The Planning & Forecasting Fix that Fashion Retailers Need to Increase Profit Margin
Nothing repeatedly challenges retailers and erodes margins as the misalignment of inventories with consumer demand. For clothing, footwear, and accessories retailers this misalignment often leads to lost sales due to out-of-stocks or higher markdowns when they have overestimated demand.
Obviously, a retailer’s revenue and profit take a hit when an item is not available when a customer wants it. And today, with shoppers quickly pulling out their cell phones to seek alternatives, retailers are at greater risk than ever of losing the current sale – and potentially all future ones –while negatively impacting the customer experience and their brand.
On the other hand, heading off lost sales with heavier inventories comes with huge costs as well. A survey conducted by Coresight Research and Celect estimated that non-grocery retailers in the U.S. absorb markdown costs of about $300 billion annually, or about 12% of overall sales.
This research report found that “misjudged inventory decisions—including overbuying, buying the wrong type of products and misallocating inventory—account for an estimated 53% of unplanned markdown costs for retailers”. Diving deeper, the research identified that the largest factor leading to unplanned markdowns was “reduced demand due to external factors such as unseasonable weather, sudden changes in consumer behavior and competitors’ unplanned promotional activities”
Factor in External Demand Drivers to Optimize Inventories
Traffic levels (store and online) and the sales of particular products in specific locations vary significantly from day-to-day and week-to-week throughout the season and no other external variable influences these demand shifts as consistently, meaningfully, and directly as the weather.
Too many retailers ignore the impact of weather and this adds error to plans and demand forecasts. Planalytics predictive demand analytics give companies the visibility they need to proactively adjust allocation and replenishment decisions based on when, where, and how much changes in the weather will influence purchasing.
Businesses use Planalytics’ product-specific, localized demand adjustments within their SAP environments to improve accuracy for core retail activities. As Planalytics’ preferred SAP systems integrator, Groupsoft provides seamless integration into SAP applications. This includes SAP’s Customer Activity Repository (CAR), where retailers can get a clear read on their performance by having a true understanding of the weather’s impact on sales. In addition, these weather-driven demand analytics can feed into SAP’s forecasting system (F&R / UDF) as well as Merchandise Planning, Allocation, Replenishment, Pricing, Promotions, the SAP Analytics Cloud, and more. Once integrated into SAP, these scalable and sustainable analytics drive measurable benefits across the business.
What We Deliver
As Planalytics’ exclusive SAP systems integrator, Groupsoft offers implementation and consulting services for operationalizing Weather-Driven Demand (WDD) analytics
Groupsoft specialises in Industry Solutions for Fashion, Retail and Wholesale Verticals.