How to Achieve Intelligent Inventory Allocation and Become a Fashion Retail Omnichampion in 2024

In the dynamic landscape of fashion retail in 2023, the path to success has been largely dependent on intelligent inventory allocation and the ability to embrace omnichannel fulfillment.

Now, with the ever-evolving challenges of inflation, geopolitical complexities and shifting consumer preferences, fashion retailers are facing a crucial crossroads. To navigate this journey and emerge as an omnichampion in 2024, it’s essential to optimize the Total Cost Per Unit (CPU) and streamline fulfillment operations. This blog post delves into the key insights and solutions that can transform your fashion retail strategy.

The omnichannel imperative

Omnichannel customers, though they represent only 7% of all customers, generate a staggering 27% of all sales. This statistic underscores the importance of embracing a holistic approach to retail. Today, shoppers crave not only online experiences but also the tactile joy of brick-and-mortar shopping. To meet these diverse demands and remain competitive, fashion retailers have to rethink their warehousing strategies.

The fashion retail sector is poised for remarkable growth, with forecasts predicting revenues exceeding $2 trillion by 2028. Ecommerce sales are set to surge by 56% in the coming years, reaching $8.1 trillion by 2026. However, the journey to omnichannel excellence requires addressing several key challenges specific to the fashion industry:

• Efficient inventory management: Centralized, real-time visibility and inventory allocation across multiple channels is essential for optimizing order fulfillment, reducing stockouts and preventing overstocking, all of which ultimately impact the Total CPU.
  
• Streamlined order fulfillment: Optimizing picking and packing processes and adopting a flexible channel strategy can significantly lower Total CPU by reducing order processing times.

• Returns management and reverse logistics optimization: Minimizing the costs associated with return handling, restocking and consolidating returned items positively influences the Total CPU.

Total CPU: The North Star metric

Total CPU stands as the linchpin of omnichannel success. It represents the overall expenses incurred in producing and delivering each product unit. Fashion retailers are fervently optimizing this metric to fulfill omnichannel orders efficiently. It’s the single most crucial metric for guiding decision-making in today’s fashion retail environment.

RELATED READ: Revolutionizing Fashion Retail with Fulfillment Orchestration 

An omnichannel fashion retail trend snapshot

The fashion industry is in a state of flux, driven by trends that pose both challenges and opportunities:

• High SKU counts and underutilized inventory space: Fashion retail often grapples with an abundance of Stock Keeping Units (SKUs) and underutilized inventory space. The proliferation of SKUs can lead to increased storage costs, decreased visibility of available inventory and challenges in efficiently allocating resources. This issue further emphasizes the need for effective assortment optimization and inventory management solutions.

• Shifting consumer preferences: While online channels remain vital, shoppers are yearning for brick-and-mortar experiences, impacting the profitability of online channels.
  
• Demand volatility: Anticipating fluctuations in consumer demand, especially post-COVID-19, is challenging. Balancing inventory allocation between ecommerce and retail channels is crucial to avoid a rise in Total CPU.
  
• Assortment optimization: Retailers are embracing leaner assortment planning and recognizing the importance of accurate demand forecasting and real-time inventory visibility.

RELATED READ: 4 Omnichannel Upgrades Every Apparel Retailer Should Consider

The power shift to the consumer

Adrian J. Slywotzky, a management consultant and author, believes that ecommerce is accelerating the shift of power toward the consumer. This shift is leading to fundamental changes in the way companies relate to their customers and compete with one another. In this era, consumers have more choices and greater influence over brands. To thrive, fashion retailers must not only optimize their operations but also build strong, customer-centric strategies.

The impact of hypermediation

Nicholas G. Carr, HBR senior editor, foresees a future of “hypermediation” in the ecommerce landscape. In this phenomenon, profits derive more from clicks than from sales. In a retail landscape characterized by ecommerce growth, unpredictability and changing consumer behaviors, achieving intelligent inventory allocation is the key to becoming an omnichampion. By optimizing Total CPU and adopting modern fulfillment orchestration solutions, fashion retailers can navigate these challenges and thrive in the industry as it evolves. Embracing consumer empowerment and the dynamics of the digital age will be pivotal in achieving long-term success in this new era of retail.

Want to know if your business is on the path to becoming an omnichampion? Use our Total CPU Calculator for a quick assessment.