The Merchandise Life Cycle
In Fashion, products tend to have a short product lifecycle due to fast changes in trends and demand. Fast Fashion accelerated the traditional business model (e.g. usually 2 collection per year), creating a perceived obsolescence and making supply chains even more complex in a context of trade liberalization that started in the 90s with China’s accession to the World Trade Organization (WTO). Western firms outsourced manufacturing to China (then Vietnam, Bangladesh, Sri Lanka, Pakistan, India…) looking to reduce labour costs. Today, leading retailers are managing global supply networks, balancing near-shore and off-shore manufacturing based on product demand characteristics or lifecycle. In Europe, countries like Portugal, Tunisia or Turkey are important manufacturing hubs. While retailers are diversifying their business models (Fashion as a Service, subscription model or resale), they are also accelerating and increasing product launches.
If managing supply chain increased its complexity with globalization, today supply chain disruptions are the new normal. Brexit, climate change and Coronavirus are just a few examples of events that are impacting supply chains. The above diagram shows a traditional merchandise lifecycle of a fashion retailer. Developing two collections was usual (AW and SS) but this is changing as brands are releasing more collections, customization, capsules or limited editions (see Nike SNKRS) and channel or event-specific assortments. Something not mentioned above is how brands are dealing with leftovers…
Retailers manage older stock through many distribution channels like outlets or discount department stores. Some retailers are even selling items by units, by weight or destroying leftovers. And many of them call themselves sustainable… it’s the right time to define a circular business where brand’s impact doesn’t finish in a store/selling the item but closing the loop: reusing, reparing and recycling. Is sustainability a synonym for coolness? Is Fashion Sustainability an oxymoron?
Back to the business of fashion complexity. Retailers are dealing with several markets, countries; different languages, shopping cultures; different store formats and fashion tastes; different commercial calendars; different taxes, prices, currencies, sizes; different lead times, regulations; sourcing countries; warehouses, etc. The equilibrium between creativity and science is key within the digital transformation of retail but, unfortunately, there is a lack of communication between designing, planning, finance, marketing or supply chain. Finance and Operations (Supply Chain/Logistics) are usually reactive areas instead of playing a proactive role in the decision-making process. Digitization is an enabler, but people and processes will drive the change.