5 Ways Fashion Brands Can Optimize Inventory To Boost Cash Flow Season to Season

Fashion is a fast-changing industry, and definitely one of the most dynamic and competitive realms of the retail world. Thanks to streaming services and social media, fashion trends can emerge and spread in an instant – inspired by a comedian’s sweater, a memorable phrase or a character in a new, bingeable TV show – then fall out of favor before you can even say ‘Add to Basket’.

For fashion retailers, forecasting for these lightning fast shifts alongside regular seasonality and promotional periods is a major challenge. With best-sellers changing on a weekly or even daily basis, how can apparel brands keep track of an inventory in constant flux? The task involves somehow predicting the popularity of brand new products, preparing supply chains for sudden spikes in demand, and keeping rapidly outdated stock from piling up and trapping cash.

The answer? Keeping a well-oiled, optimized inventory – one that drives profits and business efficiency by moving as dynamically as the fashion world does. Read on for the best ways fashion retailers can use expert inventory planning to gain full control of their inventory, therefore boosting cash flow for their growing footwear or apparel business as seasons change.

1. Ride the waves of seasonality

It’s a given that the fashion industry is highly impacted by seasonality – that includes not just the classic shifts from autumn/winter to spring/summer, but holidays such as Christmas and Easter and through to global promotional periods like Black Friday and the January sales. Though some seasonal trends are easy to predict (warm clothes will peak in colder weather, swimwear in the summer, etc.), most fashion retailers accept that there is always uncertainty in knowing what will sell. This is particularly true when introducing brand new products.

This is where seasonality codes come in. By organizing stock into trackable clusters, they’re easier to monitor and analyze when it comes to forecasting, and can provide  usable data for predicting sales, for the current year and in years to come.

Some codes will represent core products which run all year round; a white shirt, black dress or classic cut of jeans, for example. For seasonal items running alongside them, you could code your products according to season and year, such as follows:

SS23 (Spring/Summer 2023)

AW23 (Autumn/Winter 2023)

AI-driven software such as Inventory Planner factors seasonal codes into its data-driven sales predictions, so you can make purchases well in advance and won’t be caught short of the season’s hot items right as demand starts to peak.

With access to real time reports and replenishment notifications, online merchants can optimise inventory performance on a day-to-day basis, by location, variant, or demographic, quickly identify trends, and best or worst sellers – helping to maximize cash flow each season.

2. Take the guesswork out of spotting trends

Trends are the driving force of the fashion industry – but they move fast and can come and go right under your nose, losing you vital opportunities for profits.

There are multiple ways to predict trends of course, not all of them scientific. A sharp-eyed buying or product team will hopefully have some idea what’s rumbling; or you could depend on simple intuition to predict new trends using your inside knowledge of your particular sector.

When it comes to a more analytical approach, however, forecasting for trends involves looking at historical sales figures and growth patterns to predict demand for a given period. There is a lot of legwork involved here though. Intelligent, intuitive inventory planning AI tools can save you time by offering real time updates and forecasting recommendations – essential to developing an optimal inventory mix season-to-season.

Using advanced forecasting software will be able to detect whether a new product will be popular based on the success of similar products you’ve sold before. Perhaps a fringed, neon bomber jacket will sell well over festival season, just like that sequinned bomber jacket did last year?

Also, by using sales patterns linked to a particular customer group (such as those aged 20-30, or living in London) the system can help you predict more granular trends that target a specific market. This should lead you to identify which products are safe bets to invest in, and which to keep an eye on for potential stockouts, should interest spike. This way your purchasing teams will be primed to buy enough stock, and your marketing teams can also tailor their content to reach those target demographics. If the products resonate as intended, it allows you a tighter grip of your inventory and more widespread potential for boosted revenue.

3. Avoid the curse of stockouts and overstock

Having the right amount of the right items at the right time: this is the key to running a successful fashion business. Running out of your best-sellers at peak periods, or having too many old or outdated items you can’t shift, are both sure-fire ways to run that all-important cash flow into the ground.

But the curse of the fashion industry is that new stock purchased off the back of trends can go out of date very quickly, and overstocking is a real problem. In 2022, masses of retailers faced major issues when they overbought stock in expectation of pandemic levels of sales – for some big name brands, such as UK furniture retailer, the situation proved fatal to business.

Simply discounting or liquidating old stock isn’t a catch-all solution, as it can devastate your bottom line. As a preventative measure, keeping a slick, dynamic inventory planning system that alerts you to potential stockouts and overstock ahead of time can not only save you big bucks in the long-term, but vastly increase your selling potential, by having the right product, in the right place, at the right time.

Frequent purchasing based on data-led forecasting will not only predict trends to ensure you only buy the items you know will sell, but it can also offer key insights into which items are slow-moving and taking up space in the warehouse – so you can push them for sale before the boxes start to pile up.

4. Go granular with reporting

Data is king when it comes to keeping a fully visible inventory, and nowhere is this more important than the fashion industry. Even a smallish product line can have masses of variations in size, colour and style – and in order to get the most out of reporting, retailers have to go granular.

Inventory Planner offers in-depth reporting capability, so you can not only identify the denim cowboy shirt currently flying off the shelves, but exactly how many of which sizes need to be replenished first. The AI software provides daily inventory reporting for real time insights on inventory performance, and intelligent recommendations that optimizes your decision making – while saving you vast amounts of time that would have otherwise been spent manually pulling the information from various sources.

Additionally, with over 200 custom metrics as well as the ability to create merchandise categories and product tags, you can use any number of data points to laser-target which SKUs will make the most profits and make super-informed purchase orders.

5. Use smart sales forecasting methods

As mentioned, sales forecasting can be done in a number of ways – but there comes a time when broad inventory predictions will do you a disservice financially. Top down forecasting, for example, which focuses on your high-revenue items, can be great for getting an overall idea of your bestsellers, but can miss out important details deeper in your inventory. Bottom up forecasting does the opposite, but can lead to you getting lost in small product information, without the capacity to link it to wider product trends.

Using progressive, AI forecasting, a lot of this work is done for you. The retail industry today is rife with external factors that can impact sales, and that’s without the added pressure of fashion’s high competition and quick changes. Inventory Planner takes into account the multi-faceted nature of forecasting sales – taking into account lead times, seasonality, promotional periods, trends and marketing shifts – without the retailer spending hours on manual spreadsheet calculations.

In conclusion

Fashion is a fast-moving industry, but that is no reason to get lazy or overlook inventory! With an impending downturn on the horizon, reducing inventory holding and having the ability to optimize season-to-season will become ever more important for fashion merchants in order to boost sales and profitability – as well as their long-term viability.

To see how Inventory Planner can transform inventory processes for your retail business, try it yourself with our free 14 day trial