As I write this, I’m sitting in seat 13D on an American flight from Hong Kong to Los Angeles, having just completed an extremely fruitful product development trip to the Hong Kong Show. My annual trip to finalize the assortment for our Fall programs is always important, but this year, I have been especially focused, because a palpable shift has occurred in what’s working in the retail environment, and so I traveled to Hong Kong this time on a specific mission to significantly adjust our merchandising paradigms. I believe it’s inevitable that you will similarly need to do the same, as you react to some of the same factors, so I thought you might enjoy a look into the analytic process that I have used to develop the new strategy.
As readers of my past columns know, I’m a big believer in the use of data to develop effective business strategies, and nowhere is data more valuable than in making merchandising decisions. But something new has recently been showing up in the data, something that I haven’t seen before, and it has caused me to reexamine some of my core beliefs about developing product assortments.
As both a former student and lecturer at Edge Retail Academy seminars, I am aware of the fact that the best predictive factor for what is likely to sell today is what sold yesterday. Adhering to this reordering model of replenishing Fast Sellers (items that sold during the past 60 days) and Fast, Fast Sellers (items that sold within the past 30 days), while simultaneously liquidating items that are over 365 days old, has reliably been the best way to maximize GMROI (Gross Margin Return on Investment, which is calculated by multiplying stock turn by markup), which in turn is an excellent way of measuring the productivity of your inventory.
Within generally accepted limits, the bigger the GMROI, the better the performance of your inventory. And since December is the king of retail months, it makes excellent sense to pay especially close attention to what sells then, so I have always thought of the top unit sales report from the Edge for December as the ultimate report card for me (as well as for my competitors). And, of course, I have delighted in consistently having between 9 and 13 of the top 15 positions on that report over the past 8 years (although I am always trying to figure out how to get even more sku’s on the report!).
Over time, what’s shown up on the report has typically been reflective of major trends in the marketplace, so by properly anticipating those trends, and convincing retailers to stock, advertise and reorder them, we’ve built a very nice trend-centric supply chain, in which manufacturer, retailer, and consumer have all benefited. And since I’ve generally been able to get in early on major trends, our retailers have been very successful attracting the Innovators and Early Adopters who then drive the continuation of each trend in their own social groups, sometimes providing a very nice long-term sales and market share boost as a result.
The long-term trajectory of our sku’s on the Best Sellers report has been excellent, as in each year since 2010, we’ve had representative sku’s from a wide assortment of categories, as trends consistently manifested in 3-4-year cycles, and our items rose to the top. And in December of 2017, we had 11 of the top 15 sellers in the over 950 stores that feed their data to the Academy, a terrific showing, with representative products from five distinctly different categories fleshing out the best seller assortment.
But then in December 2018, while we still had 9 of the top 15 sellers, I was shocked to see that somehow every single sku was one form or another of a diamond stud earring. And of the 6 styles from other suppliers that also ranked in the top 15, all but one also consisted of different forms of diamond stud earrings. Trying to understand and react to this new reality (since frankly I didn’t see diamond studs selling any better in 2019 than in prior years), is what finally caused me to consider Zara’s model, and rethink the whole Fast Seller strategy.
With over 10,000 locations, and sales approaching $17 billion, Zara is the largest apparel retailer in the world, and is, without question, one of the biggest retail success stories of the past century. Reportedly, Zara needs just one week to develop a new product and get it to the stores, compared with a six-month industry average, and launches about 12,000 new designs per year. It was Zara founder Amancio Ortega who first coined the term “Instant Fashions” when describing the company’s breathtaking product development, manufacturing, and distribution process.
Zara is killing it in the fashion world by consistently knowing customers’ tastes, bringing these products to market almost instantaneously, and managing their inventory to ensure they have what people want, when they want it. And they have completely reinvented the merchandising paradigm, by constantly launching new collections to keep customers coming to their stores, and currency flowing into their cash registers.
Is this easy? Of course not! The Fast Seller model is actually much, much easier, because all that’s involved is stocking a store with good basics, and then reordering what sells. But as American consumers increasingly come to view jewelry as a fashion accessory, rather than an heirloom, success in the jewelry vertical will require a similar Fast Fashion approach. Fortunately, social media (particularly Pinterest) is allowing me and my design teams to access consumer preference data proactively, rather than retrospectively, and I’m honestly just working a lot harder at understanding minor trend elements than ever before.
The bottom line here is that what’s selling is now changing so rapidly that the Fast Seller approach doesn’t work the same way anymore. The internet and social media have completely turbocharged jewelry fashion trends, so that what’s hot changes now with incredible rapidity.
Normally, I come home from Hong Kong with a sense of 7-9 major trends that I’ll be following for the Fall season, and will merchandise accordingly. But this year, I’m returning home with a list of nearly 40 product attributes from prospective analysis with 11 different design teams. It’s a lot to track, and I’ve actually had to shed other duties in order to do this properly. But there’s no question in my mind that Fast Fashion will now become the new jewelry merchandising paradigm, so if you want to keep your customers, and maintain your market share and relevancy, you too will need to embrace this model, by embracing suppliers who are bringing you the right stuff, at the right prices, early and often.
Getting this right will invigorate the non-bridal component of your business, and will change your customers’ shopping experience, as well as your inventory turn, profitability, and reputation as “the place to shop” in your local market. So get on this now, and make 2019 the year you embraced a new merchandising formula – Fast Fashion – for success.
George Prout is Vice President of Sales and Marketing at Gems One, and can be reached at email@example.com, or at 800-436-7787.