The balancing act: Keeping up with shifting trends vs managing overstock

While the average household spends $1,434 on clothing per year, little thought is given to how retailers are making sure their collections hit their target audience.

Retail inventory management is the process of ensuring retailers carry merchandise that shoppers actually want, and in turn, retailers stock shelves with the correct quality and quantity. How retailers manage their inventory can greatly impact the amount consumers spend per month. When taking a step back to examine their current processes, retailers can see if they are successfully able to keep up with and capitalise on trends and desires, or if they are repeatedly missing the mark on what consumers want and when.

The fashion industry, more than others, is heavily reliant on trends and being able to capitalise on them can often make or break a retailer's success. This was seen throughout 2023 when the Barbiecore aesthetic took off and consumers across the nation ran out to purchase pink apparel. Understanding precisely how competing retailers were executing Barbie-themed collaborations in terms of assortment range, pricing structure and marketing initiatives would have helped retailers build their collection. For instance, Zara implemented a 30% markup pricing for products in their Barbie collaboration compared to similar pieces in their regular collection. By having access to this data through competitive analysis platforms, retailers are able to adjust their prices accordingly to have the competitive edge.

Given the lifecycle of these trends, retailers must be able to react in real-time by utilising a combination of transformative technology to help inventory management and in some cases, on-demand production. Throughout the past few months, some of the most in-demand pieces of clothing were those collaborating between singer Taylor Swift and the Kansas City Chiefs, due to her current relationship with Travis Kelce. Shirts that sport the phrase “Go Taylor’s Boyfriend,” among others, have been continuously selling out on Amazon as demand only continues to grow. These key moments in time can serve as catalysts for success throughout a retailer's year, if they have the knowledge and tools to capitalize on them.

Navigating fast-changing trends and excess inventory

One challenge that retailers have been struggling with is the increased pace in shifting consumer demands. Traditionally, there is a shift in trends at the start of every season, but as a result of influencers, social media, and pop culture trends, the trend cycles are shortening – to as short as a few weeks. This has made it harder than ever for retailers to stay on top of what’s selling. Retailers now often find themselves with excess stock from trends that were shorter-lived than anticipated or perhaps stock that didn’t sell because an alternative trend dominated consumers interests, such as Barbiecore – leaving all non- pink clothing on the shelves. It’s all about finding the right balance.

Another challenge retailers face is meeting and advancing their sustainability goals. In America alone, an estimated 11.3 million tons of textile waste ends up in landfills each year, partially as a result of unsold stock. In order to lessen this excess, retailers must focus on creating more targeted collections and can do so by utilizing AI solutions. In addition to creating a more targeted collection, there has been an increased demand from consumers for retailers to implement and be transparent around their sustainability efforts. Sustainability used to be considered a “nice-to-have,” but now its pivotal to consumers when they think about their purchases. A retailers values play a large role in not only attracting but maintaining their consumer base.

Ultimately, how successful a retailer's collection is directly correlates to their profit margin. The goal of every product that hits the shelves is that it be sold with a quick turnaround time, clearing space for new styles and stock, and so on. The use of AI-powered competitive analysis platforms to manage stock production levels in conjunction with product lifecycle management tools, which help retailers to properly produce a production plan, are key components to creating the most successful collection. Without them, excess inventory can accumulate, creating a challenge for retailers in terms of funds. Having stock on the shelves can tie up money that could be used for further investments in transformative technologies such as competitive analysis platforms, or updates in manufacturing processes. Retailers who fail to sell collections are not only holding themselves back from immediate success, but they may find themselves falling behind.

How AI can help maximize retailers' success

As retailers face the industry's challenges head-on, access to demand forecasting tools is pivotal. Those who use a competitive intelligence platform are able to set the right prices, build winning product assortments, optimise discount strategies, and enhance their brand image, all using AI-powered competitive intelligence data.

Users are also able to analyze their competition and product positioning in seconds, providing retailers with valuable insights into where they stand in the industry.

Fashion PLM software helps streamline product development from planning to sourcing in order to help fashion companies deliver profitable, on-trend collections even within increasingly tight time constraints. Brands and retailers using Fashion PLM software gain greater visibility over fabric and product cost management information to make the right decisions prior to production. Fashion PLM also helps retailers stay on top of their sustainability goals and reduce fabric waste in production by estimating fabric consumption for future collections and simulating different purchase-order scenarios.

Keeping up with the emergence of trends

When looking to the remainder of 2024, one trend that is anticipated to continue to pick up steam is the increased demand for outdoor apparel.

The emergence of this trend is a prime example of how a retailers' year can be shaped simply by their forecasting abilities. Those who have been routinely tracking their competitors, by using AI, were able to see not only the emergence of popularity around outdoor gear, but the shift in sentiment around the specific styles of certain jackets or boots as “quiet outdoor fashion” takes off and consumers tie outdoor wear more to their everyday styles. Quiet fashion refers to the shift from loud colors and patterns to a more minimalistic take.

While trends may come and go, the importance of being able to keep up with them will remain a necessity. Retailers who understand where and how AI can benefit them, will come out on top of their competitors in 2024.

Leonard Marano has been President of the Americas at Lectra since 1 June 2021.

"The balancing act: Keeping up with shifting trends vs managing overstock" was originally created and published by Just Style, a GlobalData owned brand.

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