Bret Schnitker, Emily Lane
October 31, 2023
Bret Schnitker 00:05
the reality is we do buy fashion pieces. But if we love the basic things that a brand offers, there's a lot of volume to be had in that. And that's where you invest your inventory. Yeah, you know, build it. But
Emily Lane 00:20
you're a perfect example of somebody who invest in that core product time and time again.
Emily Lane 00:31
Welcome to Clothing Coulture, a fashion industry podcast at the intersection of technology and innovation. I'm Emily Lane.
Bret Schnitker 00:39
I'm Bret Schnitker. We speak with experts and disruptors who are moving the industry forward and discuss solutions to real industry challenges.
Emily Lane 00:48
Clothing Coulture is produced by Stars Design Group, a global design and production house with more than 30 years of experience.
Emily Lane 00:56
Welcome to Clothing Coulture. Today, we are having another tabletop conversation where we bring you answers to questions that come from our audience. Today we are talking over by and under by Bret you always say you either over buy or you under buy, you never buy the right amount.
Bret Schnitker 01:17
I actually can't claim that I was in retail when I was a young buyer. I had a divisional that. I was always worried about getting that number, right. And he came to me and said that exact statement, he goes, you're never gonna get it right. You'll either over buy or under buy, you'll never get it right. And I keep that with me. And I've kept it with me over the years that we've had to make decisions or help customers make decisions in that respect. And there's some rules behind that. But that was the general phrase to begin with.
Emily Lane 01:43
Okay, so there's, there's no way to do it. Right? You're never gonna have enough or you're gonna have too much. If there's no such thing as a crystal ball to help give us that insight. What can you do to narrow that margin?
Bret Schnitker 01:58
Yeah. So, you know, numbers, I always go back to numbers here. This is kind of the retail math section and kind of bores individual people sometimes,
Emily Lane 02:06
Yeah I'm going to take a nap right now.
Bret Schnitker 02:08
Okay. You know, basically, in the world today, there is a, there are some specifics that, for the most part, if you want to maximize profitability, etc, you can't change, you know, we live we used to everyone talks about quick turn and all this different things. After COVID, the world of quick turn, is more challenging. In general for most, we still have port slowdowns, they have all sorts of issues in the world that slow down the processing of our goods from production to delivery. So understanding that to begin with, and putting that into retail math is important. So typically, if you just look at an average production lead time, that's about 90 days from the point you place a Pio to the point that production is done, that's pretty much around the world, some can move a little quicker, but if you're a if you're a realistic buyer and a realistic planner, and you want goods traditionally on time and planning for that, you want to put in 90 days and then if you put in about 50 days from pretty much all over the world for you know freight getting loaded onto the vessel, shipping across the oceans clearance, accounting for if there's any exams, or any slowdowns at port, domestic trucking, and then getting into your warehouse, etc, you add about 50 days. So let's say that the retail math number for from the point I place goods to the time I get them is about 140 days, that equals about 20 weeks, okay? So time is a part of the formula time is that first part and that kind of number is is a good basis for kind of allocating your number your your timing at the very beginning, okay, then you want to look at your actual sales and established retail organizations typically will do that Mondays, right, they have sales week, they sit down on Mondays, they get their their downloads on sales and style information. And they take a look at first how many units of that particular style did I sell. And so the general overview, let's say that particular style, they sold 1200 units. If it's an item that they always want to be on stock in, then you know that if we're looking at 20 weeks to get goods back in and you're selling it an average of 1200 units a week, then you're have about a 24,000 unit demand, right? You're gonna sell 24,000 units. And if you're going to be and if all of your sizes, colors and all of that within that style are perfect. You could buy 24,000 units. Right? Right. So that's the retail math at its overarching deal if if you if you manage to always wanting to be in stock in a particular item you're around you utilize that retail math, you calculate for those weeks of supply, and you make sure that you're buying those larger ones will negotiate on those units in mass put them in their warehouse. So if they have fluctuations by size or demand, they're always in stock. And others that may have more challenges can break out and break that out into different buying clumps. So they buy in tranches, if you will, if there's 24,000, units in need be below play 6000. They'll analyze their business on color and size. And they'll place another 6000 in three or four weeks and another six, and that helps manage that kind of production flow and keep them in stock.
