Advice from PLG: Key mistakes brands are making in inventory management

As the summer season comes to a close and further lockdowns loom, UK-based Parker Lane Group advises brands to look into re-evaluating their inventory management practices. The current pandemic has radically torn the fabrics of the retail market: Pre-pandemic business models no longer apply, and brands must quickly adapt to new norms in order to survive. Retailers need solutions that convert material into revenue immediately. Both fast fashion and haute couture scrambled for consumer demand as cash flows dried up. Yet, they are doing so at perilous long-term costs.

What are the key mistakes brands are making in how they manage inventory management this season? A company providing AI-powered solutions for managing returns and excess inventory, PLG shares their tips with FashionUnited on what brands can do to navigate through the common pitfalls.

Diluting brand prestige in core markets

As consumer demand grinds to a second halt, many brands are choosing to liquidate through jobbers, excessive discounting as well as outlets and discount retailers. Even luxury giants are not immune to heavily discounted online and flash sales, challenging fashion houses’ legacies of prestige and exclusivity. While these practices may increase returns for the quarter, trading a brand’s legacy for end-of-season revenue is not always worthwhile.

These options all risk sales cannibalisation in core markets, as stock is sold at cheaper prices, competing with the main brand. Furthermore, if prices are diluted, retailers cannot easily justify hiking them up to pre-sale prices later on. Both scenarios diminish returns in the long run.

It is widely believed that a product is only as good as its brand. Branding can be a multi-million-dollar investment; a commitment to carefully curating, communicating and maintaining an image and experience. But is this really worth sacrificing?

PLG’s CEO tells FashionUnited that this dilemma is largely preventable. Brand protection and monetising excess inventory are unnecessary antagonisms. “The dilution of brand prestige is only a consequence of not thinking beyond their core markets, rather than as an inventory issue in itself,” says Raffy Kassardjian, CEO of Parker Lane Group. “Re-commercing to secondary markets provides immediate, much-needed cashflow without tarnishing the brand,” he elaborates. PLG’s partners include Cache-Cache and Kiabi, and the company fulfils orders to over 60 markets worldwide.

Turning to unethical business practices

Another grave mistake in inventory management is turning to unethical business practices to clear excess stock. Many retailers cancelled supplier orders in factories, leaving workers to starve as the pandemic mercilessly sweeps across Asia. Equally, many brands resorted to the destruction of new stock, promulgating serious environmental problems. Brands that were exposed doing so led to widespread consumer backlash and PR disasters - once consumers uncover unethical business practices, it usually results in a Herculean challenge to revert a tarnished brand name.

A more subversive form of destruction is recycling brand new stock. No brand is unaware of the high-ranking importance of sustainability for consumers (or their intolerance for wasteful business practices). However, recycling is an energy-intensive service with a low-value end product. ‘Shoddy’ is a name given to the fibres (natural, synthetic or blended) leftover once garments have gone through the tearing line. It can be used to make seat filling, emergency blankets or woven with virgin fibres to make partially recycled goods. However, it is a CSR myth that recycling leads to a new garment.

This is why Parker Lane Group encourages re-commercing into alternative markets as the first point of call despite having in-house recycling facilities. “The most sustainable option for retailers is to extend the product life cycle,” Kassardjian explains. “Everyone knows it is wasteful to produce, but people need to know unnecessary destruction is also unethical.”

Holding onto stock

The third mistake brands make is holding onto unsold stock, with the hopes of selling new stock in the coming year. This is a costly mistake – each item sitting in a brand’s warehouse is costing them money by the day. There’s a reason the industry coins excess inventory as ‘deadstock’. It is, by definition, terminal.

There are huge financial repercussions for brands relying on D2C sales alone, especially as the UK and Europe head into further lockdowns and a Brexit No-Deal becomes a real possibility. As unemployment continues to rise, cash investments are halted and consumers hold onto their cash as they enter survival mode, it is unlikely the future promises fast moving sales in the coming year. This translates into steep operational and storage costs for brands that would do better investing that cash into effective re-commerce operations.

As a solution to the above, Parker Lane Group is currently developing a SaaS offering for fashion retailers. The SaaS automatically determines the optimum exit route for each item before the company fulfils the order. This provides retailers with secure access to Parker Lane Group’s expansive client pool of over 1,400 regular B2B customers. Most importantly, it empowers retailers with flexible and immediately available stock exit routes at all times.

“The software onboards retailer systems, giving them a quick understanding of the value of their unsold stock,” elaborates Aleksandra Banasik, the COO of Parker Lane Group. “Although we are still in the pilot stage, this product crystallises all our expertise into one quick solution.”

Parker Lane Group’s solution:

In re-framing their understanding of excess inventory as an inevitable supply chain issue, brands empower themselves to manage it effectively. The pitfall retailers continue to fall into is continuing to resort to outdated solutions to challenge current problems. In doing so, brands resort into unnecessary, painful trade-offs that translate into lost revenue. Brands would be wise to invest in the right partnerships required to convert these problems into not only solutions, but opportunities for future growth.