can be bought.

7. The sell-through rate presumptions  – analysis in Chapter 6 identified that the average full-price sell-through rate was 86 per cent. To further prevent selling out, the presumption for the new season has been planned at 80 per cent. 8. Average unit buy – the average number of units to be bought of each option. 9. Ideal option plan  – the total options that can be ranged within the OTB budget. Table 9.2 amplifies the point that good range planning is reliant on information gained through good research and budgeting, as except for the average selling price and life cycle, all the decision levers for the process are already in place. Tables 9.3 and 9.4 complete the range plan by adding the average selling prices and life cycle data to then calculate the average unit buy and ideal option plan.

Table 9.3  The casual wear range plan 1

2

Product group

OTB budget

Average selling price

OTB units

Rate of sale

Life cycle

Sell-­ through rate

Average unit buy

Ideal option plan

Trousers

£19,824

£50

0

5

8

80%

0

0

Shirts

£12,244

£35

0

5

8

80%

0

0

T-shirts

£26,237

£16

0

8

8

80%

0

0

Total

£58,305

£0

0

6

8

80%

0

0

FASHION MERCHANDISING: RANGE PLANNING

Table 9.4  The calculated casual wear range plan

Product group OTB budget

2

1

Average selling price

OTB units

3

4

Rate of sale

Life cycle

Sell-­ through rate

Average unit buy

Ideal option plan

Trousers

£19,824

£50

396

5

8

80%

50 units

8 options

Shirts

£12,244

£35

350

5

8

80%

50 units

7 options

T-shirts

£26,237

£16

1640

8

8

80%

80 units

21 options

Total

£58,305

£24.44

2386

6

8

80%

60 units

36 options

Data calculations 1. OTB units – OTB budget/Average selling price 2. Casual wear average selling price – Total OTB/Total OTB units 3. Average unit buy – (Rate of sale * Life cycle)/Sell-through rate 4. Ideal option plan – OTB units/Average unit buy

The sources of the average selling price and life cycle decision points are: 1. Average selling price – Historic average selling prices of previous ranges could be used, or the buyer could advise of changes to average selling prices based on competitor comparative shops. In this example, the merchandiser has applied historic average selling prices based on the product analysis from Chapter 6.

2. Life cycle  – Prentice Day has a flexible ­supplier base and can plan to have multiproduct ranges to be phased into the store throughout the season. By choosing an eight-week life cycle, each product range will have a two-month selling period. With a range plan complete, the obvious question is: What is it telling the merchandiser? Followed by: Is it the right answer? Taking the first point, Table 9.4 identifies that:

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FASHION MERCHANDISING

•• the buyer should range 36 options in total for casual wear in the season, of which 21 options should be T-shirts •• the average unit buy placed should be 60 units of each option •• bigger buy depths of 80 units for T-shirts should be placed, and lower than average buys should be made for trousers and shirts. Compared with the previous year, there has been a significant strategic change within the casual wear offer. Review the product analysis in Chapter 6 to see: •• 36 options compared with 17 options in the previous year •• 21 T-shirt options compared with 8 in the previous year •• A 1640-total unit buy for T-shirts compared with 992 units last year. The completed range plan has fulfilled two functions: It has identified to the buyer the required option information to allow them to create a total product range in line with the planning strategy set at the beginning of the planning process. Further to this, the range plan has identified a shape within which it is unlikely that the buyer will overspend against the OTB and KPI budgets set for the season. However, range plans do have their flaws, the most fundamental being that it is a generic snapshot

that takes an average set of presumptions to generate its results. Fashion of course is anything but generic, and the individual options that compose a product range will have different characteristics that affect their value and importance to a business. To be effective, the range plan should have these individualities recognized within their individual buy quantities. A second limitation with the range plan is that it does rely heavily on presumption, taking historical product analysis, such as rate of sale, and applying its findings to future presumed values in its working. Good range plans therefore rely somewhat on commercial gut feel, and for a merchandiser with much experience, this commercial approach is eagerly anticipated and well liked. For the inexperienced, though, this can compromise the range-planning process if the merchandiser has not had the time to develop this important skill. These limitations help to answer the second question: Is it the right answer? Fashion is a business, and while the range plan may be a generic average, it is the right starting point. It establishes the right shape but not the right detail. That comes with the second stage of range planning: the creation of the option detail, which uses the range-plan shape and moulds it into a unique option plan for the season ahead.

FASHION MERCHANDISING: RANGE PLANNING

FOCUS POINT 9.1: The initial option plan and brand personality Walk into any good fashion store, and the image that the business conveys will be articulate and well executed. The image is tied into the personality of the brand and can be conveyed in numerous ways. Brands such as Desigual promote quirky, non-conformist approaches to fashion, underscored by the inverted ‘s’ that screams unconventional, spontaneity and unstructured to the customer. Of course, this brand personality is nurtured and reflected in all that the brand does, including the presentation of its product offer within stores. The matching of the brand, its personality and associated characteristics within the product range is a key weapon in the armoury of a fashion business, and much thought goes into matching the two together. Take Gant UK as an example. The preppy fashion business has challenges in ensuring that the product bought for its stores can present a unified brand image to its customers. With differing genders, capsule ranges, product groups and trends, the ranges offered need cohesion to present a unified image to its customers, putting its brand image and visual presentation at the forefront of its planning process.

 HE OPTION DETAIL – T QUALITATIVE AND QUANTITATIVE ASPECTS The generic nature of the range plan means that the core limitation of the process is that the options that the buyer will have

The differing primary and secondary value chain activities of B&M and store design worked together to create a unified approach to laying out its stores. Optimized store layouts that were designed around fixture planning identified the stock capacity that stores could hold. With a layout identified, the business used the minimum credible offer (MCO) concept to match store layout to the product range’s average rate-of-sale characteristics to determine how many options could be displayed within the agreed store layout. With a comprehensive MCO in place, the range-planning process not only considered fashion trends, product and OTB budgets in its calculations, but it also added maximum display requirements into the mix. Completed range plans could then be compared with the MCO, allowing buyers and merchandisers to ensure that their product ranges did not just support their research and product concepts but could also support the image presented to the customer.

Activity Review different retailers across all levels of the market. How does each one project its image through its range planning and clarity of product offer?

developed will be anything but generic. All options in a product range will have several qualitative characteristics, such as colour, fabrication and shape, and the differing combinations of these will generate differing levels of value to a business. The option detail focus is to understand the qualitative .

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character of each option, to then apply suitable quantitative characteristics (rates of sale, life cycles and sell-through rates) that reflect the combined character of the product.

For example, the qualitative characteristics of a navy cotton T-shirt compared with a salmon-red raw silk print shirt imply differing ­ quantitative characteristics (Table 9.5).

Table 9.5  Cotton T-shirt and raw silk print shirt product characteristics Navy cotton T-shirt

Salmon-red raw silk print shirt

Qualitative

Core colour, simple shape, easy fabric

Trend colour, specific shape, exclusive fabric

Quantitative

Higher demand, large value to business

Lower demand, less financial value to business

The navy cotton T-shirt would be likely to have the characteristics of greater commercial strength and high demand, so needing stronger quantitative characteristics such as higher rates of sale and sell-­ through rate applied to it compared with the raw silk shirt. The navy T-shirt has multiple end uses, from nightwear to casual wear through to sportswear. It is a simple, easy piece that will appeal to a wide range of customers and will require no deep intellectual thought in its purchase. Its potential usage is so broad that demand will be constant throughout the season. The salmon-red raw silk shirt has a different set of characteristics. Its uses are more limited, and it is clearly suited to be a smart casual look that co-ordinates with other pieces in the range. The salmon-red colour will not appeal to all customers, and some may even feel intimidated by its tone. The raw silk fabrication will require care in wearing, cleaning and storage and that will

further put off some potential customers. The price of the garment will be higher than a simple cotton shirt, so it will have to have other attributes  – such as being ontrend – to convince the customer to buy it. By ranging this product, the buyer would know that it is a key fashion style for the season, but once trends change, its place within the range will come to an end. In effect it is the qualitative characteristics of the option that will determine the ultimate quantitative rate of sale and sell-­ through rate assumptions that will be applied to derive a unit buy. The identification of these differing characteristics to create individual unit buys is perhaps the most contentious of all buyer/merchandiser discussions. There is a high degree of subjectivity and personal choice which could influence either player, but ultimately the decision should rest with the buyer rather than the merchandiser acting in the role of frustrated buyer!

FASHION MERCHANDISING: RANGE PLANNING

FOCUS POINT 9.2: Multi-­store range planning Many retail businesses have more than one store, with differing demographics, physical sizes and local competition. The question that comes to mind when considering this is: How does range planning support such diversity within retail store estates? For a national or international chain with a large store estate and a significant product range, the question remains as to how they accommodate a multi-operation within the

range-planning process. The answer lies in defined product hierarchies. By creating a store-grading structure, the merchandiser can apply a ranking of stores based on the most suitable criterion that fits the brand and its operation. A first possible route is to rank stores by sales turnover as shown in the example below, with stores ranked by turnover highest to lowest, and a defined OTB being split by each store’s percentage mix of turnover.

Stores

Sales turnover

% Mix

OTB

Av selling price

Unit buy

Life cycle

Rate Sell-­ of through sale rate

Average unit buy

Ideal option plan

Store 1

£25,000

31.3%

£34,375

£25

1375

6

5

70%

43

32

Store 2

£20,000

25.0%

£27,500

£25

1100

6

4

70%

34

32

Store 3

£20,000

25.0%

£27,500

£25

1100

6

4

70%

34

32

Store 4

£10,000

12.5%

£13,750

£25

550

6

2

70%

17

32

Store 5

£5000

6.3%

£6875

£25

275

6

1

70%

9

32

£80,000

100.0%

£110,000

£25

4400

6

3

70%

27

32

Total

With this ranking, the normal range-­ planning process can identify the appropriate unit buy and option plan for each store in the estate. In this example, each store can range the same number of options but will need differing buy quantities. The greater the number of stores in the estate, the less uniform they will be – physical size and the number of options

able to be displayed will differ. A more suitable approach would be to rank stores firstly by size and then by sales turnover within that. The table below is a re-presented range plan, in which the store estate is sorted by size of store and then adjusted by rate of sale to reflect a reduction in ideal options to mirror the decline in size of store.

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164

FASHION MERCHANDISING Stores Size

Sales turnover

% Mix

OTB

Av Unit selling buy price

Life cycle

Rate Sell-­ Average Ideal of through unit option sale rate buy plan

Store 500 £25,000 1 square ft

31.3%

£34,375

£25

1375

6

5

70%

43

32

Store 4

500 £10,000 square ft

12.5%

£13,750

£25

550

6

2

70%

17

32

Store 2

300 £20,000 square ft

25.0%

£27,500

£25

1100

6

7

70%

60

18

Store 3

200 £20,000 square ft

25.0%

£27,500

£25

1100

6

11

70%

94

12

Store 5

100 £5000 square ft

6.3%

£6875

£25

275

6

5

70%

43

6

£25

4400

6

3

70%

27

20

Total

£80,000

100.0% £110,000

Store 4, despite being a low turnover store, is now ranked with Store 1 as they are both the same physical size. Stores 2, 3 and 4 have seen their option plans reduce significantly to reflect their smaller sizes, but – to ensure their OTB can be filled – have had a corresponding increase in their average unit buy. This poses a further dilemma. Look at Store 5 as an example. Due to its size and lower turnover, it has been ranked lowest in the store ranking, giving it the lowest

number of options. However, what if this store – despite being small – is in the most prestigious of locations and should as a result carry the widest product range to make a statement to the world? Increasingly, retail brands are developing their range planning by setting a third planning criterion, that of demographic to store rankings. The third table below elevates Store 5 to the top of the range plan to enable the range plan to be ranked first by demographic, then by size and finally by turnover.

Stores Size

Sales turnover

% Mix OTB

Av Unit selling buy price

Life cycle

Rate of sale

Sell-­ Average Ideal through unit buy option rate plan

Store 5

100 square ft

£5000

6.3%

£6875

£25

275

6

0.8

70%

6

43

Store 1

500 square ft

£25,000

31.3%

£34,375

£25

1375

6

5.0

70%

43

32

Store 4

500 square ft

£10,000

12.5%

£13,750

£25

550

6

2.0

70%

17

32

Store 2

300 square ft

£20,000

25.0% £27,500

£25

1100

6

7.0

70%

60

18

Store 3

200 square ft

£20,000

25.0% £27,500

£25

1100

6

11.0

70%

94

12

£75,000

93.8% £110,000 £25

4400 6

3.0

70%

27

19

Total

FASHION MERCHANDISING: RANGE PLANNING

Again, the rate of sale presumption has been manipulated to increase its option count, but in doing so, its unit volumes have declined to allow more options to be displayed but at a lower display factor. On a practical level, hierarchical range planning requires very full research and an appreciation of range-planning assumptions such as rate of sale and sell-through rates at store level. For businesses that have hundreds or thousands of stores, that level of research is a Herculean task. Thank

CREATING THE OPTION DETAIL Having created a total range plan, this section presumes that the buyer has decided to create an option detail for the T-shirt product group. Table 9.6 details an option detail where the buyer has proposed to buy five options  – three core basic, two fashion styles and no high-fashion options. The buyer has provided the merchandiser with the product information and fashionabilities, selling price and negotiated cost price and applied the planned weeks life cycle of eight weeks that was derived in the range-planning process. The merchandiser will now apply rate of sale and sell-through rate assumptions to each option. They will use the option analysis of the previous year to guide them in this (Chapter 6), making increases or decreases to the previous year history as required. In the case of Prentice Day these would be: •• Core basic options  – all quantitative characteristics must be well above the

goodness for ICT and the many data-mining software packages available to retailers today!

Activity Count the number of options within a product group (e.g. dresses, skirts or blouses) that are on display in differing stores. Which has the most options and which the least? Is there a link between number of options displayed and the average number of units available per option?

averages of the initial option plan as this fashionability sold out in the history year. •• Fashion style options  – the product analysis in Chapter 6 showed these as being generally below-average performers in the business and so should have quantitative characteristics just below average. Taking all the new details into account, the merchandiser will complete the option detail by applying the known facts and mixing them with commercial gut feel. These second points are reflected in the applied rate of sale and sell-through presumptions, where the core basic options have inflated rate of sale presumptions applied to the range plan. Table 9.7 presents a completed option detail, using the following calculations to identify the unit buy and its cost and selling values. •• (Rate of sale *Life cycle)/Sell-through rate % = Unit buy; •• Unit buy *Cost price = Buy cost value •• Unit buy *Selling price = Buy selling value.

165

Basic T-shirt

Basic T-shirt

Basic T-shirt

Polo T-shirt

Polo T-shirt

1

2

3

4

5

Red

Blue

Navy

Black

White

Colour

Fashion style

Fashion style

Core basic

Core basic

Core basic

Fashionability

£7.70

£7.70

£4.00

£4.00

£4.00

Cost price

£25.00

£25.00

£15.00

£15.00

£15.00

Selling price

Description

Basic T-shirt

Basic T-shirt

Basic T-shirt

Polo T-shirt

Polo T-shirt

Option

1

2

3

4

5

Red

Blue

Navy

Black

White

Colour

Fashion style

Fashion style

Core basic

Core basic

Core basic

Fashionability

£7.70

£7.70

£4.00

£4.00

£4.00

Cost price

£25.00

£25.00

£15.00

£15.00

£15.00

Selling price

Table 9.7  The completed option detail for casual wear T-shirts

Description

Option

Table 9.6  The option detail

8

8

8

8

8

8

8

8

8

8

Weeks life cycle

Weeks life cycle

80% 80%

12

80%

80%

80%

80%

Sell-­ through rate

520

80

80

120

120

120

Buy cost value

£2672.00

£616.00

£616.00

£480.00

£480.00

£480.00

Buy cost value

Unit buy

Unit buy

Sell-­through rate

8

8

12

12

12

Rate of sale

Rate of sale

£9400.00

£2000.00

£2000.00

£1800.00

£1800.00

£1800.00

Buy selling value

Buy selling value

166 FASHION MERCHANDISING

FASHION MERCHANDISING: RANGE PLANNING

With a completed option detail, the die has been cast for this product range, allowing the next steps in the concept-to-carrier bag process to begin: sourcing, manufacturing and delivery. Retailing by its nature is full of risk. The simple concept of taking a pot of money, turning it into a product to sell and doing so at a profit is in theory straightforward. In the realities of highly competitive global markets, however, the actual truth lies in the territory of risk, uncertainty and difficulty. Analyzing the completed option detail, its shape and direction is vital to assess whether it is in line with the planning strategy and reflects evolution in target customer demand and the business’s financial requirements.

The four tables which follow summarize and review the option detail to assess its adherence to what was set out to be achieved at the start of the planning process. •• Fashionability analysis

–– Core basics have increased within the mix versus the previous year across both metrics.

–– An interesting point to note is the different mix percentages between unit and buying selling value. Core basics, for example, represent 69 per cent of the units bought but only 57 per cent of the selling value to the business, caused by the lower selling prices of this basic product (Table 9.8).

Table 9.8  Fashionability analysis Fashionability

Units bought

Core basic Fashion High fashion Total

% Mix

Previous year mix

360

69%

67%

160

31%

0 520

% Mix

Previous year mix

£5400

57%

53%

26%

£4000

43%

34%

0%

7%

0

0%

13%

100%

100%

£9400

100%

100%

•• Unit buy analysis –– Table 9.9 summarizes the unit buys by fashionability and then reinterprets these into a unit buy per week. This is done by applying the life cycle presumed on the range plan (8 weeks) and, for last year, the actual life cycle at the point of the initial analysis (20 weeks).

Buy selling value

–– The analysis shows that unit buy volumes per week have increased and that, over the course of the season, it is likely that, once all buys have been complete, unit buys will have raised further.

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168

FASHION MERCHANDISING

Table 9.9  Unit buy analysis Unit buys

Unit buys

Buy per week

Unit buys previous year

Buy per week previous year

Core basic

120

15

221

11

Fashion

80

10

86

4

High fashion

0

0

36

2

Average

104

13

124

6

•• Price analysis –– Price analysis allows the buyer and merchandiser to assess the product range’s price positioning relative to last year. –– The analysis indicates that the price architecture for this range has moved

decisively towards opening price points. This is in line with the SWOT and 4P analyses conducted by Prentice Day’s owners (Table 9.10).

Table 9.10  Price analysis Price

Options

Mix %

Previous year

Mix %

£15

3

60%

3

38%

£25

2

40%

3

38%

£35

0

0%

2

25%

Total

5

100%

8

100%

•• Colour analysis –– A final analysis is a review of colour mixes to assess the impact that the range will have in store. There is a danger that the scale of core basics in any fashion business could swamp the excitement and interest provided by fashion and high-­fashion options.

–– The colour analysis suggests that the range plan, while delivering the unit buy growth and price realignment, has been at the expense of ‘excitement’ in the range. This must be corrected in future T-shirt ranges (Table 9.11).

FASHION MERCHANDISING: RANGE PLANNING

Table 9.11  Colour analysis Colour

Options

Mix %

Previous year

Mix %

White/black/navy

3

60%

4

50%

Blue

1

20%

1

13%

Red

1

20%

1

13%

Green

0

0%

1

13%

Yellow

0

0%

1

13%

Total

5

100%

8

100%

 SUMMARY OF THE RANGE-­ A PLANNING PROCESS The range plan and its associated activities are probably the most enjoyable part of the planning process for buyer and merchandiser. The effort by both roles to reach this point is rewarded by seeing the product range come alive in front of their eyes. Options that existed in nebulous form become tangible, are given names and assume personalities. Personal favourites emerge, and by making targeted decisions, accurate and realistic unit buys are created. There is plenty of room for dissent, and for example, if at the end of the process the OTB budget has not been met or if the range appears imbalanced towards one fashionability, then revisions will need to be made. By this point, the scale of revision should be minor  – the range plan should have ironed out significant discrepancies, and the process should be amenable and fun. The working on the option detail plan together brings other benefits to buyer and merchandiser beyond that of enjoyment. The working on the final range together allows them to understand better each one’s thinking and expectations for the

range. This has multiple benefits as it adds knowledge to the future steps in the planning process – the sizing and allocation of the options. It also allows time to discuss how the product range should be promoted, and which options are priorities for delivery, promotion and replenishment. Another impact of the range plan is that it reinforces the relationship of buyer and merchandiser as being a team. The product range becomes a joint effort that they both support and develop. To emphasize this point, in large fashion businesses, once the option range plan is finalized, the buyer and merchandiser will present their product ranges and the research and concepts that stand behind it to the chief executive and the senior management team, in a final range review for their sign-­off and approval. This review is of great importance as it offers a chance for the range not just to be approved, but also reviewed against the original planning strategy. Range planning also acts as an enabler of the supply chain activities, meaning that final supplier negotiations can commence, orders be placed and contracts raised. The product range is no longer an idea but a reality. Its sourcing, manufacture, delivery and distribution to retail channels can begin in earnest.

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FOCUS POINT 9.3: The 80/20 rule The Pareto principle is useful within range planning as it acts as a reminder of the imbalances in the relationship between effort and reward. Named after the economist Vilfredo Pareto, the principle asserts that 20 per cent of an input investment generates 80 per cent of reward. Pareto first developed the idea in 1906 by discovering a correlation between an input value and its output value. As an example, he noted that 80 per cent of land in Italy was owned by 20 per cent of the population, with similar relationships in other countries too. The 80/20 rule has become a general measure within business and is particularly relevant within B&M.  If one considers a product range of two options (a navy T-shirt and a salmon-red raw silk shirt), then each one represents 50 per cent of options available. However, the commercial strength of the navy T-shirt is far greater and will generate a far larger value return to a business. A commercial fashion option range plan will naturally reflect the 80/20 rule. In a product range that comprises two core basic, five fashion style and three high-fashion options, the input investment into the product range by option would be: Core basic

2 options = 20% of the option range plan

Fashion style

5 options = 50% of the option range plan

High fashion

3 options = 30% of the option range plan

Total

10 options

However, the sales potential of the fashionability types would be very different and would be likely to carry the following unit buy mix. Core basic

700 unit buy = 70% of the unit buys

Fashion style

250 unit buy = 25% of the unit buys

High fashion

50 unit buy = 5% of the unit buys

Total

1000 unit buys

Good effective range planning inevitably has parallels to the Pareto principle: it is common sense and commercially astute. The skill within B&M is to recognize the validity of the model, to replicate it within option range planning but not on the shop floor. Fast-fashion brands are experts at applying the Pareto principle. Zara is well renowned for translating trends throughout a fashion season and presenting a fresh updated collection every two weeks. These numerous options are displayed effectively, but alongside the ever present small-option, big-business core basic options in store.

Activity Research further the 80/20 rule. What influence does it have in fashion and the wider world?

FASHION MERCHANDISING: RANGE PLANNING

SUMMARY This chapter has focused on the relationship between creativity and numbers, with the focal point of this being the range plan. The introduction of the range and option detail plans has shown how those two opposing definitions of fashion and business can be finally reconciled. The numbers presented have relied upon previous chapters, with the fundamental point that this chapter has attempted to convey that if a merchandiser has good thorough product research, then range planning will be the application of

known data and so should not be feared. The key, though, is in the depth of knowledge possessed about one’s business and product. One extra point that should be made is that the right quantitative assumptions to apply within the process vary, with no standard correct answer. The examples used in this chapter are just that, open to be challenged; but that in some ways is the fun of a range review: a good debate and discussion to fully interrogate the merchandiser’s mind and commercial awareness.

SELF-DIRECTED STUDY 1. Undertake a comparative shop of an own-label and brand retailer. Create a mix analysis of product type, price point, colour and country of origin

FURTHER READING Tepper, B., Greene, M. (2016) Mathematics for Retail Buying 8th edn. New York: Bloomsbury Academic

to understand how their product ranges are constructed. 2. Refer to the companion website for Prentice Day case study exercises.

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FASHION MERCHANDISING: SIZING, DELIVERIES AND ALLOCATION INTENDED LEARNING OUTCOMES 1.

A discussion of the buyer–merchandiser–supplier relationship.

2. Key concepts in size curve management. 3. Initial allocation and its role in supporting brand personalities. 4. Delivery management and its dynamics.

INTRODUCTION The practical creation of size curves, allocation plans, is undertaken once the option detail has finalized the product range and unit buys of each option. However, the thinking and collation of the data required for each of these later activities occur much earlier within the planning process. This chapter will demonstrate why this is the case and offer practical evidence to complete these final steps within the planning process. Table 10.1 shows where the sizing, delivery management and allocation activities lie within the concept-to-carrier bag model and that, while this chapter focuses on the final planning activities of the merchandiser, there is still plenty more to the role that occurs after this point. Planning a range is one side of the coin, the other is its trading – the active process of creating a product range, driving its performance as hard as is commercially possible and making sure every effort is made to achieve or exceed the KPI budgets set for the product earlier in the planning process.

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FASHION MERCHANDISING: SIZING, DELIVERIES AND ALLOCATION

Table 10.1  The concept-to-carrier bag model Concept-to-­carrier bag step

Definition

1. Research

Undertaking and collation of relevant fashion research

2. Concept

Creation of product range concept and direction

3. Product development

Finalization of concept as a product range

4. Sourcing

Sourcing of suppliers and manufacturers for the range

5. Manufacturing

Manufacture of the product range

6. Shipping

Shipping and delivery of the product range

7. Warehousing

Receipt of the product range and its allocation to store and storage

8. Distribution

Delivering initial store allocations

9. Retail

Display, sale, promotion and stock replenishment

10. Carrier bag

Purchase of the product by a consumer

However, for trading to commence, the product must be manufactured and delivered. The merchandiser contributes to this by providing suppliers with several pieces of information that are crucial to their efficient supply of product: the size curves and delivery requirements for each option. With these two activities complete, the merchandiser can then identify the initial allocations for each option that will be delivered to stores once the product has been received from the supplier. To demonstrate these activities, the chapter will take product information from the Prentice Day T-shirt range plan, created in Chapter 9, to offer insights into the role of the merchandiser at this point in the concept-to-carrier bag model.

THE MERCHANDISER– SUPPLIER RELATIONSHIP Before moving on to the main topics of this chapter, it is worth spending some time considering the relationship between the merchandiser and their suppliers. Usually, the key relationship between retailer and manufacturer lies with the buyer, with this

reflected throughout the concept-tocarrier bag process. The buyer – with their skill set of creativity and product development – naturally leads the sourcing of suppliers, products and their components. This developmental process will mean that the buyer will both source new suppliers and develop relationships with existing ones in line with market and product trends, best

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matching supply of product to potential customer demand. However, this does not preclude the merchandiser from developing contacts with suppliers and being involved in the retailer/supplier working relationship. The exact nature of this varies depending on the complexity and size of the retail business, but it is possible to make some broad assumptions. At its simplest, the relationship between a retailer and supplier pivots on reaching a point where the retailer commits to buying product from the supplier. From the retailer’s perspective, the decision to place an order will depend on the product fulfilling several criteria such as: •• fulfilling an identified customer need (for example, appropriate fashionability and design) •• being at an appropriate quality level •• being at a cost that will allow a suitable intake margin percentage to be achieved •• available and delivered at a time that suits the retailer •• being manufactured in line with the retailer’s ethical trading standards. Reviewing the list, there will be decision points which the buyer will negotiate with the supplier, but these will depend on the merchandiser providing the negotiation detail – KPI budgeting to derive intake margin, buying budgets and WSSI open-­to-­buy phasing plans for example. To do this effectively, it is implied that the merchandiser – while not managing the supplier relationship process – will influence its direction. As product development proceeds to range planning, explicitly requiring the buyer and merchandiser to work more closely together, decisions such as size curves, confirmed delivery dates, purchase order management, sealing and delivery tracking begin to take precedence.