Emily Lane 05:38
So time and then of course, numbers on sales, those are the key ingredients to that formula. If somebody isn't a math person Well, you know, and I think you brought up a point. When you were in the retail landscape, you were looking at those numbers every week. Yeah, you don't wait until everything sold out. Or
Bret Schnitker 06:05
well, then it right, right. Always analyzing business, we say try to analyze the business with the third first 30% of sales, when you're not broken in a single size that gives you you know, you know that the stuff is out there, the customer visibility is there and you have a pretty good accurate reading of sales by size by color before everything is broken. And then you can kind of figure it out going forward. Looking as you get further into it. First thing to go are certain sizes sell at different rates than you buy as much as you try to do those accurately, you'll have some anomalies, and you'll get broken and sizes are broken in color. And that starts to degrade the actual
Emily Lane 06:47
information. Yeah, but that's also telling things that you need to make some adjustments on your buy in future orders. If you're running out of certain size,
Bret Schnitker 06:55
Don't buy exactly to the loss, you need to compensate for some of that demand. If if 18% of your sales are coming in, let's say black and you're buying 10% of your inventory, it's not necessarily meaning that you should on your next order by 18% in black, you're already kind of overselling to the inventory. So perhaps compensate a little bit more buying 20, 25% of that next order in black to offset some of the units that you have an inventory. Yeah, that are deficient.
Emily Lane 07:27
You know, in talking to some new brands that we've consulted with, often they'll they'll be celebrating when they come to us and say we completely blew out of this. It's so great. We're out of inventory. Why is this a problem? And is this a sign that maybe they're under buying?
Bret Schnitker 07:46
It's a problem. And yes, it's probably a sign they are under buying that in certain cases, it's shocking the number of people that we talked to, and we sit down, and they're really, really excited that they've sold through so many of these goods. Yeah, I understand the excitement that for a brand that has demand. That's great, you know, the customer, you know, and we had one particular brand that we were talking to and they had, I don't know 15 or 20 styles, and I'm like we're blowing out in two weeks. And I was like wow, okay, let's go look at your website. And when you look through their website, they had all these different styles. And there was no notation on the website for that particular style that it was sold out or there was only a few pieces left. So the individual had to go into the website. They had to click in there. I happen to be a double extra large I go in and I'd look sold out that I would look randomly on the largest sold out come to find it on so many of these styles. There might be one piece and a small or some of the some of the styles have been completely sold out. You're going to have a customer get very frustrated that every time they visit your site, they have to hunt and peck through it to see if any of those styles exist in their size. That creates frustration they end up getting exhausted they're not going to come back. There is a positive of selling out if it's a planned intentional sell out. Sorry, I think there is a balance between in every assortment plan. There is core fashion basic. We've talked about this in the past and fashion and seasonal fashion. So in core, and that's usually 50 to 60% of your buy if you do it right if you have a great core business that's always in stock customers can always buy and then when you move up the ladder to fashion, selling through fashion items in season should be a plan. Like I put something out it creates demand at sells out. However, as that style or the placeholder for that style online or in your store sells out. You should have a style I'll that comes in to replace it. So if you're online, you sell out of that style, you should drop that from the online presence, move it to remnant section or close out, check to the back where there's a few pieces, and then have a brand new style ready in its place. So you're always covering the demand, the customer sees four overall patterns, but
Emily Lane 10:23
following trends, giving them a reason to keep coming back to your site, fresh content with a beautiful photography of those new style,
Bret Schnitker 10:31
but having everything sold out and having it sold out for weeks is really hard for a new business.
Emily Lane 10:35
Yeah, well, let's face it, when you are out of goods, you're out of money. Yeah,
Bret Schnitker 10:41
your revenues. In fact, there have been stories of people that have miscalculated, and have had wild successful sell out on larger organizations haven't planned that effectively and had to have been let go because they haven't managed the expectation well enough. Because there's been a lot of investment in terms of store location store, build out, building that, that whole launch. And if it's way under bought, then someone's really not doing their job.
Emily Lane 11:07
Okay, so looking at investments, a lot of your newer brands, for example, struggle with that period of, you know, we know we need inventory, we know we need replenishment, we know we need a little fashion for excitement, but every time a new brand invest into the next tranche of, of styles, that's money out of the pocket, and they're still nervous and, and so how do you what are some things that you can do? Or what some advice you would share with these newer brands that are like, I would love to go deeper with my inventory, but I'm scared of the large outlay.
Bret Schnitker 11:45
Yeah. Targeted assortment planning is really important for new brands. newer brands want wider assortment, because they think that customer needs a lot of choices. And you know, a lot of excitement to bring these new customers to the table, I would tell you there is a number. And that number fluctuates based upon maybe demographic and park type of brand, where you need a certain amount of exciting pieces to get a customer to it. And you need a certain amount of colorways of core and determining that to begin with this whole targeted assortment plan where you're like, look, the reality is, is I need pieces to come in to get customers excited, but I don't need a lot of them capsule thought process and collections. But I need my depth and my my investment in excellent fashion basics that the customer buys all the time, because the reality is, is we do buy fashion pieces. But if we love the basic that that a brand offers, there's a lot of volume to be had in that. And that's where you invest your inventory. You know, build it.
