Fashion retail has undergone an unprecedented period of change in the last three to five years, with commentators comparing it to the shock created in the grocery world with the rise of the supermarkets.
Such upheaval, brought about by the rise of online retail, best represented by Amazon – which this year will mark its 20th anniversary – has altered customer perception.
Anita Donohoe, retail operations director at Ceva Logistics says: “The shift from high street to e-commerce is driving significant change in fashion logistics. Where the business was once all about full pallets delivered to retail outlets, we are now increasingly required to pick at SKU level for delivery to individual customers. 3PLs are generally not in the final mile delivery sector, so this requires greater collaboration with parcel carriers. Volumes are now less predictable and delivery lanes more diversified, so there is less ability to ‘smooth’ goods flows.”
Jonathan Pilbro, vice president UK of fashion and beauty at DHL Supply Chain, describes it as the era of the consumer, in which the customer has more power. “Forecasting, in particular, has been affected by the changing role of the customer. “It has become much more difficult, with the trends being pulled by the consumer rather than being pushed by the retailer.”
Fashion is one of the bastions of e-commerce, with a poll conducted by Voxburner noting that 28 per cent of 16-24 year olds shop for clothing online; while a further 36 per cent shop via a mobile/tablet app. A poll conducted by IMRG last year found that clothing and related sectors – footwear and lingerie – accounted for three of the top eight growth sectors of online commerce during a five year period ending 2013.
Over that five-year term, sales of clothing online had grown by 114.5 per cent, while footwear sales grew 147 per cent and lingerie sales grew 202.3 per cent. Mark Catley, head of development at Norbert Dentressangle, which counts House of Fraser and ASOS among its customers, says fashion stands right at the top of online orders.
“The seasonal peaks of fashion retail – Christmas, season end and season start – are more pronounced in e-commerce,” says Catley. “And this surge requires a lot from the logisticians in fashion: flexible warehouses, in particular when it comes to stock and personnel, as well as the way in which the operation is handled.”
Pilbro notes that the trading patterns contemporary retailers are witnessing have never been seen before, highlighting the likes of Black Friday, Cyber Monday, and, at an international level, China’s Singles Day.
Andrew Dalziel, senior director of industry & solution strategy of Infor, says that fashion is accelerating once again but in a new direction, and this means neither retailers nor manufacturers can rely on previous success.
“Accurate forecast of final SKU demand has to be done almost on the fly, minute by minute. Old sequential planning is too slow,” says Dalziel. “Social media is a great example of how fast there can be a profound change in customer demand for a given product – the often-cited example are dresses worn by members of the Royal Family. Retailers need to be hyper-agile. And this applies to ending product lines that have fallen out of favour as well.”
Mark Moody of CML, which counts Marks & Spencer and Hush Puppies among its customers, also recognises the difficulty faced by fashion retailers when it comes to accurate forecasting.
“Forecasting in fashion is less developed than other sectors, automotive for example,” says Moody. “This lack of visibility in the supply chain is a problem; forecasting, data analysis, it all needs to be improved.”
Cees van Oord of Equinox MHE notes that third party logistics providers are growing their abilities to provide data management services, which can help with areas such as forecasting.
“Stock management is very important, and as companies seek a global consumer base, this will become more and more time critical,” he says.
This boom period of online retail has placed a lot of pressure on retailers and their logistics partners, but Catley believes the industry has responded well.
“The consumer laid down a challenge, and the industry has not only met that challenge, it has gone beyond what was required of it – to its merit,” says Catley. “Which means we, the logistics providers, have to match the trends.”
With fashion, consumers must try the garment before they commit to it. In store this is a fairly straightforward process, but with online shopping it isn’t, and therefore the level of returns generated by online fashion retail is significant when compared to other products bought online.
The IMRG Clear Returns Quarterly Fashion Returns review, published last February, found that the average return rate for apparel purchased online was 23 per cent. And despite end-of-season and Christmas peaks, this figure did not change. The same report noted that returned fashion products face a five to ten per cent decline in value.
Donohoe says: “E-commerce is also creating greater demand for reverse logistics to handle customer returns, and our customers are now routinely requesting that we provide this service. This also has a bearing on labour costs and warehouse space and represents an additional opportunity that Ceva is leveraging.”
Craig Sears-Black, UK managing director of Manhattan Associates, says that for too long retailers have sought to sweep the returns issue under the carpet with no one really willing to tackle it.
