Before discussing fashion merchandising, let’s understand the difference between a style, design, trends, and fashions are. These certain terms which are frequently used in the fashion industry. But they are quite confusing and normally used by layman as synonyms.
Style: Style refers to distinctive characteristics of design features, like a product can be a skirt, trousers, shirts. But there is a particular design feature but not a specific design. The skirt may be available in many designs. Trousers may be available in many more designs.
Design: So individual interpretations of the same style are called designs. Within one style there can be much design. Like a skirt can be of various types, trousers can be of various types. So this is the difference in style and design.
Trend and Fashion: The trend is also used as a synonym of fashion largely even by the professional. Trend, as the literal meaning suggests, is the direction of movement, the degree of acceptance, duration of acceptance and how it is relevant to the other trends of the fashion. If there is a week we say something like a stronger key trend i.e something is coming into fashion. An emerging trend, something is coming into fashion or a dying trend that is something going out of fashion. There are seasonal trend secondary background trends also.
Trend, in general, can be safely used as a synonym of fashion but it is not fashion. Fashion is a product with distinctive attributes that are currently appropriate and represent the prevailing time. So fashion is basically a product and style becomes affection only when it gains consumer acceptance and it remains a fashion as long as it retains acceptance. So now we are clear about style, design, trends, and fashion. Trend widely accepted is known as fashion.
There are certain characteristics of fashion products….
- Fashion products are generally high margin items and above they carry above-average profits.
- They are such items on which a consumer will spend time money and effort.
- And these products enhance the retailer’s general image and create a sort of height, therefore, they are also consumers traffic generators.
- And they can also distinguish a retailer from its competitors.
Now the characteristics of fashion-conscious consumers…..
- Fashion conscious customers will be oriented toward the social world.
- He will be a social person gregarious and likable person.
- He will be an active participant in society.
- That person will not be an introvert
- That person will be going out mixing up with the society
- Therefore understanding the fashion, getting firsthand knowledge of fashion. Will be the first person to be to come to know about any new line been launched
And therefore they will be social people. They are attention seekers and self-confident enough to try any new style without getting conscious. Their aesthetic power is also good and they are status oriented.
Fashion life cycle: Now another concept regarding fashion Merchandise is the fashion life cycle. As an individual’s life cycle, the fashion product also undergoes various phases from the time it is introduced into the market and the time when it goes totally out of the market.
Different stages of fashion life cycle:
There are evolution, culmination, and decline of fashion just like any human being. And life cycles for different fashion very in the four phases, like…
- Introduction stage: During the stage fashion apparel is called high fashion. It will be available only at selected outlets. Prices will be very high. To encash the concept of market skimming and only fashion leaders or trendsetters will be patronizing this product.
- Growth stage: During the growth stage, the market will be flooded by knockoff. There will be many copycats available in the market. There will the cheaper versions and they will be patronized by the fashion followers.
- Peak stage: When it reaches a peak then the product started being sold on the in the Flea market on the footpath. And there will be very cheaper popular copycats are available in the market at a really low price. This is shown when fashion has picked. It is widespread in society.
- Decline Stage: After that, it comes into the decline stage where it is taken up by the fashion laggards who are very slow to follow any new fashion unless it is accepted by everybody. Else they are not confident enough to use it.
Now for any fashion, how do we measure weather fashion is being accepted or not or a fashion is successful or not. So there are two factors on which we measure the success or failure of a fashion product.
- The level of acceptance: How many people have actually accepted that type of product that can be easily measured by sales.
- The second acceptance factor is the duration of that acceptance whether it is short-lived fashion or it is fashion which lasts for a longer period of time may be over years or decades.
Depending on the two acceptance factors we have categorized fashion into four categories the flop, fad, ford, and classic.
Four types of fashion cycle:
Flop: A flop is a fashion cycle rejected by all consumer segments almost immediately. That means in terms of the level of acceptance its sales are dismal and even the few customers who patronized it in the first phase they also discard it very fast. Only a few fashion innovator who try out anything new available in the market. Those people will invariably buy anything with it is a flop or fad or whatever, but they will also quickly discard this fashion.
If a fashion product becomes a flop, it gives neither a significant level nor duration of acceptance. They represent a financial loss for the person launching those products and tarnish the retailer image. They should be discarded as early as possible.
FAD: The Other extreme is FAD that has got a very high level of acceptance but that acceptance is very short lived. A large number of people will patronize it. Fashion will become very popular but that will be a very short-lived fashion may be counted in a month or at the most season. But they are extremely profitable because they create a great market hype. They are profitable as well as risky because if they are a flop before a retailer has made up its margins or recovered his margins. Then they become a disaster.
