Posts Tagged 'Forever 21'

Inventory management? It depends on the inventory

I commented recently (on RetailWire) about the skill set needed to manage different kinds of inventory. There is no hard and fast rule, because it depends on whether the store in question is in the “staple” or “fashion” business:

Any store needs to hit the right balance between staple, fashion and fad merchandise. (The difference being that “fads” have a much shorter life span unless they evolve into fashion trends with more staying power.) The question of “the right balance” really depends on the nature of the retailer’s brand image and target customer. Clearly Forever 21 needs to play in a completely different world than (say) Chicos — which is not devoid of fashion but is more dependent on staple inventory.

It’s a key question because the product life cycle of each type of merchandise — and the inventory management needed to get into and out of trends profitably — may be totally different for fads, fashion and “basics.” Retailers don’t want to be stuck with too much of a fast-moving fad; on the other hand, they don’t want to erode their in-stock levels on basics by fixating on chasing trends.

Will an off-price concept fix H&M?

H&M is jumping on the off-price bandwagon with a new concept called Afound, with the objective of liquidating its goods more effectively. (It’s also a hot segment with a lot of new players over the past few years.) Here’s my comment from a recent RetailWire discussion about what really ails the company:

I’m not sure that another off-price brand in an increasingly overcrowded market is a long-term solution to H&M’s problems. They need to address a few core problems in their existing stores first, as the article points out:

1. How does H&M move faster in the product development cycle, to compete more effectively against Zara and even Forever 21?
2. How does the company figure out a more effective liquidation strategy for its existing stores, instead of leaning on a new concept?
3. How does H&M play catch-up on omnichannel, considering it was late to the party?

H&M stores have always avoided the chaotic, “treasure hunt” feel of a typical Forever 21 store — and with a bigger focus on basic, affordable “wear to work” apparel for budget-minded shoppers. But this has come at the cost of becoming boring and predictable, compared to Zara’s unbeatable speed to market.

Are social media driving the speed of trends?

The short answer to my own headline question (above) is “yes,” but there is a lot more to this issue. Here’s my comment from a recent RetailWire panel discussion:

Social media may be a factor in fashion trends going Aeand moving faster. But the influence of “fast fashion” retailers (Zara, Forever 21 and others) can’t be understated. They mastered their supply chain in order to bring new goods to the selling floor a lot faster, and in order to react to early test orders in a big way. Most traditional retailers built their logistics around long lead times, especially on private-brand goods, and are scrambling to catch up.

The idea of “speed to market” requires a change in mindset — affecting supply chain management, the willingness to chase big ideas, and the ability of retailers’ vendors to move just as fast.

Is there a market for “ultra-fast” fashion?

RetailWire panelists weighed in on the growing trend toward “ultra-fast” fashion. If the short lead times of fast fashion retailers (think Zara) aren’t short enough, how about two to four weeks from concept to delivery? And what sacrifices need to happen as a result? Here’s my comment:

Retailers have been too slow reacting to the fast-fashion capability of companies like Zara and Forever 21. These two companies (and a few others) have brought great supply chain management and data science to the art of getting relevant product to their customers quickly. But the key word here is “relevant”: Does a two-week lead time offer enough chance to test and reorder in depth?

Cost is another factor: Ultra-fast retailers will probably have to pay a premium for manufacturing labor close to their stores (especially in the U.S.), even if there is some offsetting saving on transportation. Fast turnaround makes sense if your store needs Stanley Cup championship jerseys tomorrow, but for the majority of goods a little extra time is worth the investment.

J. Crew changes its creative director

Here’s a recent comment from RetailWire about Mickey Drexler’s decision to replace Jenna Lyons, the longtime creative director of J. Crew, in light of a continuing sales slump:

Product development is the lifeblood of a brand like J. Crew. There is no question that the company’s merchandise assortments lost their way for the past several years, and Mr. Drexler has been frank about design mistakes in his public statements about J. Crew’s sales problems. While retailers are chasing the success of fast fashion stores like Zara and Forever 21, these tactics may not be right for J. Crew’s preppy brand identity and higher-end positioning.

As to the change in creative directors (after many years where Ms. Lyons’s efforts were instrumental to the company’s success), I guess it’s like a baseball team: If you’re the owner or the GM, it’s easier to fire the manager instead of all the players.