“With the returns we deal with running at approximately 15 per cent of online orders, it seems small,” says Sears-Black. “But when 50 per cent of the business goes through an online portal, 15 per cent becomes a major factor and cannot be pushed back.”
Sears-Black believes those fashion retailers that get it right with returns will be the ultimate winner. Moody notes that, in particular, the returns process continues to be a huge problem for international deliveries.
When it comes to clothing ordered online, there are those customers that wear an item once – whether it be for a night out or special occasion – before returning it. With devaluation being a big concern in fashion retail, Russell Holland of CheckPoint, believes RFID may be able to reduce the issue. “Security tags, which, if removed, void returnability could reduce the level of devaluation among returned garments,” says Holland. “Integrated RFID tags would know where the product was purchased and whether or not it has been worn. It would also give a greater idea on customer treatment.”
The evolution to omni-channel is the dominant concern among retailers at present. Moody describes omni-channel in Tolkien-esque language: “One channel to rule them all”. Dalziel highlights recently released figures for the success of John Lewis’ Click and Collect over the holiday period: fifty six per cent of all John Lewis online orders were collected in store.
“This shows that the entire supply chain needs to support this evolution and enable efficient logistics from order to pick up,” says Dalziel. “It is clear that there is still a strong need for ‘brick & mortar’ stores though their role is drastically evolving.”
Dalziel says though, that throughout all of these concerns it is critical to remember that within fashion, margin growth depends on visibility and that visibility means the successful integration of systems.
“From a technological perspective this leads to the use of cloud and a clear focus on loosely coupled integration,” he says. These technologies enable growth as well as keeping costs lean and delivering the speed and agility needed to succeed.”
Case Study
Worldwide retailing
Being world wide, the web offers retailers a potential client base of three billion internet users. This internationalisation of trade presents its own logistics challenge for fashion retailers – especially if you get into the returns process.
Cees van Oord of Equinox MHE believes some retailers may underestimate the process of going global: “If you look to an international audience, you need to be able to maintain your logistics network,” he says. “This requires you to integrate your systems overseas.”
CheckPoint’s Russell Holland says that for retailers to be able to do this their logistics providers need to be able to provide a one-stop solution with a global footprint.
“This system will need to be a product with scalability for an international model,” says Holland. “And for this to work, logistics providers should be thinking global from the outset rather than having to go back and upgrade their existing systems to suit international business.”
Of course, there are logistical considerations at retail level too. In the UK August is a summer month, while in Australia it is a winter month. Collections need to be considered, as Manhattan’s Craig Sears-Black acknowledges.
“There are seasonal variations across the globe, these can present both problems and opportunities,” says Sears-Black. “If it is always winter somewhere, then the stock stays relevant. However, with four seasons, the number of products being sourced is high.”
And with a global audience, with varying tastes, style can be a big influence on people’s buying habits. Mark Moody of CML says that obsolescence in fashion is a real problem. However, Sears-Black believes a strong brand can eliminate such barriers.
For Jonathan Pilbro of DHL Supply Chain, the challenges for a retailer going global are the same as for any retailer at any level.
“You need to have knowledge of how things are done, and you need to maintain standard quality across the board,” says Pilbro. “Local knowledge though is key. Here in the UK we pay for delivery at point of purchase, overseas in a number of countries delivery is paid to the delivery driver. Knowing this is vital.”
Mark Catley of Norbert Dentressangle, says that serving the international customer is an increasing factor in the thought processes of online retailers. “Retailers will seek to position their stock closer to their consumer base.”
Sears-Black says that orchestrating direct shipment is awkward. “If you have all your stock coming from China to the UK, only for it to then be shipped back out to Australia, where’s the sense in that,” he says. “If you want to operate globally, then this sort of thing needs to be recognised.”
Andrew Dalziel of Infor, says that when it comes to international growth there is a pretty clear path to cross border concerns. “Handling foreign currency is the first issue, then reporting under different regulations, then physical infrastructure to support growth,” he says. “With international operations, one key aspect is the development of a global inventory visibility – knowing what is where right across all warehouses and how it stacks up to what is wanted and where.”
As an example, Dalziel says that the UK may have sold out of red denim but have outstanding orders. Before committing to a further manufacturing order, it may be that the company can fulfil that order out of a different warehouse in Europe. This decreases risk and improves customer service despite different buying patterns.
