Retail

Retail

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

Don’t blame the weather – four things non-food retailers could consider to protect their business from the seasonal risks

It’s that time of year again when it seems almost all fashion and home retailers in the UK make the headlines due to the impact of weather on trading performance.

Seasons have never been easy for retailers to manage – the usual quandary of when to launch, how much and what to buy, balancing the risk of failure against the expectations of customers. Whichever way you cut it, you will never get it right. It’s the merchandiser’s nightmare; seasonal categories will either fly or fail.

This delicate balance is becoming more important as well as more challenging to manage. The changing economic situation has led to shifts in the way people approach spending on clothing and footwear in the UK. In fact, Mintel highlights the rise in replacement buying, indicating consumers are buying only when they need to, and less on impulse. Consumer priorities have shifted – so when winter doesn’t arrive on cue as planned for, customers do not oblige.

But how can fashion retailers help themselves, take back control and make the most of unpredictable seasons?

 

Diversification

Some retailers are actively seeking to diversify their product offer away from seasonally sensitive categories. Many are introducing new, as well as expanding existing non-core categories. For example, H&M has launched a home accessory collection, and more recently expanded their beauty and make-up offering.

There are many ways this can be achieved:

  • Give more space to non-seasonal categories which are relevant and more predictable
  • Work with more third parties to reduce risk and drive your income (even though it may reduce your potential margin)
  • Increase the mix to less seasonal reliant product categories such as lightweight jackets, gilets, sweats and move away from heavy coats and knitwear at this time of year

Retailers such as New Look have been driving growth through wholesale to other third party retailers such as ASOS as a way of diversifying their business mix and reducing their own risk. At the same time they have been able to capitalise on the additional brand awareness and exposure the relationship offers the brand.

 

In-season trading

In a world where cost pressures have driven product sourcing further away from the point of sale, the option to ‘go short’ has long been relinquished.

Ironically, the opportunity to trade in counter-seasonal categories when the weather doesn’t play ball is one of the key ways retailers can offset profit lost to funding markdowns on slow selling seasonal categories.

Sourcing a quick turnaround product on shorter lead times could be a crucial way of turning short term risk into medium term gain; boosting chances to sell at full margin.

Furthermore, flexing space (physical and virtual) between different categories can help bridge the gap – such as expanding basics or essentials ranges with lower price points with all year round demand.

 

“Market trading”

For retailers with an ever growing international presence, the potential to think globally about seasonal product demand is huge. Why not use innovative ways to trade products between markets and drive efficiencies? This supports a pursuit in profit through joining forces with the counter-seasons in different geographies.

Some retailers have their own local websites in international markets. This offers greater opportunity to take advantage of trading seasonal product more aggressively in different geographies based on demand and reduce exposure in others.

Why not reduce risk in one market by re-distributing product to markets where seasons have been kinder? Or why not hold stock over to sell in the next season? For international retailers, it’s always winter somewhere…

 

Price and promotions

Yes, you read that right. Promotions are all too often considered an anathema in retail; the enemy of margin.  Perhaps it’s now time to step up control of the promotional calendar and plan promotions to ‘expect’ the misbehaviour of the weather?

This can all be planned into the buying margin, and promotions can be better co-ordinated across the business by being in control, and knowing a ‘Plan B’ doesn’t always mean losing unplanned margin.

These approaches are not new – or complicated to execute – but sometimes it can be difficult for retailers to step back and realise a way out can be planned that will keep both customers and shareholders happy all year round.

Of course, as in every buying and merchandising decision, you need to have the ability to plan ahead by having proper visibility of business performance. This is where many retailers need to embrace digital transformation, and bring themselves ‘out from the cold’.  

 

Let’s not blame the weather

In fact, the use of sophisticated weather analytics, to both plan and react to weather conditions, could be applied to non-food trading as it is in the food sector. My colleagues Tom Wraith and Guy Baxter outlined the concept earlier this year, and there are certainly advanced analytics that could be applied to drive better supply chain planning and reduce risk by becoming more proactive.

So, let’s not blame the weather. It’s time to get more proactive, think more creatively and embrace both international and digital to make the impact of weather a ‘chill’ of the past.

About the author

Lee Pettman
Lee Pettman
Lee is a Senior retail consultant with experience in merchandising and buying in various non-food sectors. Having spent time working in the retail industry for 10 years, he now delivers a wide range of projects for clients across the retail sector.

Leave a comment

Your email address will not be published. Required fields are marked *.