Inventory Planner warns clothing retailers about dangers of being caught with excess stock
More than half of fashion retailers find themselves stuck with excess stock after a disappointing start to 2023, according to research by Inventory Planner.
It found that 62% of apparel sellers still have goods they cannot sell after January discounting.
And the ‘returns tsunami’ which traditionally hits hardest in January and early February will only make the problem worse. Last year 22% of excess stock was written off altogether by clothing retailers.
UK fashion retailers are sitting on an average of £53,000 worth of excess stock due to the downturn in consumer spending. It has little value and is costly to store.
Inventory Planner polled 500 fashion retailers. 48% said there would be ‘dangerous ramifications’ for their cash flow if they failed to sell excess stock.
77% of apparel retailers are planning to offer even more discounting to try to shift the unwanted products.
More than half said they were ‘greatly concerned’ about their ability to shift excess stock and 56% said it would be difficult to absorb the loss of marking down prices and liquidating unwanted products.
The survey found that 70% of fashion stores struggle to predict customer demand and sales in this fluctuating market and 26% do not know how to calculate excess stock.
Inventory Planner CMO Sara Arthrell says: “Excess stock is a huge issue for fashion retailers at this time of year. And a tsunami of returns which always comes in January and February after peak trading is going to make these problems even worse.”
“The key to avoiding inventory waste is by forward planning and having rapid response software which allows fashion retailers to pivot quickly to fill order gaps and ditch items early which are not selling.”
Clothing company Joules said extensive discounting to clear inventory had hurt its profit margins before it crashed in November last year. It was bought out of administration by Next.
Peak trading in December for many fashion e-commerce sites was hit by the postal strikes, and several fashion giants have recently issued disappointing trading updates including boohoo and Asos.
Fashion retailers are sitting on piles of unsold clothing due to a hangover from previous supply chain issues, and poor demand for current season stock.
An easing of supply chain disruption has led to a pile up of products in warehouses as lead times from east Asia have shortened. This means that retailers faced with clearing old stock are receiving new items quicker than expected.
Marks & Spencer was forced to "re-adjust stock flow" and discount coats, jackets and boots by 20% to clear excess stock as milder weather combined with customers cutting back led to poor sales for some winter ranges.
Asos is planning to write off £100 million and £130 million of out of fashion inventory to help refresh its brand. Asos has also partnered with Secrets Sales, the discount market place for fashion, to clear the backlog of excess stock and boost revenues.
And some retailers are hibernating excess winter stock to sell in autumn/winter 2023 rather than discounting.
Arthrell comments: “How to clear excess inventory without discounting too heavily or writing off stock is the headache facing many fashion retailers as we head towards spring.”
“Many fashion retailers struggled with product shortages during the pandemic due to understandable supply issues. Now they are faced with the opposite problem - a glut of unsold merchandise which is eating into profits and damaging cash flow.”
“Discounting cripples margins and is not sustainable over the long-term with the cost of living headwinds all fashion retailers are facing.”
“That’s where technology comes in. Inventory planning provides accurate replenishment recommendations based on years of purchasing data so you are never under or overbought on inventory.”
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