Decisions made by both roles at this point will directly influence each other. For example, a merchandiser’s decision to delay deliveries would change the production priorities of a supplier, so changing the sealing process of the buyer. The triumvirate will therefore need to have regular contact with one other, bringing the merchandiser firmly into the retailer/supplier relationship. In practical terms, many retail fashion businesses split the physical decision-­ making process between buyer and merchandiser at the point of raising confirmed purchase orders, which act as legally binding agreements to buy product. An approved purchase order allows the management of remaining product development decisions to rest with the buyer, whilst the orderly delivery of stock and authorities to ship can rest with the merchandiser. The finalized purchase order that facilitates this role demarcation contains relevant details, the origins of which will come from both buyer and merchandiser: •• purchase order number – the unique reference for the order •• buying terms  – the agreed financial terms agreed between retailer and supplier •• shipping details – the agreed process to deliver stock •• product details  – the agreed product descriptions, cost prices and unit buy quantities by size •• the value of the order •• signatures – signed by an authorized signatory of the retail business. The creation of an approved purchase order still needs some final detail from the merchandiser to allow the manufacturing process to begin: unit buys require size

FASHION MERCHANDISING: SIZING, DELIVERIES AND ALLOCATION

curves applied to them, initial allocations decided and finally delivery phasing to be worked out.

SIZE CURVES The creation of accurate size curves relies on effective analysis to guide the deciding of the correct balance of size availability for each option. A first danger point within this is that reliance on past sales history, while as good as any other starting point, must be solely relied upon. As silhouettes differ year on year, the historic sales by size may not always translate easily season to season. Any size analysis undertaken must be as individual as possible to the new product range – a simple generic size analysis to cover as many products as possible is not appropriate. A second point is that, by reviewing previous season sales by size, one can assess what has been sold but not necessarily what could have been sold had the size curve been different. If a size consistently sells out early in a season, its true potential has not been realized, and so in any sizing activities, an element of speculation is required concerning what ‘might have been’. However, despite these two dangers, it should also be recognized that, without an average size curve, manufacturing garments would be more expensive and take

longer as each option would need to be production-planned individually. The innate skill within size curve planning is to negate the dangers within the analysis rather than simply being aware of how to calculate the curve. If executed well, size curves can overcome their inherent weakness to be a valuable source of driving multi-sales across options, enabling them to be mixed and matched by customers to their own individual size preferences. In practical terms, knowing the right point within an option’s life cycle at which to analyze size curve data eliminates much of the identified weaknesses. To highlight this, Tables 10.2, 10.3, 10.4 and 10.5 below follow the sales and stock history of a past Prentice Day white basic T-shirt for a 12-week life cycle. Table 10.2, for example, shows: •• the sizes ranged (sizes XS to XL) •• cumulative sales achieved up to week 3 by size (total 64 units) •• the percentage mix of sales to week 3 by size •• the stock remaining at the end of week 3 (total 156 units) •• the percentage mix of stock remaining at the end of week 3 by size •• the total unit buy by size (total 220 units) •• the percentage mix by size of the buy.

Table 10.2  Size curves at week 3 White T-shirt: sales weeks 1–3 Size

XS

S

M

L

XL

Total

Sales

11

17

19

12

 5

 64

% Mix

17%

26%

30%

19%

 8%

100%

Stock

13

18

38

45

42

156

% Mix

8%

12%

24%

29%

27%

100%

Total buy

24

35

57

57

47

220

% Mix

11%

16%

26%

26%

21%

100%

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FASHION MERCHANDISING

Table 10.3  Size curves at week 6 White T-shirt: sales weeks 1–6 Size

XS

S

M

L

XL

Total

Sales

22

34

38

24

10

128

% Mix

17%

26%

30%

19%

 8%

100%

Stock

 2

 1

19

33

37

 92

% Mix

2%

1%

21%

36%

40%

100%

Total buy

24

35

57

57

47

220

% Mix

11%

16%

26%

26%

21%

100%

Table 10.4  Size curves at week 9 White T-shirt: sales weeks 1–9 Size

XS

S

M

L

XL

Total

Sales

24

35

57

36

15

167

% Mix

14%

21%

34%

22%

 9%

100%

Stock

 0

 0

 0

21

32

 53

% Mix

 0%

 0%

 0%

40%

60%

100%

Total buy

24

35

57

57

47

220

% Mix

11%

16%

26%

26%

21%

100%

Table 10.5  Size curves at week 12 White T-shirt: sales weeks 1–12 Size

XS

S

M

L

XL

Total

Sales

24

35

57

48

20

184

% Mix

13%

19%

31%

26%

11%

100%

Stock

 0

 0

 0

 9

27

 36

% Mix

 0%

 0%

 0%

25%

75%

100%

Total buy

24

35

57

57

47

220

% Mix

11%

16%

26%

26%

21%

100%

FASHION MERCHANDISING: SIZING, DELIVERIES AND ALLOCATION

By plotting the changes in the T-shirts sales and stock ratio at weeks 3, 6, 9 and 12, it is possible to see changes in the size curves relative to the availability of stock. Over the next four tables, review the sales and stock ratios for sizes XSmall and XLarge. At week 3, sizes XS and XL sales mixes differ to both the stock and buy mixes, suggesting that size XS sales are stronger than the buy size curve predicted (17 per cent sales mix versus 11 per cent buy mix), while size XL sales are weaker than the buy size curve (8 per cent versus 21 per cent). Size XS sales mixes are maintained at 17 per cent; however, only two units are left in stock, so future potential is limited. Size XL, meanwhile, still has healthy stocks and will be able to continue to sell at its current rate, so maintaining its sales potential. By week 9, size XS is out of stock, and so its cumulative sales mix is beginning to decline, whilst size XL can continue selling as stocks remain high. As a result, its cumulative sales mix begins to increase. By week 12, the sales mix of size XSmall has reduced from its initial 17 per cent to 13 per cent of total sales. As sizes Small and Medium have also sold out, their sales mixes too have reduced compared with

the initial analysis in week 3. At the other end of the scale, the sales mixes of sizes Large and XLarge have increased between weeks 3 and 12 as these have remained in stock, meaning actual sales have been recorded throughout the 12-week life cycle. There is therefore a correlation between life cycle, sales and stock mixes, making it key to review these at the point in time when all sizes ranged are holding an optimum number of units. In the example above, this would be at week 3, as this is the period when all sizes reflect accurate sales to stock mix, so best reflecting true opportunity. Referring again to the Prentice Day case study and the option detail created in Chapter 9 shown below in Table 10.6, the final step in the sizing process is to work out the unit buys for each size. This final step is straightforward! Using the basic white T-shirt unit buy from the above range plan and using the following calculation it is possible to identify that the XSmall unit buy is: •• Unit buy *XSmall mix = XSmall unit buy •• 120 units *17% = 20 units Table 10.7 identifies the size curve for all sizes ranged of the white basic T-shirt.

177

Description

Basic T-shirt

Basic T-shirt

Basic T-shirt

Polo T-shirt

Polo T-shirt

Option

1

2

3

4

5

Red

Blue

Navy

Black

White

Colour

Fashion style

Fashion style

Core basic

Core basic

Core basic

Fashionability

£7.70

£7.70

£4.00

£4.00

£4.00

Cost price

£25.00

£25.00

£15.00

£15.00

£15.00

Selling price

Table 10.6  The completed range plan for casual wear T-shirts

8

8

8

8

8

Weeks life cycle

80% 80%

12

80%

80%

80%

80%

Sell-­ through rate

 8

 8

12

12

12

Rate of sale

520

 80

 80

120

120

120

Unit buy

£2672.00

£616.00

£616.00

£480.00

£480.00

£480.00

Buy cost value

£9400.00

£2000.00

£2000.00

£1800.00

£1800.00

£1800.00

Buy selling value

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FASHION MERCHANDISING: SIZING, DELIVERIES AND ALLOCATION

Table 10.7  Size curve for the white basic T-shirt White T-shirt: size ratio Size

XS

S

M

L

XL

Total

Total buy

20

31

36

23

10

120

% Mix

17%

26%

30%

19%

8%

100%

FOCUS POINT 10.1: The importance of sizing within fashion It can be very frustrating for a retailer’s customer to find the perfect product only to discover that their size is not available. The simple question of why a retailer cannot pay as much attention to sizing as they do to the design and creative elements within the products is one that seems to never end. Making sure that size curve analysis is undertaken at the correct time within the life cycle of the product is an important step in resolving the issue; however, it is not the only one. First, the sizes themselves may be incorrect. ‘Size UK’ – a 2002 national survey, the first since 1951 – was undertaken by several stakeholders including the London College of Fashion, Marks and Spencer, Arcadia group and House of Fraser. Its aim was to provide an up-to-date review of the actual size and shape of the UK population that would enable retailers to update their size charts to better reflect body and shape.

Product group

OTB budget

Average selling price

OTB units

As part of the survey, 5000 men and 5000 women were measured in electronic booths that took about 150 measurements on each body. The people were active: measurements took place in colleges and in retail stores, while inactive members of the population were not measured. The results showed that waist sizes had expanded 6 inches, and that body shape and so product blocks required updating, which meant a realignment of sizing as its historic sales patterns were being skewed by customers having to size up or down to find product to fit. (Size UK 2002) A second issue is the temptation for buyers and merchandisers to try to squeeze more options into a product range than the range plan allows. Take the example of the Prentice Day range plan calculated in Chapter 9 and replicated below.

Rate of sale

Lifecycle

Sell-­ through rate

Average unit buy

Ideal option plan

Trousers

£19,824

£50

396

5

8

85%

47

 8

Shirts

£12,244

£35

350

5

8

85%

47

 7

T-shirts

£26,237

£16

1640

8

8

85%

75

22

TOTAL

£58,305

£24.44

2386

6

8

85%

56

37

179

180

FASHION MERCHANDISING If, for example, the buyer and merchandiser decided that the ideal option plan was too low and they wanted to treble the

options without changing the OTB budget, the effect on the average unit buys would be to reduce them as shown below.

Product group

OTB budget

Average selling price

OTB units

Rate of sale

Life cycle

Sell-­ through rate

Average unit buy

Ideal option plan

Trousers

£19,824

£50

396

1.7

8

85%

17

23

Shirts

£12,244

£35

350

1.7

8

85%

17

21

T-shirts

£26,237

£16

1640

2.7

8

85%

25

66

TOTAL

£58,305

£24.44

2386

2.3

8

85%

22

110

Activity As each extra option is added, the unit line buy reduces, and so fewer units are available by size, and at some point, size curves will fragment even before they reach stores.

INITIAL ALLOCATIONS Jackson and Shaw state that the range-­ planning process means that ‘the range plan is the main source document for planning what lines options and how many of them will go to each individual branch’ (Jackson and Shaw 2001: 140). Having presented the range plan at work in Chapter 9, the sense in this assertion is clear. The initial allocation process does, however, have its roots much further back in the planning process, with the decisions made prior to range planning ultimately shaping the intellectual direction of physical stock management. Elements of the concept-to-­carrier bag model and the decisions made throughout it must all be considered, so ensuring that the business’s image is reflected in how it presents its stock, as well as supporting the financial requirements of efficient stock management.

Review size curves available in several different stores. Which retailer offers the best size curve, and which has run out of certain sizes? What might that tell you about their sizing analysis?

From a quantitative perspective, the range plan coupled with the defined size curves provides the following components that are relevant to the allocation process: •• the options that require to be allocated •• the stores to be ranged with the options •• unit buys from which the allocation quantity is derived •• the sizes available and the curve shape required. Taking this starting point, the merchandiser can begin to build the allocation plan by collating all the available data from the planning process into an allocation table, as shown in Table 10.8 below. The following example presumes that the merchandiser is allocating the white basic T-shirt from the completed option detail.

FASHION MERCHANDISING: SIZING, DELIVERIES AND ALLOCATION

Table 10.8  Draft allocation plan Fashion brand

Prentice Day

Style

Basic T-shirt

Colour

White

Fashionability

Core basic

Total unit buy

120

Stores ranged

1

Size ratio

17%/26%/30%/ 19%/8%

Display factor Rate of sale Resupply time Allocation calculation Total initial allocation Allocation % of buy

The derivation and the subsequent allocation decisions will, however, come from a wider source of data and business strategies which will influence allocation decisions. The addition of qualitative elements to supplement the quantitative process helps influence judgements about whether the decisions look and feel right commercially. Mixed together, these twin elements include: •• The business model and the personality of the brand •• The product type and fashionability and the options role within the range plan •• Visual merchandising strategies that reflect the brand personality •• The rates of sale and sell-through rate assumptions of the product •• The supplier location and flexibility within the supply chain

Taking each in turn, it then becomes possible to assess the impact of qualitative influences on a quantitative process. •• The business model and the personality of the brand For Prentice Day, the original SWOT and 4P marketing analyses identified very clearly that the business was focused on mid-market, core basic product ranges with loyal regular customers. Ensuring the allocation reflects this model will require a focus on volume opportunities through simple standardized approaches to store layouts and large allocation quantities to ensure option and size availability always. •• The product type and fashionability and the options role within the range plan Taking the overall business model requirements into consideration requires further refinement by taking time to assess the role of each product in the range to understand what its problem-solving characteristics are. Core basics, as volume sellers, will need a differently sized allocation quantity to a fashion option, which will have more specific and so more limited volume potential. High-fashion options which will have very limited buy quantities will tend to be allocated on more of a case-bycase basis. •• Visual merchandising strategies that reflect the brand personality While visual merchandising (VM) strategies are beyond the remit of the merchandiser, there is a requirement to understand how allocated product will look in store. An eclectic, bespoke product offer will need to look and feel very different to one that is core basic in focus. The merchandiser will need to know the number units of an option type that retail operations consider

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to be a credible statement for display and to ensure that this display factor is built into the allocation plan.

This point is possibly the most important of all. At the heart of good allocation planning lies stock management: ensuring that stock levels in store are optimum. Too much stock and the shop floor becomes clogged, whereas too little means that volume potential is lost by out-of-stocks and size fragmentation. Knowing the lead time in conjunction with the display factor and rate of sale assumptions will enable optimum allocation quantities to be planned. Taking these qualitative and quantitative considerations into account for Prentice Day, Table 10.9 builds an allocation plan for the white basic T-shirt.

•• The rates of sale and sell-through rate assumptions of the product These considerations are very much the domain of the merchandiser and will have been carefully considered throughout the range-planning process. These assumptions  – which drove the range planning process and the resultant unit buys for each option – must be carried through into the allocation plan. •• The supplier location and flexibility within the supply chain

Table 10.9  Final allocation plan Fashion brand

Prentice Day

Style

Basic T-shirt

Colour

White

Fashionability

Core basic

Total unit buy

120

This delivery

120

Stores ranged

1

Size ratio

17%/26%/30%/19%/8%

Display factor

4 units per size = 20 units total

Rate of sale

16 units per week

The example in Table 10.9 shows a process and train of thought integral to the planning process undertaken  – and this is

common across all retail businesses, with the obvious exception of pure play-online retailers.

FASHION MERCHANDISING: SIZING, DELIVERIES AND ALLOCATION

FOCUS POINT 10.2: Allocation planning – the OOS percentage Fashion retailing is not a linear industry, and while the components in allocation may be broadly similar in all business model types, what constitutes the right answer will vary considerably. Beyond the example given in this chapter, there could be many kinks and curves that change the allocation-planning process. Probably the most common decision that is included within the process is: how much should be allocated as a percentage of a delivery? That question is like asking how long a piece of string is, as the dynamics that went into the planning process up to this point are likely to vary not just from business to business but by individual product type, too. A better question to ask addresses how a merchandiser can optimize stock management within the requirements of the business model. Different businesses will operate their value chain to best fit the demands of product management, and a starting point to decide how to optimize stock management would be to identify some influences on the topic: • The frequency of change within the product mix  – brands such as Zara will inject new options into their business more frequently than a brand such as Gant. Therefore, the pressure to deliver, allocate and sell out of an option is more immediate, and so there may be no time built into the value chain for regular stock replenishment. • Use of promotional strategies  – some brands will hold regular promotions, such as one-day and mid-season sales, whereas others may only discount at end-ofseason sales. The type and regularity of promotions change the pace of replenishment, with rates of sale achieved varying significantly in differing weeks of a

fashion season, so changing the amount of reserve stock needed at any one time. • Different budget requirements  – the emphasis placed by luxury and premium brands on design, fabrication and embellishment naturally places their product into a smaller and more elite customer segment, in which scarcity of product is valued, with buy quantities smaller, possibly bespoke. This will mean that allocation quantities may equal as much as 100 per cent of the buy. By contrast, businesses that work on volume and efficiency of scale will expect to hold reserve stock to infill size or colour shortages while the product life cycle is active. • The capabilities of the supply chain will influence allocation plans. The resupply time is a component of identifying the initial allocation quantity, but for some suppliers and product types, that could be zero. Where there is no practical ability for the supply chain to resupply product if it sells well, then the only other route to maintaining reserve stocks is to deliver all buy units together and use warehouses to hold potentially large quantities of stock to replenish stores. • The product itself will determine replenishment criteria. Like the example above discussing different budget requirements, different fashionability attributes will ­require different replenishment strategies and so different quantities of reserve stock. The important point in stock management is to understand the impact of these influences and measure the efficiency with which decisions about allocation and reserve quantities are decided. This measurement tool is known as the out-of-stock (OOS) percentage. In short, OOS identifies the ­ ­unavailability of a style/colour/size (a unit

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buy for each size, also known as a stock keeping unit – SKU) for retail sale at the time of measurement. Various studies suggest sales loss due to out-of-stock is valued at 4 per cent which, whilst small as a percentage, is large as a potential shortfall in cash sales. To remedy this, attention is needed not just to supply chain initiatives such as cross-dock distribution and other pre-retail activities,

A SUMMARY OF THE PLANNING PROCESS As Part II ends, it is worth spending a short time reflecting on its contents. Over the course of six chapters, the process demonstrated has taken an initial product concept and built that into a researched, budgeted product range, which at its end reflects the original strategy objectives. The process is not a definitive one; there are too many different business models, organizational hierarchies and product types within the world of fashion for one to exist. Instead, it is a process that captures the nuances and discipline required by the fashion merchandiser to be effective in their role. Part II has offered some key learning messages. First, the quantitative elements of any product range are relevant throughout the planning process, carrying equal weight to those issues judged to be qualitative. The size, shape and characteristics that a product range offers to a retailer’s customers owe as much to the fashion merchandiser as the buyer. The context of the merchandiser role established in Part I – to act as a bridge between the conflicting demands of fashion and business, or buyer

but also aligning rate of sale demand forecasting with accurate stock management to identify optimum allocation and replenishment strategies.

Activity Research the concept of cross-dock and distribution centre operations within fashion businesses.

and finance – allows product ranges to be balanced, as well as made relevant by the buyers’ creative skill. A second point is that in the modern, complex and competitive world it is unrealistic to expect a single role, the buyer, to be able to possess either the time or the skill set to juggle both the qualitative and quantitative requirements of the product management process. There are many talented buyers creating wonderful ranges, but the competitive landscape, increasingly sophisticated consumers and supply chain capabilities mean that the activities undertaken by a fashion merchandiser are more than just desirable, they are vital. A further point is that the merchandiser activities have been shown to be both logical in operation and commercial in approach. This is an important point, as the rise of business-to-customer relationships, social media, brand management and their personalities requires an awareness of product, its market and the customer attitudes within to make effective quantitative decisions. By appreciating the languages of product and finance, the merchandiser role has become more commercially astute, and the planning process has benefited from that.

FASHION MERCHANDISING: SIZING, DELIVERIES AND ALLOCATION

With the context of the role established in Part I and then demonstrated through Part II, it is right to consider what has yet to be discussed. The modern world of retail fashion is full of competing ideas and business approaches. The development of models such as fast fashion, off price, online and others means that a one-­size-­fits-all

planning process does not exist. Thought needs to be given to the broad reshaping of the merchandiser role to fit new ways of operation. Thought needs to be given also to the immediate pressures facing retail businesses, such as ethical trading, globalization and supply chain capability. These will be discussed in Part III.

CHAPTER AND PART II SUMMARY This chapter has acted as the finishing point for the planning processes of the fashion merchandiser and this second part of the book. It has presented the links between the finalized option detail, size curves and allocation of stock to stores by again taking the Prentice Day case study and breaking it down further into the final details of the planning process. With that, the planning

process is complete, and one is left with the impression that, for the merchandiser, the planning process is shaped like an inverted triangle – at its beginning lies the widest amount of data to sort through, while at its end, one is left with an SKU in the product range, beyond which there is no further layer of product to plan.

SELF-DIRECTED STUDY 1. Refer to the companion website for Prentice Day case study exercises. 2. Understand a chosen retailer’s allocation approaches by reviewing the units

on display and size curves of different options. Is there a relationship between amount on display and selling price?

FURTHER READING Tepper, B. and Greene, M. (2016) Mathematics for Retail Buying 8th edn. New York : Bloomsbury Academic

BIBLIOGRAPHY Jackson, T. and Shaw, D. (2001) Mastering Fashion Buying and Merchandising Management. Basingstoke: Macmillan

Size UK (2002) Results from the UK National Sizing Survey. Available at https://www. independent.co.uk/news/uk/this-britain/ from-a-size-12-to-a-16-how-women-havechanged-shape-546959.html

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PART III FASHION MERCHANDISING AND THE MODERN TRADING ENVIRONMENT This final part moves on to discuss the merchandiser role within the context of a modern business environment. There is a greater emphasis, as in Part I, on discussing ideas and issues, but references where relevant will be made to the practical application presented in Part II. The flexibility afforded by the advances made in free trade, technology, changed demand patterns and supply chain capabilities means that a rigid one size fits all linear approach to buying and merchandising is no longer the norm. While the strategic planning output remains the same, there is an increasing focus on “micro merchandising” where greater focus to ensure that the product range’s potential is worked to its maximum. This aspect of buying and merchandising is discussed across the next three chapters. First, by reviewing the merchandiser role across various regions of the globe, second, by assessing the e-Commerce paradigm and finally, by looking at the impact of supply chain developments within retailing. Finally, to pull the strands of all three parts together, a final chapter will, with a sustainability focus, discuss the relationships within the fashion retail value chain, and how their common working and goals together contribute to the complex but highly addictive product management process.

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MERCHANDISING: A GLOBAL PERSPECTIVE

INTENDED LEARNING OUTCOMES 1.

To review four global perspectives of the merchandiser.

2. To relate these perspectives to the concept-to-carrier bag process to understand role differential by location. 3. To discuss emerging changes to the merchandiser role within a fashion retail business.

INTRODUCTION The reality of the planning process is more complex than the linear model presented in Part II. Indecision is common, as are problems with OTB budgets and option details not matching and product designs requiring changes due to intake margin pressures or even just because better ideas come along. The biggest issue is that different markets require different approaches to the creation of a product range. This prompts two observations: First, the differential of creating product ranges by sector (high street, bridge and luxury for example) is complex; and second, in a global context, the split of roles, activities and responsibilities will differ depending on the heritage of the retail industry and the unique characteristics that define the market. These factors mean that a single defined merchandiser role cannot exist. Rather, different activities in the role will assume different levels of importance and may even lie with other roles. The expectation of a single ‘one-size-fits-all’ approach to the matching of supply and demand within product management is unrealistic. In a global context, there are too many variables at play, many of which are out of the control of the B&M function to support a single approach. This is no bad thing in fashion. The very principles of fashion are that it is naturally uncertain, volatile and individualistic. Those characteristics, coupled with local market dynamics, make ‘local’ approaches to fashion management essential.

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This chapter presents four examples of the international variances in the merchandiser roles offered by academics from different global regions.

Each is accompanied by a summary perspective of how the merchandiser, or equivalent role, supports product management within fashion retail.

GLOBAL MERCHANDISING CASE STUDIES

CASE STUDY 11.1: Australia – Julie Dugandzic, RMIT, Melbourne The traditional merchandise function of the planner and buyer has changed significantly over the past 15 years. But, are these changes appropriate for all retail models? The role of the merchandise planner has now become more analytical and data driven. The buyer, once the ‘merchant’ of the business, is now driven more by design and the speed with which a product can be brought to market. This design-­driven retail model is synonymous with fast-fashion business. But is it suitable for a business where the model is not about product life cycle? Does it enable the merchandise function to identify and adapt to the increasing demands of the customer and the new markets in which they operate when the merchant role is no longer present? Despite popular assumptions, the Australian retail market is a challenging one. We are seasonally at odds with most of the northern hemisphere. Tastes/trends are driven by the casualness of the culture, which are at the same time fickle due to the immediacy of social media and the internet. The size of the market is also comparatively small, which has proven problematic for local retailers. The arrival of faster global brands whose purchasing power ensures far

lower prices has put increasing pressure on achieved margins and consequently gross trading profit. Typically, the merchandise function has consisted of a merchandise planner and buyer who work closely to manage both the quantitative and qualitative measures of the business, respectively. It is not unreasonable to suggest that the success of a business depends largely on the success of this relationship. Both parties need to be strategically aligned and able to collaborate effectively with various internal and external stakeholders. Within this function, a good merchandise planner is essential. Providing critical analysis and insightful reporting to management, the planner’s objective is, in its simplest form, to manage inventory levels to maximize sales and profit. They must be commercial and able to identify opportunities through analysis and minimize risks through carefully considered actions. More recently the role has evolved to function within different parameters that are designed to support the specific business model and hence operate more effectively in that space. Two examples of this are the Cotton On Group and Kmart Australia. Both oper-

MERCHANDISING: A GLOBAL PERSPECTIVE

ate at the lower end of the market; however, the role of the merchandise planner in each business is quite different, with their relationship with the buyer tailored to the needs of each business and continuing to evolve as the market demands more.

THE COTTON ON GROUP The privately owned The Cotton On Group (COG), Australia’s largest global retailer, operates 7 brands out of 18 countries through over 1500 stores. After 5 years of 20 per cent annual growth, COG delivered AUD 2.6 billion in revenue in 2018 (Ibisworld, 2019). This fully vertically integrated sourcing model is supported by a merchandise structure quite different to any other but designed to facilitate a high-turn fast-­fashion machine. It consists of three teams: planning, merchandise and buying. Planners are focused on achieving profit objectives through effective inventory management and markdown control. Supported by a team of analysts within the merchandise team, they too are highly analytical, constantly unpacking and slicing data across the business, devising forecasts and inventory strategies. The buyer and a team of product developers manage the development of ranges and engineering of garments to meet the costing targets provided by planning. In terms of the concept-to-carrier bag model, this business differs at the ‘Range Planning’ and ‘Assortment Planning’ stages. In the COG, buying is a similar role to that of design and operates quite independently of the planning function. The merchandise manager connects the functions of planning and buying; collaborating with both to ensure financial outcomes are met, they oversee another team of analysts and allocators in the merchandise team.