FORD: The third one is FORD. FORD is the best seller in fashion merchandising. We call FORD a fashion product which is widely accepted for a longer period of time and has a stable demand. Usually, they are produced by many different manufacturers in a variety of style line.
Classic: Last but not the least is the Classic look classic 3rd or classic say whatever name you give it. It is the fashion that has a moderate level of acceptance but which lasts or endures for many many years sometimes decades. These are known as classic products.
Now we will understand some basic theories of fashion adoption. Fashion adoption theories are also known as Trickle theories. There are basically Three Types of Trickle theory. Trickle-down theory, Trickle-up theory, and Trickle-across theory.
- The trickle-down theory hypothesizes that the new innovative fashion style originates in the upper socio-economic classes and is passed down to the middle class to the lower socio-economic consumer. Any high fashion style which may be popularized by a celebrity, by a Bollywood personality, they will first be accepted by the higher society. When they become popular, they become acceptable. Then the middle class follows the suits and later on when various cheaper copycats are available then there that fashionable dress will also be adopted by the lower socioeconomic segments of the society. So most of the fashion follows the Trickle-down theory where the fashion will be first accepted by fusionist or higher society and then it gradually tickles Down. You can say that gowns are basically a ladies gown which is covered under the Trickle-down theory.
- Then Trickle-up theory: It is an unusual type of fashion movement rather not unusual but you can say the other uncommon or not comprehensible type of fashion movement which starts from the lowest rate of society but gradually trickles upward to the upper state of society. Denim, jeans, Twinkle jewelry, tattoo, they can all be the examples of this. Tattoos, Tinkle jewelry, no speed things they were popular in the tribal or the lowest stage of society. Earlier the jeans wear meant for the farm laborers.
Later on their convenience factor on their way because of their Bling factor, they were adopted by the middle class and then ultimately by the upper classes also. Today tattoo is believed as a high fashion item, a good example of Trickle-up theory.
- Then comes across trickle across theory where the fashion can be launched in any startup society, maybe apart, maybe the middle, maybe lower, and initially it is marketed to the opinion leaders within that society. When the other opinion leaders patronize a particular product then that product is adopted by the followers in that society and gradually the whole of that market segments start patronizing that product. Just like in a class, if someone fashion leader sister buys a new dress and gradually promotes it and gradually other people also start liking it. Then maybe by the next week or next month, ten more people will have the same type of dress and when most of the class will be having the same type of similar type of dress then rest of the people will feel left out and they will also go and buy such product.
Not only a dress but any product for that matter, maybe stationery goods, maybe a file carrying bag may be a folder or whatever.
Another concept in fashion merchandising that we need to learn is the basic fashion continuum. Basic fashion Continuum means a product which is a basic today, may become a fashion tomorrow or a product which is a fashion today may become a basic product tomorrow. A good example can be like mobile phones which were launched as a fashion but now they become a basic product. Or you can say the sneaker shoes, the Canvas shoes which were a basic item, basic running shoes with a slight change in their colors and styles and designs, they were converted into the fashion product that is basic fashion Continuum.
Basic Goods: Before going further into this let’s understand what is a basic good and what is a fashion good. Basic good, a functional good that changes infrequently. General necessity is that are purchased on a replacement basis as a necessity. These products are required not out of fashion or out of choice but because they are required for day to day living, they will be known as basic goods. And you will not buy them because you are found something like a notebook or register or a basic piece of watch. You will not buy them because you really like the design of your writing pad or your pen but you have to buy them when they finish out or when you run over them. Then you will purchase a new one. So that is a replacement buy.
Fashion Goods: Fashion goods, on the other hand, has an aesthetically appealing good. There may be a fancy letter pad of fancy writing pad with you maybe because you like it. Although you may not need because your old basic writing pad is still in used. So this is the difference in basic goods and fashion goods.