Two new fast fashion battlers?

There’s been plenty of attention paid to Forever 21 and H&M for the past several years, but it’s worth keeping an eye on Zara and Uniqlo as they expand their footprint in the U.S.  I commented recently on RetailWire that Zara has a competitive advantage in terms of product development and supply chain:

Zara has a big head start over Uniqlo in the U.S. retail market although it has plenty of room to grow vs. other fast-fashion competitors like Forever 21 and H&M. More importantly, speed to market is in Zara’s DNA. And they offer a modified “treasure hunt” approach to the merchandise, compared to Uniqlo’s approach of key items in lots of colors. Unless Uniqlo is prepared to change its philosophy, Zara has the edge.

It’s understandable that Uniqlo would want to benefit from what Zara already knows about fast turnaround of product development — supported by great logistics management — but it may not be as easy to imitate. Think of how many e-commerce sites aspire to the level of Amazon’s execution but can’t quite get it done.

Zara continues to impress

From a recent RetailWire panel discussion about Zara’s ongoing growth:

Zara’s mastery of supply chain to exploit trends has long been noted, but their targeting of a fairly broad customer base less so. They seem to straddle the sweet spot between Forever 21’s focus on what used to be called the “junior” customer, and H&M’s emphasis on more wear-to-work clothes.

As to store openings — at least in the U.S. — Zara has been more deliberate than its competitors, so its comps may reflect that it is not suffering from the same square footage overload as many other omnichannel retailers right now. But — as usual — it really comes down to merchandise content.

Are fast fashion retailers guilty of overexpansion?

An interesting RetailWire discussion about whether fast fashion retailers are discovering (just like traditional department stores) that there is too much of a good thing when it comes to square footage and store locations. Here’s my point of view:

Fast fashion retailers (especially Forever 21 and H&M) have expanded very quickly as real estate has become available during the past five years. (This includes Forever 21’s move into some vacated mall anchors.) They are probably finding — like other brick-and-mortar retailers — that there can be too much of a good thing when it comes to square footage. And some of those store openings have been in regional malls that are in decline anyway.

it doesn’t help matters — during this period of overexpansion — that fast fashion retailers are suffering from the same malaise as department stores. (Only the off-pricers seem somewhat immune right now.) Given weak demand for apparel, and the lack of a sales-driving trend, it’s tough for most fast-fashion stores to gain traction.

American Eagle takes a page from fast fashion

Most RetailWire panelists agreed with me (on a recent discussion thread) that American Eagle is wise to grow its inventory at a slower pace than its sales. It’s really an overdue effort to learn from the best practices of fast fashion retailers, and here’s my comment:

If any of the “Three A’s” of specialty retail had figured out how to improve their supply chain and product development, they probably would not have lost as much market share to the “fast fashion” masters of the art like Forever 21, Zara and H&M. It’s not just about the right merchandise content, but also about speed to market — and speed to exit a downtrending idea. Cutting down on lead times, and sourcing closer to one’s stores, is critical to making it happen.

So American Eagle is right: There is no reason why inventory levels need to grow at a faster pace than sales growth. In fact, just the opposite…if “just in time” sourcing and smart inventory allocation are working as they should.

The junior problem: It’s not just about Abercrombie

There were plenty of comments at RetailWire upon the sudden resignation of Mike Jeffries, CEO at Abercrombie & Fitch. Although his company has made more than its share of mistakes over the past five years, I argue that some of the problems are endemic to the industry:

There are many issues at play here. First, it comes down to merchandise content: The mall-based junior retailers have been too slow to move to the “fast fashion” model of competitors like Forever 21, so their long-leadtime product development can put too much of the wrong product into their stores. The junior customer figured this out a long time ago.

Second, mall-based apparel traffic has suffered for years. The misses’ chains (Talbots, for example) have hardly done any better than their junior counterparts. There are too many fast-fashion and off-price options where the “treasure hunt” for variety is a compelling part of the shopping experience now.

Finally, the economics of the consumer have changed: First, the Great Recession put a damper on overall discretionary spending for apparel that has yet to recover fully. And the discretionary dollars have shifted dramatically, away from apparel and toward personal technology. One more element in this “perfect storm” for the junior industry.