Emily Lane 12:54
You're a perfect example of somebody who invest in that core product time and time again, yes. Okay, in a case where you're doing everything, right, you're running the numbers, you're taking a look at the sell through and you're you're planning you're going deeper and you're still chasing business. What are the options?
Bret Schnitker 13:21
We had this in retail, when we would have a category that was extremely hot. And we were always chasing it, we kept on running the numbers. And the numbers would look like in some cases like crazy large numbers that the organization I worked out, you know, there were times we were running numbers, and it said, we had demand of 120,000 pieces of a particular style. We were like, wow, it's a big demand fashion piece. And we would weigh those in and we would sell it faster than we ever imagined. We go through those units and we're like, Well, how big is big? How can we how can we keep addressing this demand then comes the tough decisions and that is spending the money to keep the customer engaged in the successful items. And that comes down to investment in airfreight. Sometimes your overall business is going to have a certain margin that you've planned in and you've maximized margin because you've minimized the expense terms of freight. But if you're chasing this demand and you want to keep that going on a trend till the actual bolt can come in decisions like air freight can be important because even though you're in essence wiping away a lot of profit, air freight can be expensive. You're keeping that inventory and and keeping that customer coming back to the point that you can replenish. There are hybrid versions of that where you can air, air air freight to a coast and you can fast truck to your warehouse. These are all decisions that you can make in in the heat of the battle there are it from certain countries like China, there's carriers like Madsen that can be much quicker In terms of freight deliveries, so you'll spend the money but catching up keeping up with the demand cycles on particular styles. Sometimes it's necessary
Emily Lane 15:10
in a more mature business, where you're you've got fluctuations of demands in inventory. And, and you want to be able to fill but maybe be a little bit more thoughtful with regards to that bottom line, maybe not airing the product. Demand, what are other options,
Bret Schnitker 15:27
especially in core product, where we're talking about a scenario, we always kind of want to be in stock, making sure that the customers there. But you might have some adjustments, adjustments by color, or size, and you always want to be, you always want to be cognizant that and then having that inventory, there are plans that you can put in place with factories overseas, where you book grayish fabric prepared for dye fabric, or dyed fabric, and trims and stock. All of those efforts that you do up front by having those particular components of production in the warehouse ready to go. helps speed up the production timelines, therefore minimizing the need for cost for air freight, you can react closer, sometimes fabric can take four to eight weeks to produce. So if you're, if you've got dyed fabric in house, and you're simply converting that into garments, you know, that can speed up the overall 90 day lead time and get it down to 45 or 60 days.
Emily Lane 15:27
That's great.
Bret Schnitker 15:28
Yeah.
Bret Schnitker 15:29
Okay, any other little pieces of wisdom for those buyers out there? Or entrepreneurs? Trying to answer that question of how much do I really need to buy.
Bret Schnitker 16:41
There's an interesting evolution of what's happening today in retail, and I would have never assumed it would work. But it's working it started in furniture where you go to some of these big furniture stores and you're like, I love that couch, I want to buy it, when can you deliver it next week later. They're not actually putting in that purchase for that couch till you place it. And so it's finding its way into retail, and it has a nice message because you're actually only buying to demand. So one of these evolutions in retail that's occurring that I find very interesting that helps you maximize your business is going out creating a collection and saying these goods, we're going to prebook only place your orders and time those will be in and get out in four or five months but place them now they'll be in four to five months we were we don't care to over produce, we care to produce the demand. And this whole pre booking pre buying trend is a very interesting trend that will help businesses identify up front if they have a big enough audience. The demand by style without overloading or undermining, I find that find that really interesting today.
Emily Lane 17:56
That is great. And then on top of those pre books, you know, there's going to be additional,
Bret Schnitker 18:00
People that want right so you can have a little bit by 20% or more to say, you know for those people that buy it, but if you're just look I'm I'm going to pre book I'm gonna buy to, you know, the pre booked volume then you don't end up with excess inventory. You don't end up with markdowns, it's more of a sustainable bend to a story. And I think it's a healthy way for a business to plan for future volume.
Emily Lane 18:22
Well, thank you so much for providing that insight on buying. You kept me awake. I thought I was going to take a nap. So congratulations. Well, for those of you that have questions for us, don't hesitate to reach out we're happy to answer your questions and in a future tabletop conversation. And don't forget to subscribe to stay apprised of upcoming episodes of Clothing Coulture.
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