Clothing retailers are trying to cut their way to higher profits – RetailWire
February 10, 2021
Cut cut cut. Retailers want to cut their path to higher profits.
On the one hand, dealers reduce factory orders for the spring and summer, Reuters Reports. On the other hand, many online sellers are pursuing ways to reduce product returns that drive costs up and generate profits The Wall Street Journal.
The measures to reduce the number of factory orders are a direct result of the measures retailers have taken over the past year to transfer goods that have not been sold due to the outbreak of the novel coronavirus pandemic.
Reuters cites an estimate by McKinsey & Company that the present value of unsold clothing inventory in stores and warehouses is between $ 168 billion and $ 192 billion, double what it normally is. Fast fashion chain Primark currently holds $ 205 million in unsold merchandise for the spring and summer seasons and $ 277 million in other merchandise for fall and winter.
Miran Ali, who owns four plants in Bangladesh and represents the Star Network, an alliance of manufacturers in six Asian countries, said Reuters Under normal circumstances, his factories would be at full capacity in the spring and summer and already considering large orders for the fall and winter.
Today, however, Mr. Ali said, “Brands buy less from fewer people.”
Factory orders aren’t the only place retailers try to cut costs. The Wall Street Journal points to steps companies are taking to reduce product return on investment, an issue that is even worse on balance as online orders have grown significantly for most retailers since the pandemic.
The product return rate for online purchases is about three times higher than for buying goods in stores. As online sales increase, the cost of returns for retailers continues to grow. While retailers remain confident that customers will return to stores near the prepandemic sooner rather than later, many expect the items ordered online will continue to grow relative to their total sales.
Retailers are turning to various virtual try-on technologies to give consumers a better idea of how products like clothing, makeup, and glasses fit and look on them. While the utility of these programs has shown some benefits, there is still plenty of room for improvement with less returns than the goal.
QUESTIONS FOR DISCUSSION: Do you see retailers, particularly in categories like apparel, slashing orders significantly for the balance in 2021 and early 2022, and how will this affect retailers and brands? What do you think it takes to reduce the number of online order returns?
“The overproduction of fashion is coming to an end.”
“Consumers don’t want to return products, especially these COVID-19 days, so any digital assistance in improving accuracy will be greatly appreciated.”
“What should really shock people is the amount of transfers that are typically held in retail stores. More than $ 80 billion is a huge sum and has a massive impact on retailers’ profits.”