This is a delicate balance retailers need to walk. With signs of the pandemic getting under control, there are good reasons for optimism, and consequently increasing inventory – carefully. I think the remainder of 2021 will be a bit of a crap-shoot for apparel retailers, as demand will be difficult to predict.

Returns from online orders is a killer, and while new technologies for determining sizes are helpful, they are far from fool-proof. The best way to minimize returns is to have stores open so customers can try on goods – like back in the old, pre-pandemic days.

In the U.S., overall apparel sales fell by around 25 percent last year. Volumes plummeted to a similar degree. Retailers adapted their forward orders accordingly, but were left with a glut of inventory from early in the year. Given this backlog, and the fact that apparel sales volumes will remain suppressed over normal levels in 2021, it is hardly surprising that factory orders are down. Once the glut from last year has worked its way through, orders will pick up a bit.

The good news is that a lot of retailers have strengthened margins as they had less inventory on the shop floor during the fall/winter season and were not having to discount to shift excess stock. This is a lesson that will stick and I expect a lot of apparel retailers to take the “less is more” approach going forward.

Shoppers will be back and those brands who know who they are and what their customers desire, and who have a plan how to sell it, will be poised for a fast recovery. Those who hold over yet another season will learn the hard way – merchandise is like milk, it doesn’t get better with age.

Let’s look at categories. Athleisure is soaring, but no one needs an evening gown right now. Assortment planning has never been more important.

20 percent off! 30 percent off! 50 percent off! 70 percent off!

There is only one reason for that. In my 50 years of observation of retail the Achilles’ heel of retail operations has been the inability (mindset) to balance inventory and demand. During that time there have been no lessons learned.

Retailers, particularly in apparel, plan on selling a high percentage of their goods at ticket and then a low percentage with a minimum of discounting. Yet year after year, it is quite the opposite.

And this mindset isn’t just in retail. I have seen companies project 5 percent growth in a market that is projected to grow 2 percent. When questioned, the answer is always, “we will grow market share.” When I have asked, “is your competition going to let you do that?” I get get looks like I am speaking another language.

Hello department stores! There is NOTHING that can help the profitability of retail more than balancing inventory with demand and reducing price cutting off the ticket. NOTHING!

This is a negative cycle in the making. It is possible to be profitable in the short term, at the cost of reduced growth. But one can only cut so much. The factories will go out of business. Designers will be laid off. I hope the cuts are well thought out, strategic and in categories that do not hurt in the long term.

Cuts to factory orders based on carryover inventory are no surprise to anybody. They can be planned around and not necessarily repeated. Cuts made in order to avoid end-of-season residue inventory are completely different and long overdue. I’ve looked very carefully at EOM January inventory at several retailers two years in a row. Retailers like AEO and Loft that were smart in January 2020 were even smarter in January 2021. Retailers like Talbots and Express had rooms bulging with unsold inventory both years. If a pandemic doesn’t push a retailer into a more cautionary mode, what would? End of season inventory that has to be sold at 60 percent to 80 percent off is one of the biggest profit drains a retailer has. What is it going to take to get retailers to take their foot off the gas a little — pandemic or not?

I think orders will be sharply curtailed for a number of reasons. First, nobody knows if the current pandemic will be under control this year, with the most optimistic estimates now pointing to August at the earliest. Secondly, there is significant evidence that we are quickly moving from pandemic to endemic, with the threat of new variants keeping all of us tied to an ongoing series of booster shots for the foreseeable future. And, perhaps even more importantly over the long haul, purchase patterns have changed – perhaps forever. If or when the pandemic is over life won’t be going back to “normal.” Lots of workers will continue to work remotely for any number of reasons, and most of them will continue to favor “Zoomwear” over my high-style clothing choices. The market for athleisure? Hot! The market for suits and ties? Not so much. As to the online returns problem, if I actually knew the answer to that I’d be unplugged in Tahiti now. What I do know is that an effective answer isn’t on… Read more »

The source of high returns has been well documented as primarily driven by poor or incomplete product descriptions and imagery. According to a Power Reviews survey, the top irritation when researching products online is Poor Product Descriptions – 43 percent of consumers. Yet too often we see clothing on some sites with maybe two pictures and limited information on materials or size. There also may be a need to have a size guide with measurements for various types of clothing on the website because sizes vary by manufacturer. We’ve documented at our company that better data product information can reduce returns.

Retailers may also want to experiment with virtual sizings or have a promotion to invite their best customers in for sizing when it is safe to do so. This information can then be added to customers’ personal profiles so they can access the information wherever they shop and potentially reduce the hassle of returns for the customer and the retailer.

The overproduction of fashion is coming to an end. Previously, brands could afford a lot of waste and still make a profit. Now that people are going out less and buying less, garments’ overproduction shifted from a sustainable theory for intellectual discussions into a real bottom-line-impacting business pain-point. When brands are forced to cut orders to self-sustain, the adoption of innovative fashion technology solutions is accelerated. Circular economy and digital fashion are now in fashion. For example, H&M partnered with Flux for digital rewards and Loop for recycling clothes. Adidas, Macy’s, and Modcloth worked with Zeekit for virtual fitting. Levi announced the launch of a new buyback and resale program to reduce denim waste. COS launched resell collection with Reflaunt. The Fabricant collaborated with DressX and made the first digital fashion for this month’s L’Officiel Ukraine cover page. Change of Paradigm produced a virtual gallery/3-D interactive experience showcase with Spring Studios.

What should really shock people is the level of carry over stock normally held in retail. More than $80 billion is a huge sum and is a massive hit on retailers’ profits. This year is an exception and it is not surprising that retailers are cutting their orders. However what needs to change is the inefficiency of the process used by fashion retailers that could save millions of dollars and also massively reduce the impact on the environment of buying so much excess stock. The return of online purchased stock cannot be a surprise to anyone in retail. It is one of the costs of running an online business. It is also one of the reasons why online retail is less efficient than traditional retail and so getting people back out to the shops is vital for all retailers. The fact marketing people use this as a tool is even more amazing. They do not understand the cost of “free returns.” They may be free to the customer but cost the retailer plenty. Let’s hope… Read more »

Retailers are learning lessons about a long fixed supply chain model that will change ordering over the long term. The new model will focus on being more nimble, ordering more frequently in smaller quantities and being able to pivot to reflect an uncertain and fast-changing retail environment. This approach will inevitably result in higher costs for the retailers on a per unit basis, but will benefit them by having greatly reduced overages.

Consumers don’t want to return products, especially in these COVID-19 days, so any digital assistance in improving accuracy will be greatly appreciated.

Some day it will be acceptable to do a quarterly review that says:

1. We planned down 10%;
2. We achieved our planned lower sales, with associated costs and margins as per plan;
3. Intentionally, we didn’t chase winners and missed out in some high growth categories by choosing to stay on the sidelines, and “ignored” some large potential increases.

Returns present a real problem for many retailers, especially as return percentages are at high levels due to online ordering. When it comes to virtual try-ons, the experience isn’t quite the same. I tried it on Warby and Adidas as I was looking for new glasses and shoes, but knowing the product actually fits is still a big issue.

Also, the reverse logistics for returns is very expensive and most of the times retailers cannot find an easy way to re-merchandise returned items properly. Sure, retailers can try to engage the customer who is back for returns with a compelling store experience to entice them to buy more. After all, most retailers are happy to drive traffic into the store for any possible reason. In fact, Kohl’s tried that with the Amazon return counter. Seems like that hasn’t worked well either.