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Be it the relentless trend cycle, underestimating a bestseller or missing the taste mark, brands have continually struggled to win at fashion’s supply-demand game. But as the tide continues to turn for many — see near bankruptcies and tumbling profits — focusing on inventory could be vital to clawing back the financial losses of the last few years.
In the past year alone, both luxury and high street players have cited inventory concerns in their earnings reviews. Richemont saw its operating margin decline by 3.7 per cent, with inventory provisioning noted as a key factor. H&M, meanwhile, is still clearing its stockpile, as it hopes to be in a better inventory position by the end of 2025. Between supply chain disruption and micro-trends, predicting what consumers want and delivering these on time becomes a never-ending task.
For brands, this makes inventory management a primary concern, as trends enter consumer lexicon faster than brands can maintain stock. Excess inventory can result in a myriad of problems, from lost profits through slashed prices, to added warehousing costs and the environmental concerns associated with overproduction. Michaela Wessels, CEO and co-founder of buying and merchandising platform Style Arcade, sees overproduction as a historical challenge for fashion. “The fact that we’ve been loading landfills for the longest time should have been reason enough to fix the oversupply issue,” she says. Then, there’s then the flip side: the selling out of popular items, which can also impact a brand through the loss of potential revenue.
The problem is threefold — with economic outlook, brand equity and environmental impact all at risk. As forecasting becomes essential for brands to invest for growth, businesses that cannot close the gap between supply and demand will fall behind.
How to meet demand
Many fashion brands still operate inefficiently, attempting to analyse data across multiple inventory management and product insight platforms, while ignoring the complexities of supply and demand. “Every single product has a different size and demand profile by region and store, which is why this has to be driven by algorithms and AI,” says Wessels. The Style Arcade platform offers a way to tackle these nuances, through AI forecasting that calculates how many SKUs a retailer should order by channel, brand, category and region.
Luxury label Alémais is proving that it’s possible to defy the industry norm. Launched during the pandemic, the brand almost sells exclusively at full price, and has seen its stockist footprint more than double since joining the Style Arcade platform in 2022.. While strong design plays a huge role in Alémais’s success, Style Arcade has allowed it to connect, automate and analyse thousands of product data points in seconds. This lets its team focus solely on the creative side of the business, while keeping stock aligned with what its customer base is actually purchasing.
Meanwhile, Hong Kong label Tibi prides itself on bypassing trends, though happily admits this limits the sales of certain products. “We have a clear point of view going into the purpose of each product,” says Tibi president Elaine Chang. “If we’re considering a runway style that pushes the envelope of creative storytelling, we may purposely buy it on a constrained basis.”
When it comes to stockouts, according to Wessels, many brands don’t know their ceilings, particularly fast-growing e-commerce brands. “Brands purchase a bestseller, thinking they’ve doubled, tripled the units on their previous buy, and it just sells out in a day,” she explains. But stockouts can create a vicious cycle, as they regularly distort the data that brands depend on, meaning that no matter how hard a brand tries to make data-led decisions, it may struggle to see the real-world demand for out-of-stock SKUs.
Style Arcade’s True Rate of Sale algorithm removes the impact of out-of-stock products to measure their true demand. It helps brands “buy to their demand and realise their revenue opportunity versus trying to quantify in spreadsheets”, says Wessels. For Tibi, this helps the label maintain stock across all sizes by accurately calculating demand. “If you don’t buy enough of a specific size, you can’t meet the demand, and this metric corrects it,” Chang says of the algorithm.
Unlocking the bigger picture
But predicting demand is only half the battle. Brands need to be agile enough to act on insights effectively and quickly. “Omnichannel retailing is complex; and first-party data, while intended to be available and accessible between trading partners [brands and wholesalers, for example], is siloed,” says Wessels.
Brands seeking to enhance their inventory strategies need complete visibility — not just across their owned channels, such as e-commerce or physical retail, but also across those of their wholesale partners. “Brands need complete omnichannel visibility, or they’re operating a large part of their business without insight and missing critical opportunities to sell,” Wessels says.
Style Arcade — built by former fashion workers, for fashion workers — breaks down these barriers by connecting the data of brands and wholesale partners in a single, secure environment. “Style Arcade users rely on the application for their entire end-to-end workflow,” says Wessels. With end-to-end visibility of key functions such as wholesale operations, teams can manage and share data across all channels, allowing buyers and merchandisers to spot product opportunities quickly. Ralph Lauren is among those already benefitting, by being able to align its merchandising processes to those of its stockists.
For Style Arcade’s partners, this time saved is essential. “Style Arcade has allowed us to eliminate time spent on the fundamental tasks of data collection and reporting, which is subsequently reallocated to areas where human input is vital,” says Tibi’s Chang. For Tibi, this human point of view is essential to its success. “Creativity thrives when humans and a distinct point of view are the basis for all decision-making. The business is not data driven, but data smart.”
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