As of Thursday, February 16, 2017
Maybe everybody should look to Zara—the highly successful Spanish retail chain that can churn out clothing collections in a few weeks—to survive these uncertain fashion times.
Zara can produce garments with its manufacturing partners anywhere in the world in two to three weeks, with half of that product done close to home in nearby countries.
On the opposite end of the spectrum, the average retailer or clothing company takes six to nine months to come up with a finished product—from concept to the final garment. “This is the world that most of us have lived in,” said Jeff Streader, managing director of Go Global Retail, a retail consultancy in Manhattan Beach, Calif., for private equity and strategic investors.
Streader was speaking at the Americas Apparel Producers Network’s Los Angeles regional conference on Jan. 9. Held at the Avery Dennison Customer Design & Innovation Center in the Los Angeles Arts District, it attracted attendees from Tukatech, Lectra, Alvanon, Avery Dennison, Bureau Veritas Consumer Products Services, Fortune Screen Printing, Swisstex Direct, Buhler Quality Yarns, Contempora Fabrics, Coville Manufacturing, Toad & Co., Patagonia, Oakley, Haggar Clothing and Wear It to Heart.
The idea was to talk about the benefits of product development and manufacturing in the Americas, which can provide short lead times with many facilities only hours away by plane. “There are three-day cycle times coming out of Central America,” said Mike Todaro, managing director of AAPN, which is a nonprofit group whose members are manufacturers based in the Americas. “There are amazing success stories in this hemisphere.”
For years, manufacturers have been chasing the cheapest labor rates and raw-material prices around the world. But these days that doesn’t seem to work. “Searching for cheaper prices in Asia has not resolved the underlying problem,” Streader said.
The idea is to work smarter, not harder. One of the underlying problems these days in creating retail profits are the massive markdowns taken on merchandise. “The industry average in markdowns is 40 percent,” Streader said. “Do the simple math. It is the highest cost in our industry. The Achilles’ heel is in markdowns.”
On the other hand, Zara is known for not having as many sales as other retailers, resulting in average markdowns of 15 percent. That is Zara’s silver bullet because they are not producing six or nine months out and then pushing their products into their stores when shoppers are onto the next trend. The Spanish retailer is listening to its customers and getting new items to their store shelves quicker than other clothing chains.
Also, quick turns on inventory leads to better cash flow and profitability. “Sixty to 80 percent of today’s retailers’ total assets are in inventory,” Streader observed. “If it is only moving two times a year, you sell out of an item every six months. That is where the industry is often.”
Moving merchandise faster has grown even more important in the last few years with the whole see-now, buy-now concept in runway shows taking hold of the fashion world. Tommy Hilfiger recently took over a big patch of beach in the artsy Los Angeles neighborhood of Venice, where his in-season catwalk showed off 55 looks to 3,000 people.
In a white paper written by Todaro, he showed how a U.S. retailer worked quickly with a Central American factory that had links to its supply chain located nearby. The factory was able to turn around an order in three to six weeks. When a specific garment sold well, the retailer ordered more of that style in a different fabric. Delivery took six weeks, but if the retailer had used greige goods, the garments would have been done in three weeks.
Other challenges manufacturers and retailers are encountering include employing technology to personalize a customer’s experience, catering to consumers shopping on mobile phones and tablets, and incorporating omni-channel systems. “Digital is a bright spot if executed properly,” Streader said.
At the recent National Retail Federation conference in New York, attendees noted that everyone was talking about personalization—the relationship between the consumer and retailers and how he or she wanted to be recognized, whether it was through personal marketing, tailored shopping suggestions or emailed newsletters. “Mobile engagement is complicated,” Streader said. “Mobile is disruptive, and we are going to have to figure out how to use mobile to our advantage.”
Omni-channel is important for selling products that may not be on the store floor or finding the right size for customers. “A responsive supply chain is a lever that winning brands and retailers will deploy,” Streader said.