While the shift toward at-once programs, or just-in-time inventory, has been going on for years in the apparel and footwear industry, it is clearly accelerating due to the tightened credit market and consumer slowdown. But vendors remain concerned about how the counter trend toward fewer pre-season buys is reshaping futures programs.
For retailers, it's become even more necessary to keep inventories to a minimum to preserve cash flow and meet lender requirements in today's troubled economic climate. Increasingly, many retailers are foregoing the often deep discounts offered in pre-season bookings to avoid being stuck with huge markdown risks at the end of the season, retailers told Sporting Goods Business.
But stores have been pushing for better at-once programs for years because buying closer to the season and even in-season leads to more accurate buys around consumer demand instead of waiting up to nine months for futures orders. Working on leaner inventories also enables retailers to chase hot product instead of waiting for last-seasons' slow-sellers to clear of the sales rack. Finally, frequent in-season deliveries help stores manage their cash better.
But many retailers claim vendors have been reluctant to share the inventory risks and build up adequate in-season inventories to meet their fill-in needs.
"The retailers have to have more support from the manufacturers on having replenishable merchandise rather than up front orders where the retailer takes all the risk and financing responsibility," stated a head merchant at a major regional full-line sporting goods chain who declined to be named.
Said an assistant GM at an independent sporting goods store, "Many product categories can get into an over-inventory situation using futures orders. The more we can use fill-ins and at-once orders the better control we can have."
While vendors clearly don't want the inventory risk, they also note that futures programs enable the discounts that bring the coveted high-margin buys to retailers. Many also believe the shift away from futures programs will ultimately hurt product development and bringing new ideas to market.
"The industry will see less demand, which will mean less of a buy with our factories," said Brian Good, senior manager of credit and A/R at Puma. "When or if the product becomes in demand and the customers want to do at-once business, they will be unable to fill in due to the decreased buy which will affect all...Only those companies that have lines that repeat every year will be in stock. Brands that have new styles year after year will become very hard to get a hold of."
Brad Gruber, national sales manager at Grendha Shoes Corp, said that with vendors being forced to forecast narrow and deep, there will be little differentiation between retailers and margins will consequently suffer.
Said Eric Tung, president of FERA Intl. Corp., "There are limits to how fast product can be packed, shipped, delivered, and out on the floor. So there is greater risk for the retailer of lost sales."
Discussion Question: What are the merits of at-once versus futures programs in the soft goods industries? What are the risks of increasingly relying on quick-response programs to meet inventory needs?