Fashion has moved from an almost parochial business to an international one. Certainly, any retailers in the sector with significant growth ambitions are having to spread their horizons and look well beyond their home markets. According to Verdict Research growth is flattening in big markets like Germany, France, the UK and Italy while all the really exciting growth is in East European countries like Estonia or Slovakia ”where fashion markets are less saturated and consumer appetites have yet to be sated.”
The big European retailers have become adept at stealing each others’ customers. Leading Continental retailers have made major inroads into international markets and the top five non-UK clothing retailers in the EU have around half their EU stores outside their home countries, says Verdict.
The internet has added a further dimension to internationalisation. While the demise of online clothing retailer boo.com a few years ago was one of the most notorious collapses of the post dot-com era, other online retailers have been working quietly away and are now beginning to reach a degree of maturity. Indeed, pure-play lingerie and ”intimate wear” specialist Figleaves.com has been going so long that its late 1990s-vintage ERP systems will soon need replacing with a much more sophisticated SAP system, says chairman Daniel Nabarro.
Today, the company sells lingerie in 96 countries although it currently only has UK and US websites and DCs; buyers from other countries have beaten a path to its door, despite the language and currency obstacles. However, new country and language-specific websites could follow soon.
Figleaves.com has carved out its own niche and has a supply chain to match. ”One thing we do is offer a huge variety of sizes,” explains Nabarro. Bras in particular have a myriad of different sizes and fittings, so much so that a single model can easily spawn 200 different size and fitting combinations, even without considering different colours. ”This is what makes our supply chain complicated. Some sizes might sell in large numbers, but others may be very slow movers.” Figleaves.com however prides itself on trying not to let the online customer leave empty-handed. In fact, it”s this ability to satisfy the more obscure demands that has led to the company”s success against high street retailers.
As with many supply chains, it’s the long ”tail” of infrequently ordered items that cause the headaches. Care must also be taken with interpreting data, adds Nabarro. ”With some of our harder-to-obtain items, when customers do discover them, they are often so thrilled that they order five of them at once.” That though could send completely the wrong signal to an automated ERP system.
Returns was one issue that helped undo some earlier attempts at online clothing retailing. Figleaves.com has managed the problem by offering customers return postage labels and promptly recrediting customer accounts while monitoring returns to detect signs of abuse of the system.
The new SAP system will make the business more scaleable and will also help in important areas such as vendor assessment.
Fashion has moved very quickly from a relatively unsophisticated approach to supply chain to one where IT is used to support decision making. Gone are the days in which systems integration used to take months or even years. One of the proudest boasts of TNT’s Fashion Group is that it can set up an interface with a new customer in a maximum of eight days.
Setting up interfaces
Philip Bracken, TNT Fashion Group’s business development manager explains: ”We have special software that allows us to set up interfaces, usually within days. Because it can map from one system to another, we don’t have to spend time reprogramming, which is what used to take the time.” In fact, with smaller customers with relatively simple needs, the system can be up and running inside a single day, he adds.
Once a fashion company realises what technology is capable of, ”the tail stops wagging the dog,” continues Bracken. ”They can make decisions much more quickly, and this supports the modern supply chain where, for instance, if the weather turns foul, you might want to bring forward supplies of raincoats or puffa jackets that you’ve got somewhere in your pipeline.”
Also, given the increasing internationalisation of many retailers, along with the shortening lifecycle of many fashion ranges, many retailers are switching stocks between different countries. ”But to do that successfully, you”ve got to have really good control of your supply chain,” says Bracken.
The other big trend in fashion has been the movement of large parts of the manufacturing process offshore – usually to the low labour cost countries of Asia. But fashion companies have perhaps focused too much on manufacturing labour costs and not enough on total supply chain costs, says Alain Vix, marketing director at supply chain support specialist, Hughenden. Quite apart from the fact that basic material costs are increasing, many businesses don’t fully appreciate the costs of holding inventory (while 10 per cent of the retail value is often quoted as a yardstick, the true figure could be nearer 40 per cent, he believes) nor do they always seem to appreciate that buying in stock from abroad brings many extra costs as well. Failure to appreciate this fact might explain many leading players” poor financial performance in recent years.
That said, Hughenden’s latest poll suggests that many companies in the sector are having a rethink, spurred on by the recent successful example of high street fashion chain, Zara, which buys a large proportion of its stock from Europe and other close-at-hand countries, and Wal-Mart-owned supermarket chain Asda, which recently announced that it is switching some of its sourcing for its George clothing range back to the UK. ”Distance is beginning to outweigh labour cost savings, and lead-time has also become absolutely crucial in fashion,” says Vix.
The recent unpredictable weather showed the value of a responsive supply chain, he adds. Last year’s hot dry spell lasted into October; Zara still had teeshirts and summer clothing on sale in the UK while other retailers were attempting to shift woolly jumpers.
”Forecasts will always be wrong,” says Vix. ”The problem is that if you expand your supply chain, as companies in retail have been doing, it will fill up with stock.”
There is nothing wrong with cost saving from offshore manufacture, ”but it shouldn’t be at the expense of flexibility. The important question any fashion company should ask itself is: How quickly can we turn the supply on or off?”
Part of the answer may be postponed manufacturing – making a basic uncoloured garment in a low cost country and shipping it to somewhere close to the point of sale for colouring and final finishing. Offshore manufacturing of the complete garment may be perfectly acceptable for some items where demand patterns are fairly stable and predictable – men’s socks, perhaps.
