Off Season Fashion Sales: Procurement in Retail

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Table of Contents

Introduction
Discussion
Conclusion
References

Introduction

Fashion though by definition could mean style or trend is also very much synonymous to change. Thus, in the clothing or apparel industry – which is one of the most apparent and universal manifestations of fashion—everything is time sensitive. Seasons dictate the trend, celebrities can create the boom and things just come and go.

In this clearly “ever-changing” industry, procurement and project management is an inevitable big business hump that needs to be smoothly passed through. Thus, this paper aims to look at the processes involved in procurement and project management within the fashion retail industry and also investigate on how a clearance market can possibly ease the burdens of excess inventory while increasing the revenues from stocks.

Discussion

Fashionably in Business : The industry and emerging trends

Considered to be one of the most colorful, exciting, dynamic and fast-paced industries of the times, fashion goods, remain to be a booming business worldwide. In 2006, Italian luxury fashion goods accounted for about 26 billion Euros, notwithstanding the adverse economic cycle of the last few years. Glamour aside, this financial prospect makes the industry very much attractive especially in expanding brands and building sustainability. (Brun, Caniato,Caridi, 2006)

Perhaps, even how fashion as an industry evolved from being “elitist” to more accessible has largely contributed to its catapulting success.

“Fashion trends also affirm themselves in a spontaneous way in accordance to the Zeitgeist, i.e. the spirit of the age prevailing at the given moment. Traditionally, a polarization can be observed in the fashion industry: some companies choose to operate in the mass market, selling low cost products that are available to a large number of consumer, whilst other companies are aiming at providing exclusive and expensive products to an elitist segment of consumer” (Brun,Caniato, Caridi, 2008)

This occurrence somehow became a significant element in the growth of the business and in even how the market is reacting. In fact globally, more and more people are becoming “fashion conscious”. The advent of the metro-sexual or the term coined for heterosexual men who are more strongly concerned in their appearance (clothing, looks, etc) is in fact a big and emerging market share for fashion retailers.

What’s Hot and What’s Not : Fashion Retail Problems

M. Karakul’s 2008 article “Joint Pricing and Procurement of Fashion Products in the Existence of a Clearance Market published in the International Journal of Production Economics, cites that in the apparel industry, the dilemma of always balancing supply and demand is a normal phenomenon. That the fashion retail industry is very time-sensitive. With a major change happening at the onset of every season, fashion retailers face the dilemma of introducing more and more product lines at every given period but having such very short time to sell and ease out stocks. Therefore, the short life-cycle and high demand variability of the products puts a high stake on procurement and in the long run, demands a whole lot of project management.

Another factor to be considered in the realm of the fashion retail supply chain management is the long supply lead times. The retailers are bound to commit to procurement quantity as well as product variety in advance. Foresight is a very important aspect that demands stock orders be placed at least 4 to 6 months before the start of the season. Other variables that may affect season dependent fashion goods may also come from related business that also dictate trend, like film and television or the emerging new media, that is the internet. Apart from designers, celebrities also can set the style and in fact in this high-tech world, even blog sites elicit reviews and create major influences. As supermodel Heidi Klum would always say: “In fashion, one day you’re in, next day you’re out!”

Emerging Trend: The Clearance Market

With so much foresight and guarantee expected in the fashion retail industry, procurement and project management face a resounding salvation against loss and excess with the clearance market. Though balancing between production and demand will always be a present predicament, the existence of the clearance market posts a possibility of increasing not only the procurement quantity but also the price for the regular season.

This is quite intuitive, because any excess Inventory after fully satisfying the regular season demand can be used to satisfy the clearance market demand at the end of the season. Existence of a clearance market increases the total demand for the product and an increase in demand induces an increase in supply, price, and profit. (Karakul, 2008)

In spite of this great possibility, in terms of project management, there are still other practical matters to be dealt with in terms of actually assigning price values for both the season sales and the clearance sales to be able to determine whether the quantity procured will be justifiable for profit in both possible sales opportunities. There are vital decision variables such as the appropriate quantity to procure at the onset of the initial project and the right projected amount to dispose, in any event that a surplus of stocks come on hand after the season. (Willoughby, 2001)

Conclusion

Shorter season shelf life but longer potentials for profit indulges the business to stretch its potentials for sustainability. “Fast-fashion” therefore is the trend in the fashion retail. Indeed, this is what makes fashion brands like H&M and Zara such big forces to contend with in the industry.

In realizing the potentials of the clearance market, there is indeed a great opportunity to minimize losses and in fact even increase revenues and prolong sustainability while being up against the ever-changing business called fashion. Wise integration of pricing methods and factoring rates for the secondary (a.k.a. clearance) market sales will surely yield practical benefits. Marketing strategies then comes in the process and integrated properly to management and procurement in order to sustain retail industries.

References

Brun, Alessandro; Caniato, Federico; Caridi, Maria (2008), Logistics and Supply Chain Management in Luxury Fashion Retail: Empirical Investigation of Italian Firms, International Journal of Production Economics.

Karakul, M (2008) Joint Pricing and Procurement of Fashion Products in the Existence of a Clearance Market, International Journal of Production Economics.

Willoughby, Keith (2001) Project Procurement and Disposal Decisions: An Inventory management Model, International Journal of Production Economics.

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