KMART AUSTRALIA Kmart Australia offers a contract to COG. In 2017, Kmart delivered AUD 5.578 billion in revenue: an increase of 8 per cent on the previous year. Kmart’s hefty investment in a vertical integration model has fostered close partnerships with suppliers through transparency and inclusion in the merchandise function, ensuring all roles within the product management process evolve together (Wesfarmers, 2019). The merchandise planner operates beyond inventory management to play a role in the supply chain; they analyze critical aspects of the business such as speed to market, more effective inventory allocation and cost savings through more efficient logistics. The brand’s implementation of its ‘Better Together’ sustainability program (Wesfarmers, 2019) has also seen greater engagement with supplier assessments and sourcing strategies. The buyer, whether in charge of private label or national/global brand assortments, connects the customer and design, curating product development to ensure that the right balance of trend, basics, price and quality is delivered at a time appropriate for the Kmart customer. Critical path management by the buyer results in more effective implementation of business strategies through closer synergies with the planning function.

CONCLUSION Although structured differently, both merchandise functions work for these respective businesses. For both, design is paramount, but how they deliver that design differs. For The Cotton On Group, speed to market and freshness is critical for their customer, whereas for Kmart, price and inven-

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tory depth is intrinsic to the design offering. Because of this, the planning functions differ. Merchandise planners in each business focus on facilitating the delivery of these key measures: COG through management of OTB, markdowns and inventory; Kmart through greater awareness of supply chain and cost of goods in the business. Interestingly, although the buying functions also differ, both businesses focus on margin dilution and profit, making the issue of agile assortment planning increasingly key to the merchandise function. Depth of purchasing and product life cycles vary, but the issues remain the same: what is the best balance of merchandise at any one time in a business to ensure positive financial outcomes? Assortment planning has been overlooked in recent times in favour of design. It brings the qualitative (buyer) and the quantitative (planner) together collaboratively for one process. This single step in the buying process ensures that balance – the critical element every retailer desires – is achieved. Consequently, assortment planning is attracting renewed attention, as more retailers invest heavily in powerful assortment planning systems. Further to this development, assortment planning offers the ability to access new markets. Online markets themselves are evolving, opening further opportunities for information gathering. With this comes greater access to data and the question of what to do with it: sophisticated algorithms and merchandise management systems that can extract more detailed consumer data fuel the need for more specialized analysts.

These analysts provide far more intimate details of the consumer and the market in which they operate. Such insights demand new, more specialized roles around allocation and planning, ensuring that these needs of the business are met and ultimately resulting in greater sales and profit. Savvy retailers looking to gain an advantage have created positions around data mining and data science: commercial analysts, digital analysts, predictive analysts and planners for specific parts of the business, such as demand planners for basics and ecommerce planners specific to online markets. By embracing this analysis, retailers can meet the needs of the rapidly changing consumer. As new markets emerge, further challenges to merchandise planning emerge. To increase their market penetration, more brands are moving into wholesaling. Once again, this creates demand for a new role, as the brand moves into a different position in the supply chain and so puts new demands on the planning process.

ABOUT JULIE DUGANDZIC Julie Dugandzic is a teacher at RMIT’s College of Design and Social Context specializing in fashion buying and merchandise planning. Working across footwear and accessories categories, Julie has spent nearly 20 years in retail, including management roles in sales, operations, buying and planning at major Australian retailers, including Myer and Target. Julie is passionate about creating critical thinkers, building digital competence and actively engaging students with industry.

MERCHANDISING: A GLOBAL PERSPECTIVE

CASE STUDY 11.2: India – Gaggan Bhatia, Pearl Academy, New Dehli The retail industry in India is undergoing a paradigm shift, becoming more dynamic with each passing day and changing at a breakneck speed. The retail industry in India is expected to grow to USD 1.1 trillion in 2020 from USD 672 billion in 2017 (IBEF, 2018), thus becoming the fastest-­growing industry in the world. The fashion and lifestyle industry, which is currently valued at USD 100 billion, is expected to grow in the offline area at a compound annual growth rate of 8–10 per cent followed by 15–20 per cent in the online space over the next 5 years (brandequity.economictimes.indiatimes.com, 2019). India is increasingly becoming the focal point of interest for the global fashion and lifestyle industry, which is just a reflection of its growing spending power. This coupled with an increasingly technically enabled population is making India too important for brands to ignore. On one hand, there are many positive drivers for the fashion sector, but at the same time, the biggest challenge facing this sector in India is sheer diversity of the country and heterogeneity of its consumer. It would be fair to argue that we, as consumers, are generally ignorant of the behind-the-scenes activities of the fast fashion eco-system. Teams of highly motivated professionals work tirelessly to curate and present fashion as a tool for consumers to express their style and personality to the world. But how do these professionals actually create a fashion range? Before the start of every season, the biggest questions that haunt every retailer are: ‘What to buy?’ and ‘How much to buy?’ This is because any merchandise purchased which is not in trend or is not aligned with the requirements of the target audience

will end up as unsold stock inventory. However, merchandise that is aligned with the market requirements and needs but is not produced in the required volume  – perhaps because of misinterpretation of market sentiments  – would result in unhappy customers, ultimately affecting business profitability due to missed selling opportunities. The core aim of every fashion retail brand is therefore to meet the 6R’s: the ‘right product’ in the ‘right quantity’ at the ‘right time’ at the ‘right place’ offering the ‘right quality’ at the ‘right price’. In the initial stages of retail growth in India, meeting and addressing the challenges of the 6R’s rested with several roles and activities. The task of identifying the right product at the right time was the responsibility of the product developer/planner, who before the start of season would undertake market research by looking at historical data. After combining it with future trends, they created a product line suitable for the target audience. The buyer had the responsibility of estimating the right quantity and setting the right price based on the buying budgets allocated. Their primary role was to coordinate with the product developer/planner to understand the collections and plan inventory purchases. Getting the merchandise made in the right quality through an elaborate vendor management process and making sure that the merchandise reaches the designated stores or is displayed on the website were the jobs of the merchandiser. More recently, retailers realized that these roles were becoming interconnected and that they could not exist and perform in isolation. As a result, these positions were merged to create a category manager: a ­position which would play the role of a product developer – a buyer as well as a merchandiser.

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To illustrate how a category manager works, let us use the example of one of India’s largest online fashion retailers: MYNTRA.  At MYNTRA, there are two sets of category managers: one that manages wholesale brands and a second that manages the company’s private label. In both scenarios, a category manager’s core responsibility is to take care of the overall hygiene of the product category for which he/she is responsible. To understand the role in detail, review the following set of seven activities that the category manager is expected to perform: 1. For a new season, it is the prime responsibility of a category manager to assess the buying pattern of the consumers, understand opportunities by completing indepth analysis of historical data, current and future market trends, and competitor analysis to create a feasible product range plan. The primary aim is to make sure that both top line (gross sales turnover) and bottom line (net profit) are healthy. 2. Evaluate the allocated buying budgets and keep the opportunity of available open-to-buy to adjust to market fluctuations and to avoid missed sales opportunities. 3. Managing vendor relationships is crucial for the success of a category manager. At MYNTRA, this includes the right product selection, management of stock availability and acquisition of products through effective communication and co-operative relationships with vendors. Category managers are responsible for negotiating competitive prices which generates maximum margin, negotiate convenient payment terms and on-time delivery of merchandise. 4. Ensure optimum levels of inventory are achieved by analyzing daily sales patterns. Based on their analyses, they can

create better depth of buy and width of option choice in their buying decisions. This helps with the curation of products, which act as revenue drivers for the organization. 5. Determine a competitive price architecture in line with the brand’s positioning. As the category manager is required to strike a fine balance between the top line (gross sales turnover) and bottom line (net profit or earnings), with the prime aim of keeping the category vital statistics in check, pricing policy forms a significant facilitator of this responsibility. 6. Sometimes it happens that despite the in-depth research and careful planning, the sale of merchandise does not give anticipated results. A category manager is expected to have a clearly defined liquidation plan and strategy to clear stock inventory, which includes mid-season discounts and end-­ of-­ season sale discounts. 7. In addition to the above roles, a private label category manager is required to create a robust vendor management system, which will allow the brand to build relationships with the suppliers and service providers and contribute to the execution of efficient and responsive value chains depending on the market demand and needs. A fashion retailer for its private brand buys merchandise under two arrangements. One is under the ‘marketplace’, where a category manager works closely with the vendor’s team to create a feasible product line based on vendors input, and inventory is planned based on the historical data. The other arrangement is ‘outright buy’, where the category manager shares his insights and gets the merchandise made accordingly. Inventory under this arrangement is the sole responsibility of the brand.

MERCHANDISING: A GLOBAL PERSPECTIVE

To summarize, a category manager walks on a tight rope. On one hand he/she must work on identifying and creating a right product mix, offer competitive pricing and ensure consistent product availability by having a proactive approach. On the other hand, he/she must work towards optimizing sales of a specific product, creating a liquidation plan to reduce inventories, thus minimizing the impact on bottom lines.

ABOUT GAGGAN BHATIA Gaggan Bhatia has over 20 years of experience in fashion supply chain management,

sourcing and vendor management. Having worked with brands such as Gap, Forever 21, Koovs and DKNY, he has an extensive understanding of global fashion and retail industry. Currently, Gaggan is an assistant professor at Pearl Academy, a premier fashion institute based in India.  He believes in making the process of learning meaningful and interesting. He is a strong follower of experiential learning. Having completed his master’s in fashion marketing from Nottingham Trent University, Gaggan is now pursuing a PhD in sustainable supply chain management.

CASE STUDY 11.3: The Philippines – Ana Pingol, Business Consultant, Manila The Philippines has enjoyed healthy GDP growth in the last five years. A growing middle-class population and increased cash flow from overseas Filipino workers have been key drivers of growth. With this, disposable income and consumption have ris-

en and helped to propel growth in fashion retailing via independent retailers, as well as department stores housed in mega-malls. The fashion retail industry comprises a mix of local and global brands, as shown in the table below.

Brand

Business type

Year established in Philippines

Number of branches

Bench

Local brand

1987

111

HandM

Global brand – parent company owned

2014

21

Uniqlo

Global brand – joint venture

2012

56

Forever 21

Global brand – joint venture

2010

10

Penshoppe

Local brand

1986

109

The SM Store

Department store

1958

61

Robinsons Department Store

Department store

1997

48

Rustan’s Department Store

Department store

1952

5

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With an increasingly diverse pool of brands, the Filipino customer of today is enjoying an unprecedented wealth of product options. The merchandiser and the merchandising team are central to this development, as they are in overall charge of the product assortment that provides customer satisfaction, brand equity and profitability. In the Philippines, most organizations use the title merchandiser, but this combines the responsibilities of the existing buyer and merchandiser roles. It is both a qualitative and quantitative role that encompasses both buyer and merchandiser activities identified in the ten-step concept-to-carrier bag model. The merchandiser works in teams from the birth to the death of a product. In some cases, the steps ‘Research’, ‘Distribution’, ‘Retail’ and ‘Carrier bag’ may be carried

out by an early-career member of the merchandising team, such as an assistant merchandiser. Where this is the case, the entire process still lies with one team and not with separate buying and merchandising teams. Key performance indicators for merchandisers include sales turnover, gross sales margins, sales to stock ratios and, of course, fullprice sell-through maximization. There are subtle differences in the merchandiser role depending on the retailer’s business model. To understand these differences, consider the table below. It summarizes the conceptto-­carrier bag process model for two types of retailer: a fast-fashion local brand and a mid-range international brand, sold via a local retailer. The shaded rows highlight differences in activities for the merchandiser role in the two different types of retailer:

Concept-tocarrier bag step

Execution details

Approximate Timing

Research

Review of past ranges, competitors and future trends

December

Concept

Product range ideas and top-level category budgets

December

Product development

Range plans with options, prices, unit buys, OTB

January

Sourcing

Sourcing of manufacturers for the range, samples review

January

Manufacturing

Overseeing flow of manufacturing from samples approval to shipment monitoring

January to March

Shipping

Approvals for shipment confirmation, shipment monitoring

March to April

Warehousing

Final quality control, revision of initial allocation

March to April

Distribution

Release of allocation, product trainings

March to April

MERCHANDISING: A GLOBAL PERSPECTIVE

Retail

Review of sales performance, stock transfers, replenishment and repeat plans

April to June

Carrier bag

End of season with full-price sell-through target achieved

April to June

Concept-tocarrier bag step

Execution details

Approximate timing

Research

Feedback of past ranges, competitors and future trends

April

Concept

Product range ideas and top-level category budgets

April to May

Product development

Range plans with options, prices, unit buys, OTB

June

Sourcing

Submission of selection from brand range, requests for items not available in range, purchase commitment negotiation

July to August

Manufacturing

Liaising with brand on completeness of range production

September to February

Shipping

Shipment monitoring

March

Warehousing

Quantity and quality check, arrange for returns if any, review initial allocation

April

Distribution

Release of allocation, product trainings

April

Retail

Review of sales performance, stock transfers, check for possibility of replenishment and repeats

April to September

Carrier bag

End of season with full-price sell-through target achieved

April to September

Differences in business models are not the only influences on the Filipino merchandiser role. Consider the following three environment influences on the role: 1. With a lower GDP per capita compared with developed markets, each product range must provide value to the customer. Value does not necessarily equate to lowest possible retail price but instead best perceived market value.

2. Given that the Philippines has a tropical climate with only dry and wet seasons, the merchandiser must also ensure that seasonless dressing trends are capitalized. This is an easier task for local brands who have control of the manufacturing process and a more complex one for retailers of international brands who can only choose from existing collections which may be geared for markets with four seasons.

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3. Consider the geography of the country: the Philippines is an archipelago, and key markets in the south of the country can be as far as 900 kilometers from Metro Manila, the economic hub of the country. Therefore, accurate customer profiling and allocations are needed to lessen opportunity cost of lost sales turnover and stock transfers. Regionalism is also a factor, meaning that merchandisers must account for differences in culture across internal regions, tailoring assortment to each region’s market segment. Technology now gives access to better point of sale, stock inventory management and business intelligence systems, with more data available for the merchandiser to use in the decision-making process. Conversely, the customer also has more access to product information through the internet, e-commerce and social media. This perfect storm of big data, hyper-­informed customers and increased competition has made the product management process more complex but also more insight rich. This has led to a greater focus on quantitative aspects of product management. As a result, retailers are introducing a new planner role. This frees the merchandiser to focus on the qualitative and creative details of the product. The planner, equipped with better infrastructure and access to information, focuses on the quantitative and financial details. Sales, promotion and margin reviews, forecasting, sell through analysis, allocation and stock transfers are now the responsibility of the planner. The ability to derive speedy commercial strategies based on data is also critical, as omni-channel retail progresses in the Philippines. With regional fashion site Zalora, Alibaba-backed Lazada and mobile marketplace Shopee gaining ground with millennials, traditional brick-and-mortar brands

are increasingly pushed to offer the omnichannel experience. In the ASEAN region, the Philippines still lags in e-commerce conversion, as e-commerce is still a comparison market for Filipinos. The realities of the critical customer and omni-­channel imperative have impacted the skill set of the merchandiser, with e-­commerce merchandisers or online trading manager roles now being in demand. As a result, retailers are drawing on merchandiser skill sets as they set about increasing consumer conversion rates, managing long-tail stock inventories and market share growth. Meanwhile retailers are also seeking planners who can turn large datasets into dollars and forecast to be ahead of competition. As the roles of the merchandiser and planner continue to evolve, there is now a need for those working in the industry to be mindful of upskilling. Opportunely, training and development options have now improved with availability of short courses and online training to further cement the developments within the roles.

ABOUT ANA PINGOL Ana Pingol is an independent retail management consultant with a focus on buying and merchandising. She is a well-­rounded professional with experience in Apparel and Accessories markets in Asia and the UK, both in the value and luxury segments. She uses her experience to provide expert recommendations on product management processes, managing merchandising analytics and team training and development. As a merchandiser, she believes in S.M.A.R.T. goal setting and using data to put the customer at the core of decision-making. She is an advocate of continuous learning and motivational leadership. She works with emerging merchandiser talent to help them develop their skills and career opportunities.

MERCHANDISING: A GLOBAL PERSPECTIVE

CASE STUDY 11.4: United States of America – Michael P. Londrigan, LIM, New York THE MERCHANDISE PLANNER IN THE USA The U.S. apparel and accessory market is a diverse market and includes many different levels of fixed retail space and online sales companies. It is currently dominated by three major players: Amazon, Walmart and Macy’s. Respectively, these three companies account for $36 billion, $25 billion and $22 billion in apparel and accessory sales, or just over 28 per cent of the total market (Marketwatch.com, 2018). The balance of the sales comes from a diverse number of companies, from small boutiques to online companies and everything in between. Two key players interact to bring these products to market and satisfy consumer needs: the merchandiser and the planning analyst (planner). Of course, there are more people involved, but for the purposes of this case study, the focus will be on these two roles. In most instances, the merchandiser will work within a team to build and execute seasonal collections, while assisting to build pricing strategies that support seasonal budget objectives and deliver desired mark ups. In addition, the merchandiser will conduct market research on the competitive landscape and provide data to assist in communicating key performance indicators to drive market share, revenue and profitability, while creating strong checks and balances in the process to evolve strategy and merchandise assortments necessary to meet consumer demands. Notice the term ‘in most instances’. Fashion businesses of differing sizes can adopt different language and can view the role of the merchandiser in somewhat different terms. The merchandiser is more tuned in to the qualitative mar-

ket trends and products and less focused on quantitative numbers and budgets. Conversely, the role of the planning analyst, or simply the planner, is to plan and forecast for future merchandise buys based on historical data and current inventory levels. They take over the planning of a new range after the merchandiser has set the assortment plan for the planning period. The planner is responsible for reviewing stock to sales ratios, responding to changing sales trends, and ensuring that departments achieve plan sales, plan markups and plan markdowns. In addition, the planner coordinates and plans merchandise flow-through while maintaining inputs of data in various merchandising systems. The planner is therefore a quantitative role that is focused on numbers and budgets. From a process perspective, this division of responsibility does not mean that the roles are mutually exclusive. Both are in fact a part of an overall team that has responsibility for all aspects of driving sales, profits and effectively delivering products on time to the consumer when the consumer wants it, where they want it and at the price they want. To put it in historical context, the merchandising function was developed in the twentieth century. The planning analyst role, meanwhile, is a relatively new function, made possible due to the increased role of technology within the decision-­ making process. Before the development of capabilities such as category management systems, linked supply chain activity and real-time data reporting the merchandiser would walk the sales floor at the end of the business day and physically count the stock to determine inventory levels and plan the next buys. This required locally based mer-

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chandisers with a keen local knowledge of their market. Thankfully, today with the advanced data analytics and the amount of information at the merchandiser and planners’ fingertips, there is no need for that manual process, as the computer with its various programs has made the role of the planner possible. The evolution of this role brought a new level of analytical rigor and hence the ability for retailers to exert a greater level of control in the planning and trading process. Technology development therefore has had a very profound impact on fashion management. The split of roles between merchandiser and planning analyst has shown retailers that by controlling their stock inventory with a planner they can increase profitability. This has never been as important as today, as many U.S. retailers are significantly increasing the use of private label programs or private brands. These private labels support unique product propositions that mean allowing U.S. retailers to differentiate themselves in a competitive market but also enabling internal control of the supply chain process. The effect of the increase of private label programs has heightened the need for the planner, as the ownership of the merchandise is now the retailer’s responsibility, giving rise to a stronger need to better control their stock inventory levels and the actual flow of merchandise. This is important, as effective stock inventory management is directly linked to the retailer profit and loss account and balance sheet ledger and ultimately the bottom line. As evidenced by the above, it is only the large retailers and online companies that can afford to hire and maintain a team that would involve merchandisers and planners. A company such as Macy’s will have hundreds of planners and merchandisers given the size and breathe of their apparel and accessory assortments. A small retail format such as a boutique may employ the same

techniques, but the reality is that one or two people, perhaps the owners, would most likely carry out these functions.

A MENSWEAR EXAMPLE To illustrate how the merchandiser and planner roles function, the table below lays out a concept-to-carrier bag process at a menswear retailer. As discussed, the merchandiser has various functions that need to be accomplished in order to fulfil their roles, and a planning timeline must be adhered to in order meet the deadlines that are set. Most merchandisers will work with a calendar or schedule to keep them on track and list key dates or milestones that need to be met. There is a constant overlap between the start and finish dates as the merchandiser, like the planner, works on multiple seasons at the same time. A rough merchandiser calendar might look like: October/ November

Research next fall season, complete spring/summer purchases

December/ January

Fall (Autumn) buying trips based on research, begin to receive spring/summer merchandise

February/ March

Fall (Autumn) line review finalize assortment, develop fall mark down strategy, ­evaluate spring/ summer

April/May

Research spring/summer, mark down spring inventory, place production for fall

June/July

Mark down summer inventory, start to receive fall merchandise

August/ September

Plan spring summer, place buys, evaluate fall early sales, continue research

MERCHANDISING: A GLOBAL PERSPECTIVE

All the while, the planner works alongside the merchandiser at critical points in the concept-to-carrier bag process calendar, making decisions as to when to purchase the product assortment, how many units to purchase, when to deliver into the business and, finally, which stores (physical or online) will receive the assortments. The calendar-driven process model therefore holds key trigger dates by when decisions will need to be made. It goes without saying that it is a complex and detailed process map to complete in such a short space of time.

ABOUT MICHAEL P. LONDRIGAN Fashion industry veteran Michael P.  Londrigan is the vice president for academic affairs at LIM College. He was promoted to this position in January of 2017. Michael joined LIM College in 2008 as the chair of the fashion merchandising department and was promoted to dean of academic affairs (undergraduate) in 2013.

PERSPECTIVES ON THE MERCHANDISER ROLE The huge structural change within the global economy affords significant potential value to fashion retailers. However, change is not a panacea. To be fully exploited, it is reliant upon effective usage by the roles within the specific business activities that form the value system. The management of product by buyers and merchandisers needs to keep pace with the new opportunities that present from the simple – knowing the complexity of the market, as shown by Julie Dugandzic, to the strategic, as highlighted by Michael Londrigan, with the emergence of the

Michael arrived at LIM College with nearly 30 years of experience in the apparel industry focusing on retail, wholesale and textiles. He has a strong background in product development along with extensive executive sales, marketing and merchandising skills. He holds an MBA in Marketing from Fairleigh Dickinson University. Michael is the author of two textbooks: Menswear: Business to Style, published by Fairchild Books, and Fashion Supply Chain Management, published by Bloomsbury in 2018. He has held several positions throughout his career, including national sales and marketing manager for Ulster Weavers, sales executive for Regal Menswear, managing director of U.S. marketing for Cotton Incorporated, vice president of sales at Harper Industries, account executive at Oxford Industries and associate menswear buyer for JCPenney. He also served as project coordinator for Social Accountability International’s ‘New York City Factory of the Future Project’.

planning analyst role within the USA region. Change must inevitably impact the buyer and merchandiser roles of the future. Emergent skill sets of cross-­ functional awareness and hence interpersonal skills, along with an emphasis on analytic and social media skills, are changing the operation of the buying and merchandising function. As such, structural change indicates that the accepted wisdom of the remit of buying and merchandising amongst other roles within product and supply chain management needs to adapt to a new paradigm, where consumer control, big data and the need for a ‘micro merchandising’ approach are demanded. To understand

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the paradigm, the author, in a series of focus groups with buying and merchandising professionals, has identified how the buyer and merchandiser roles in the UK are now evolving. The research reviewed four objectives: •• The relevance of buying and merchandising within retail business models.

The research affirmed that buyer and merchandiser are both connected to product management and that value creation was at its heart. There was an emphasis on the financial impact that buying and merchandising can have on a retail business. Citations that support this are placed in Table 11.1.

Table 11.1 The strategic relevance of buying and merchandising within retail business models ‘Retail is all about buying and selling stuff and making money for someone along the way and it is that whole, you know, where the trigger is’ ‘Cash flow when you’re working for a business is absolutely fundamental’ ‘KPIs that exist in every business especially in omni-channel but it’s about who has responsibility because so many people touch those aspects of the site. Is it only product that drives the average basket value?’ ‘Our buyer would always discuss the range beforehand with our merchandiser and they would say, “Ooh, are you sure about that, I think that’s pushing it too far, maybe take that out or pursue that next season” and stuff like that, so our buyer would always negotiate with the merchandiser first before they went out to our directors’ ‘Margin is a big thing, that’s probably where merchandising has any authority - margin, margin, margin’ ‘I think people underestimate the importance of social media in consumer decisions’ ‘When it comes to trend forecasting, for example, from our side it would come from design so maybe they should pay attention to what’s happening on social media and stuff but then we also have an e-commerce department, don’t we? So, if their job is to post stuff on the companies’ social media, they should also pay attention to what our competitors are doing’

In reviewing the citations, there is a general connection to Parts I and II of this text. However, there was also interesting commentary on the way that the buyer and merchandiser roles worked together. There is evidence of the accepted collaborative working between buyer and merchandiser, but there were also thoughts around the hierarchy between the two, with suggestions of an unequal relationship. Finally, there was a focus on new emerging activities and terminology suggesting

that the omni-channel societal and process impact is having a clear effect on day-today product management. This impact appears to be affecting both activities and relationships within the value system. •• Key relationships between B&M and other value system roles The research suggested a potential evidence of a weakening of the buyer/merchandiser relationship as more and more focus is placed on the consumer facing

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activities such as marketing that now are fully integral to achieving sell-through and rate of sale assumptions. Emergent views focus on a broadening and more appre­ciated

merchandising role, whilst that of the buyer was highly focused around visual literacy and the ‘idea’. Table  11.2 summarizes key citations for this research question.

Table 11.2  Key relationships between B&M and other value system roles ‘I think the merchandising role, maybe it is stretched a bit more, merchandising are much more knowledgeable about brands and products than maybe 10 years ago and they’ll give you… they’ll be more vocal about it as well in terms of giving you opinions, which buyers want, which probably wouldn’t have happened 10 years ago’ ‘I think the importance of the merchandiser role is a lot more appreciated now and companies and the buying are more adapted to it and they can see the benefit of the role. So that builds the trust between the relationships as well’ ‘It’s that visual literacy, it’s that, you know, owning the handwriting of the brand, owning the handwriting of what that store is even standing for and those visual skills are absolutely fundamental and that’s something that I don’t think a merchandiser from the work I've done could ever replicate’ ‘But actually store-grading, bizarrely, I would almost take off merchandising now because we have whole teams of, you know, almost the store planners, you know, the layout people, they own the grading because ultimately they own the store plans’ ‘I think merchandising and marketing have to have a really strong link as well. I don’t think it’s just a marketing to buying side, I think definitely from a promotional point of view and we get involved so anything that’s going on to social media or anything like that’ ‘For us, buyers will work a lot more with the studio and a lot more with the editorial and the creative teams but still merchandising will work with them as well but on different components’ ‘I feel as a business the merchandisers are more responsible for the delivering the sales so in terms of, so like having complete veto over product if we don’t think it’s going to work’ ‘It feels almost as if the buyers are there cultivating relationships with the suppliers, managing critical path etc., which is a bit more operational and then all the processes are being led by merchandising’ ‘I only ever raise a purchase order after merchandising have confirmed it’ ‘We have a business analyst for each category so like for running, for basketball… although they just look at everything. Literally if you need to know something you just go to them, they are like a whizz, a numbers whizz’

One highly interesting point was the bleed of marketing and brand management relationships into the merchandising role, which feels counterintuitive to the accepted context of spreadsheets, mathematics and

logistics within which the role is viewed. Perhaps this is the most fundamental change in the role of the merchandiser compared with the classic role descriptions laid out in Chapters 2 and 3 in Part I of this text.

