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Missed Digitalisation: Theses for More Efficiency Within the Fashion Industry

Processes within the fashion industry are inefficient, Ivan Herjavec says, general manager at the wholesale platform Buying Show ( www.buyingshow.com). Structures and processes that are outdated need to be overcome - a breakdown of the fashion industry’s five most striking problems.

1. Planning processes that are outdated

A lack of proper planning processes - too long lead times when ordering or at the production site - is a big issue within the fashion industry. Planning processes did not change in decades. An example for good time management is Zara. A vertical brand, Zara occupies the fast fashion market that takes the latest designs from the runway and immediately turns them into fashion trends. The very reason for that is that nowadays consumers ‘ expectations towards shopping are higher. On their twelve shopping sprees a year on average, they want to explore new things every single time. To meet these requirements, brands do need better planning processes that include product development, production as well as marketing and distribution, aligned with the market and actively communicated to consumers.

2. Digitalise your distribution

Slow and expensive product development processes result from outdated communication channels between brands and manufacturers. To this day, brands will initially develop expensive samples or prototypes for the entire collection to be showcased at fairs, in showrooms, or by the sales force and sent across the globe. But only those pieces that are ordered during these processes will be actually produced. Hence, product testing takes several months from the idea to the production of samples up to the retailers’ order that eventually determines the extent of production. Those processes occur two or three times a year offering not too many opportunities for retailers and brands to exchange ideas. Moreover, selection and order processes of retailers are complex and take long. More often than not, it takes brands weeks to receive a definite order by retailers since they need to make a choice in showrooms and the order needs to be confirmed, too. The brands on the other hand can only place an order with their producers when all orders by the retailers are received.

3. High costs in sales department

The B2B sales process is too short and too expensive: At the beginning of the year, every order for the upcoming season needs to be processed in a very short time window. In order to do so, brands need to expand their sales force to cover a bigger fraction of the market. Then again, those sales teams need lots of samples and they have to travel a lot which produces high costs. Add to that expenses for showrooms in various cities where they can meet up with clients. All those activities produce additional costs.

Almost every brand misses the opportunity to sell its collection during the season to its clients, the retailers. Interested parties cannot look at a brand’s inventory. They know only what is available by request. Brands with remaining stocks can only get rid of them through extensive acquisition. There is a lack of efficient processes and technical support to make additional sales more profitable. Selling of the goods gets pricy until in the very end, margins are barely existent and goods are sold at dumping prices to outlets in the far east for instance.

4. Risks due to order cancellation

It might take half a year between the placing of an order and shipment which leads to a high level of risk: Retailers can cancel their orders that already had been forwarded by the brand to its producers. Also, there is the risk that the brand cancels orders for various reasons. Both parties incur a risk. In case of a cancellation, retailers have to find another brand or product category whereas brands need to find other retailers for this very order.

5. Lack of money

The time gap between order, shipment and sale of goods are quite a big problem for the fashion industry for brands usually need to pay producers up front and only in a best case scenario 30 days after receiving the goods. The average delivery time from the factory to the warehouse is 30-60 days. This means that goods that arrive at the brands’ warehouses are either paid for or are about to be paid for.

Retailers expect term of payments of 30 to 90 days, starting with the receipt of invoice (usually the date of shipment from brand to retailer). This means that brands are financing the deal 30 to 120 days in advance (sometimes even beyond that stretch), incurring a high level of risk. Retailers as well need 90 days on average to sell so many goods that their costs are covered.

Solution approach

Brands and retailers alike will find assistance and solutions for these avoidable main issues of the fashion industry at Buying Show, the digital wholesale platform. Buying Show connects brands and retailers, grants access to a variety of different collections and enables uncomplicated and fast orders and payment at a one stop source.