Apparel retailers and brands alike have found themselves in the midst of a speed-to-market arms race. And speed itself is no longer the only issue; this new dynamic environment is adding a layer of complexity to the already challenging world of product design, development and sourcing.

Not only are consumers becoming savvier and increasingly demanding, speed to market (STM) is also becoming more complicated as the lines between channels and markets merge and manufacturing bases and assortments grow more complex.

Even though retailers are blessed with the fullest picture of consumers they’ve ever had, they’re challenged to incorporate this critical data into the product development process. Adding to the pressure, the stakes are higher than ever before: Lost sales are on the line, but, more importantly, so is customer loyalty.

All these forces conspire to make profitable, sustainable STM a more compelling prize for retailers—but also much more complex than ever before.

WHY BRANDS AND RETAILERS MUST GET SMARTER ABOUT STM

In the age of the always-connected omnichannel consumer, cycle time reduction is not the only piece of STM that can lead to a competitive advantage. To stay out front, supply chain executives need a holistic STM strategy, one that encompasses everything from product concept to the consumer, and it requires alignment across every critical functional area of the organization as well as with the mills, factories and logistics providers.

There are four basic STM models:

  1. Rapid Replenishment. Quickly fulfilling a low-inventory, top-selling item within a given season.
  2. Test and Scale. A structured, proactive approach to new product innovation achieved by piloting a new product in select stores or markets before deciding whether to roll it out more broadly.
  3. Read and React. Using the current season’s consumer behavior, trends and spending as a basis for late-in-the-season tweaks or next season’s products.
  4. Trend Injection. Quickly identifying trends, then designing and producing products for immediate in-season delivery.

As part of their STM strategy, brands and retailers will need to choose a model or a combination of models across their product lines. Many factors drive the effectiveness of a given STM model, including availability of demand and trend analytics, supply chain capacity, assortment, supplier capabilities, materials, timing, margin, and seasonality, just to name a few. More sophisticated brands and retailers are leveraging a blend of speed models across core, fashion and seasonal items. Not all models are appropriate for all categories, flows or price points, but each model used will need to be rationalized into the overall calendar. Clearly, the right approach is essential to balance the models and ensure they’re supporting the overall customer engagement strategy, assortment strategy and business objectives.

For example, let’s say a retailer is planning to pursue a trend injection model for some of its assortment. The retailer may initially balk at the high cost of shipping the product via air, which will drive down the initial markup unit.

But by taking a comprehensive view of the costs, sell-through and margin, retailers will see the less-intuitive result: By ordering the product later in the season and shipping it faster, this new trend-right product will have more time at full price and with a higher sell-through, which ultimately reduces markdowns and improves gross margin.

Regardless of the model used, speed—and sustainability—ultimately rests on how well each component of the supply chain is integrated with all the others. The speed of a retailer’s supply chain relies on strong, integrated capabilities across consumer insight and analytics, merchandising and product development, planning, sourcing, distribution, and logistics.

zoom iconExhibit 1: Many brands and retailers use a combination of four STM models to support customer engagement and assortment strategies.SIDEBAR: CASE STUDY: STM BOOSTS SALES FOR FOOTWEAR BRAND

Issue: An international fashion footwear retailer and wholesaler was experiencing slowing top-line sales. One reason for this was that the brand was struggling to service reorders on its most popular styles, with out-of-stocks running at roughly 10% of styles. 

Solution: Using the rapid replenishment STM model, the brand designed a cross-functional seasonal development calendar and aggressive fast-track program to refresh its line mid-season.

Results: The brand forecasts a sales boost of $8 million to $10 million by selling 300,000 more pairs of shoes annually.

KURT SALMON’S EXPERTISE

Unlocking the biggest STM benefits requires a holistic understanding of the entire supply chain—from both an organizational and a customer perspective—to coordinate the movement of both ideas and products effectively. Kurt Salmon understands this complexity and interconnectedness. With deep expertise in process, organization and system components—from initial concept to delivery—we leverage product development and sourcing, merchandising, supply chain, consumer insights, and other operational expertise to craft holistic STM strategies for retailers and wholesalers alike. Our global team is here to help across multiple regions to combine comprehensive strategy with seamless execution.