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Further to this, the effectiveness of the buyer/merchandiser relationship was highlighted, and this debate identified structural shape but also the power dynamics between the two. More clarity of the dominance of the term merchandising was gleaned, as its perceived power to control and deny emerged strongly. An interesting point to note within this section was the emergence of a ‘business analyst’ to support buying and merchandising. This mirrors the role descriptions provided by Michael Londrigan (USA) and Julie Dugandzic (Australia).

•• Innovation impact on the B&M role The term ‘marketing’ is clearly now entrenched into buying and merchandising. In support of this, the merchandiser role was discussed as evolving as a more creative role but also interestingly as a substitute for buying. This was supplemented by thoughts around the elevation of a smaller but more focused buying role and a broader wider merchandising role, able to think and act with greater accuracy because of the takeover of data mining by technology (Table 11.3).

Table 11.3  Innovation impact on the B&M role ‘There are people where the merchandiser has actually been that buying function as well for a period of three, six months and successfully so’ ‘Depending on your business model and how much your buyer is out of the office, you're essentially, as the merchandiser, the most senior person on your team and you're leading the buying half and the merchandising half and there is, kind of, you're the final decision-maker and business needs to go on when those people are out of the business’ ‘Technology has given us more thinking time so certainly in terms of being strategic we’ve actually got a little bit of breathing time where before it was just paper everywhere’ ‘Someone like ASOS can carry a very long tail of options, which is represented on the balance sheet. I think the job therefore may be for merchandising and marketing, again, how do you promote and sell that long tail?’ ‘Marketing comes in because I think there's a lot about someone like ASOS having so much possible product that it's about curating what they're offering to marry onto those social media trends whatever they see coming through, how quickly they can react to demonstrate a curated answer for their site and I think market places’ ‘It is the consumer that is everyone’s marketing manager’ ‘Image approval isn’t actually something that the e-commerce team do, that’s what the buying team does, so I mean I have to make sure that then I have to then approve every single image that then goes online for my brand, for each product’ ‘Whenever a product went to the website, I would always have a look, every Monday I would have a look at the new product coming in and I would make sure that it looks how we want it to look on the website’

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The research is stark. It is the consumer and their shopping behaviour that are now driving the buying and merchandising function. This is a significant point. It changes the principles behind the function from a pushing of product onto the consumer, from a planning perspective to one where the consumer pulls the retailer into their individual demand pattern. The emphasis on the role of marketing within this changed process cannot be underestimated. The speed with which product is developed, manufactured and delivered to

a retailer is now supplemented with the speed with which product can be uploaded to websites, social media and ‘marketed’. •• B&M activities within an omni-channel fashion environment The focus groups identified that the strategic, forward-thinking mind set is prevalent within buying and merchandising. A key message is that algorithms and data analysis alone do not generate success and, to be relevant, need to be used effectively.

Table 11.4  B&M activities within an omni-­channel environment ‘So, if your business is ok in keeping it kind of just doing bestsellers and running it as it is then that’s fine but if you want to move it forward you need somebody (the buyer) that can do that’ ‘If we’d just used the data, we would have said well no, you can’t pick up any of those products. Yet we’ve had to go, the buyers have had to take data but then also they’ve had to use their gut. We've taken that data back and translated it through the business, so people understand such a shift in a brand away from what the history would tell us’ ‘Everyone’s got a sticker on the back of their calculator that says property of… and then you’ve got basic maths, the margin… It’s more, for me, it’s those softer interpersonal skills’ ‘It's now somebody who's got much more of a sociological approach who understands the nuances of what international needs, what e-commerce needs, what branch, what web needs, it's somebody who has maybe more of a relationship building ability’ ‘Long gone are the days where you have to have a degree in finance or maths in order to go into merchandising’ ‘Both should have some sort of trend awareness because of the merchandiser keeps an eye out for upcoming trends they will be able to see what the buyer sees when they select a product’ ‘Your relationships with people sort of underpin everything because everyone is so honest in terms of what they’re trying to achieve’

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Table 11.4 is illustrative of the changes to the merchandiser role that are revolutionizing its character and contribution to product management. As the global perspectives of the merchandiser role suggested, technological capability is creating a new focus on analytical capability. However, reliance on data

analysis only is dangerous, as the citations in Table 11.4 suggest. Key to the successful use of data is the quality of relationship between buyer and merchandiser to challenge data presumptions and understand the impact of analysis outputs compared with the retail brand and its positioning.

SUMMARY As this chapter concludes, it has provided some differing angles of the merchandiser role. Much of these angles carry commonality. The context of the merchandiser role appears to be constant, and the focus on analysis, stock management and profitability remains. However, different nuances of the role exist around the world, not least in the name given to the merchandiser role. What has emerged is that innovative technology and the growing capability of big data sets, omni-channel integration and the changing power of the consumer are conspiring to broaden the role of the

merchandiser. The bleeding of marketing activities into the buying and merchandising function is clear, as is the greater visual literacy that the fashion merchandiser must now have. Most importantly though are the emerging soft skills: relationships, negotiation, discussion and collaboration. The profile of the merchandiser is pivotal in the development of product within a fashion business. This appears never to have been more important, and as the role moves from being purely numerate into one that carries strategic weight, it is presenting new and exciting challenges for the role and its incumbents.

SELF-DIRECTED STUDY 1. Access recruitment consultant websites in the UK, USA, Australia, India, China and Spain and assess the different product management roles that are offered.

2. Create a list of the numbers of each role offered and their key activities. Which roles appear to be in demand and how do their responsibilities differ by region?

FURTHER READING Hebrero, M. (2015) Fashion Buying and Merchandising: From Mass-Market to Luxury Retail. London: Create Space Independent Publishing Platform

Snoeck, J., & Neerman, P. (2018) The Future of Shopping: Where Everyone is in Retail. Tielt: Lannoo Campus

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BIBLIOGRAPHY Cotton on Group (2019) OUR VALUES – Cotton on Group. Available at https://cottonongroup.com.au/who-we-are/ IBEF (2018) Retail Industry in India. Available at https://www.ibef.org/industry/ indian-retail-industry-analysis-presentation Ibisworld (2019) Ibisworld Australia, p.Financials. Available at https://www. ibisworld.com.au/ Marketwatch (2018) Analysis and Forecast to 2025. Available at https://www.

marketwatch.com/press-release/ united-states-apparel-accessories-andother-apparel-market-2018%2D%2Danalysis-and-forecast-to-2025%2D%2Dresearchandmarketscom-2019-02-01 Wesfarmers (2019) Annual Report. [Internet] p. 42. Available at https://www.wesfarmers.com.au/docs/default-source/ asx-announcements/2019-annual-report. pdf?sfvrsn=0

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INTENDED LEARNING OUTCOMES 1.

A review of e-commerce within the context of buying and merchandising.

2. A provision of three summaries to highlight the impact of e-commerce on the product management process. 3. A summary discussion of the impact of e-commerce on the product management process.

INTRODUCTION The development of e-commerce and the e-retail business model has had a profound effect on the way fashion product is bought by consumers. The ability to shop 24 hours a day via an electronic device whether at home, in the office or whilst mobile was beyond the wildest imagination of those who can remember twentieth-century shopping characteristics. The scale of product that can be accessed is incredible, and the fact that choices need not be limited to a local high street but can be broadened to other towns, counties and countries means that the opportunity to be truly unique in what we wear is upon us. The business benefits of e-commerce are easy to imagine. The move to trading online via either a pure play or a multi-channel operation enables a business to have exposure to a wider potential market than its local one. A bigger business implies greater economy of scale in a cut-throat industry, enabling the risks of trading to be balanced across a wider operational portfolio of distribution channels. In addition to the wider trading opportunity, the mixing of service standards such as free delivery and customer relationship management (CRM) activities that pivot around the brand and the impact on business size and shape by e-commerce is widespread. Buying and merchandising is not immune to this, and this chapter will concentrate on this aspect of e-commerce only to demonstrate practical differences 208

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between the processes laid out in Part II and the e-commerce impact on the role of the fashion merchandiser. This chapter will not act as a holistic summary of differing distribution channels, marketing approaches or a detailed technological discussion; rather it will pose relevant questions about this new route to market for a retail business.

E-COMMERCE INTRODUCTION Within the fashion retail industry there is significant evidence that a radical transformation of the retail distribution channel via e-commerce is now prevalent. Web-­based information technologies have fundamentally changed supply chain management transforming operational processes and activities via improved information management and the streamlining of value systems via integration between the differing channels. Demand too has been disrupted with the multiple distribution channels driven first by e-commerce and more latterly via m-commerce.

Multi-channel retailing has reached a level of integration that, to be effective, requires integrated promotions, consistent product across all channels and an information system that shares customer, pricing and inventory data, all of which is supported by differing delivery options (Beck and Rygl, 2015). The totality of developing omni-channel retailing is highlighted by Verhoef et al. (2015), who emphasize integration of the consumer experience across multi-touchpoints and wealth creation being measured holistically across all channels combined (Table 12.1). Thus, an omni-channel operation by its nature places overall customer experience and sales across all channels at its apex. The

Table 12.1  Multi-channel taxonomy Channel operation

Dimension 1

Dimension 2

Operational example

Multi-­ channel

More than one channel widespread at a time

No consumer interaction capability No retailer integration control

No customer, pricing or inventory data shared across channels

Cross-­ channel

More than one channel but not all channels widespread at that time

Partial to full interaction capability for consumer Partial or full integration controlled by retailer

Customer, pricing or inventory data shared across channels, but merchandise not offered via channel catalogue

Omni-­ channel

All channels widespread at that time

Full interaction capability for consumer Full integration controlled by retailer

Customer, pricing or inventory data controlled across channels

Clark adapted from Verhoef et al. (2015)

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multi-dimensional nature of e-­ commerce presents challenges to accepted concepts of an authoritative product offer. Not only does the marketing mix broaden in scope but so potentially does the product offer, unlimited by a physically limited channel and local consumer. The growth and influence of e-­commerce continue with such pace that its development in 20 years from the first online retail stores via non-integrated multi-channel strategies to the pull mentality of click and collect or the buy online return in store (BORIS) integrated omni-­ channel operation of today has been breath-taking. While positive for consumers and an opportunity for business, an omni-channel operation does place the mentality of the value system and silo structures as an anathema to an agile, consumer-­ focused, integrated, omni-­channel retailing operation. Within the focus of buying and merchandising activities, highly integrated promotions, product consistency across channels and click and collect capability place new demands on the creation, execution and supply of product to the consumer. The multi-­ channel environment

therefore pressures the merchandiser throughout the concept-­to-­carrier bag process. From initial demand planning and the creation of accurate KPI budgets via the management of stock in and outflows through the WSSI to the creation of balanced range plans, there is much that affects the merchandiser role. The impact on the merchandiser is greater than the pressures it places on the accepted role and activities. e-Commerce also changes the context within which these activities are carried out. Greater fulfilment options are required, as the consumer now expects convenience delivery to match the convenience of finding the right product. Greater fulfilment options require a greater flexibility within stock management and its flow through the concept-to-carrier bag process, which is a major focus with retailers. This ties into the ability to service customer demand from any distribution source at any time of the day. This then changes the mind set of planning from the creation of a budget and range shaped by total season and finite store location to one that is devolved where the consumer ultimately directs the flow of product.

PROFILE 12.1: A day in the life of an e-commerce merchandiser – Elise Thomas – beauty retailing The easiest way to describe this role is that it is like a store manager– you want all your stock on the shop floor ready for customers to find, you also want your shop to be an easy shopping experience and for customers to find what they are looking for, as well as enjoy browsing the shop. Ultimately you are responsible for customers finding prod-

uct and ensuring their journey through the site is as smooth as possible (no broken links allowed!). As e-commerce merchandisers, we have touch points with everyone in the business: marketing, operations, buying, merchandising, content, insight – basically everyone! It is quick and reactive, meaning you can make

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changes instantly, and if it does not work, you can undo quickly. We are ultimately responsible for the sales and stock performance onsite and customers finding the product. We regularly review customer journeys and use tools like Google Analytics to better understand the customer and make improvements. Just like a standard merchandiser, we build trading plans and reforecast, manage the trading calendar and plan campaigns accordingly  - ensuring the web is supported with stock and the site is optimized. Mondays are very similar to those of a standard merchandiser – we report on sales, stock and last week’s activity, plus we also review traffic and conversion onsite and at-

E-COMMERCE AND BUYING AND MERCHANDISING To put this complexity into a real-life context, two industry practitioners, one from the merchandising perspective and the

tend a trade meeting. The rest of the week can be varied and range from meeting with the buyers regarding upcoming product launches and planning how to execute online to meeting with third-party suppliers that can support your website with the ‘next thing’ in customer experience. In terms of the personality for this type of merchandising, adaptability is key as things change and evolve all the time. A positive and approachable manner is a must  - you get to work across the business, so it is important to have great working relationships; and like a traditional merchandiser, you must love numbers and have excellent attention to detail.

second from buying, relate their experiences of working within an e-­commerce environment and identify the practical implication on product management planning and trading activities.

CASE STUDY 12.1: The merchandiser and e-commerce – Adam Rose, Debenhams Following the ‘birth’ of the web in the mid-­ nineties and subsequent arrival of online retailing, the rise of this new channel coincided with my appointment as global trading director for childrenswear at Debenhams. Embracing new online business and digital opportunities was and remains high on my personal agenda, and I set about focusing the divisional team on what this new channel could bring. What became immediately apparent was that online trading was not just a new ‘store’ that was able to achieve higher sales volumes than our largest bricks-and-­mortar

stores but was the catalyst for changes in consumer behaviour and shopping habits and business-to-consumer (B2C) interaction. In addition, it heralded new access to customer data metrics and accessibility for consumer and retailer alike. In a new environment such as this, leading the teams to understand and embrace online trading led the merchandising team to several new truths within our ability to plan and trade a product range. For example, we quickly learnt that: –– The online store became the number one store in both unit volume and sales

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turnover, changing our KPI planning presumptions –– Best and worst sellers differed between online and physical stores, adding a new dimension to our product analyses at the start of the concept-to-carrier bag process We also started to see our online store as a source of new datasets which could enhance our concept-to-carrier bag process by creating new analysis tools and KPIs: –– Daily hourly sales budgeting became possible, allowing more accurate planning –– We could create new analysis measures such as site visits and basket measures –– We could create targeted marketing and promotional techniques within the online store and via social media and email to reduce markdown spend –– New measures on stock management, such as delivery and returns, were available to support the relationship with our customers The new knowledge that we were able to utilize took the teams to a new set of questions: how does our customer shop? And how can we use this knowledge within our merchandising roles? We learnt to focus more on the customer facing elements of retailing to understand how searches online were made and the types of terminology that was used to find product. Linked to this, we saw that an online store was just that: a store. Its layout, navigation tools and sequence of products were significant in customer conversion. As our knowledge grew, we were able then to build a deeper level of detail about our shopping audience. We understood the value of reviews and ratings, understanding how often and when customers would log on, how much they bought, returned and how often they abandoned the basket and

logged off. From a marketing perspective, we were able to understand how promotions worked and how they linked to loyalty and repeat purchases. Over time, the new planning and trading capability that we had developed led to organizational change. With a broadening capability and an increasing integration with the marketing specialism, the business questioned prevailing internal structures and accountabilities to ensure the right teams and roles were able to access and act on new information streams. This organizational focus has meant that, as technological capability has developed, the business has been able to ask new questions of its buying and merchandising teams. For example: –– Accepting that, where online stores are a retailers biggest trading opportunity, it justifies a corresponding level of attention –– Product ranging decisions can be different from ranging products for online stores only to use different store channels to trial new ranges –– Creating distinct promotional offers for all channels or specific channels only Of course, with the rate of technological change, nothing stands still in the online store dynamic. There are still more developments to come. As technology develops, greater focus can be placed on stock allocations and obtaining the optimum return on finite stocks. Second, the use of algorithms and predictive tools, which are already intrinsic to retailers such as Amazon: the use of data and tools will drive reliable sales and stock predications to allow the better management of consumer and business expectations. It is machine intelligence that will also influence logistical planning and the flow of stock through the concept-tocarrier bag model. This influence need not just be in the flow of stock, but tools such

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as product life cycle management (PLM) can connect retail buyers and merchandisers digitally to external suppliers and agents in the design process to considerably shorten lead times and activities. Finally, technological change is not limited to the online retail channel. Technology has also developed new analysis tools that can be used within the concept-­to-carrier bag process. Examples of these are: –– Edited: This is an industry tool that compares online ranges and marketing stances across global retailers. It has transformed the prevailing approach to the ‘competitor shop’ activity of the buying team –– Hit wise: This is an industry wide tool that helps retailers understand consumer insights, channel optimization and promotional campaign analysis –– Hydra maps: This tool is linked to Google ‘heat mapping’ and visualizes the intensity of data in geographical regions to help pinpoint opportunity –– Site Catalyst: A dashboard tool that summarizes key online parameters (demand, order value, visits, conversion and availability) to compare with KPI planning –– Google Trends and Adwords: Widely available and fascinating information that allows the delving into customer search terms. This is very useful for buyers and

It is clear from Case study 12.1 that the e-commerce impact is greater than simply applying a new technology to established buying and merchandising practices. For the merchandiser, the case study identified that consumer behaviour has changed and that, as a distribution channel, an online store has distinctive trading differences to that of a bricks-and-mortar operation. A second point is that e-commerce being

merchandisers to identify emerging trends –– Bazaar Voice: This tool harnesses the value of translating reviews, rating and customer feedback. Used correctly can give real insight into your customer perception of the product offer In summary, the development of the online distribution channel has developed over the last 20 years into more than ‘just another store’. It has been part of a cultural change within buying and merchandising that has been reflected in greater datasets and capability in planning product ranges. This change is also felt in the way that buying and merchandising is organized. This point connects explicitly to Chapter 11, where global insights into the merchandiser role identified that new roles are beginning to emerge to capture new opportunities.

ABOUT ADAM ROSE Adam Rose has over 15 years of experience at a senior management/board level. His most recent substantive position was trading director for global product ranges at Debenhams. He was business lead for the major transformation programme developed by Debenhams and represented the company as an ambassador for change and voice of the business within the wider business environment.

technology driven has enabled a new set of analysis types to be developed that have opened new insights into how well a product range was ‘talking’ to its target consumer. A final point to note was that real-time data have changed the capability of the merchandiser to react to change. Where sales data are now being continually updated, immediate decisions about product ranges can be made, so reducing

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the over emphasis on planning and forecasting that has been the historic feature of the existing concept-to-carrier bag model. These points are amplified when one reviews the newer analysis tools that the merchandiser can now employ as part of their research activities. Table  12.2 below lays out new ways of understanding business and range performance. What is striking about the metrics is the granular nature of analysis today. Granular data allow performance to be measured at consumer level rather than the historic option and SKU level. It supports understanding where multiple sales are being made, and more importantly, how coordinated pieces sell. A

buyer may range a matching jacket and trouser to encourage outfit building, but until now, there was no way of determining if this was how the consumer shopped. The new metrics also give insight into how individual options ‘communicate’ to the consumer; the fewer the product views and the greater the sales is suggestive of an option that is easily understood by the consumer. Most importantly, the metrics give a definitive answer to conversion. As new options are launched, the merchandiser can not only now measure sell-through rates but also how often the option was reviewed. A lot of views and low sell-through rate is a double rejection of the buyer’s ideas!

Table 12.2  e-Commerce analysis tools Add-to-bag rate – Add to bag/Visits AIV – Average item value = Revenue/Units AOV – Average order value = Revenue/Orders Bounce rate – Bounces/Entries (when a customer leaves the website after viewing only one page). Browse to buy – Units/Product views (this is the number of units sold divided by the number of times it was viewed) Conversion – Orders/Visits (ratio between orders and visits. It answers the question ‘how many visits translated to an order?’) Demand per visit – Revenue/Visits (how much demand is generated per visit to the site) Engaged – This is a measure of the number of visits with at least two pages visited Entry rate – Entries/Visits (visits where entry page is that URL/Page name. Entry rate means, of the number of visits to the page, what percentage entered the site on that page) Exit rate – Exits/Visits (the percentage of visits which left the site on that particular page) IPO – Items per order = Units/Orders Last touch marketing channel – The last marketing channel through which the customer entered the site Product views – Occurs when the product detail page is viewed Viewed availability – The ratio of product options available (e.g. if a pair of shoes came in size 5, 6, 7 and 8, but size 5 was out of stock, viewed availability would be 75 per cent)

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Table 12.2 also demonstrates the versatility of the analyses. They can open the merchandiser role to an easier conversation with the buyer about future planning activities. The metrics broaden the conversation beyond simply financial KPIs and build a softer discussion that is more product focused than financially driven.

This does not negate the role and influence of KPI budgets, but it does allow a common language to emerge and the opportunity to mutually understand each other’s positions. With that in mind, Case study 12.2 presents the opportu­ nities of e-commerce from the buyer perspective.

CASE STUDY 12.2: The buyer and e-commerce – Zoe Hinton, London College of Fashion OPTION PLANNING IN THE E-COMMERCE ENVIRONMENT The e-commerce is an arena where retailers are not governed by physical store space requirements, and as a result, many of the accepted range planning rules change somewhat. Physical stores being required to ensure that product ranges can be displayed within a given square metreage placed an emphasis on the range planning process, resulting in an option count that, where space was tight, could be too small to compete. Conversely, where store space was large, ranges could easily become ‘over optioned’, as buyers created too many options simply to fill the store. This problem and the resulting potential impact on profitability have challenged buyers and merchandisers for many years without an appropriate solution. As market dynamics change and product ranges evolve to reflect this, store space tends to be static in the short term; no matter the trading conditions, the store size stays the same. In an online environment, the dynamics around the range planning process and the derivation of an option plan are changed. With no physical store space to consider, product ranges can in theory be as big or small as the perceived business and trend opportunity presents; take the fictional Hinton Maternity as an example.

During the e-commerce growth revolution, certain product groups witnessed huge sales turnover growth as the e-­commerce sales mix grew exponentially. Maternity for example, quickly developed an online sales turnover mix of 46 per cent, compared with an average sales turnover mix for ecommerce for all product groups of 20 per cent. In real terms, at a 46 per cent mix, this meant for the buyer and merchandiser that the e-commerce store was accountable for nearly half of all sales turnover within the maternity product group. The 200 bricksand-mortar stores that stocked maternity wear accounted for the remaining 54 per cent of sales, representing a mere 0.3 per cent sales turnover per store. The speed of change was both frightening and exciting and presented a new way of planning the maternity range. First, with Hinton Maternity’s core market being focused on core womenswear fashion ranges, physical stores focused their highest footfall areas to these products. Maternity tended to be placed in the lessappealing locations in store alongside other ‘sub-brands’ such as plus-sized ranges and childrenswear. This approach, while maximizing opportunity for the core business, meant that, for the maternity buyer and merchandiser, maximum sales turnover and profitability were never achieved. This in

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turn meant that OTB budgets could not be maximized, and the ranges bought with this OTB could not be fully developed. The second context was that the maternity customer was identified as ‘time poor’. This characteristic of the maternity customer meant that they were short of time to make purchases due to the busy nature of parenthood. The placing of maternity in less than optimum spaces in store actively discouraged their engagement with Hinton Maternity, as the ranges were limited but also difficult to find. At a stroke, e-commerce provided a compelling opportunity: a website presence comparable to core product ranges with easy access for the time-poor maternity customer.

SALES TURNOVER GROWTH AND THE EXPANSION OF PRODUCT RANGES The effect of e-commerce for the maternity department was considerable. Over a four-year period, the product range and its options quadruped in size as a direct result of a growing OTB funded by sales turnover growth. As the product range expanded, Hinton Maternity was able to develop ecommerce exclusive options because of the increased demand. This had a further knock on effect to bottom line profitability, which grew in line with sales turnover growth. This was key to market share growth, in particular within the denim and jersey areas, which were strong e-­commerce product groups. Further developments within the product offer included variation in waistband construction, leg length, leg shape, sleeve length and colour, all of which were the direct result of a stronger engagement with the consumer, allowing analysis of more robust sales turnover data which in turn allowed further expansion in sales turnover,

OTB and hence option count. See below examples of the sales turnover and option count growth over a four-year period between 2011 and 2014. Season

e-Commerce % mix of department

Number of e-commerce exclusive options

AW11

15%

100

AW12

26%

250

AW13

33%

300

AW14

46%

400

THE IMPACT OF GROWING PRODUCT RANGES ON THE CONCEPT-TOCARRIER BAG PROCESS Not surprisingly, there was a significant impact of such growth on the product hierarchy of the product range. This impact was felt most profoundly in product types that were easier to retail online, such as core basic and essential items. Previous assumptions of what constituted a balanced product range looked like were challenged. Both width and depth assumptions in key product types were changed, with volume still taken by key lines but spread over colours, leg lengths, waistband construction (key for a maternity customer) and pack combinations. For basic jersey products various combinations of sleeve length, fabric and colour at any one time, in some cases upwards of 30 options per programme, became the norm. In addition, the denim programme was an exercise in organization and co-­ ordination between buying and merchandising, with the range of approximately seven styles accounting for almost 50 options alone.

E-COMMERCE AND THE MERCHANDISER ROLE

Denim range

All store options

e-Commerce only options

Total

Supersoft skinny black

1

6

7

Supersoft skinny wash

1

6

7

Supersoft skinny rinse

1

6

7

Colour reversible

1

3

4

Rinse bootcut

2

7

9

Lead in rinse

0

2

2

Authentic skinny

1

2

3

Acid skinny

1

0

1

Boyfriend

1

0

1

Wash bootcut

0

2

2

Lead in bootcut

0

4

4

These dramatic changes in size and shape of the maternity range posed real challenges within the KPI budget management of the department. Key issues that emerged were focused around the management of intake margin, depth of unit buy per option and the flow of stock through the WSSI. These in turn required a new approach to the planning process. The resulting dominance of core basic product within the overall product range meant that, rather than planning these products to fit within a seasonal budget and range plan, they were managed through a system of ‘line monitors’. Line monitors are in effect mini WSSIs that are updated at option level on a weekly basis, with stock being ordered on a ‘just in time’ (JIT) model. These individual line monitor plans were then carefully coerced and co-­ ordinated into a range for the customer to ensure the product available in store provided a wellselected offer. Physical store range plans were carefully selected reflecting the limitations of stores. e-Commerce meanwhile offered unlimited

opportunities for trial and experimentation and the driving of volume sales through options which could not often be ranged in physical stores. This approach resulted in a long-tail approach to product management. The accepted view of long-tailing approaches is that volume products are ranged alongside a very long tail of small volume ‘niche’ products. For Hinton Maternity, the result was what seemed to be an unlimited variety of niche products each changed slightly and bought in small unit quantities, whilst the volume core basic options were bought in larger unit quantities.

