The fashion industry nature stresses the balance sheet, very sensitive between days of payment (days of payables) and collection period (days of receivables), with a high level of uncertainty because of fashion trends (if the customer likes the product or not), weather conditions (a warm winter will let stores with high levels of coats and jackets inventories) and others externalities altering demand like politics (e.g. Brexit, Trump) or social media (e.g. Dolce& Gabbana social media crisis).
Fashion time to market is shortening thru fast-fashion but there are other formulas to reduce the risk of over stocking as volatilities and risk are very high nowadays. The Fashion retail revolution started with postponment when Benetton switched from yarn dye to garment dye. Some years later, Zara reinvented fashion thru real time trend identification and best-in-class operations.
Today, customers will queue for hours to purchase a limited edition of an item designed by an influential designer. A 12-15 months merchandise cycle doesn´t make any sense. Fast-fashion consumption and the culture of limited edition require a different model like capsule collections or customizations. It´s about managing the Fear Of Missing Out (FOMO) effect.
Cult of the line at Supreme NYC
A Capsule collection is used as a way to break the standard fashion lifecycle. Customization and limited editions permits to reduce over-stocking risks thru to make-to-order business model, a manufacturing process in which manufacturing starts only after a customer’s order is received. On the other side, make-to-stock is a traditional production strategy that is used by businesses to match production and inventory with consumer demand forecasts.
Consumerism in the liquid era is fast, compulsive and ephemeral. It´s all about freshness and scarcity. The objetive is speeding up the merchandise cycle or time to market while reducing product time-on-offer. Coolness is the Holy Grail in today´s luxury. Many brands are embracing this revel counterculture attitude thru capsule collaborations, hiring talent or acquiring “streetwear” players. Instead of managing high-volume productions/inventories, brands are creating deeper assortments or long tails.
The Business of “Drops” or “Drop Model” in Fashion
Nike bets for customization but also for a list of releases or special editions. Every pair of sneakers has a release date and customers can ask for notification or shop it in advance. If you visit the SNKRS site you will feel in a museum where sneakears are sold as pieces of art. Some of them are already sold out, making the impression of escarcity.
Nike is partnering with some of the most famous fashion designers like Virgil Abloh, John Elliot, Kim Jones, Riccardo Tisci… to become a high-end fashion brand, an icon beyond sport lovers. It´s again, fashion and retail, art and operations. While product design and marketing create the customer “need”, operations or supply chain delivers the product in an efficient and effective way. SNKRS is an example of best-in-class “partnership” between both sides of the coin.
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