The New Normal is Adaptability
By Marc Weiss - CEO, Management One
The new normal is “adaptability.” I was thinking about how to best make the case to adjust to new conditions and realized I am preaching to the choir. Everyone reading this blog has been adapting rigorously since the beginning of 2020. What did occur to me is with inflation and The War in the Ukraine unfolding, that the new normal is how well we adapt to changing conditions and what we can do to be in control to better manage our own outcomes.
I recently had a conversation with Ilse Metchek, President of the California Fashion Association, and here is a recap of our conversation. Ilse had some very pragmatic advice.
Don't just write the order. Get clear and definitive delivery dates and background details. Is the information you are getting coming from the owner or the rep? This could make a difference. If goods are coming from China, are they delivered to warehouses in Mexico and Canada first, and then shipped here? This is important to know as those would be safer delivery dates. Even goods coming from Vietnam depend on components that have been shipped from China, so keep that in mind. Are goods being shipped by air or by boat?
Seek out alternative vendors. Reliability is critical. Get online and check out, FashionGo, Joor, Nuorder, Faire and Max Retail for fashion and Fitted for footwear. We have clients that start their day not by reading their email but by checking their current OTB on Retail ORBIT® and then seeing what merchandise is available.
Strong B vendors available and in the bullpen when needed can avert the crisis of cutting off the flow of new goods.
Incremental increases in Initial Markups (IMU) should be happening now. I know many of our footwear clients raised prices on existing inventory based on upcoming price increases on the same and similar products. Our Luxury retailers added another 5 to 10% to their initial markups to help cover investing in core inventory. Thus far there has been zero price resistance, as demand has remained strong for new goods, including the first two months of 2022. ( see chart in our February newsletter)
Ilse and I both agreed that given market conditions it is better to confirm than to chase. If you normally invest 50% of your future OTB, increase it to 70%. If it is 80% increase it to 100%. Some of our Retail Experts are even recommending over 100% in certain verticals to cover fallout, inflation, and changes in assortments. Every vertical is different and there is no one size fits all. Also, some buyers are better at chasing goods than others.
What is strategically critical is to have a fresh flow of goods every month. This is true from luxury to fast fashion and nearly every other vertical. It not only brings your customer newness, it gives you a lever to stop the flow if things begin to soften. We continue to track the relationship of inflow to revenue. It is astonishing to witness this ongoing correlation. So pay attention to your stock-to-sales ratios and cost of purchases.
Be more strategic in your buying. Buying has always been important for independent retailers, but now it is critical. That may include hiring new people to allow you the time to source new and review existing goods to ensure the products remain competitive.
A few potentially disruptive things to consider:
There may be a dock strike in June on the West Coast (the current contract expires in July).
China may be emboldened to make a move on Taiwan, and what will be our response?
How long will the war in Ukraine last and what ripple effects will affect the independent retail community?
We are continuing to be bullish on 2022. The underlying economy is strong. Geopolitics typically is not that impactful on our economy, and customers seem prepared to pay higher prices as we are not currently seeing price resistance. I believe the above recommendations will keep retailers adapting and will allow Indie retailers to navigate our current environment.
Onwards and Upwards.
Marc