THE BUSINESS IMPLICATION As with all fashion brands, speed to market was paramount for Hinton Maternity. Its suppliers were chosen by their ability to provide wanted product types in the fastest time, with the added benefit of fabric purchasing by merchandiser teams to speed up the process further. To speed the concept-to-carrier bag process, key decisions were devolved. For example, the order confirmation process, with its assumptions made in terms of

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colour, trim, fabric and print, was on occasion remotely agreed to keep up with demand patterns. For the most part, this was successful, with the time-saving opportunities created outstripping the times at which perhaps product choices were compromised. In addition, the B&M team became ‘braver’ as time went on, and the view of ‘e-commerce-only’ as an interesting opportunity for trialling quickly became a platform for guaranteed profitability. This resulted in ensuring ‘volumes’ were placed at this level, with product buys in the hundreds quickly escalating to the thousands, and rates of sale which were historically averaging between 6 and 8 unit sales per option per week jumped to averages of sometimes upwards of 30 units. The implication of volume and the positive impact on intake margins and logistics were in stark contrast to the original physical store business.

The buyer has been affected by e-­commerce in two significant ways. First, e-commerce has offered the opportunity to widen a range. The scale of sales turnover potential has facilitated product development into new product opportunities. This opens new creative directions and the ability to trial new ideas with smallscale buys, where display factors within a bricks-­and-­mortar store need not inflate buy units to look credible when displayed. A second impact is that extra width of range coupled with shortened product life cycles has made the buyer’s life a busy one. As the case study demonstrated, the product development process is becoming devolved with more emphasis being placed on supplier involvement within the process.

ABOUT ZOE HINTON Zoe Hinton is a lecturer at London College of Fashion, where she specializes in fashion buying and product development. She has a keen interest in student engagement and digital pedagogy, experimentation with online platforms and interactive sites to improve the student experience. Zoe has an extensive background in retail, having spent almost 15 years in the industry across various high street retailers. She has repeatedly been responsible for running departments which delivered record profits, both at House of Fraser and New Look. She spent her time in multiproduct areas, buying products across categories and working with factories all over the world. Link in with her at https://www.linkedin. com/in/zoe-hintona41a4528/

Table 12.2 also carries useful analysis metrics for the buyer. One that is of note is the ‘last touch marketing channel’ metric. This has a qualitative feel and is useful to build an image of the consumer lifestyle as well as simply being a route to understand the consumer journey. Similarly, bounce rate can give a good feel for imagery and the effectiveness of the design of the website but also the product images that are placed on a landing page or within product category pages. For both buyer and merchandiser, the breadth of opportunity both to analyze but also develop their range is much greater. However, there is something missing in the new rubric. Greater access to information via the web is a god send and can be easily accessed. This creates new research time

E-COMMERCE AND THE MERCHANDISER ROLE

pressures that limit the amount of deep analysis that any one buyer or merchandiser can undertake alone. Help in accessing data is needed!

E-COMMERCE AND COMPETITIVE SHOPPING The beauty of a website is that it can generally be accessed by anyone in the world. For buyers and merchandisers this means that the competitive shopping exercise can be undertaken at any time and any competitor fashion range analyzed. This

makes global analysis possible, but of course this would present an impossible logistical challenge for the team to undertake. Case study 12.1 highlighted new analysis tools that can be used within the concept-to-carrier bag process with many resources referenced. One of these was EDITED.  Case study 12.3 below gives an insight into how new technological capability can be harnessed to significantly improve the comp shopping activity and how competitor data can supplement an understanding of the market.

CASE STUDY 12.3: Using big data and competitive shopping – Kristina Mills, EDITED The fashion retail industry has changed dramatically since online shopping started to flourish in the early noughties. The internet has meant that the commercial world has shrunk considerably, and as a result, retailers have had to work a lot harder to maintain relationships with their customers. The internet and the advent of the global marketplace, however, has meant that there are more opportunities than ever before to understand what trends are resonating with customers. Helping retailers understand their place in this increasingly competitive landscape is what we do at EDITED.  The EDITED analytics platform leverages artificial intelligence to track, monitor and reveal insights on competitor product ranges, pricing strategies, markdown timelines and trends across the global retail landscape. The software is used by buyers, merchan-

disers and trading teams to generate a huge competitive advantage. These data-driven insights help them make proactive, smarter commercial decisions that maximize revenue. The best way to illustrate how retailers use EDITED to track the performance of trends is to walk through a real-life example. Leopard print was one of 2018’s biggest trends and was all over the runways, street style and the high street. But how did the trend develop and how did buyers and merchandisers use EDITED to analyze whether it was a trend that had potential for sales turnover and gross trading profitability? During the Fall 2016 runway season, retail analysts at EDITED identified leopard as a key trend to watch, with names like Dries Van Noten, Givenchy and Bottega Veneta featuring the print in their collections.

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(EDITED, 2019) A trend emerging on the runway is something that we are all very familiar with, but EDITED makes it very easy to identify how a trend translates from the runway to the high street. Market analytics is the hub of the data in EDITED, and using it, retailers can see how widespread a trend was. Leopard print was

an emerging trend in Fall 2016, and the data supports this. Leopard print was predominantly stocked in the luxury and premium markets (where these segments stocked 56.3 per cent of the assortment. This is versus 46.8 per cent of all Fall/Winter newness in the UK market).

E-COMMERCE AND THE MERCHANDISER ROLE

38.2%

Mass

45.7%

Premium 29.7%

Premium

23.4%

Luxury

Luxury

23.4%

Value

7.5%

Mass

Value

26.6% 5.4%

(EDITED, 2019) The left chart displays all leopard print newness in Fall/Winter 2016 in the UK per market segment. The right chart displays all newness in Fall/Winter 2016 in the UK per market segment. Top stocking brands of this trend unsurprisingly reflect this. Saint Laurent, Givenchy, Cavalli and Stella McCartney dominate the leopard trend. Comparing this to Boohoo, Next, Vero Moda and Missguided for all newness shows a clear slant towards the luxury market. Data insights like this allow buyers and merchandisers to assess whether a trend is emerging. In particular in the mass market, being able to follow, in real time, how a trend is performing among aspirational brands can make the difference between a good season and a bad one. Every day, EDITED technology tracks key performance metrics, such as newness, sell out, replenishment, price changes and marking down, that buyers and merchandisers review in determining whether a trend is

right for their customer base. Having established that Fall 2016 was the emergence of the leopard trend in the UK market, retailers will use these metrics to track whether a trend is worth developing, how much to range and when the right time is to launch. By Fall 2017, had leopard started to infiltrate the mass market in a meaningful way? New products on the market had increased by 18 per cent, but compared with Fall 2016, the mass market had stepped away from leopard print. The luxury and premium markets accounted for 63.5 per cent of the assortment, an increase of over 7 percentage points. This is a clear indication of trend growth within these segments but also shows that it is still a trend that higher fashion brands have confidence in. This can clearly be seen in the brands that were stocking the trend most broadly. The graph below is taken from market analytics’ ‘Who and Where’ analysis and displays the top 10 stockists of leopard print newness in F/W 2017.

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Brand

Products

Dolce & Gabbana

115

Roberto Cavalli

77

Michael Michael Kors

56

Philipp Plein

45

Stella McCartney

44

Karen Millen

43

Missguided

38

R13

38

Equipment

35

BLUGIRL FOLIES

34

(EDITED, 2019) The brand that stands out here is Missguided. This fast-fashion retailer bucked the trend of premium and luxury retailers dominating the leopard print market. For mass market retailers assessing whether it is time for them to start stocking leopard print, understanding whether Missguided saw success with the print is incredibly important. The 38 leopard print products Missguided stocked in Fall 2018 were split across core c­ ategories

(see chart below that displays the category split of leopard print products stocked by Missguided in F/W 2017) - potentially to trial what categories could be the most successful in this trend. This is a shrewd strategy that fast-fashion retailers have the luxury of being able to test. However, longer lead time retailers can use EDITED to make assertions on what categories to buy into based on how the trend has performed for others.

E-COMMERCE AND THE MERCHANDISER ROLE

Tops

25.7%

Outerwear

20.0%

Dresses

14.3%

Bottoms

14.3%

All-in-ones

14.3%

Footwear

5.7%

Accessories

5.7%

(EDITED, 2019) The next question then becomes how did leopard perform for Missguided? The leopard print products launched in Fall/ Winter 2018 saw a replenishment rate of 34 per cent, which is considerably higher than their average replenishment rate of 16 per cent, a strong initial indicator of good performance. In addition, these products saw an average level of markdown at 44 per cent Mean # Days

compared with their average 55 per cent. Finally, the leopard products sold out in an average of 22 days compared with an average 49 days in total. The statistics are compelling: their gamble paid off. To highlight this, the chart below displays on the left hand Missguided’s leopard print offering for F/W 2017, and the right, Missguided’s entire F/W 2017 offering. Mean # Days

69

79 57

31 11 1st Majority SKU sell out

1st Full Replenish

49

40 22 1st Sell out

1st Discount

1st Majority SKU sell out

1st Full Replenish

1st Sell out

1st Discount

(EDITED, 2019) Statistics like this go a long way to helping quantify that a trend has the potential for sales turnover and gross trading profitability. With actionable data provided by EDITED, the guesswork of deciding whether a trend

is going to resonate with their customers is removed. Like all good research, buyers and merchandisers do not just rely on the performance of a single retailer. They can further analyze a whole market to make a

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truly informed decision. Functionality such as statistics analysis in EDITED showed that, for the leopard print trend, the number of products on the total market increased by 18  per  cent, the number of days to first markdown increased from 58 to 65 days and the percentage of products that were not marked down increased from 22 per cent to 32 per cent. All key indicators that the leopNew in 4.0k

ard print trend was growing and offered a commercial opportunity. Retailers picked up on this, and by Fall 2018, leopard print newness in the British market had grown by nearly 400 per cent! The graph below tracks how new drops of this trend have grown between August 2016 and January 2019, and the peak in Fall 2018 stands out.

2019

2018

01 Aug ‘16 - 01 Jan ’19 2017

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3.0k

2.0k

1.0k

0 Oct 2016

Jan 2017

Apr 2017

Jul 2017

Oct 2017

Jan 2018

Apr 2018

Jul 2018

Oct 2018

Jan 2019

(EDITED, 2019) In sharp contrast to previous seasons, the top stockists of leopard print apparel were now firmly in the mass market sector. New Look, Boohoo, Pretty Little Thing, Quiz and River Island dominated the top stockists of the leopard trend, and the mass and value markets grew their share of this trend to 61.2 per cent. The clear transition of this trend into the mainstream is clear, but this naturally at some point results in much higher levels of markdown spend. Once buyers and merchandisers see a trend starting to become saturated in the market, they pay very close attention to markdown activity. Again, using the leopard print trend as an example, in Fall 2018, the average days to first markdown dropped dramatically from 65 days to 47. On top of that, the percentage of products that saw their prices increase dropped from 32 to 25 per cent. The combination of these factors strongly suggests that the leopard print trend hit critical mass in Fall 2018, and

this suggests that it will begin to fade and be replaced. As for what that will be, Fall 2018 runways showed a real uptick in tiger and zebra prints. The data supported this context. Between Fall 2017 and Fall 2018, there was an increase of 211 per cent in new tiger print products coming onto the market with the luxury and premium markets owning 65.9 per cent of the market; early indicators that the market is moving into these trends. Seasonal trend analysis, however, is just one of the several ways in which retailers use EDITED to make sure they are planning their assortment in the most profitable way. Pricing, colour and intake analyses play an equally vital role in making a successful assortment. Through critical analysis of the market and how it changes, retailers are becoming more commercial in their trading decisions every day. The right product, at the right price, at the right time means that retailers can create more profitable assort-

E-COMMERCE AND THE MERCHANDISER ROLE

ments that consumers want. Getting it right also reduces waste in the industry, so the planet benefits too.

ABOUT EDITED EDITED is used by the world’s best brands and retailers to have the right product at the right price, at the right time. But more than that, it has become the single biggest source of real-time retail data in the world. Now industry professionals can know more

The case study provided by EDITED makes fascinating reading. The sheer breadth of data and analysis capability has a liberating feel about it that means that data can be collected but more importantly interrogated. Decisions can be made with a greater sense of validity and therefore confidence. For the merchandiser who naturally deals in objective facts, this is of great

about their markets than ever before. Every day, brands and retailers on six continents use EDITED to understand their markets in real time and trade more efficiently. And it is not just cutting-edge online retailers; this is a product that is transformative for every business. Data are essential. You need data to compete with the best companies in the world and to give your customers the best product. Find EDITED at: https://edited.com/

benefit. It also allows buyer and merchandiser to work together more effectively by reducing the amount of subjective decision-making. If one then thinks ahead to the developing artificial intelligence (AI) capability that is emerging, then tools such as EDITED are likely to become the norm and fully integrated into the concept-tocarrier bag process.

SUMMARY The e-commerce arena has had a profound impact on the distribution channel and the role of buying and merchandising. It is more than a new distribution tool: it is the catalyst for change. It is changing the capability of buying and merchandising and forging new dynamics in B2B and B2C relationships. This chimes with Chapter 11 and the

changed roles within buying and merchandising, where roles such as planners and product analysts are becoming the norm. There is a sense of cohesion within this thought which requires a change to existing practice; not necessarily revolutionary, but a change nonetheless.

SELF-DIRECTED STUDY 1. Research the development and growth of Amazon and eBay to understand their business models in relation to long tailing and drop shipping. 2. To understand the scale of difference between physical store and ­e-­commerce sites, review a product

range of a retailer both instore and online. Assess the differences in total products offered, their price, colour and size choices. Then research further to determine the number of e-commerceonly product types.

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FURTHER READING Chaffey, D. (2011) E-Business & E-Commerce Management: Strategy, Implementation and Practice 5th Edition. Upper Saddle River: Prentice Hall

BIBLIOGRAPHY Beck, N. and Rygl, D. (2015) Categorization of multiple channel retailing in Multi-, Cross-­ and Omni-Channel Retailing for retailers and retailing. Journal of Retailing and Consumer Services, Vol. 27, pp. 170–178 EDITED (2019) Available at: https://edited. com/

Verhoef, P., Kannan, P. and Inman, J. (2015) From multi-channel retailing to omni-­ channel retailing: introduction to the special issue on multi-channel retailing. Journal of Retailing, Vol. 91, Iss. 2, pp. 174–181

13

THE MERCHANDISER AND THE SUPPLY CHAIN

INTENDED LEARNING OUTCOMES 1.

Defining supply chain management within a fashion retailer.

2. Supply chain management and its relevance to the activities of the merchandiser. 3. Discussing the supply chain and the impact on the role of the merchandiser. 4. Summarizing the fashion merchandising role and its place within a fashion retailer.

INTRODUCTION In laying out the principles and practice of the role of the merchandiser, references have been made numerous times to the influence of supply chain management within the merchandiser decision-making process. Part I emphasized the linkage between the role of the merchandiser and the somewhat conflicting roles of buying and finance by discussing control processes that the merchandiser can bring to product management. Part II, in describing the activities of the merchandiser, made references to linking quantitative and qualitative characteristics together to create a defined product range. Finally, Part III has discussed emerging themes in global perceptions of the merchandiser role and the impact of e-commerce. All the chapters within this final part have related in some way to collaboration, or the relationships between the merchandiser and the other roles within product management. As the supply chain further globalizes, it is in effect creating a dispersed eco-system of contributors to the creation of a product range. This dispersal takes a lot of co-­ordination of process and alignment of interest. This chapter will discuss this point using the theme of supply chain management and the merchandiser role within it.

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SUPPLY CHAIN MANAGEMENT The breadth of supply chain management is greater than just the heavy goods vehicles that deliver raw materials or finished products from one location to another. It is a broad discipline within any business that touches not just all the roles that are part of a concept-to-carrier bag process, but all roles within a fashion business. Supply chains have been defined many times; the excellent Christopher definition of supply chain management, noted it as being: ‘the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole’ (Christopher 2011: 3). In reviewing the definition and pulling out its keywords, the discipline can be further explained as follows: •• Management  – Management does not mean a singular approach where one role defines a process that others follow, but it is the co-ordination of diverse roles and activities into one process that suits all, including the end consumer. •• Relationships – As Nike found to its cost, where roles do not align around a common aim, then serious issues, in this case the use of sweatshops, can arise. To develop relationships, the processes employed should be fit for all, and the sharing of information commonplace. •• Deliver – Great product ranges need to be delivered on time within the trend life cycle and identified WSSI phasing.

Delivery requires the co-ordination of activities that are located apart and possibly in different parts of the world and time zones. •• Superior value – The obvious exampling of this would be the alignment of quality and value for money for the consumer. There is also a quantitative element, via good stock management, on-time deliveries and replenishment to maintain full-size curves during a product’s life cycle. •• Less cost – Less cost within the supply chain brings advantages to the consumer in the form of stable or reduced selling prices. For all businesses within the chain, it also means the elimination of inefficiency within the chain, reduced wastage of raw materials and the elimination of buffer stocks of raw materials. In using this definition, Christopher goes on to refine it, focusing on the word ‘relationships’ within his discussion, acknowledging that, to deliver greater levels of superior value, reduced cost and profitability, there may be occasions where: ‘the narrow self-interest of one party has to be subsumed for the benefit of the chain as a whole’ (Christopher 2011: 3). For the merchandiser as for the other interested parties within the chain, for this to occur, there needs to be an understanding, first, of the peculiarities of the fashion supply chain, and second, to work flexibly within it to deliver their product range to the target consumer.

THE MERCHANDISER AND THE SUPPLY CHAIN

FOCUS POINT 13.1: Business-­to-­business online trading The development of business-to-business (B2B) trading capabilities has transformed the way the various stakeholders in the product management process work together to create product ranges. Fundamental to this is the exploitation of the opportunities afforded by electronic business, or e-business. E-business relies on effective ICT to support the coordination of the various activities that together comprise the retail supply chain. E-business uses relevant ICT to link the various activities into a seamless, effective and reduced cost process of data management and fast 24-hour communication methods that allow the businesses to benefit from reduced cost bases. The consumer meanwhile benefits from responsive supply chains that get product to them at the appropriate quality, price and timing. At the heart of e-business is the linking of all internal and external systems and processes into a single unified approach by way of the internet. Early examples of this were the moves to use electronic data interchange (EDI) as an interface to allow two or more computer programs to talk to each other. Within buying and merchandising, linking retailer to supplier meant that purchase orders could be transmitted electronically between them, and advance delivery notifications could speed up the delivery process.

With the increasing sophistication of the internet, businesses have been able to make use of intranet and extranet sites to further develop supply-chain efficiency. Intranets allow the coordination of internal activities – such as buying and merchandising, design and retail operations  – to facilitate quicker decision-­ making, visibility of data and improved communications. Extranets meanwhile link the internal activities to the external activities – such as suppliers, manufacturers and logistics – to allow all activities to work in real time together despite being physically separated. The scope of extranet trading goes well beyond the supply chain. It also brings the most important stakeholder  – the customer – into the relationship. The development of e- and m- commerce, ordering online, customer relationship management (CRM) and online marketing has put ICT at the centre of a modern retail business and has significantly changed the dynamics and lead times involved in planning and delivering a fashion product offer.

Activity Create a SWOT (strengths, weaknesses, opportunities and threats) analysis of the evolution of technology within the fashion industry.

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THE FASHION SUPPLY CHAIN Fashion supply chains have been irrevocably changed by the rise of the fast-fashion business model, which harnessed free-­ trade and technology developments to revolutionize the supply of fashion product to meet rising consumer demand. In adopting the fast-fashion principle, the fashion supply chain has to all intents and purposes moved towards a rolling range-­ plan approach, where collections are launched on a regular basis over the course of a season, requiring a constant flow of processes when compared with a legacy model of planning collections within a defined spring/summer or autumn/winter period. The fast-fashion concept has been so well received by the consumer that it is considered ubiquitous within the fashion industry. Its precise shape and form can of course differ from business to business: Zara champions a vertical business model that focuses on in-house control, whereas the Primark model focuses on entry price points on the high street. The commonality between all fast-fashion models, however, is speed to market, where in response to up-to-the-minute sales data, rolling range plans create ranges in real time, so postponing many of the planning decision points into the trading activities of the concept-to-carrier bag process. Using again the Christopher definition, but this time considering it within a fast-­fashion context, its key words show that:

•• Management – Concept-to-carrier bag planning is condensed from months into weeks, and overall management is achieved through speed of decision-­ making, ever-changing priorities and activities and a constant flow of information to all stakeholders for ­synchronized decision-making. •• Relationships  – The constant flow of information in turn requires an emphasis on all roles within the chain talking to each other. Within Zara, for example, designers, market specialists (country managers) and buyers work together to dissect performance and create new prototype products. •• Deliver  – A greater number of options requires the supply chain to co-ordinate more transactions within a compressed period. This is complicated by the mix of options: core basics requiring volume supply chain approaches, while fashion styles require responsive supply chain approaches. •• Superior value  – Different trends will overlap as each is layered onto the product range. A seamless transition of cutting dead one trend, without incurring ongoing markdown and brand dilution, requires constant and detailed micro product analysis and review. •• Less cost  – Time is the biggest cost within fast fashion, with a complex mix of product types, dual sourcing strategies that are a mix of long lead-time suppliers to provide regular volume deliveries of core basics and local short lead-time suppliers for fashion or high-­ fashion options.

THE MERCHANDISER AND THE SUPPLY CHAIN

FOCUS POINT 13.2: The plethora of supply chain approaches Supply chain management is full of abbreviations and exotic terminology, which for a discipline that many find dry, is quite refreshing. This focus point presents a whistle-stop tour of the most prolific. To set the scene for the differing approaches, there is first the little matter of the distinction between push and pull supply chains to discuss. Historically supply chains have pushed products from supplier to the end consumer. This approach has its origins in a trading environment where supply chain capabilities were limited, but it also was built around using known historic demand patterns to supply consumers. The obvious inbuilt inefficiency of such approaches is that demand is unlikely to be linear, and reacting to changes in demand is slow, meaning that push supply chains, if applied to the wrong product type, can develop bullwhip characteristics and the risk of obsolete stocks within the supply chain. Pull supply chains by contrast are those where the consumer pulls product through the supply chain. The chain in effect reacts to consumer demand and maintains a very small stock to keep goods flowing, adjusting production to demand patterns as they emerge. A pull supply chain is, in effect, an agile one, while a push supply chain emphasizes as lean an operation as possible. Push and pull supply chain strategies can then be further refined using the following supply chain approaches: Materials requirement planning (MRP) – a push supply chain approach whose focus is to order materials against a projected demand. It relies upon timely decisionmaking within the supply chain to best match supply to demand. Within a fashion retail context, the merchandiser could apply the principles of MRP within their planning and trading of core basics.

Just in time (JIT) – a pull system, like MRP, in that it aims to match demand and supply, but does so at the very latest moment possible, with as accurate sale and stock data as possible. To work, JIT requires a high degree of integration between retailer and supplier, flexible trading activities and short lead-time product. For the merchandiser, it emphasizes their trading activities and good relationships with suppliers. Quick response (QR) – QR further emphasizes integration of retailer and supplier and manages time within the concept-tocarrier bag process to reduce lead times as much as possible. Quick response is the supply chain model around which the fast fashion concept was created; Zara is famous for not just short lead times, but its quick response to emerging trends and demand management. As QR is focused on lead time reduction, if this can be achieved, its relevance can be for all products in the range, and so alters the entire concept-­to-­carrier bag process and timings. Continuous replenishment (CR) – This is an ultra-responsive supply chain, where sales data is passed electronically from retailer to supplier automatically to replenish stocks as needed. As orders are created in real time as demand requires, the trading dynamic changes and the notion of creating orders and purchase orders as part of the trading supply chain disappears. It is therefore ultra-lean, as it eliminates the need for high stock levels and can significantly increase stock turn presumptions within the KPI budgeting process.

Activity Research each of the supply chain approaches and identify their relevance to different product types, fashionabilities and business models.

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PLANNING TOOLS TO SUPPORT THE SUPPLY OF PRODUCT A priority within buying and merchandising has been to use accurate single-source information that can easily connect the different stages of the concept-to-carrier bag process. A focus on pertinent and usable solutions via technology has meant that over time several different applications have developed to achieve this. At the genesis of this, many solutions did not join up the various elements of the concept-­tocarrier bag. For example, category management systems that acted as stock management tools did not link to WSSI reporting systems. This lack of integration meant that often sales and stock records differed by application type. As technology capability has developed and applications now connect and talk to each other, the merchandiser has powerful tools that can offer a single view of all product management KPIs, act as gateways to the next stage of the concept-­to-­carrier bag and, most importantly, speed up the planning process. The consistency that this brings allows a greater efficiency in decision-making, but it also allows easier relationships with external stakeholders. For a supplier, timely, consistent and accurate information makes the production and delivery of a product range easier to plan and action. Constant changes due to incorrect information or communication breakdowns are as much as a drag on the supply chain as delays in fabric delivery. A more efficient supply chain means lower unit cost prices and so selling prices to the consumer and a greater likelihood of products being delivered on time. In short, a win-win for supplier, retailer and consumer in one.

An example of application capability is Buyerplan. This application tool has been developed to support the concept-to-­ carrier bag process from initial reviews of the past season through the planning of a new season to its in-season trading. It does this through its four connected tools (Figure 13.1).

Range reviewer

Merchandise planner

Assortment planner

Line planner

Figure 13.1  The Buyerplan tool Taking each of the applications, they support the merchandiser in a seamless flow of activities that follow the logical process of creating a fashion range. In reflecting back to the Prentice Day case study in Part II, merchandiser activities include the blending of many types and sources of data. Being data rich is not necessarily a good thing. Data themselves are meaningless, but data that are used as a source of information with which a decision can be made are invaluable. Data therefore need to be sorted, prioritized and definite. As an information tool, it is then powerful as it allows decisions to be made but also guides the path to the next decision point. Within a supply chain management context, this creates a manageable critical path to ensure decisions are timely; but when these are complemented with information flows to other stakeholders such as suppliers, they create data exchanges between

THE MERCHANDISER AND THE SUPPLY CHAIN

different stakeholders such as retailer, manufacturer and logistical provider. In effect, when aligned, at a press of a button, information and the decisions that result can be

shared with all via online capability. Looking at Buyerplan in detail (Table 13.1), its applications can facilitate such stakeholder collaboration as follows.

Table 13.1  Buyerplan applications in detail Range reviewer

Assortment planner

Line planner

Financial summaries

Analyze sales and profit against budget and previous seasons

Departmental summaries

Compare performance of different product groups

Stock-­flow analysis

KPI history by week to assess lost opportunity

Attribute and product analysis

Assess product range performance by option or attribute

Best sellers

Rank option performance to KPI budget expectation

Financial targets

Undertake KPI budgeting process

Buying targets

Link the OTB from merchandise planner

Store planning

Plan sales turnover and apportion floor space by store

Store grading

Create store gradings by sales and floor space

Range structure

Create range plans and calculate width and depth of option range

Order planning and deliveries

Calculate purchase order details and phase deliveries

Attribute planning

Apply attributes to options to analyze the shape of the product range

Product images

Add images and fabric details for visual representation of the product range

Packaging & presentation

Create packaging templates for products

Critical path management

Track and control all production critical path dates (continued)

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Table 13.1  (continued) Merchandise planner

Sales planning and re-forecasting

Plan KPI budgets pre-season and reforecast in-season

Open-to-buy management

Flexibly set target stock levels and calculate open-to-­buy budget

Profit and volume planning

Create gross trading profit and stock turn budgets

Multi-­channel planning

Plan individual channel KPI budgets

Line planning

Manage core basic options by line monitor

The logic of Buyerplan can then be matched to the process of the conceptto-­carrier bag in Table  13.2, which overlays the two together and, in doing so,

demonstrates that the concept-to-carrier bag is as much a quantitative, supplyfocused process as one of creativity and art.

