Never out of stock – how does the business model work in uncertain times?
Timeless fashion items that can be sold at any time - the idea seems tempting for retailers and brands, especially during pandemic times. But in practice, fashion companies differ significantly in the way they offer never-out-of-stock items. In this series, three brands from different segments reveal more about their NOOS system and how it has worked during the pandemic.
Starting with Cecil and Street One, two womenswear brands of the CBR Fashion Group, whose NOOS items are a permanent fixture of the business model. In fact, the sister labels’ with NOOS share accounts for 30 to 45 percent of sales. In contrast to the classic image of NOOS, CBR takes an unusually fast-moving approach to its labels' never-out-of-stock system.
The German clothing group’s brands launch twelve independent collections every year. Each of the twelve collections contains new NOOS items; at Street One, these are called QR. The amount of “always in stock” items is between 20 and 40 percent per collection. What is special is that unlike what one is used to from the old familiar NOOS system, the CBR Group does not mainly focus on timeless classics in its collections.
Cecil and Street One accelerate the classic NOOS model
“We made significant changes to QR and NOOS a good three and a half years ago. You can still find basics like a white t-shirt or a white blouse in our stores, but we now also work with a lot of QR and NOOS items that have a very modern appeal,” explains Marco Schneider, head of national sales at Cecil and Street One, in an interview. In the best case scenario, NOOS or QR articles should not even stand out within the collection, so the claim of the brands.
The runtimes of QR and NOOS articles are also significantly shorter for the two womenswear brands than for classic NOOS. Instead of being a fixed part of the selection over a longer period of time, as is usually the case, the availability of NOOS items at the CBR Group is limited to a few weeks. The majority of so-called "TOS" (temporarily on stock) products at Cecil and “Limited” items at Street One have a runtime of between four and six weeks.
By enhancing and accelerating the classic NOOS process, the brands aim to bring more excitement to the sales floor while allowing retail partners to reorder items. “This drives point-of-sale success, cash conversions and higher inventory turns,” explains Schneider. The risk is greater with trendy items, he adds, but the appeal to the customer, and therefore success on the partner's side, is significantly higher.
“A partner who passes on QR or NOOS will not succeed in our business model,” says the sales manager. The “tried and tested favorite items,” as they are advertised on the brands' website, are a key success factor for the company and very popular with female customers. Regular customers know the QR and NOOS items inside out. “The customer comes into the store and asks her favourite salesperson, ‘I'd like the Toronto, which one is the new one?’ Because she just knows that the Toronto fits her and it just has a different color, a different makeup or a different wash from month to month,” says Schneider.
Remainders in times of the pandemic: “That's a risk we have to take”
“By having such short-term cycles, we have to pre-produce everything,” says Schneider. Eighty to 90 days before delivery, retailers have to decide on budget and order quantities. Retailers do not have to commit 20 to 25 percent of the budget; this is scheduled for NOOS and QR adjustment. “Normally, we have the requirement that every QR or NOOS item is also adjusted at least once. There are partners who work so successfully with this, that the NOOS or QR selection is turned over two to three times in this short time span,” states Schneider.
Thus, it can happen that the supposed never-out-of-stock article is suddenly no longer available: “If the item is really hot, you may receive no-sales after just two to three weeks. That means, the article can no longer be shipped because it is unfortunately already gone," says Schneider.
But what does it look like when the turnover of goods is suddenly brought to an abrupt halt by the pandemic, as it has been in recent months? As in much of the fashion industry, Cecil and Street One had visibly more merchandise than usual due to high NOOS inventory. “If the item was misjudged by us, both the article itself or if it was affected by a shut store, it stays in stock with us. That's the risk we take, and our outlets are then the first channel through which we divert merchandise,” Schneider explains. Due to the unpredictable pandemic situation, the production quantities of QR and NOOS items in the sevenths and eighth collection for the months of July and August have still been reduced this year as a precaution.
Despite the high merchandise risk, Cecil and Street One want to stick to their short-term NOOS system. Whenever stores were open regionally or between the first and second wave, they would have been able to achieve good results once again relatively quickly and partners would have immediately turned their auto QR and auto NOOS back on. “We believe we will have the success we had before Covid, even after Covid,” concludes Schneider.
Stay tuned: Premium shoe manufacturer Lloyd talks about its NOOS model in our next installment.
This article was originally published on FashionUnited.de. Edited and translated by Simone Preuss.