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Posts Tagged ‘Apparel’

I have never really given T.J. Maxx much thought. I can’t recall the last time I was in one of their stores, and going to T.J. Maxx has not been an obvious choice to me since I was in high school (and that tells you more about the shopping options in Manchester, NH, in the early 80’s than anything else). But now Fortune has an article singing the praises of T.J. Maxx — or more accurate its parent company TJX, which also owns Marshalls among other retail chains (Is T.J. Maxx the best retail store in the land?, Jul 24). The article is full of all sorts of interesting nuggets (TJX is basically the successor company of Zayre, another retailer from my childhood, who knew?!) as well as laying out seven “secrets” from the company playbook. Some of these are about positioning in the eyes of the customer (e.g., Put real treasure in the treasure hunt) or management talent (Find a CEO who gets retail). But many of their points go right to the stores operations and how it manages its supply chain.

The off-price business is a volume game: selling a ton of goods and selling them fast. The measure of speed here is how quickly a company turns over its inventory: TJX does that every 55 days, vs. 85 for its peer group, according to Morningstar. Indeed, the company is structured to whisk items through its distribution centers and stores—and a lot of items they are: TJX shipped some 2 billion units to its stores in its 2014 fiscal year (which ended on Feb. 1), up from 1.6 billion in fiscal 2010.

Former employees say that the stuff moves so rapidly that merchandise is often sold before TJX has paid its vendors for it. The busiest stores can take daily delivery of product, which employees put out on the floor right away—a “door to floor” approach that cuts down on the amount of space needed for backroom storage. Sources say items typically go on markdown if the turn rate is slower than about seven weeks, which also contributes to the rapid flow.

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Gustin

One of my favorite topics to teach is the newsvendor problem, an inventory model for very short-lived products like newspapers and fashion goods. One of the points that gets made in that class is that variability is costly. Having to commit resources before knowing what will sell means risk and risk may be a reason not to be in the business. But that risk also suggests an opportunity: If one can find a way to reverse the order of things and commit resources only after knowing what will be demanded, then an otherwise unprofitable business can be a profitable one.

That is essentially the idea behind Gustin, a maker of high-end jeans. It initially sold its jeans trough boutiques, which bought jeans at a wholesale price near $80 but then marked them up to around $200. Gustin had to front all the cost of production and then wait for stuff to sell. Now, they have reversed the order of things and take orders directly from customers ahead of production. As the founders tell it on Marketplace, they have positioned themselves as a totally crowdsourced fashion company (Burning down the house that Levi’s built, Apr 8). You can hear the story here:

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photo-main

“Where does that come from?” sounds like an easy question to answer and at a high level it is. Which car models are produced at which plants is public knowledge so whether your Toyota was built in Kentucky or Alabama is easiest enough to figure out. But if you want to take it to another level — to know where different components came from and where the stuff that goes into the components comes from — is a lot harder. That is the conclusion reached in a blog post on Nautilus (The Secret Life of Everything: Where Your Stuff Comes From, Oct 29). Modern, global supply chains are so far reaching and support so much complexity that transparency (at least to the outside world) is lost.

I’d thought of [supply chains] mostly in terms of delivering Amazon orders and keeping Staples stocked. Those are just endpoints, the final few steps of a waiter carrying a meal on a tray. And what I really didn’t get was that supply chains don’t just carry components and ingredients, but synchronize their movements. Shipping a box of pens to Staples is the obvious part. Coordinating the arrival of barrels, caps, boxes, ink cartridges, and nibs (through which ink flows) at the pen factory—and also metal to the nib factory, oil to the plastics-maker, and so on—is the bulk of what supply chains do, and in the most efficient manner possible, with algorithms optimizing everything from shipping networks to the path of pallets through warehouses, with an eye to what happens when one of these many moving parts goes invariably astray.

The problem then is that unless you pick a real simple product — like a T-shirt — it is pretty much impossible to know where all the components come from and where all the various production steps are executed. NPR’s Planet Money took on this challenge of tracking a T-shirt from cotton field through production and shipping to the disposition of used American clothes in Africa. It’s an eye-opening  picture of global supply chains.

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Big data is in fashion

Big data is, of course, one of the business world’s most in vogue buzz words. It may even be having an impact on how various industries function. Case in point, today’s Wall Street Journal reports that several firms are selling data and services to fashion brands and retailers (Fashion Industry Meets Big Data, Sep 9).

The forecasting companies offer analysis of fashion shows, data on the current market offerings and—for an added fee—bespoke research and consultancy services. The data are generated by teams of staff employed to trawl art exhibitions, events, restaurants and even scientific journals.