Sean Cassidy, retail industry consultant at NCR’s data warehousing specialist, Teradata, says that forecasting in fashion is beginning to catch on; it has traditionally been strongest in sectors such as food, ”But people are moving towards it, at least in the more basic areas of fashion.” However, whereas in food, last month’s demand can be taken as a reasonable guide to what will happen this month, a fashion trend can come and go within a few weeks.
British high street and catalogue retailer Next has an interesting approach to forecasting, he adds. It circulates early copies of its catalogue to selected customers – offering them a discount on advance purchases. The data it gets from these early sales is fed back into a demand forecast.
Fashion retailers are also beginning to recognise that they have more than one supply chain to manage, adds Cassidy. High street names like Marks & Spencer commonly have ”basics” type ranges and posher labels aimed at the more fashion conscious and the supply chains for these can be quite different.
Systems are everything in logistics too, says Philip Brown, international logistics director at NYK Logistics, which works across the world for many fashion retailers, but especially in the manufacturing regions of China and the Indian subcontinent, and at the point of consumption in Europe.
A major trend that he discerns is for companies like NYK Logistics to act as a lead logistics provider or 4PL in the fashion industry; the really clever part of what such companies do is to provide electronic purchase order management systems that allow users to drill down and find out exactly how many green size 12s are in a particular container and when they will arrive. ”The internet has really made this possible over the past 10-12 years,” he explains.
A lot of the bigger retailers are also doing ”buyer consolidation” in Asia – assembling the right mixes of hanging or boxed garments ready to go more-or-less straight onto the shop shelf in Europe.
Nigel Illingworth, product director at Retail Assist – whose Merit’ supply chain system is used by several major retailers including some of the big fashion names such as Principles and Burberry – says that many companies now demand information in real time, or very close to real time. Being able to guarantee to the store manager or, increasingly, the online shopper, that that particular red dress in that particular size is ”theirs” is vitally important.
The flip side though is some lines” passage through the supply chain is positively glacial and Merit can help identify these slow movers too.
Fertile ground for RFID?
With all this emphasis on detail, and with replenishment often carried out at or near item level, fashion might appear to be fertile ground for the first commercial applications of RFID. There are signs of it happening at the higher end of the market, says Illingworth, but it remains to be seen whether it will catch on at the lower end.
Not high fashion, perhaps, but health and safety equipment company Arco is typical of recent trends in garment manufacture in that it carries out finishing work on its range of mainly Far Eastern-manufactured workwear products closer to home, at a decoration facility at Fulwood, Lancashire. This employs 135 people and handles around 50,000 garments a week, explains Joan Irving, Arco’s supply chain director. ”We buy undecorated clothing, mainly from China, and usually the customer will want it embroidered with their logo and, very often, the individual’s name.”
While it might be feasible, technically, to carry out the customisation in China, doing it in the UK ensures consistent standards and also vastly increases flexibility – a customised garment can be delivered in days, rather than the several weeks it would take if it had to come from China.
TK Maxx, a subsidiary of US-based ”off price” retailer TJX Group of companies, is another company that has moved away from seasonal buying for its network of 200 UK and Irish high street stores and which are now being expanded into Germany. Its buyers can buy as and when they spot good prices, as close to season as they dare in order to benefit from the best deals. But this also allows the company to respond more quickly to trends and customer needs and, it says, creates a more vibrant product range. Daily deliveries to stores ensure that customers will always see something new every time they visit.
The retailer has taken on consultants to help it with the next stage of its expansion plans, by helping it understand the number, format and location of future distribution facilities required along with which operational processes should take place and where.
Alan Porte the retailer’s senior vice president of distribution services, explains: ”TK Maxx sits right in the middle of a very competitive market space. The consumer price point is critically important to our success and we needed to explore precisely how we could optimise the supply chain to enhance our competitive edge.”
With growing consumer concerns over sweatshop labour in China and other parts of Asia – often involving some of the big brand names – ethics and, to a slightly lesser extent, organics, have become a big issue in fashion. The venture capital arm of Dutch-based sustainable banking specialists, Triodos, has invested €500,000 in Historic Futures, an online tracking system that supports the development of fair trade and organic clothing businesses.
Cheltenham-based Historic Futures myString technology provides an on-line tracking and traceability service to retailers and brands who want to back up their ethical claims – where materials and components come from, where the cotton was grown, yarns spun and where items were manufactured by typing in a code on each garment into the Made-By website. By associating products with contract numbers, a virtual information chain can be created and paper documentation can be scanned in pdf form and kept on-line.
Whitni Thomas, Triodos’ investment manager says that the paperchase involved in proving that a product is ethical can be formidable with perhaps dozens of contracts, certificates of origin and so on. ”Retailers might be able to manage as long as it’s a small part of what they do, but for entire ranges it”s much harder.” Pressure on mainstream brands to adopt ethical sourcing will also increase, as more competition from specialist retailers and traders emerge.
Philip Brown, NYK Logistics
Electronic order management systems allow users to drill down and find out how many green size 12s are in a container.
Whitni Thomas, Triodos
The paperchase in proving that a product is ethical can be formidable with dozens of contracts certificates of origin and so on.
Alan Vix, Hughenden
Distance is beginning to outweigh labour cost savings, and lead-time has also become absolutely crucial in fashion
Nigel Illingworth, Retail assistant
Many companies now demand information in real time, or very close to real time