I hope you've had a great week.
Today we're diving into the phenomenon of unsold fashion inventory and the legacy system behind it. Rather than pointing the finger, I'll endeavour to illustrate the huge number of factors at play in the industry's supply chain (which go some way to explaining why the system functions as it does) and next week we'll look at what might be done to change things up.
But before we jump in, let's extend a warm welcome to our newest subscribers: Lucy, Prue, Bar, Dotty, Ieva, Shie, Ellen Carrie, Lola, Tara & Danielle. It's great to have you here.
Ready? Let's go.
In the fashion industry, burning and slashing unsold garments and accessories used to be relatively common practise. Public outrage saw pledges from these companies to abandon such behaviours, but that doesn't mean the problem has gone away.
Part of the issue is that it's just so darn hard to predict demand and determine what will sell. Another factor is the way the fashion industry operates: “coolness” has long been about maintaining an air of exclusivity - and for the high end brands that set the pace, discounting (to help push through laggard stock) just doesn't play into that narrative. Another element at play is that fashion is so much about newness and change - what's in, what's not. The fast pace of social media has reduced the lifespan of a trend and so the window for selling through of-the-moment pieces is now shorter than ever.
Together, these factors put the industry in a tricky bind and over production is often the result. The fashion industry is a very complex system, and different segments of the industry play by different rules (i.e. fast fashion vs. luxury) so today I'll be highlighting some top levels factors that explain why the system has evolved the way it has…
MARGINS & MOQs
If a brand does not manufacture its own products in house (and in fashion, very few companies have their own manufacturing facilities) then they must look for a 3rd party manufacturer. This is the case for LUXTRA: since starting out in 2017 we have been working with the Italian manufacturer Cristian SRL, who craft bags for many well known premium and luxury brands.
When working with a manufacturer, a brand cares about 3 main things:
2) MOQ (Minimum Order Quantity)
3) Unit price
At LUXTRA, we rank them in that order, but larger brands, that can easily meet a certain level of MOQ might make the unit price their top priority. When I say “MOQ” I am also talking about pricing tiers: like almost anything, the more you buy, the cheaper it gets:
Order 50 bags and the unit cost is, say 100.
Order 100 bags and the unit price goes down to say, 75.
Order 200 bags and the unit price might be 60.
You see where I'm going with this.
For many large, established brands, it's very tempting to order more, so that the company can make more profit per unit. From conversations I've had, it's often the case that a company's management team set strict margin benchmarks (let's say 75% margin) for the production team to hit. A lower unit price obviously helps the company make more money on each individual item. And perhaps, in larger brands, it's easy to push the issue along to the Sales & Marketing department to sell the product.
We humans have a long history of passing the buck. © Clifford Berryman
FLUFF BALL OF THE WEEK: BOB @BabyBrotherBob
I've never met this little munchkin, but rather I watched Bob's story on Instagram. Poor little Bob was an orphan kitten, rescued and nurtured back to health by the amazing Christina Ha. Bob has now found his forever home. A delightful happy ending.
One of my best friends from Australia has just landed in London, so I'm off for a happy reunion.
Have a lovely week ahead,
LUXTRA Founder | Inventory Ponderer | Aussie at Heart