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Effect of Ecommerce on Fashion Supply Chains

Ecommerce continues to gain an ever-growing market share of fashion sales.

Consumers are increasing choosing to buy online due to the convenience and range available.

Ecommerce giant Amazon has recently launched its fashion department offering clothing and accessories from a wide selection of high street brands.

For fashion retailers keeping up with changing consumer behaviour requires adjustments to logistics and supply chain operations. It may also require them to rethink their approach completely.

Fashion Supply Chains

Ecommerce and Social Media

One area often overlooked is the strong links between social media and ecommerce.

Consumers are exposed to a wide variety opinions, reviews and guides via social networks. It’s not uncommon to read of a celebrity tweeting a picture of an outfit and for that item to sell out online in minutes.

While some of this activity is planned there are still occasions when peaks in demand take the brand by surprise and retailers are left wondering if they had known in advance how many more units they could have sold.

As social media is of the moment it requires a very agile supply chain to keep up to speed with demand. It also requires a more joined up communication across the company with clear plans for dealing with peaks in demand.

Customer Expectations

We live in an on-demand society and customers expect automatic availability and fast delivery at little or no cost.  Some retailers have balanced this high expectation by introducing click and collect, this allows customers to buy online and collect from their local store.

One drawback of click and collect is that stores need to cope with receiving, storing and managing many more customer orders, older stores may not naturally have the space or set-up for this. Click and collect also doesn’t favour high street location stores where parking is limited or expensive.

However, for modern out of town store click and collect increases footfall and up-selling opportunities, while providing a convenient and cheap service.

For ecommerce retailers who can’t offer a service like click and collect, finding the right delivery partner is essential. One that provides a speedy service at an affordable cost.

fast online delivery

Ecommerce Returns

All retailers have to deal with returns, however, ecommerce tends to suffer from increased return rates. This is in part due to the difference between customer product perception as created by the online store and the reality when they receive the item.

It is crucial to process returns quickly, to maintain availability and to ensure that as much stock as possible is re-sold at full price.  If the returns process is not managed diligently and quickly, the cost of markdowns and lost sales will increase significantly.

The processing cost of a returned item is up to three times as high as that for a normal outbound order so inefficient or delayed processing can quickly reduce profit margins.

On the other hand, there is a commercial opportunity for a return to generate an additional profit since it provides further direct contact with the customer, which is especially true if the return is to a store.  In this instance, goods sold via the e-commerce channel can create additional physical sales at the stores but the store will need to adapt to an increased flow of returns, which can include products they may not stock. 

Alternatively, the presence of a store can generate additional sales through the e-commerce channel.

Retail Store / Inventory levels

Serving multiple sales channels - selling via online stores, own physical stores, wholesale customers, outlet stores, international stores and event-driven sales (including pop-ups) increases complexity in the supply chain. To satisfy varying demand and maintain availability, the stock has to be managed as a single inventory with the opportunity to move product quickly from one channel to another. This, in turn, requires visibility of stock across all channels.

High street store rents are still notoriously high and so fashion retailers want to use as much available space to display and sell clothing. Inventory levels have to be managed accurately so that stores are not stuck with clothes at the end of a season which they then have to mark down in order to sell.

Impact

Reduced inventory in shops can lead to more frequent and smaller orders. This has a big impact on the requirements in the distribution centres e.g. a shift from case picking to item picking - not only is more labour required but also more packaging material, and as a consequence, more kilometres are driven to deliver the same quantities to shops.

Ecommerce click and collect also increases the problem, where orders may need to be dispatched to stores on days when deliveries are not scheduled.  Achieving the balance between availability and space is becoming even more challenging.

 supply chains retail

Need help to review your fashion supply chains to ensure maximum efficiency and effectiveness then talk to Total Logistics the complete supply chain consultancy and experts in supply chain optimisation for the fashion industry.

 

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