Table 13.2  The concept-to-carrier bag and the Buyerplan tool Concept-to-carrier bag activity

Definition

Buyerplan tool

1. Research

Undertaking and collation of relevant fashion research

Range reviewer Merchandise planner

2. Concept

Creation of product range concept and design direction

Range reviewer Merchandise planner

3. Product development

Finalization of concept as a product range

Assortment planner

4. Sourcing

Sourcing of suppliers and manufacturers for the range

Line planner

5. Manufacturing

Manufacture of the product range

Line planner

6. Shipping

Shipping and delivery of the product range

Line planner

7. Warehousing

Receipt of the product range, its allocation to store and storage

Merchandise planner

8. Distribution

The process of delivering initial store allocations

Merchandise planner

9. Retail

Display, sale, promotion and stock replenishment

Merchandise planner

10. Carrier bag

Purchase of the product by a consumer

Merchandise planner Range reviewer

THE MERCHANDISER AND THE SUPPLY CHAIN

The comparison of the concept-to-­ carrier bag with the Buyerplan application reveals two key points. First, there is a consistency in industry process and activity to the Prentice Day case study in Part II. Second, and more importantly, the use of linked technological applications allows the buying and merchandising process to become non-linear with different applications, in this case, merchandise planner and range reviewer, relevant at different process points within the planning and trading seasons. What is not apparent is how this process can link with external stakeholders such as the manufacturer. The internet, and now Blockchain, allows the connecting of stakeholders in B2B relationships. The connection between retailer applications such as Buyerplan to supplier systems is, within a fast-fashion context, required. Supplier interaction tools provide a fast, single channel for sending and receiving data that enable process co-ordination and a single source of common information. This supports

speed within the fashion supply chain by reducing delays in decision-­ making and miscommunication caused by multiple sources of information. Buyerplan supports a supplier interaction facility which allows the ‘instant’ exchange of information between buyers, merchandisers and suppliers worldwide. To make this web-based application effective, tools such as status dashboards, traffic light warning systems, progress and documentation tracking and sampling management combine to keep all stakeholders aware of the progress of planning activities and merge different roles and responsibilities into a single management tool. In summary, the principles of matching consumer demand for fashion to its supply require an integrated and collaborative approach to the product management. This approach extends beyond that of buyer and merchandiser. It extends to their internal relationships and now, via internet capability, B2B relationships form part of this tight collaboration.

FOCUS POINT 13.3: Blockchain – the next step in collaboration A global, dispersed supply chain is in effect a series of discrete links that together create, manufacture and distribute products. These links connect hundreds of people, process steps and information points across a timeframe that can stretch across months rather than days. Over time, these links have developed into sophisticated chains capable of translating a designer’s idea into a product on a website or in store within a set timeframe and at a cost that is acceptable to the consumer. Technology has played no

small part in this, and many leading fashion businesses organize their operations around enterprise resource planning (ERP) and supply chain management software. However, whilst good at digital management of process and supply, most only offer limited visibility of how the supply chain is working. This failing is often caused by natural breaks in the information flow: B2B systems not talking to each other or when information used to keep the supply chain flowing is paper based.

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The development of Blockchain will revolutionize these failings. A lack of supply chain visibility has several implications for the fashion industry. First, with dispersed supply chains, any breaks in visibility are akin to not having a signal for a mobile phone; no one can truly know where the product is, whether it is configured correctly and whether it is on schedule until it enters a part of the chain where it can be viewed. Second, much of the value system includes B2B relationships that together create but do not necessarily own the product. This means that the importance of each product being produced will have a different priority status during its journey. Third, and perhaps the most keenly felt, is that a lack of visibility allows bad practice to creep into the chain. Without visibility, it is difficult for those in the chain to know exactly what is going on in the chain from the outsourcing of activity to third parties without permission to illegal or unethical practice. As a digital ledger, Blockchain has many potential applications that can be used for any activity transaction within the chain. These include activities such as contracts,

GLOBALIZATION AND THE SUPPLY CHAIN The reduction in trade barriers is most often discussed in terms of its impact on agreements such as the Multi-Fibre Arrangement and quota systems. There has also been movement at the consumer end of the supply chain, with fashion retailers operating as global players, opening stores, franchises and concessions in foreign markets. The effect of these twin influences has been to widen opportunity,

product specifications, tracking of progress through the chain and payment. Blockchain works by recording all transactions across all copies of the ledger on nodes (computers) that are within the chain. This decentralized chain is highly transparent, as all in the blockchain can see the progress of product. It is also secure, as every block in the chain is linked to the one before and after it. There is also no overall control, as each node will be connected to the chain and all will carry the same information. At its simplest, Blockchain solves the age-­old problem of stakeholders thinking they know how the supply chain is working. No longer can a product be in two places at once: shipped and on the high seas, but delays in paperwork confirmation suggesting it is still at the port of despatch.

Activity Research Blockchain and, using the concept-­ to-carrier bag model, build a process map of how many external stakeholders the merchandiser will work with to complete each process step. Then think about where a visibility breakdown will delay the decisions at each process step.

but also to increase the risks of trading. The opportunities for chasing the lowest-­ cost producer to facilitate price deflation have led to quantitative benefits but sometimes at the cost of originality, while retailing in new unproven markets has brought sales turnover growth but not always profits, as Asos are finding in China and Uniqlo found in its first disastrous foray into the UK market. Globalization places a different set of pressures on the role of the merchandiser. The core merchandiser activity is

THE MERCHANDISER AND THE SUPPLY CHAIN

the delivery of profitable product ranges. Profitability can be measured by the gross trading profit and stock turn that the range achieves at the end of its life cycle. For the merchandiser, these KPIs are derived by their ability to manage the flow of stock in and out of the retail business. In a global context, this is very difficult, as until the product is delivered to the retailer, the merchandiser cannot physically see where the product is, what quantities are in transit or even have a firm date for when it will be delivered. Add to this the ability of the consumer to

return product easily and that they all also do not know when this might occur or in what quantities. Supply chain management and stock visibility throughout the supply chain is a core requirement of a global supply chain. Visibility of stock wherever it is the supply chain allows effective flows of stock as well as an efficient process to manage re-­supply. GS1 standards provides real time inventory management through a single number. Here, Jacky Broomhead of GS1 UK discusses supply chain standards and visibility to support the merchandiser.

FOCUS POINT 13.4: GS1 UK, supply chain standards and visibility  In the 1980s, the UK had a thriving textiles industry, many factories across Europe were owned by the brands that designed their products and the high street was abuzz with shoppers. Today, the apparel supply chain has changed immeasurably. In the upstream space, globalization and the trend for outsourced production have scattered the supply base and increased the number of players involved in manufacturing a product. Downstream, new e-commerce channels and cross-border trade have multiplied the routes to the market, leading to longer, more complex supply chains. The apparel sector has largely benefitted from these developments. Easier access to global suppliers has increased competition, reduced costs and created a more agile supply chain. Consumers have embraced fast fashion and online shopping, opening-up new markets for apparel companies and providing significant sales growth. That said, a global supply chain is not without its drawbacks. Outsourcing production to

multiple suppliers in different countries increases complexity, which impedes visibility. In turn, these third parties often sit atop an intricate and ever-changing nexus of sub-suppliers that contribute to the final product. The closer we get to the customer along the chain, the more services such as click and collect or ship from store have turned retail outlets into mini warehouses. Delivering these new services effectively requires greater certainty around inventory visibility to ensure the right stock can be accessed at the right time and shipped to the right place. This tiering of suppliers and emergence of multiple routes to market has made it difficult for apparel companies to monitor activities and track products across their supply networks. Unfortunately, wherever there is greater opacity, there is also greater risk. It has become essential for companies to introduce methods to improve visibility to better manage the activities and movement of inventory across their supply chains.

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The basics of visibility within the supply chain are straightforward. First and foremost, to make something visible, it must be identified. In the complex apparel supply chain, elements need to be identified in a way that can be understood and easily communicated to all parties – both internal and external, human and machine – on a global scale. To achieve this, we use numbers. Specifically, a standardized and universally unique numerical identifier maintained by supply chain and data standards body: GS1. There are three types of identifiers relevant to the apparel supplier chain: Global trade item number (GTIN)

The GTIN is used to identify products, people or assets in the supply chain. It is the 8-, 12- or 13-digit number you will see on consumer items below the barcode and is sometimes referred to as an EAN or UPC. In apparel, the GTIN is used to identify a product at the colour/size level: for example, a red dress in size 10 will have its own unique 13-digit GTIN. The same red dress in size 12 will have a different 13-digit GTIN

Serialized shipping container code (SSCC)

The SSCC is used to identify groups of objects like a pallet or case of products. It can also be used for online parcels

Global location number (GLN)

The GLN is used to identify locations along the supply chain, including factories, warehouses, ports and retail outlets

WHY NUMBERS? Many apparel brands rely on style names to refer to a product internally, but when we consider the broader supply chain and volume of apparel stock keeping units (SKUs), a number is the most efficient way to communicate information to people and machines. When used across a supply chain, language can be ambiguous. Words are subject to variations in spelling or pronunciation, creating the opportunity for error or confusion. The number of letters in an alphabet will also vary across languages, making translation a challenge. Numbers, on the other hand, are constant. This enables numeric identifiers to be used consistently around the world.

THE IMPORTANCE OF USING AN INDUSTRY STANDARD GS1 industry standards exist to create a common language between trading partners. By using an industry standard identifier, businesses can ensure compatibility of their data, systems and processes with those of others in the supply chain. Standards also create operational efficiencies, as the same label and identifier can be used by multiple trading partners. Uniqueness prevents data conflicts, as no other product, location or parcel will use the same number.

AUTOMATIC IDENTIFICATION AND DATA CAPTURE Once we have the identifier, we need a way of transferring the number into a machine-­ readable format  – simply put, something that can be scanned. The technical term for this is automatic identification and data capture (AIDC). It refers to any automated method for identifying an object, collecting data about that object and entering it into a computer system. The rise of technology has made AIDC essential for businesses for several reasons:

THE MERCHANDISER AND THE SUPPLY CHAIN

yy AIDC takes away the possibility of human error yy Data errors, once in a system, are costly to correct yy Machine to machine interaction is faster than human to machine yy Manual data entry is tedious, and suitable resource is challenging to find AIDC spans many different technologies, but the one commonly used in the apparel supply chain is the barcode.

THE IMPACT OF BARCODES While largely taken for granted today, the introduction of barcodes in the mid-seventies created a step change in stock visibility and inventory management. Before the barcode, retailers used price stickers on each product, and cash registers recorded only the quantity and price of items purchased. Businesses relied on manual stock counts to understand sales numbers and stock data. The introduction of barcodes enabled retailers to quickly and systemically record the flow of inventory, providing the necessary data to support merchandising decisions. These benefits were not limited to individual stores. By creating an automated and systemic means of capturing a product’s journey, movements could be accurately tracked, traced and communicated along the supply chain, leading to better planning and demand forecasting.

PRODUCT VERSUS ITEM LEVEL IDENTIFICATION In the seventies, the GTIN represented a significant shift in inventory visibility. Today, there is a growing appetite for identification at a more granular level. Challenging trading conditions, more demanding shoppers and the rise of omni-channel are forcing retailers to do more with leaner stocks. The ability for consumers to view store stock levels when shopping online or to have an order picked

from store is becoming increasingly commonplace. To deliver these options successfully, apparel companies need up-to-date stock information, single stock pool visibility and trust in the accuracy of this information. To achieve this level of detail, apparel retailers like John Lewis, River Island and H&M are turning to serialized GTINs and radio frequency identification (RFID) technology to manage every unit of a product individually. RFID is a form of AIDC technology that differs from barcodes in three key ways:

No line of sight is required

RFID readers use radio waves to pick up information stored on an RFID tag. When an RFID reader is switched on, it emits a signal that will identify any tags within its read range, removing the need for line of sight and minimizing human intervention

Faster read speeds

An average RFID reader will capture 20,000 tags per hour and can read multiple tags at the same time. By contrast, a human with a barcode scanner can read only 200 tags per hour, which must be read one at a time

RFID tags are serialized

RFID identifiers use a serialized GTIN – a unique set of numbers is added to the base 13-digit GTIN to create an identifier for every instance of a product. This means that every individual product unit can be tracked and managed throughout the supply chain

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THE BENEFITS OF STOCK ACCURACY Using RFID, inventory management and stock accuracy can be improved through more frequent stocktakes. Today, most apparel companies rely on a biannual stocktake to verify their numbers. However, due to shrinkage and human error, these records will deteriorate week by week, impacting their accuracy. Research from GS1 UK and the University of Leicester found that, on average, apparel stock records are only between 65 and 75 per cent accurate. Companies that introduced RFID were able to conduct weekly stock counts, increasing stock accuracy to a range of 93–99 per cent. Inaccurate replenishment

When stock accuracy is low, replenishment accuracy is also impacted, as merchandising decisions are based on data that do not reflect what is happening in-store

High levels of buffer stock

When retailers cannot trust their stock records, the merchandising department tends to allow a buffer for replenishment orders, sending in more stock than needed to account for inaccuracies in inventory data. This can lead to excess inventory at the end of season to be sold at markdown prices

Poor fulfilment rates

With many retailers using inventory across channels to fulfil customer orders, stock visibility and accuracy are crucial to ensuring customer satisfaction

The importance of stock record accuracy to the merchandiser is fundamental to their ability to manage the flow of stock in and out the retail business. When retailers cannot trust their stock records, there are immediate implications on inventory management. These have flow on effects to product handling costs, profits and customer satisfaction, such as: Before implementing RFID, 25 per cent of web orders fulfilled from store by UK retailer, Jack Wills, had to be cancelled due to poor stock visibility. Since introducing RFID, stock accuracy grew from 59 per cent to 95 per cent, bringing online order cancellations down to just 5 per cent.

DISCUSSION QUESTIONS: 1. Standardized identifiers are commonplace in inventory management, yet future use cases include traceability, anticounterfeit, blockchain and even returns fraud. Consider how it could be used in these areas of the apparel supply chain? 2. To learn more about barcodes, download the BBC World Service’s podcast: ‘50 things that made the modern economy’, episode ‘Barcode’. 3. To learn more about how RFID and serialized identifiers are used in apparel retail, download our report Measuring the impact of RFID in retailing: key lessons from 10 case study companies, available from www.gs1uk.org

ABOUT GS1 GS1 UK is a community of more than 38,000 members working in retail, foodservice, healthcare and more. GS1 UK is one of 112 independent, not-for-profit GS1 organizations operating worldwide. GS1 UK helps everyone involved in making, moving and trading goods to automate and standardize their supply chain processes using the common language of GS1 global standards. For more detail on GS1 standards, visit www.gs1uk.org

THE MERCHANDISER AND THE SUPPLY CHAIN

PROFILE 13.1: A day in the life of an international merchandiser – Rachel Moyse – fashion retailing The role as an international merchandiser, responsible for managing the relationship with franchise partners and agreeing sales and stock budgets, is a fascinating one, because we get involved in analyzing sales across several different countries and territories, all of which have their own nuances and needs. The focus is optimizing stock packages for specific markets, to ensure you are covering cultural requirements and key trading periods. We are in constant contact with the various partners we work with (whether our own team or external franchise partners), and together build the product budgets, product mix requirements and sales turnover and stock delivery plans. We represent the franchise partner and as such are regularly dealing with queries  – challenging back where necessary – and ensuring partners are fully equipped to trade their markets. We are responsible for forecasting sales turnover and stock deliveries for the year ahead to calculate profit targets that our own business can expect. And just like a typical merchandiser role, we monitor and reforecast in-season to react to current trading conditions. We use WSSIs to monitor sales and intake and suggest markdowns and promotions to help support trade. We also participate in regular conference calls and meet with partners (both when they

are over in the UK for product presentations and ad hoc visits, and during our own visits to the markets). It is a very enjoyable role, as it is hugely fast-paced and has lots of variety – no work week is ever the same. The opportunity to travel, build relationships with partners from across the world and learn more about the retail market in other countries adds a component that core merchandisers rarely get involved in. International merchandising involves working closely with several different teams across head office, meaning you gain a really strong understanding of how the brand as a whole operates. The downside is that different partners will have varying levels of IT systems/ retail ­experience/commerciality/communication, and this can be frustrating at times. Because the aim is for a balanced relationship, it can be that, although you can suggest trading actions to take, these will not always be followed up by the partner – as such, it can be less tidy and structured than core merchandising, which does not appeal to everyone. The sort of personality that works best in this world – on top of the usual planning and analytical skills – would have excellent communication skills, resilience adaptability and strong negotiation and influencing skills.

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FOCUS POINT: 13.5: Supply chain capability The fashion supply chain is global. This has been driven by the transformative effects of the move towards demand-led pull system, where free trade and technological capability have led to retailers outsourcing non-­ core manufacturing activities to focus on the design, branding and retailing of fashion products. As a result of the outsourcing of the upstream activities of the supply chain, a global network of agents, manufacturers and processors has developed often via off-shore, low-cost locations within the developing world. The evolution of a global network has brought

Supplier value chain

Business value chain

Then consider how the supply chain is now affected by consumer behaviour and the accepted flow of stock back into the supply chain by generous returns policies whereby the sale of product is not necessarily its point of leaving the supply chain. As consumers increasingly use returns policies to return product, supply chain logistics must increasingly manage a reverse logistics process to take back, re-process and re-sell products.

many advantages: reduced selling prices, an agile approach to product management and, for retailers, new routes to expansion. Today, the fashion supply chain faces new challenges. There is often a presumption that the supply chain is about the supply of product only. This is not the case. If one considers the value system and its composite value chains, then it can be seen that the origins of supply chain management lie within the pushing of product from supplier to end buyer followed a linear, upstream to downstream trajectory.

Channel value chain

Buyer value chain

Reverse logistics refers to operations that reuse products and materials. In short, it is a process that enables the movement of products from a presumed final destination (e.g. the consumer) to capture value (re-sell) or dispose (cannot be resold). In effect, reverse logistics in the supply chain has to be able to backtrack at least one process step (to a retailer distribution centre) and potentially even further back should the product be returned to a manufacturer for re-purposing.

THE MERCHANDISER AND THE SUPPLY CHAIN

Supplier value chain

Business value chain

Returns

Channel value chain

Returns

Channel value chain

This presents new logistical challenges. First, it requires a highly integrated supply chain that can effectively manage the cost base of the supply chain and ensure optimal efficiency within the process management of various stakeholders internal and external to the retailer. Second, the integration of the supply chain must also offer a co-ordination of effort whereby new roles and competencies must ensure a market-led mind set. Finally, there is a presumed new set of relationships within the supply chain that emerges as local process houses and small-scale manufacturers grow in importance within the overall chain. Whilst a fantastic service proposition for the end consumer, a reverse logistics capability does have a significant impact on the role of the merchandiser. On a positive note, a returns process offers a new layer of analysis that can be used to better understand range performance and, in the case of suppliers, if products supplied by a manufacturer are constantly returned, that might suggest problems with their reliability. On a more problematic note, the merchandiser in effect loses an element of control over their biggest responsibility: stock management. At the core of the merchandiser role lies the conversion of a cash open-tobuy into a physical product that needs to be sold as quickly as possible to convert

Buyer value chain

Returns

Buyer value chain

back into cash. This basic premise of stock and cash flow management is potentially changed, as the consumer is unpredictable and there is no way of truly knowing if a sold product has left the total supply chain for good. A second point is that, if a customer does return a product, it may not be fit for sale at full price, and so the merchandiser has to consider alternative ways to move it out of the supply chain. There may be a markdown spend required or the product may have to be held as stock and disposed via stock write offs. Both these routes have negative effects on the KPI budgets and hence gross trading profit. The competitive emphasis placed on easier delivery of product to customers and then, as required, its return is telling. The offering of delivery service convenience, coupled with a returns incentive, can encourage customers to increase their basket sizes beyond buying one or perhaps two items. The effect of an increasing basket size, coupled with an efficient reverse logistics process to enable a high resale rate, can grow sales turnover faster than if the incentive were not there. The table below shows a theoretical impact of increasing basket sizes on sales units and closing stocks, assuming a 40 per cent returns rate and a 90 per cent resale rate, of which 65 per cent is sold at full price and 25 per cent at 50 per cent off.

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Units

No returns

25% volume increase

50% volume increase

100% volume increase

Opening stock

260

325

390

520

Sales per week

 10

 12.5

 15

 20

Sales per 26-week season

260

325

390

520

Returns @ 40%

  0

130

156

208

Total sales without returns re-sale

260

195

234

312

65% of returns sold at full price

  0

 84

101

135

25% of returns sold at 50% off

  0

 33

 39

 52

10% returns unsold, valued at 50% off

  0

 13

 16

 21

Total sales including returns re-sale

260

312

374

499

Unit sales increases do not automatically translate into matching sales turnover and gross trading profit growth, and so the second table translates the data into a possible financial impact.

The table shows that, based on the assumptions made, it takes a 50 per cent unit uplift to generate marginal profitability growth of £240 over the no returns figures.

Value

No returns

25% volume increase

50% volume increase

100% volume increase

Selling price

£100

£100

£100

£100

Cost price

£50

£50

£50

£50

Total selling value

£26,000

£29,550

£35,490

£47,320

Total markdown value

£0

£2300

£2750

£3650

Total cost value

£13,000

£16,250

£19,500

£26,000

Total gross trading profit

£13,000

£11,000

£13,240

£17,670

Total closing stock

£0

£650

£800

£1050

Note: Excluding VAT The conclusion? The fashion supply chain focus is changing, and it should be considered in broader terms than simply a global model. It is as much local as it is global, and its complexity is growing

downstream as reverse logistic capability becomes more prevalent. There is also a further consideration that is implied by this new service standard. To be economically viable at KPI budget level there appears to

THE MERCHANDISER AND THE SUPPLY CHAIN

be a need to drive volume sales to cover the cost and risks of generous returns policies that cannot be squared with the developing realization that our industry must move towards a more sustainable and ethically sound footing.

Activity Research the terms reverse logistics, last mile logistics and dynamic supply chains. Consider the implied financial and time costs of products being bought and returned by customers.

SUMMARY Words such as ‘responsive’, ‘lean’ and ‘relationships’ that characterize supply chain management also neatly summarize the role of the fashion merchandiser. As one role within an increasingly diverse fashion retail supply chain, the merchandiser provides important links to connect many of the dots within the chain. Those connections are increasingly important, as product management is no longer limited to buyers, designers and suppliers; a whole army of roles now contributes to the process. Marketing, information technology, international relations and retail operations all influence product management in ways that have never been seen before, meaning that B&M is fully integrated into the wider supply chain. This naturally means that B&M activities must integrate with those around them. Technology in the form of application

software is one too, another is the provision, again by technology, with total stock visibility within the total supply chain. To expect a single role, the buyer, to be able to create ranges for global markets or different distribution channels within a dynamic market is one thing, but then to expect them to be able to fully research, make decisions and understand the implications of their actions for a broad measure of variables is unrealistic. The value of the merchandiser today is that they can balance a wide range of partisan positions within a business and contribute to holistic decision-making. This places the merchandiser deeply within the context of supply chain management as defined by Christopher, bringing further activities within the supply chain into the thinking process of product management.

SELF-DIRECTED STUDY 1. Investigate the history and development of lean and agile supply chains and the changed focus from pushing product to customer to models where the supply chain reacts to product pull factors.

2. Research various software applications that support the buying and merchandising function and plot their functionality to the concept-to-carrier bag model. Review the commonality of terminology and capability they provide to the planning process.

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FURTHER READING Christopher, M. (2011) Logistics and Supply Chain Management 4th ed. Harlow: Pearson

BIBLIOGRAPHY Christopher, M. (2011) Logistics and Supply Chain Management 4th ed. Harlow: Pearson

Fernie, J. and Grant, D. B. (2015) Fashion Logistics: Insights into the Fashion Retail Supply Chain. London: Kogan Page

14

SUSTAINABILITY AND  PRODUCT MANAGEMENT (co-authored with Hannah Middleton)

INTENDED LEARNING OUTCOMES 1.

A discussion of the sustainability concept and its relevance within fashion business.

2. The identification of the potential impact on responsible product management activities. 3. A focus on the activities of the merchandiser and how emerging sustainability themes impact their role. 4. A final review of the role of the merchandiser within the concept-tocarrier bag process model.

INTRODUCTION We live in a fragile world where the evidence of human activity on the environment is all around us. This evidence crosses many spheres, whether it be the use of non-­biodegradable plastics and harmful chemicals, the wealth gap between the developed and developing world and even the pollution of our everyday lives. The fashion industry is regularly questioned about the impact of its operations. It is often described as the second most polluting industry, with thousands of types of chemical being used to turn raw materials into textiles, pesticides being used to grow cotton and annual product wastage in Europe and America combined being estimated at ten million tons of textiles. In addition, the rise of e-commerce and its focus on distribution service where we order what we want, when we want it, and have it delivered where we like has huge implications for the fashion industry. Extra packaging, extra

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emissions and extra service standard costs all seem to go against the nature of awareness of our own individual footprints within the world that we live in. This final chapter will review the context of sustainable practice within the concept-­to-carrier bag model and consider how the merchandiser role can adapt to it and make use of new approaches to professional life to minimize the physical cost of product management.

SUSTAINABILITY WITHIN PRODUCT MANAGEMENT Brundtland (1987) defines sustainable development as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’, and there is growing pressure on the fashion industry to be more sustainable in its activities as we learn that human activity is resulting in the destruction of our planet. The goal of sustainable fashion practice is to create a system which can limit the human impact on the environment and act with a social responsibility towards others (Woodside and Fine, 2019). This is not easy to achieve. There are sustainability challenges at every stage of the product life cycle of a garment. Environmental impacts are the use of harmful chemicals, the generation of greenhouse gases, extensive use of water and the disposal of clothing and accessories. Social impacts include, but are not limited to, modern slavery, poor working conditions, workers’ rights and health and safety challenges. This breath of challenge is made more difficult, as supply chain management is a complex process (Hines, 2004) where there are often many tiers of suppliers (Christopher, 2011). This often results in a lack of transparency across supply chains, allowing poor practices to go unnoticed. Meanwhile, the end consumer

is increasingly questioning where their fashion purchases are made and are demanding more transparent supply chains to allow them to make informed purchasing decisions. In addition to the scope of sustainable practice and changing consumer behaviour, production methods, legislation on modern slavery, the use of harmful chemicals, lack of transparency and sustainability challenges vary across the global supply chain, making it difficult for fashion businesses to be wholly sustainable within their operations.

