In the fast-paced world of fashion, success for retailers hinges on being able to put the right item in the right style or size in the customer’s hand at the right time – a simple concept that is difficult to execute for a number of reasons.
Fashion is a perishable commodity where trends change overnight, making it difficult to ultimately predict duration and demand. Ordering too much product translates into increased capital expenses that can erode a retailer’s bottom line, while ordering too little can lead to missed opportunities and lost sales. Unlike other retail segments where items have a set location on the shelves, items do not stay in one spot. Inventory is constantly on the move between the rack and the dressing room throughout the day, often causing a false out-of-stock situation and a lost sale when the size a customer may need is in the dressing room waiting to be re-stocked. And keeping an accurate inventory is difficult – and costly – further compounding the ability to ensure the right item is available for your customers at the point of decision.
The financial impact associated with these challenges are staggering to fashion retailers. The Harvard Business School found that 8% of all retail items are out-of-stock at any given time, costing the top 100 retailers an estimated $69 billion annually. Lack of inventory visibility often results in up to 65% inaccuracy in inventory counting, making accurate ordering an even more difficult task. And the very nature of high value merchandise that is openly accessible to customers increases the opportunities for theft. According to the annual survey conducted by the University of Florida, retailers lost more than $37.1 billion to shrinkage in 2010 – 1.6% of overall sales.