Fashion companies use the data to plan their latest collection or catwalk show, with the online services replacing the bulky and intermittent style books that designers and merchandisers used to receive. …

“[Fashion forecasters] have always been used but they’re more accessible now because of the technology,” says Marks & Spencer creative director Belinda Earl, who has just launched her first collection for the U.K. high street bellwether. “They are important, not always to lead but to re-evaluate and help confirm you’re on the right track.” …

Retailers are also turning to number crunchers to improve execution. U.K. start-up EDITD trawls the Internet to gather data on who’s selling what, how many products are flying off the virtual shelves and how much are they going for to guide companies in their merchandising decisions.

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Last week I posted on making toys in the US; this week it’s apparel — specifically, T-shirts and sweatshirts. Let starts with sweatshirts and a firm called American Giant. The story starts back in December with an article in Slate describing the company’s business model and extolling the wonders of its product (This Is the Greatest Hoodie Ever Made, Dec 4, 2012). In effect, American Giant uses technology to cut its distribution cost and rolls a good chunk of the savings into offering a superior product.

In the 1970s, when the fashion industry morphed into a mass-market business dominated by mall stores, its marketing and distribution costs began to skyrocket. To keep retail prices down, companies began to shrink the price of producing clothes. Today, when you buy a hooded sweatshirt, most of your money is going to the retailer, the brand, and the various buyers that shuttle the garment between the two. The item itself costs very little to make—a $50 hoodie at the Gap likely costs about $6 or $7 to produce at an Asian manufacturing facility.

American Giant has found a loophole in the process. The loophole allows Winthrop to spend a lot more time and money producing his clothes than his competitors do. …

American Giant doesn’t maintain a storefront, and it doesn’t deal with middlemen. By selling garments directly from its factory via the Web, American Giant can avoid the distribution costs baked into most other clothes. …

But there is really no comparison between American Giant’s hoodie and the competition. It looks better and feels substantially more durable—Winthrop says it will last a lifetime. When you wear this hoodie, you’ll wonder why all other clothes aren’t made this well. And when you hear about how American Giant produced it, it’s hard not to conclude that one day, they all may be.

OK, so what do you think happens when such glowing press hits the web a few weeks before Christmas? Right, they sell out of everything. Here is a BBC report how they got hit by a tsunami of orders (American Giant: The problems of being an overnight success, Mar 10).

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luluSo Lululemon has a problem with its yoga pants. It is of the I-see-England-I-see-France variety (Lululemon Yoga Pants Pulled From Stores for ‘Sheerness’, Wall Street Journal, March 19).

The yoga-apparel retailer’s shares tumbled late Monday after saying it has pulled some of its popular pants from stores, after a mistake by a supplier left the pants too see-through. …

“The ingredients, weight and longevity qualities of the pants remain the same but the coverage does not, resulting in a level of sheerness in some of our women’s black Luon bottoms that falls short of our very high standards,” Lululemon said in a release.

Lululemon said Monday it has used the same manufacturing supplier on key fabrics since 2004 and is working to understand what happened.

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The New York Times Magazine has a long article on how Inditex and its main brand Zara have grown to be one of the world’s most influential fashion players (How Zara Grew Into the World’s Largest Fashion Retailer, Nov 11). They even have a spiffy video.

Not surprisingly, both play up the role of operations in the firm’s success.

A traditional ready-to-wear fashion company in the West sends the designs for its clothes to independent factories in countries like China and India, where the labor to make them is cheap. These clothes are then shipped back and stocked in stores in spring and fall, with smaller shipments throughout the year.

But a brand at Inditex will make a fall collection, for example, and then ship only three or four dresses or shirts or jackets in each style to a store. There’s very little leftover stock, few extra-smalls or mediums hiding in the back. But store managers can request more if there’s demand. They also monitor customers’ reactions, on the basis of what they buy and don’t buy, and what they say to a sales clerk: “I like this scooped collar” or “I hate zippers at the ankles.” Inditex says its sales staff is trained to draw out these sorts of comments from their customers. Every day, store managers report this information to headquarters, where it is then transmitted to a vast team of in-house designers, who quickly develop new designs and send them to factories to be turned into clothes.

More than half of Inditex’s manufacturing takes place either in the factories it owns or within proximity to company headquarters, which is to say in Europe or Northern Africa. Inditex owns factories in Spain and outsources production to factories in Portugal, Morocco and Turkey — considered costly labor markets, typically. The rest of its clothes are produced in China, Bangladesh, Vietnam and Brazil, among other countries. The trendiest items are made closest to home, however, so that the production process, from start to finish, takes only two to three weeks. Inditex’s higher labor costs are offset by greater flexibility — no extra inventory lying around — and on faster turnaround speed.

That means that if Inditex stores in London, Tokyo and São Paulo all have customers responding enthusiastically to, let’s say, sequined cranberry-colored hot pants, Inditex can deliver more of these, or a variation on hot pants, sequins or that cranberry color, to stores within three weeks. The company tries to keep the stock fresh; one promise its stores make is that you will always be buying something nearly unique. Merchandise moves incredibly quickly, even by fast-fashion standards. All those thousands of Inditex stores receive deliveries of new clothes twice a week.

So is there really much new here? (more…)

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