Basic fashion continuum as we discussed just now. A product can have both the characteristics which fall in the category that lies in between. Pure basic products can be body warmer in winters and pure fashion products maybe junk jewelry and rest many other products that fall into the in-between range. Therefore a basic product can easily be converted into a fashion product. One example can be when I just not discussed like your old simple writing pad and their fancy writing pad. A simple writing pad is a basic product and a fancy writing pad is a fashion product. But you can’t make anybody to buy another writing pad unless the old one is finished or Lost or turn whatever. Therefore you come out with new designs new photos of new colors and lure the customer into buying the new writing pad even the old one is still running fine. Another example in fashion terms can be the basic Canvas shoes now sold as sneakers. So what do we do for transforming a basic product into fashion? We will introduce some new product features like basic canvas shoes, we added some color, made it multicolor, use different fabrics, creating interesting styles color or fabrication and the least expensive change which you can make into the basic product is its color. Like earlier Canvas used to come only in the white color now, it is available in multi colors many colors and therefore you lure the customer into buying more shoes, today the red one tomorrow the green one, the day after tomorrow the multi-colored one. Had it been a basic shoe? then it would have remained the same shoe unless it is worn out. The person will not go and buy another basics shoe.
Transforming a basic product into a fashion product will naturally result in an increase in the sale but every basic product cannot be transformed. What transformation will you make into a bag of rice or a bag of wheat? Although people are trying to do that also like organic food still it is slightly difficult. So the line between any fashion acceptance or rejection is very thin. The safest way is to make something familiar which should look new.
How do we plan stocks for fashion merchandising? To understand the difference first, we should know that there is a difference in the stock plan for stable merchandise and stock plan for fashion Merchandise.
- Stock plan for stable merchandise: Only quantitative assessment of quantity presently in-hand and desired stock at the end of the period is required since demand is predictable due to the history of parcels and relatively accurate service forecast. Basically inventory planning where you just ensure that you don’t run out of stock. You should have sufficient stock at all points of time. So you will consider the stock in hand. The rate of sale, the lead time in which you will get the stock from the vendor from the date of placing the order. After considering all these factors you can go for the stock plan for stable Merchandise. They are plane mathematical calculations and no art. Experience, of course, is required but no special attitude is required for that.
- On the other hand stock plan for fashion, Merchandise is more of an art because demand is not predictable in basic products. Demand is predictable in fashion products. Demand is unpredictable there in a limited sales history because fashion lines always will come out with the new fashion line which will not have any sales history.
Fashion products will not be having stable sales for a long period of time. So there will be a limited selling period. After that it will go out of fashion will be very few months of peak sales and therefore it is difficult to plan the sales.
When you can’t focus the sales that mean stock plan depends largely due to it remains the art for the merchandisers.
So how do we forecast the demand for fashion Merchandise? It is done in two ways, one is the Merchandise budget plan which is basically a financial plan. It looks after the financial aspects of merchandise categories like how much money can we spend on buying the inventory. So that sales can be achieved. how much margin we will get out of that? How many inventory rotations we can achieve in a given time period? and what are the GMROI objectives? How well they are being met?
GMROI is a gross margin on return on inventory which is a very good indicator of the inventory productivity. But it is not a complete buying plane because it dealing with only in numbers in financial terms or you can say in dollar terms or rupee terms.
It doesn’t tell you what is specific SKU which is a specific product to purchase therefore we will go for another plan known as a model stock plan. But before that the budget plan popularity of style of fashion Merchandise at the beginning of the season is unknown. Initial orders have to be placed with no sales information but price range and sizes we can, in fact, rely on the past history.
Now how do we develop a merchandise budget plan?
- First, we will set our margin and inventory turnover goes how much margin will be required out of this Merchandise category and how many rotations product wise rotations we want in order to inventory to become productive.
- Then seasonal sales forecast for each category. How seasonal variation will affect our sales?
- Then the sales forecast will be broken down in the smaller parts by month.
- Then we will also plan our reduction what markdowns we are going to give. How much we are going to lose by wear and tear and breakage in the inventory.
- Then determining the stock needed to support forecasting.
- Since then did they will determine open to buy for each category in monetary terms? This terms we have studied just now it is cause like markdowns, inventory loss, the stock needed, open to buy, GMROI stock turnover. We will be studying in the other module.
After that one’s even the stock forecasting has been done we come to the terms of sale. Sales terms because in the case of fashion merchandising, Merchandise is new normally not many competitors are there along with the vendor. Therefore, vendors, there is no set price or no set term for any vendor. So a lot of selling may take place and retail merchandisers should be ready for that.
Now what we can negotiate with the vendors, there are different types of discounts.
Trade discount: Trade discounts are offered to different types of customers based on their business classification. Like a vendor will be offering more discounts to wholesalers, a lesser discount to a retailer and different tire depends from industry to industry but different amounts of discounts to different persons in the supply chain. The wholesaler will get a different discount, the Retailer will get different discount Another manufacturer who is using the products of this vendor will get some other discount. if a customer directly comes to these vendors, he will get some different types of discount. These are known as trade discounts and normally go by the industry standard for prevalent industry practices. Click here to see an example.