ENVIRONMENTAL IMPACTS The Natural Resource Defense Council (NRCD) have concluded that textile making is one of the most polluting industries in the world, referring to the growing use of raw materials, production and dying of fabrics, the laundering of garments and the end-of-life disposal of product. In the UK alone, over one million tons of clothing is thrown away each year, more than half ending up in landfills (Harris, 2010). Statistics such as these have resulted in waste reduction becoming a key metric within the fashion industry; we have seen the growth of the rental market, the sharing market and the thrift and vintage market. Further to the environmental focus, the Zero Discharge of Hazardous Chemicals (ZDHC) is a group of apparel and footwear

SUSTAINABILITY AND PRODUCT MANAGEMENT

brands and retailers working together to lead the industry towards eliminating harmful chemicals by 2020. Together, brands and retailers are working to substitute hazardous chemicals for safer ones in the production process. The ZDHC estimate that 20 per cent of water pollution comes from textile dyeing and treatment, with cotton production using 4 per cent of all world pesticides and 10 per cent of insecticides. The World Health Organization (WHO) estimates that there are up to three million pesticide poisonings a year, resulting in 20,000 worker deaths. In 2012, Greenpeace tested more than 100 garments from global fashion brands across all levels of the market, from luxury to high street, and confirmed that all collections contained hazardous chemicals. Not surprisingly, fashion businesses are under increasing pressure to opt for fabrics that do not contain dangerous chemicals and to choose biodegradable and degradable fabrics over non-degradable fabrics. Apart from the upstream supply chain benefit, this also reduces the pressure on using landfill sites for unwanted fashion products, as biodegradable and degradable fabrics will decompose. This approach challenges the accepted model of fashion production and consumption. Every fashion product begins its life as a combination of raw materials, known as the cradle stage, which then pass through subsequent stages of manufacturing, washing, distribution and consumption, before becoming waste at what is known as the grave stage (Muthu, 2014). Instead, new environmentally friendly models are looking to move away from the cradle-to-­ grave model, opting instead for a cradle-­to-­cradle model, choosing to recycle un-wanted products and to use recycled fibres to extend the product life cycle for as long as practically possible.

SOCIAL IMPACTS The much discussed fast-fashion model where ever-increasing numbers of products are ranged in a sped up supply chain has been linked to a lack of ethical supply chain management and an increase in global emissions. Customers demand constant newness, and in the case of Zara, new products are delivered to stores every two weeks. This puts enormous pressure on fashion supply chains to deliver numerous collections throughout the year, working to short life cycles and the squeezing of manufacturing lead times. The collapse of the Rana Plaza building in Bangladesh in April 2013 that claimed the lives of over 1000 people is a case in point. Crucially, safety concerns about cracks in the building were ignored by factory managers, who insisted their workforce continue working, driven by pressures to deliver products on time to retail customers. As consumers, as we continue to demand speed and low-price within our purchases, fashion retailers continue to work with factories in Bangladesh and similar low-cost production countries, attracted by their lower labour costs. This implies that the accepted competitive landscape of shortened buying cycles, selling-price pressures and rampant competitive pressures requires a more robust and effective system of control. The upstream supply chain workers often have limited powers to challenge the market dynamic as is demonstrated by the Rana Plaza tragedy. As a result of this, measures have been taken to protect workers throughout the supply chain, with examples such as the introduction of the Fairtrade Certification Mark and the Modern Slavery Act becoming effective. The Fairtrade Certification Mark was introduced in 2005 to ensure that farmers

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receive a fair price for cotton grown and to guarantee that workers had worn protective clothing when spraying the cotton crop with pesticides. The UK Modern Slavery Act 2015 requires commercial organizations with a total global annual turnover of £36 million operating in the UK to produce an annual slavery and human-­ trafficking statement. Modern slavery is defined as people who are coerced to work using violence or intimidation or by more subtle means, such as accumulated debt, retention of ID papers or threats of denunciation to immigration authorities. To further encourage sustainable practice, as part of the United Nations 2030 Agenda for Sustainable Development, world leaders developed the 17 Sustainability Development Goals (SDGs). Launched in 2016, the SDGs, which focus on the 5Ps of people, planet, prosperity, peace and partnership, were launched on 1st January 2016. In adhering to the SDG goals, businesses are challenged to avoid using fabrics with harmful chemicals, respect the Modern Slavery Act and endeavour to be more sustainable. However, it is not easy to be ‘fully’ sustainable. Take Burberry for example who, anxious to retain their exclusive, premium, brand image, were exposed in July 2018 burning unsold clothes (Independent, 2018). Despite such activity, Burberry was commended for their sustainable approach and later listed in the 2018 Dow Jones Sustainability Index for Textiles, Apparel and Luxury goods (Independent, 2018) for their work to recycle more, their anti-fur strategy and their work for ZDHC. The Burberry example highlights the challenges faced by businesses in adopting a holistic sustainable approach. The complexities of the supply chain are such that a business may be sustainable at some stages of the concept-to-carrier bag but not at others, raising questions about the ability of fashion to be a truly sustainable industry.

As this book has shown, the buying and merchandising function and its activities have a significant role to play with sustainability awareness. Indeed, throughout the concept-to-carrier bag process, buyer or merchandiser could unwittingly act or make decisions that impact the sustainable behaviour of the supply chain upon which they rely: •• Time – there is enormous pressure within the fashion supply chain for a supplier to deliver product on time or face a possible financial penalty. This is made more acute where collections need to be delivered together to ensure a co-ordinated look within stores. •• Demand patterns  – if demand patterns result in large bulk orders, then often excessive overtime is expected of the factory workers to achieve delivery deadlines. Very often, as seen in the Rana Plaza case, factory workers have very few rights to protect their working conditions and hours worked. •• Production planning  – unstable flows of purchase orders lead to volatility and often short-term contracts within the supplier sector. These unstable, low-pay approaches to employment can be made worse when production is outsourced to unregulated third-party factories in peak periods of production, making it difficult to develop fully transparent supply chains. •• Delivery management  – the delivery of product from supplier to retailer is one that is highly anticipated and is the culmination of the planning process. Any trading decisions to use air freight as opposed to sea freight to achieve KPI budgets will have a significant carbon footprint. •• Intake margin  – as competition grows and customers’ disposable income shrinks, so fashion businesses are under pressure to negotiate ever lower cost

SUSTAINABILITY AND PRODUCT MANAGEMENT

prices to support selling price flexibility. In some instances, buyers and merchandisers may opt to work with factories operating in countries where the labour cost is low and prioritize pricing and intake margins over quality and adherence to ethical sourcing and sustainability priorities. Chapter 4 demonstrated that buyers and merchandisers do not work independently of other roles in the supply chain,

but it is the total chain that is responsible for sustainable practices being adhered to. The question therefore is what actions could improve the long-term impact of the fashion industry? Certainly, cost benefits such as economy of scale, better production rates due to improved employee morale and selling benefits of enhanced reputation or demand patterns from customers could be derived from a different perspective within product management.

CASE STUDY 14.1: People Tree – ethical trading in focus People Tree, the British–Japanese trade fashion company, began life as Global Village in Japan in 1991, launching in the UK in 2001. The brand ethos and its designs explore ways in which to balance the wellbeing of its makers with delight for its 25–40-year-old female wearers. People Tree is a design-led company that sees clothing as a vehicle for poverty alleviation and puts its focus on community-centred sustainability through economic stability, skills preservation and low-impact production methods in all that it does. As part of this, the company promotes the use of local skills to create employment and works closely with 50 fair-trade groups in marginalized communities across 15 countries including Bangladesh to manage the supply chain from growing cotton to weaving and embroidery, to stitching and delivery. The design process starts with a kick-off meeting between the People Tree teams in the UK and Japan, who work collaboratively to plan fabrics, colour palettes and share inspiration. Designs are inspired by trends, but more fundamentally, by the producers they work with, of whom many of these have rich textile histories, use traditional techniques and provide inspiration and an identity for

designers to work with. Preparation for a new collection starts up to 18 months ahead of the season, meaning that producers can plan their production, preventing the bottlenecks prevalent in mainstream fashion that can result in unpaid overtime to fulfil orders and insecure employment due to peaks and troughs in the flow of purchase orders. The long lead times create challenges at the distribution end as this means that staggered drops into stores are needed. As head of design, Tracy Mulligan says, ‘There’s always a way to make it work  – it’s a lot of fun and it’s important to have a sense of humour when trying to overcome challenges. There’s a lot of laughter in the People Tree office’ (Parker 2011). To enable financial stability within the supplier base, 50 per cent of the order value is paid in advance and the balance is paid on delivery, compared with the three months that it takes many fashion retailers to pay for stock. This helps to facilitate close working relationships between the design and production and the sales and marketing teams, which in turn enables existing skills utilization as well as new skills development. The resultant knowledge of the potential customer in terms

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of aesthetic and quality demands, alongside practice-based skills and working environments that are aligned to People Tree’s values, offers a framework for product development and capacity building. This forms creative possibility rather than constraint and adds an element of surprise and uniqueness to the collection, as it is not produced in the same way as other competitor brands.

THE MERCHANDISER AND SUSTAINABILITY The previous section concluded by asking if new perspectives within product management could support sustainability within product management. This next section attempts to demonstrate some possible ways that the merchandiser can contribute to the debate. Relating the ten process activities of the concept-to-carrier bag model to the wide breadth of sustainability, like much of the product management process, cannot be evidenced in a single one-size-fits-all series of paragraphs. Connecting sustainability examples to the many fashion retail business models, product concepts and target customer types means that this would be impossible. However, it is possible to use established research to narrow the debate to the significant influences that directly relate to the B&M function, and from there to articulate how the merchandiser could help influence the promotion of sustainability within a fashion retail business. Research by Galland and Jurewicz (2010) identified six key themes that place pressure on the workings within the retailer–supplier supply chain relationship. These they defined as:

This case study is based on the work of Liz Parker and is a summary of a larger case study that can be found in Parker (2011).

Activity Research artisan cloth and accessories suppliers in developing countries and review how relationships such as those People Tree has with its suppliers can bring economic benefits to small communities.

•• Unstable buyer–supplier relationships If faux fur is on-trend, then retailers will buy faux fur. If leather is on-trend, they will buy leather. There is an inherent instability in the buyer–supplier relationship, but as Nike found, unstable relationships are not just borne out of the fickleness of trends, but also from divergent interests. The buyer looks for the best quality product at the most favourable commercial terms and often is given incentives such as bonuses to achieve them. The supplier meanwhile looks for efficiency within their processes with a consistency of approach. •• Continued downward pressure on cost prices The fashion industry is highly competitive, and the pressures that this creates are intense. The development of brands such as Primark, who trade on very low selling prices and very high volumes, and Boohoo, who mix low prices and discounts, has transformed the high street price architecture downward. As selling prices reduce, the pressure on cost prices to follow suit to protect retailer intake margins is high. Often retailers have used their power to change trading terms to protect profits or imposed fines for late deliveries regardless

SUSTAINABILITY AND PRODUCT MANAGEMENT

of reason, which many B&M teams use as ‘margin enhancers’.

•• Regular changes to product specification and purchase orders

•• Increased processes

One of the challenges of product management is the length of time that a concept-­to-carrier bag model can take. The setting of a creative and financial concept around which product development, budgets, OTB and range planning can pivot has many decision points which can often be used to action changes of mind. New trends may emerge, or the macroeconomic environment may throw a curve ball into the planning process. Beyond commercial pressures, there may simply be a consensus that a colour needs to be changed, a trim altered or unit buys reviewed.

quality

demands

and

There are many staging posts in the creation of product that ensure the quality of a garment is not just in line with the expectations of the end consumer but also complies with relevant legal requirements. The development and emphasis placed on brand management mean that quality entails not just the right colour, fabric type or button, but also the right placement of labelling, use of hangers and other pre-­ retail activities. Each can add time to the process, while the additional quality demands will add complexity. •• Shorter lead time pressures between order placing and delivery The twin emergence of competitive pressures such as high competition levels and technological advancements has enabled lead times to be cut and an increase in the reliance on flexibility within the supply chain. Nowhere is this more apparent than within the fast-fashion context, which can turn product concepts into stock within six weeks or fewer. The consumer has a regular supply of fresh fashion to buy, and the retailer the opportunity to better manage cash flow and commercial risk. For suppliers, this has had the very subtle but powerful impact of changing the direction of the supply chain from pushing product to the customer to being pulled by them. In order to be effective, this pulling of product ordering requires postponement strategies such as the use of bulk fabrics, which are coloured or trimmed at the very last minute, which in turn adds complexity and uncertainty to the planning of efficient manufacturing.

•• Cancellation of indicated or confirmed orders Buyers and merchandisers are often responsible for multimillion pound product categories that encompass many different product types, and the pressure on these individuals is immense. They are constantly searching not just for good deals but flexibility too in their quest to provide a product which is creatively astute but also capable of creating wealth. One source of flexibility is to manage OTB up or down dependent on trading conditions, and where OTB reduces, purchase orders can often be cancelled or indicated orders may be abandoned.

SUSTAINABILITY AND KPI BUDGETING At the heart of the merchandiser role, is the responsibility to create and manage the financial parameters of a product range. A key message that emerges from the research of Galland and Jurewicz is that suppliers are often faced with ever shorter lead times, so making any delays to

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production a significant problem. Often these delays are beyond their control  – weather, customs delays or earthquakes as examples. However, there are occasions when production is delayed due to problems within the supply chain or simply because lead times are too tight. The merchandiser may respond to these by imposing fines on the supplier to cover the lost sales opportunity. Over time, such penalties tend to become a KPI budget within their own right, and as a source of security

and potential additional gross trading profit, are chased with at times alarming ferocity. Table 14.1 below shows a KPI budget summary with an added provision for such supplier funding. It presumes that the sum of late delivery fines equates to 2.3 per cent of turnover, and as supplier funding is seen as a financial benefit, it increases gross trading profit, in this case by £1293, all at the expense of the supplier.

Table 14.1  Revised KPI summary to include supplier funding Menswear Planning year with supplier funding

Planning year without supplier funding

108,500

108,500

Markdown %

19%

19%

Markdown spend £

20,480

20,480

62%

62%

2500

0

Gross trading profit %

50.60%

50.2%

Gross trading profit £

46,768

45,476

Opening stock £

55,432

55,432

Closing stock £

55,432

55,432

Stock turn

1.96

1.96

Product category Sales budget Total sales turnover £ Markdown budget

Intake margin budget Intake margin % Supplier funding Late delivery fines Gross profit budget

Stock budget

VAT: 20%

SUSTAINABILITY AND PRODUCT MANAGEMENT

Calculation •• (£108,500/1.20 VAT) *62% = £56,057 sales at cost price •• (£2500/1.20 VAT) *62% = £1292 supplier funding at cost price •• (£20,480/1.20 VAT) *62% = £10,581 markdown at cost price •• £56,057 + £1292  – £10,581 = £45,768 gross profit An alternative, collaborative approach can be applied within B&M, in the form of a retrospective discount also known as an incentive bonus scheme (IBS). This is a financial agreement that encourages a partnership approach between retailer and supplier by setting financial incentives for the retailer to increase its trade with its suppliers over the course of several seasons.

By agreeing to a long-term partnership that is expected to grow each year, as the retail business develops, a supplier can naturally expect orders to rise gradually over time both in terms of unit buy and number of options produced. This type of agreement reduces the uncertainty of forward production and overhead planning for the supplier and could also produce economy of scale in manufacture. In return for this safety and long-term order placing, the retailer, who may be passing up opportunities to source elsewhere, would be entitled to a retrospective payment from the supplier at the end of a season dependent on the volume of business that had taken place. To demonstrate this, Table  14.2 takes from Chapter 8 the calculated Prentice Day OTB budget of £128,980 to show how such a scheme could work.

Table 14.2  Retrospective discount approach to supplier funding Open-to-buy selling value

£128,980

Open-to-buy cost value

£66,640

Open-to-buy growth

10%

Incremental open-to-buy

£6664

Retrospective discount selling value

£2500

Retrospective discount cost value

£1292

(£2500/1.2) *62%

Retrospective discount as % of OTB

1.9%

(£1292/£73,304)

To generate the same £2500 taken in late delivery fines, the table shows that the retailer would need to grow its OTB by 10 per cent. Where retailers spend OTB calculated in the millions, growth rates required to generate meaningful retrospective discounts would be much lower and so represent a viable option to consider. The table also demonstrates that relationship building and collaboration, if managed with a

(£128,980/1.2) *62%

(£66,640 *1.1) = £73,304 – £66,640

different approach, can result in financial as well as operational benefits to both retailer and supplier.

SUSTAINABILITY AND STOCK MANAGEMENT The stop–start approach to product ordering, and potentially wild variances in production planning, puts the order

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management within the sustainability focus. Central to stock deliveries is the accurate phasing of OTB to allow regular injections of new product trends, and it supports the management of cash flow. The real world is unfortunately anything but logical, and several blocks to sympathetic supplier production planning can occur. First, fashion ranges by their nature are built around colour stories or trend themes, and so – to be cohesive in store – require to be delivered together. This naturally builds peaks and troughs into production planning; a mad rush to get all options of a product range delivered at the same time, followed by potential inactivity until the next range launches. A similar dilemma is faced once the planning season is over and the trading season begins. Many retailers do not release all the available OTB prior to the season beginning, reserving a percentage of the budget value to spend on repeats of best sellers. The problem this presents is that, until a product begins to sell, it is impossible to accurately predict, first, how it will sell, and, second, if the rate of sale will be high enough to require a repeat order. Taking the stop–start production process first, it is inevitable that there will be peaks and troughs in production; however, it is possible to smooth out severe pinch points. The development of information technology has greatly expanded the capability of supply chains, which can facilitate the supply of product in response to the pulling of stock by actual demand rather than supply based on pushing product to customers in anticipation of future demand. By linking IT systems, both retailer and supplier can electronically pass information, such as purchase order details, between

them. Crucially, they can share stock information, and so transform the production process. By adopting a replenishment approach, in which stock shortages against pre-set targets are identified to the supplier on a continuous basis, deliveries can be made as required, rather than via a best guess forecast. This approach to trading brings the benefits of further improved cash flow to the retailer and an improved production flow to the supplier. It does have its limitations, as to be truly effective, suppliers need to be able to produce and ship in shorter lead times, and so the retailer could become overly reliant on a local sourcing strategy. There are also questions over the handling of very small order quantities and the efficient management of the purchase order’s creation and delivery process. In addition to these questions, another concerns the relevance to fashion or high-fashion options, which by their nature, are volatile in their sales potential and limited in their in-season life cycles. Not surprisingly, it is within core basic product that this approach is most effective and relevant, as the switching cost to a customer of buying opening price point easy styles across several brands is low to non-existent. Despite these benefits, there is a potential flaw in a continuous replenishment approach to core basic stock management. It is reliant on accurate initial planning to ensure that the range assumptions that are used to derive unit buys are well thoughtthrough and do not require constant revision. Once in-season, there is also a need for a mechanism to ensure actual trading results are reviewed with any required changes to forward planning actioned and communicated immediately.

SUSTAINABILITY AND PRODUCT MANAGEMENT

THE CIRCULAR ECONOMY As the various chapters of Part III have demonstrated, the world, the retail businesses and the roles within them are in a period of significant change. This change is no more prevalent than in the growing awareness of the need to develop a sustainable future not just for our industry but for the planet and all its inhabitants. This final section of this chapter and book recognizes that sustainability as a developing theme is still to be fully translated into the roles and activities of buying and merchandising. Real questions still exist as to the effective marrying of sustainability and product management as retail value systems rely so heavily on low-price multi-­location sourcing whilst also having to provide multiple delivery options. The debate appears to be pivoting around themes of cradle-to-cradle circular economy approaches to commerce as opposed to the prevailing cradle-to-grave mentality of use and dispose. The following section will discuss the circular economy concept and then move on to draw attention to the implications that this has on the merchandiser role and their activities. By doing this, the section will also act as a

Inbound logistics

Operations

summary of the whole text and also provide insights into the future image of the fashion retail industry. The circular economy concept is simple at heart. It is based on the concept of designing product in such a way that there is no resultant waste or pollution. In effect, every resource used in the creation of a blouse for example will be reused once the blouse is no longer needed. This reuse cycle continues until the resource can no longer be used and is subsumed back into the planet’s eco-system. The concept is highly relevant today if one accepts that the prevailing processes of design, manufacture and sale no longer work in an acceptable manner. To demonstrate this, we review again the primary activities within Porter’s value chain. The process of value creation is presented in a linear, left-to-right supply chain, where product raw materials are sourced, combined into a finished garment, moved through a distribution process, marketed and sold. This ‘take, make, waste’ (Ellen MacArthur Foundation, 2019) makes no provision for raw materials to be reused (Figure 14.1).

Outbound logistics

Figure 14.1  The value chain – primary activities

Marketing and sales

Service

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Similarly, if one then considers the retail industry, it has historically made no provision for re-use. Products were offered for sale and, as fast-fashion and low-cost sourcing evolved, consumers were encouraged to continuously buy products. The retail model followed a similar linear, left-­to-­right approach of sourcing, stocking and selling only. A circular approach differs in several ways. First, by employing processes that allow the reuse and repair/recycling of raw materials, a closed loop supply chain of forward and reverse logistics facilitates an end use product to be reintegrated into the supply chain once its original use has been exhausted. A circular economy looks to keep the materials of production in use for longer by constant reuse; in effect becoming the raw materials for the next cycle of products. Second, it recognizes that the product design and manufacture process is inherently wasteful (think use of water, off cuts of fabric and inaccurate stock forecasting) and so by moving away from a ‘take, make, waste’ approach to a ‘take, make, reuse’ offers the business opportunity to extract additional value from existing resources and from a sustainable angle do so whilst preserving the planet’s scarce resources. In effect the value chain shape becomes as shown in Figure 14.2.

This changed value chain shape has a significant impact upon product management. The fashion industry is huge, measured in sales in the trillions worldwide. The production of fashion has approximately doubled since the turn of the century (Ellen MacArthur Foundation, 2019), driven by consumer affluence. In the midst of this, use of fashion products has declined by almost 40 per cent (Ellen MacArthur Foundation, 2019), driven by a move towards disposable fast fashion, lower selling prices and inducements by retailers to buy in volume. A move to a textiles industry that encompasses a ‘take, make, reuse’ mentality offers a new perspective on the product design and buying process. It could for example allow the development of new exciting fabrication types, the adoption of preloved ranges by retailers rather than always sourcing new products or even the move towards bespoke products using recycled materials at the high street mass market level. For the merchandiser there is much to consider. Table 14.3 reviews circular economy themes in the context of the concept-­ to-­carrier bag model as used throughout this book. The table identifies that there is a potential implication on the direction of the future role of the merchandiser as we move further towards a sustainable fashion industry.

Recycle

Make

Remake

Use

Reuse

Figure 14.2  The circular value chain – primary activities

SUSTAINABILITY AND PRODUCT MANAGEMENT

Table 14.3  The concept-to-carrier bag and circularity Concept-to-­carrier bag activity

Potential impact of the circular economy

1. Research

Whilst product ranges will still require optimal planning, the success criteria may well change. Sell-through rates may no longer be looked to be planned at their highest level but one that allows maximum full price sales and for any excess stock to be put back into the supply chain for reuse or recycling.

2. Concept

KPI budgeting parameters would change, with a potential growth in stock levels financed by a reduced need for markdown. This approach, whilst reducing the need for terminal stock targets to be as low as possible, would have a knock on effect to cash flow planning.

3. Product development

Product ranges may be created to fit within trends but also within the flexibility of using products in different shapes or colours for future seasons. This would create range shapes that plan around a new set of attributes such a recyclability. A bigger point would be the potential slowdown of fashion and the move towards less injections of stock. This would change the life-cycle planning parameter used with range planning.

4. Sourcing

Whilst the reliance upon a WSSI or similar tool would likely remain, it would reflect a different phasing of sales, markdown spend and opento-buy. There would be a more even flow of sales over the season and less emphasis on the end-of-­season sale.

5. Manufacturing

As products are manufactured and delivered, the process of forward logistics would be unlikely to change significantly. The change would focus more on the management of the process rather than a tool with which to dominate the buyer/supplier relationship.

6. Shipping

Like the manufacturing step, there is little change foreseen to the mechanics of shipping. The routes used and transport types would likely focus less on speed and more on environmental priorities

7. Warehousing

The management of a warehouse/distribution centre tends to sit outside the control of the merchandiser, a changed KPI budgeting and trading strategy however would have implications for stock management. With many cross-dock operations that see stock simply passing through a warehouse and not be stored, a changed approach to sell-through rate assumptions may increase the amount of out away stock and so increase the reliance upon in-season trading activities

8. Distribution

An alternative to increasing warehouse stocks would be to continue to allocate most of the stock to stores but then use reverse logistics at the end of the selling period to return from stores to a distribution centre for a return to the upstream supply chain (continued)

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Table 14.3  (continued) Concept-to-­carrier bag activity

Potential impact of the circular economy

9. Retail

The fashion industry is a business, and so market forces will continue to direct the retail activities. Stores could become drop off points for used products to go back into the chain. Alternatively, they could become local small-scale manufacturers and recyclers that reuse and repurpose products to be sold again in store. Ideas like these would change the role of the store and how its size and shape are utilized by both buyer and merchandiser within their planning presumptions.

10. Carrier bag

The consumer. The great unknown! Co-ordinating a diverse set of consumers with different attitudes to fashion and sustainability presents challenges. Key to this is how to manage their expectations of low prices and ever-changing fashion with a greater potential complexity within the supply chain.

Table 14.3 cannot be thought as definitive; the subject is still evolving, and new business processes and best practices will take time to develop. This does present a compelling end point for this academic text. Retailers and the roles and activities within them have changed significantly over the centuries, and they will continue to change. Sustainability appears to be becoming the principle driver of change, just like e-commerce has done so over the last 25 years. As such, Table  14.3 has suggested potential impacts of sustainability themes on the merchandiser role. Implied within is that it is the cognitive capability of people to recognize not just new strategies but also new operational metrics and tools. As such, the delivery of sustainable fashion must start with a thoughtful application of prevailing and new merchandising activities and skill sets.

SUMMARIZING FASHION MERCHANDISING: PRINCIPLES AND PRACTICE This final chapter concludes with an example of the future: artificial intelligence (AI). The case study provided by IBM is a

powerful example of how two key elements within the merchandisers evolving role, the use of data and acting to support a sustainable future for all of us, can be combined. This is an important final point. Much of this book has dealt with planning, assumption and forecasts and the tools that the merchandiser uses to manage these types of uncertainty. This uncertainty builds risk into product management activities and a tendency to take advantage of opportunity as they arise in the hope that they will contribute to a successful season. Of course, not all apparent opportunities are what they seem, and so many times these hopes become mistakes and costly ones at that. As it is now clear, the fashion industry must and is changing. The linking of waste management and AI as shown in the IBM case study shows a potential new road for the industry to follow. AI is often seen as a lot of data that can help make business decisions, but it can also change prevailing practice and assumption. Any professional in the fashion industry should take note of that and act upon it.