Quantity discounts: Then there are quantity discounts. Quantity discounts are offered as an incentive to buy in bulk for the retailer or anybody you buy more quantity, you get more discount. You keep on increasing your quantity even discount percentage will keep on increasing. But this should not entice the retail merchandiser to buy more quantity. You should be very of overbuying an item because otherwise, it can result in the heavy discount with you have to give in town to your customers it will wipe out the benefits of quantity discount.
Seasonal discount: These types of products are offered on a discount for buying prior to the beginning of the sale season because at that time the sales potential of a particular new fashion Merchandise is not known. So any retail merchandiser buying the Merchandise at that time is putting something at stake taking a risk. Therefore that retail merchandiser gets the discount for that risk-taking ability. But you should assess your storage capacity as well as the capital investment requirements and you should also guard against the problems related to early purchases like the early selection of colors price changes and OTB which may result in a loss at a later date.
Other types of sale discounts are indirect sale discount, they are like an advertising allowance,
Advertising allowance: Vendor pays up to one half of the cost of advertisement for his or her products. It is appended interest as well because if the vendor’s product does not move down to sales, the retailer will get the next order from the retailer. So payments for the earlier order may be blocked. Therefore it is the interest of the vendor to move the product from the retailer end. Therefore the vendor also contributes to the advertisement by the retailer. A retailer can’t sell it directly because sales pointed at retailers premises.
Postdating allowance: Another type of discount that can be negotiated with the vendor is a postdated discount. post dated discount means you have to negotiate that you want an additional period for payment. Because the more time you get for making the payment more time value of money factor goes into your favor. if the vendor is giving you a month time to bake a payment you should negotiate for 2 months. This will enable you to sell some of the Merchandise and cash it before your payment is becoming due.
Cash Discount: Then there are cash discounts. Cash discount means when you are making payment before the due date. Vendors are allowed you to make the payment within 3 months but you are making the payment within 10 days. That means you should get the benefit of that time value of money. Therefore you can negotiate some discount from the vendor for paying much before the due date. this is known as cash discount.
There are certain special buying situations in which you have to buy fashion Merchandise sometimes. So these situations also should be understood.
- Special sales and promotion goods: Major sales events usually require special purchases at lower prices. You are celebrating the birthday of the store, you are celebrating Diwali sales, you are going for Valentine sales, now Valentine Day sale is short of short duration sale. You will be requiring a special Merchandise for that which will not last for the entire season. You will not get the customers for that. So you have to take special precautions for that.
- Job lots and distress Merchandise: sometimes you get an offer from the vendors for their held up stock when they are having their stocks held up with them which are not selling. Otherwise, they are a good stock. Then you buy them unless you have got money with you. You will not be able to take advantage of that offer. So that you have to keep some funds for that. They make clutter the inventory and tie up your Investments.
- Consignment good: Consignment good sometimes you buy on a consignment basis. In consignment, basis possession is transferred to the retailer but ownership is not transferred and therefore there’s no commitment to make the payment unless the Merchandise is sold. The only disadvantage in this method is if Merchandise is not sellable, it unnecessarily occupy your expensive retail space. Ultimately will not make the payment but you will be returning it to the Merchandise and your storage space for that period is unutilized.
- Guaranteed sales: Here you don’t make the payment to the vendor immediately. Vendors also make you some minimum payment. They are also known as memorandum transfer, memo buying, a guaranteed sale is similar to consignment arrangements.
Anything unsold or selling Slowly can be returned to the vendor but the title of ownership is with the retailer that means the retailer is responsible for the safekeeping of stock,
Committing fraud for the inventory and bear the risk in case of fire and flood there are special orders when you get a special order then you make a special payment.
Specification buying is again a type of buying in which a retailer is a gift his or her own specifications to the vendor and Merchandise is made as per the requirements of a specific retailer. Merchandise has to be produced for that particular retailer can’t be given to anybody else. Therefore the retailer also has to commit larger quantities for that.
Basic Stock List: Certain stock list we have to maintain for proper management of fashion Merchandise. Basic list schedule or listing of stock keeping unit for staple merchandise.
Model stock list: Fashion Merchandise indicate in very general terms what type of colors and styles we are going to keep. It is the initial planning of a model stock list. Never out list specifically created a list of key items or best sellers for which the retailer wants. Extra protection against the possibility of a stock out which should never go out of stock. They have basically listed products during the ABC analysis. It includes all fast selling stable, key seasonal items, and best-selling fashion merchandise.
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