SUSTAINABILITY AND PRODUCT MANAGEMENT

CASE STUDY 14.2: The merchandiser and e-commerce – Joseph Kearins, IBM The fashion industry is plagued by sustainability issues, and one of the most visible is waste. WRAP, a resource-efficiency charity, estimates that UK households send £140 million of used (but still wearable) clothes to landfill every year. A major factor in fashion industry waste is dead stock  – inventory that fails to sell, even at a discount. Businesses dispose of dead stock to keep it from clogging up their warehouses. For several reasons (brand perception, cost etc.) dead stock is often sent to landfill or incinerated, rather than being re-used or given away. These practices have received a considerable amount of media attention recently; the resulting public outcry has led the UK Environmental Audit Committee to ask the government for a ban on unnecessary incineration, in addition to measures such as taxes aimed at fast-fashion businesses and financial incentives for environmentally friendly products. Dead stock has therefore become more problematic for the industry, and there are a few different things businesses can do to manage waste more effectively. One approach is to help manage dead stock into the circular economy more effectively. At the same time, industry can also reduce the amount of dead stock that is manufactured in the first place. To remove dead stock at the source is not as simple as ‘make less stuff’. Sometimes an item is overproduced, sometimes the allocation strategy puts the right product in the wrong place at the wrong time. Getting orders and allocations right is difficult because consumer behaviour is often unpredictable and volatile – a new trend may emerge suddenly, sometimes it may disappear within a few weeks, while others may last for years. It is difficult for brands to react with speed

and precision to that volatility, leading to range failure and waste. One way the industry can improve reaction times to volatile demand is by dramatically shortening the manufacturing and supply chain. By doing this, brands are in a better position to act at short notice, and so can theoretically bide their time before making more informed buying and allocation decisions. There is simply less time for consumer tastes to change when supply chains are shorter. Yet this does not address the entire problem for the buyer or merchandiser, who needs to deliver a trend not just on time but also in precise volumes, sizes, colours etc in multiple retail locations. Reducing time to market helps improve agility, but it does not improve a company’s innate ability to predict demand. This is evidenced by fast-fashion brands which, though able to respond rapidly to consumer tastes, still get the mix wrong and produce large quantities of dead stock. What does it take to predict consumer demand more accurately, and what could the impact be? Fundamentally, a business needs two things: 1. Information 2. The ability to analyze and act on that information effectively and efficiently With these, fashion businesses can make superior buying and merchandising decisions. Brands often hold much of the information they need and can frequently bolster what they do have with third-party data on e.g. social trends and weather. What they may not have is the ability to organize and use that information. For example, it is common for merchandisers to make forecasts with stock and sales data; it is less common

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to use demographic, population movement and social media data. While this sort of analysis is now possible, it is not an industry standard. Even in the earlier buying stages, the process of analyzing and making judgements on trends can be rudimentary. And while many retailers work with retail analytics companies and forecasting agencies, buyers are often left to scroll through the same social and fashion apps used by end consumers, searching hashtags and celebrity feeds to get a sense of where the market is heading. Historically, it has been difficult to analyze complex, unstructured datasets such as images. Analyzing financial and inventory data has been possible for a long time even using MS Excel. In comparison, analyzing pictures to understand colour or silhouette trends requires more advanced technology. Over the last few years, things have started to improve. AI is able to recognize patterns in huge volumes of unstructured data sets, such as pictures, sounds and free-flowing text, providing insights that would have once been impossible to uncover in a commercially sustainable way. Merchandisers can use these data sources to refine their forecasts. For example, AI can analyze customer reviews to identify the sentiment towards products, colours, styles etc. These can be cross-­referenced with location, demographic and sales data to sense and pinpoint consumer demand (in different places). Taking another example, a fashion retailer in Asia plans to use AI to determine the right assortment plan for each store, predict the next best product to incorporate into its mix and improve the efficiency of its supply chain. Once, a buyer or merchandiser may have been able to analyze and use ten data sources over three weeks to support planning; now, they can consolidate years of that effort into a period of days. Imagine a scenario where a buyer or merchandiser could

instantly analyze 100,000 fashion images from social media to identify an emerging colour trend, providing extra time to optimize range decisions before it is too late to take corrective action. This gives brands a valuable opportunity to ensure they are buying and allocating the right range for their consumers, reducing the risk of ordering unwanted stock that goes to landfill and incineration. It would be virtually impossible to achieve the same impact with historical planning and analytics methods, and the gap will only widen as AI continues to improve. As with many innovations, the challenge is often to persuade people to accept change as much as it is to create the underlying technology. Arguing that a merchandiser should begin to look to new external data sources, or that buyers should use more analytical tools, may be a hard sell. The sentiment runs even deeper within the design function. Yet AI has already shown that it can play a supporting role even in product design. To take one example, Australian designer Jason Grech used AI from IBM to design an eveningwear range. Publicly available fashion images and AI visual recognition technology were used to predict colour and print trends, which were used to select the colour palette for the range. Grech also used images of architectural shapes and structures he was inspired by. AI was used to match these images to patterns and silhouettes in historic catwalk images, to stir ideas for new designs. As a result, the design research process was six times faster than usual, giving the team more time to focus on other aspects of design (IBM Case studies, 2019). There are also lessons to be learned from adjacent industries. A fast-moving consumer goods company analyzed external data for ambient population and points of interest to predict consumer demand. They were able to increase sales in two

SUSTAINABILITY AND PRODUCT MANAGEMENT

major cities by 3 per cent, reduce out-of-­ stocks by 10 per cent and improve shelf cycle time by 24 per cent. By putting the right products in the right place at the right time, the business is able to reduce the risk of stock going to waste. Dead stock is one element of the waste problem. The overarching issue of sustainability is far-reaching. Waste happens throughout the supply chain, and the industry is plagued by other issues such as water usage, pollution and a questionable record with garment workers. AI and other emerging technologies such as Blockchain have already shown promise in addressing many of these issues in addition to dead stock, in both fashion and other consumer industries. (For example, authenticating and storing safety certificates on a blockchain can help brands ensure labour

standards compliance through their supply chain.) Part of the answer to the sustainability crisis is, as consumers, to embrace a more sustainable way of living. At the same time, we can also put new technologies to work to help businesses operate more sustainably.

ABOUT JOSEPH KEARINS Joseph Kearins is a strategy consultant for IBM’s Global Consumer Industries Centre of Competence primarily working with IBM clients in the fashion & luxury industries. He also contributes to IBM research blogs and is active in knowledge exchange activities between industry and academia. Find IBM Research blogs at https:// www.ibm.com/blogs/research/ and IBM Case Studies at https://www.ibm.com/ case-studies

SELF-DIRECTED STUDY Review the ethical trading initiative website to review the scope of ethical trading. This can be found at http://www.ethicaltrade.org/

Review the Investor Relations section for fashion retail businesses’ websites to review varying commitments to corporate social responsibility and ethical trading.

FURTHER READING Elkington, J. (1994) Towards the Sustainable Corporation: Win-Win-Win Business Strategies for Sustainable Development. California Management Review, Vol. 36, pp. 90–100.

Modern Slavery Act (2015) Available at http:// www.legislation.gov.uk/ukpga/2015/30/ contents/enacted UN SDG Article Voluntary Agreement (2019) Available at https://sustainabledevelopment.un.org/vnrs/

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BIBLIOGRAPHY Brundtland, G.H. (1987) Report of the World Commission on Environment and Development: “Our Common Future.” United Nations Available at https://www.are.admin.ch/are/en/ home/sustainable-development/ international-cooperation/2030agenda/ un-_-milestones-in-sustainabledevelopment/1987%2D%2Dbrundtlandreport.html Christopher, M (2011) Logistics & Supply Chain Management. 4th ed. Harlow: Financial Times Prentice Hall. Ellen MacArthur Foundation (2019) Available at https://www.ellenmacarthurfoundation. org/ Galland, A. and Jurewicz, P. (2010) Best Current Practices in Purchasing: the Apparel Industry. AsYouSow. org. Available at: https://static1.squarespace.com/ static/59a706d4f5e2319b70240ef9/ t/5a7f6a069140b73f5d0 da92b/1518299654690/ Apparel_Report. pdf

Harris, B. (2010) A More Sustainable Future for Fashion. London: Detra. Hines, T (2004) Supply Chain Strategies. Oxford: Elsevier. Muthu, S.S. (2016) Environmental Implications of Recycling and Recycled Products. Singapore: Springer Parker, E. (2011) Steps Towards Sustainability in Fashion: Snapshot Bangladesh, edited by Hammond, L., Higginson, H. and Williams, D., London: London College of Fashion and Fashioning an Ethical Industry Petter, O. (2018) Burberry is the Most Sustainable Luxury Brand, According to Dow Jones Index. The Independent Available at https://www.independent.co.uk/life-style/ fashion/burberry-sustainable-dow-jonesindex-2018-fashion-week-london-riccardotisci-a8537546.html Woodside, A.G. and Fine, M.B. (2019) Sustainable Fashion Themes in Luxury Brand Storytelling: The Sustainability Fashion Research Grid. Journal of Global Fashion Marketing, Vol. 10, Iss. 2 , pp. 111–128

GLOSSARY 4Ps  See Marketing mix. % Mix  The value or importance of a series of variables within a common measure. % Variance  The extent to which a variable differs to a comparable variable. For example, sales of shirts this year compared with sales of shirts last year. Allocation plan  A calculated plan that dictates the number of units per size of each option that will be allocated to each store that is to be ranged. Attribute  A characteristic or trait that sets one or more objects apart from another attribute type; for example, different fashionabilities. Average line buy  The number of units bought of an option. An average line buy is the average number of units bought across a range of options. Average selling price  The calculated average of the selling prices of all options within a product range; for example, the average selling price of two shirts priced £5 and £10 is £7.50. B2B/B2C  Business to business (B2B) refers to trading between two separate businesses. B2C refers to businesses trading with consumers. Balance sheet  A ledger that summarizes the value of a business by quantifying its assets and liabilities and identifying its resulting value as a going concern. Basket size  A measurement of the number of products sold within one transaction.

Buy online, return in store (BORIS)  The activities of customers who buy product from an online store and return it to a bricks-and-mortar store. Brand personality  The combined set of attributes or characteristics that together identify to consumers consistent personality traits and values within a business’s products, marketing communications and supply chain operation. Branded buying  The buying of products from a wholesale brand where buyers select predesigned and manufactured options to range within their stores. Bricks-and-mortar (B&M) store  A physical store on a high street. Budget  An estimate of the expected value of an income or expenditure item for a specified period (see also KPI). Business model  A business model comprises defined processes, organizational structure, product types and trading strategies that together create value by being consistent and applicable throughout all aspects of the business’s operation. Buying budget  See open-to-buy (OTB). Buying season  A specified period during which a retailer sources and purchases options to range in their business. Cash flow  The movement of cash into a business in the form of sales and out in the form of expenses over a specified period

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Closing stock  The calculated value of all stock that a business owns at the end of a specified period. It is usually recorded as a cash figure at selling price value. Commitment  The total sum value of all outstanding purchase orders for products that have been ordered but not yet delivered. Concept-to-carrier bag model  A theoretical linear process map that identifies the sequential steps that a retail business may take to translate product research into a product range which is subsequently bought by a target customer. Consumerism  The culture of consumers buying more products than they need to cover individual basic needs to reflect status and growing wealth. Continuous replenishment  A supply chain process whereby a product supplier replenishes a retailer’s stock by receiving daily information electronically of sales and stock movements and supplies product to replenish back to pre-agreed stock levels. Core basic  An option that is not influenced by fashion trends and is demanded consistently across several seasons. Corporate social responsibility (CSR)  The voluntary adoption by a business of practices that are designed to support society, people and the environment in its strategic and day-today operation. Cost price  The negotiated and agreed price paid by a business to its suppliers for products that it will buy. Crowdsourcing  An activity where an organization uses a large mass of individuals to gain information and

ideas that can be used by itself for future opportunities. Delivery schedule  A ledger that plots over several weeks anticipated delivery dates of new product into a retail business. It is usually created for the length of a season and is continuously updated with changes to delivery dates and size of order. It is created to show orders by size (units, cost and selling value) and the date on which the order is due to be delivered. Display factor  The total number of units of an option or several options needed to fill a fixture or a number of fixtures. Distribution channel  A single channel by which a product moves from supplier to retailer and on to the end customer. Distribution channels vary in type, and for the customer include physical stores, online stores and catalogues. See also Multi-channel retailing and Omnichannel retailing. Drop shipping  An order-fulfilment supply chain process in which retailers pass customer orders directly to a manufacturer or wholesaler who will deliver product directly to the customer. E-retailer  An online retailer that conducts its business through a website and delivers customer purchases either from their own warehouse or direct from the manufacturer. Electronic data interchange (EDI)  An early system of two computers talking to each other to share information between two businesses and to enable the transmission of data. Fashion style  A product type or option that interprets current trends for an identified target customer.

GLOSSARY

Fashionability  A subjective measure of the level to which an option conforms to current fashion trends. For example, a trend-led option has a high fashionability, while a core basic option has low fashionability. Fast fashion  A business model in which shortened lead times within the supply chain enable ranges to be offered for sale faster than in traditional business models. Forecast  A revision of a previous decision that relates to the re-forecasting of KPI budgets for a season to change them to better reflect current trading conditions and resulting financial expectation. Glocalization  A business term that refers to the adaptation of a product or service that is specific or altered in some way to be traded within an individual locality or culture. Gross domestic product (GDP)  The market value of the production of goods and services within a specified period. Gross trading profit  The financial benefit accrued by a business through its trading activities for a specified period. High fashion  The first or most relevant options in a new trend or style. Intake margin %  The difference in value between the cost of buying an option from a supplier and the selling price offered to a retail customer. This is expressed as a percentage. Just in time (JIT)  A supply chain method of operation in which product is manufactured at the point that it is needed rather than based on future demand. Key performance indicator (KPI)  Performance metrics that measure the success of an individual or

range of items. KPIs are applicable in any situation where measuring success is required; for example, financial budgets. Lean, agile and leagile  Supply chain systems where the designed supply chain reflects the characteristics of the products being supplied. Lean supply chains place an emphasis on supplying product with minimal cost, while agile supply chains emphasize flexibility. A leagile supply chain is a combination of the two focuses into one. Life cycle  The length of time measured in weeks that an option has been available to buy by customers. Like for like (LFL)  An identical comparison between two similar or identical variables to enable an undistorted measurement of the performance of the variables. Line monitor  A document that is used to forecast weekly sales for an option. The monitor is used to inform when new stock should be ordered based on recorded sales rates. Linear footage  An arm on a fixture or a space available for on a table for displaying stock. Each arm or pile carries a specified size presumption that enables the linear footage of a display area to be calculated. Long tail effect  An approach to product management in which a retailer offers a very wide number of products, but in very shallow quantities. Manufacturing requirement planning  A supply chain approach that pushes product to consumers using preidentified demand patterns. Mark down spend  To reduce selling prices. Markdown values are expressed

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in cash and are the difference between the original price and the new reduced price. There are two types of markdown: point of sale (POS) where product is discounted when sold only, and clearance, where product is discounted regardless of whether it has been sold or not. Mark down spend % to sales  The value of markdown spend expressed as a percentage of sales value. For example, where markdown values are £10 and sales values are £100, the markdown % to sales is 10%. Mark up  To apply an increase to a given cost price to derive a selling price. Marketing mix  A theoretical model used by a business that mixes various elements of a business’s proposition to assess the balance between them and to identify gaps within the proposition. Historically referred to as the 4Ps, the model has extended to become the 7Ps. Minimum credible offer (MCO)  The minimum number of units that must be on display in a shop to make the product offer look credible to the customer. Multi-channel distribution  A process of offering products for sale to a customer in more than one way; for example, simultaneously offering a product range through a mix of physical stores, online and catalogues. Multi-fibre arrangement  A trade agreement that imposed quotas and tariffs on commercial trade between developing and developed nations between 1974 and 2004. Omni-channel  A recent development of multi-channel retailing where a retailer co-ordinates all its various distribution channels to offer a seamless transaction

to its customer. All channels offer the same range of products and services and facilitate the customer to engage with more than one channel when making a purchase (for example, click and collect). Open-to-buy (OTB)  The amount of budget available at any given point within a financial period to purchase stock with. OTB is expressed at selling value and derived from KPI budgets. Released OTB is a proportion of the budget that can be spent by the buyer. Opening stock  The value of stock in a business at the beginning of a specified period of time. Usually recorded as a cash figure at selling-price value. Option  A style/colour. A jumper is a style, and a red jumper is an option. If the jumper is available in red, white and blue then the one style has three colour options. Out of stock (OOS)  The difference between planned and actual stock levels. The OOS is expressed as a percentage, and the higher it is the more out of stock a business is to its planned level. Own-label buying  A range of options designed by a retailer to be sold under their own branding or sub-branding. Percentage mix  See % mix. Phasing  The breaking-down of a variable into smaller amounts which add up to the whole. For example, when phasing sales, the total budget will be broken down across all the weeks of the season. Previous year  A season or financial period that has finished and is compared with the season or financial period that is being planned or currently in operation.

GLOSSARY

Product category  A collection of product groups that all appeal to a specific customer demographic or product end use; for example, menswear or casual wear. Product group  A grouping-together of similar products that can be planned in the same way; for example, trousers, shirts. Product planning  See Range planning. Profit and loss account (P&L)  The profit and loss account of a business that records all trading income and expenses for a defined financial period. Promotional calendar  A calendar of dates during which a business actions a promotion to influence business performance (for example, a midseason sale), or a date where an outside influence had an impact on business performance (for example, The Olympics). Purchase order (PO)  Between two companies, a legally binding agreement to trade that states the products to be bought and all negotiated terms of trade. Quick response  Quick-response manufacturing is a process whereby emphasis is placed on the reduction of the time taken to manufacture a product. This enables the manufacturer to respond to market demand faster and reduces waste in the manufacturing process. Range planning  The process undertaken to identify options to be ranged in a future product range. A completed range plan will blend a mix of options to be balanced across product type, colour, selling price, attribute and depth of unit buy. Rate of sale  Rate of sale measures the average number of units sold of an option per week per store during its life cycle.

Replenishment  The resupply of stock to shops as a result of stock being sold to customers. Resupply time  The length of time measured in weeks that a supplier takes to deliver a repeat order. Sales density  A measure of performance that identifies the value of sales achieved from available store selling space. It is expressed in currency, and the higher the sales density the more effective the use of available space. Sales turnover  The cash value paid by a customer to a retailer for a product or service. Season  A defined period in which product ranges are sold; for example, a spring/summer season or an autumn/ winter season. Sell-through rate %  Sell-through rate measures the amount sold of an option by expressing sales units as a percentage of the units bought. Selling price  The price at which a retailer offers product for sale to consumers. Size curve (also called a size ratio)  A size curve measures the quantifiable value that each size offered of an option represents. Square footage  A measurement of the floor space available in a physical store that can be used as retail selling space. This space can also be measured in square meters. Stock/Inventory  The products available to be sold to customers at any given time, measured in units and value. Stock turn  A ratio measuring the rate at which stock is converted into sales over a given period. Generally, the higher the stock turn the better the business performance. Style  A product such as a jumper or dress (see also Option).

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Supply chain management  A system of resources that working together plan and manage the process of designing, sourcing, manufacturing and delivering a product. SWOT  An analysis tool that identifies the (internal) strengths and weaknesses and (external) opportunities and threats that influence a business or individual. Unit buy quantities  The number of units bought in total of an option within a product range. Value added tax (VAT)  A consumption tax levied by governments on goods and services at the point of sale.

Value chain  A model developed by Michael Porter that organizes the activities of a business into primary or support. The co-ordination of these activities will enable the delivery of optimal product at a reduced cost, so leading to an improved margin for the business. Weekly sales, stock intake report (WSSI)  A document that breaks seasonal KPI budgets into weekly budgets and is used to calculate OTB budgets by week. Weeks cover  The number of weeks in which an option would sell out at current unit-sales-per-­week levels.

UK/EUROPEAN–AUSTRALIAN TERMINOLOGY GLOSSARY By Julie Dugandzic, RMIT, Melbourne Book term

Australian equivalent

Merchandiser

Merchandise Planner

Buying Terms

Trading Terms

Core Basic

Basic/Volume

Display Factor

Model Stock

Fashion Style

Fashion Core

Forecast

Replan/Forecast

High Fashion

Directional

Intake Margin %

First Margin %/Intake Margin %

Like for Like (LFL)

Comparable (Comp)

Line Monitor

Line Plan

Own Label

Private Label

Product Category

Department

Product Group

Class/Subclass

Resupply Time

Lead Time

Sales Density

Gross Margin Return on Floorspace (GMROF)

Square Footage

Square Meterage

Stock Loss

Shrinkage

Total Buy Value $

Total Cost $

Value Added Tax (VAT)

Goods and Services Tax (GST)

Other terms relevant to the Australian retail environment Australian term

Meaning

Cash Margin

The income to a business before operating expenses are deducted. It includes markdowns

Gross Margin %

Cash Margin expressed as a % of Net Sales $/Total Sales $

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INDEX definition, 40 fashion buyer Hannah Middleton, 41–43 management consultant and lecturer, 41–43 of role, 41 skill set, 43–46 fashion merchandiser role, 47–48 AQUAretail, 48–51 skill set, 52–55 Buying and merchandising (B&M) function, 77–78 key contacts, 69–73 meeting schedules, 73–76 organizations, 57–78 structure, 60–61 allocator, 65 assistant buyer, 62 assistant merchandiser, 63–64 buying administration assistant, 62 reorganizing, 67–69 value chain, 58–60 Buying cycle and fast fashion, 37–38

A Allocation plan, 183–184 Allocator, 65 Anderson Ford, Mary, 48 AQUAretail, 48–51 Assistant buyer, 62 Assistant merchandiser, 63–64 Assistant territory merchandiser (ATM), 64 Attribute, 27 Automatic identification and data capture (AIDC), 238–239 Average selling price, 160 B

Balanced product ranges, 25–26 Balance sheet, 28 Balasubramanian, S., 4 Barcodes impact, 239 Beckham, David, 60 Bhatia, Gaggan, 193–195 Blockchain, 235–236 Branch merchandiser, 68–69 Brand personality, 6, 161 Bravo, Rose Marie, 6 Bra wars, 7–8 Brazil, Lee, 54–55 Brittain, R., 4 Budget analysis, 96–102 Budgeting process, 112 gross trading profit, 129–130 intake margin, 123–125 key performance indicators, 113–115 markdown spend budgeting, 120–123 review, 130–132 sales turnover budget, 115–119 stock target, 126–129 Budgeting strategy, 110–111 Burberry, 6 Business-to-business (B2B) trading, 229–230 Buyer and merchandiser roles, 35–38 Buyer’s administrative assistant, 63 Buying administration assistant (BAA), 62 Buying and merchandising (B&M), 30 activities, 40–55

C

Circular economy, 257–260 Colour analysis, 168–169 Concept-to-carrier bag model, 30–34 The Cotton On Group (COG), 191 Cox, R., 4 D

Daly, Charlotte, 68–69 Delaney, Heather, 77–78 Dugandzic, Julie, 190–192 Dunkerton, Julian, 59 E

E-commerce, 209–210 business benefits of, 208 buying and merchandising, 211–219 competitive shopping, 219–225 merchandiser, 210–211, 261–263

272

Index 80/20 rule, 170 Etsy approach, 22 F

Farfetch, 15–16 Fashionability analysis, 167 Fashion business balanced budgets, 27–29 balanced product ranges, 25–27 buyer and merchandiser roles, 35–38 buying and merchandising, 30 concept-to-carrier bag model, 30–34 definition, 21 dover street market, 23–24 Etsy approach, 22 nordstrom local, 22–23 rent the runway, 23 role of product within, 24–25 TJX, 24 Fashion buyer Hannah Middleton, 41–43 management consultant and lecturer, 41–43 of role, 41 skill set, 43–46 Fashion industry, 247 Fashion merchandiser role, 47–48 AQUAretail, 48–51 skill set, 52–55 Fashion style options, 165–167 Fashion supply chains, 230 Finch, Rachel, 47 Fri, J., 4 G

Ghebreab, Sennait, 43 Global merchandising Australia, 190–192 India, 193–195 perspectives, 201–206 philipinnes, 195–198 United States of America, 199–201 Gobbetti, Marco, 6 Goworek, H., 41, 47 Gross trading profit budgeting, 129–130 GS1 industry standards, 238 H

Hinton, Zoe, 215–218 Holder, James, 59

I

Industry deregulation, 7–10 Initial allocation process, 180–184 Intake margin budgeting process, 123–125 J

Jackson, T., 41, 47, 180 Jones, Megan, 65 K

Kearins, Joseph, 261–263 Key performance indicators (KPI) budgeting process, 113–115 gross trading profit, 129–130 intake margin, 123–125 markdown spend, 120–123 retail operations, 131–132 review, 130–132 sales turnover, 115–119 stock target, 126–129 and sustainability, 253–255 Kmart Australia, 191 L

Langdon, Rachel, 53–54 Leong, Charmaine, 64 Londrigan, Michael P., 199–201 Lyst, 16 M

Macro environment, 89–91 Management consultant and lecturer, 41–43 Mandelson, Peter, 7 Markdown spend budgeting, 120–123 Marketing mix, 84 Marks & Spencer, 29 Merchandise distribution assistant (MAA), 65, 66 Merchandiser–supplier relationship, 173–175 Middleton, Hannah, 41–43 Mills, Kristina, 219–225 Moyse, Rachel, 241 Multi-store range planning, 163 N

Net-a-Porter, 16 Neves, Jose, 15 Nolan, Katie, 52–53 Nordstrom Local, 22–23

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274

Index O

Open-to-buy (OTB) budget, 135–136 creating, 136–139 prentice day casual wear WSSI, 145–153 review, 139–141 WSSI report, 141–144 Out-of-stock (OOS) percentage, 183–184 P

People Tree, 251–252 Peterson, R., 4 Pingol, Ana, 195–198 Portas, Mary, 59 Porter, M., 58–60 Prentice day menswear case study, 84–87 initial approaches, 87–89 macro environment, 89–91 planning strategy identify, 91–92 SWOT analysis tool, 86–87 Price analysis, 168 Product analysis, 103–110 Product vs. item level identification, 239

Shaw, D., 41, 47, 180 Siddique, Nismah, 66 Size curves, 175–180 Stock accuracy, 240 Stock keeping unit (SKU), 184 Stock management, 255–256 Stock target budgeting, 126–129 Strengths, weaknesses, opportunities and threats (SWOT) analysis tool, 86 Superdry, 59–60 Supply chain management, 228 capability, 242–245 globalization, 236–237 planning tools, 232–235 plethora of, 231 standards and visibility, 237–240 Sustainability circular economy, 257–260 KPI budgeting, 253–255 merchandiser, 252–253 principles and practice, 260 within product management, 248–249 social impacts, 249–251 stock management, 255–256

R

Range planning concept, 156–161 creating the option detail, 165–169 initial option plan and brand personality, 161 qualitative and quantitative aspects, 161–165 Rent the Runway, 23 Research and analysis budget analysis, 96–102 budgeting strategy, 110–111 product analysis, 103–110 retail mathematics vs. commercial acumen, 95–96 Retailing changing players, 10–13 from consumption to consumerism, 4–5 definition, 4–5 industry deregulation, 7–10 seeking competitive advantage, 13–14 twenty-first century, 17–18 Retail mathematics vs. commercial acumen, 95–96 Rose, Adam, 211–213

T

Thomas, Elise, 210–211 TJX approach, 24 U

Unit buy analysis, 167 V

Value chain, 58–60 Varley, R., 4, 25, 41, 47, 48 Visual merchandising (VM) strategies, 181 W

Weekly stock, sales, intake (WSSI), 141–144 Wingate, J., 4 X

Xilai, Bo, 7 S

Sales turnover budget, 115–119 Schmierer, Victoria, 63 Seeking competitive advantage, 13–14

Z

Zara and competitive advantage, 14–15