White tees folded neatly on a table display at Gap with ample inventory in all sizes. Nude tank tops sold on forever21.com, available year long at a consistent price. Black crew neck socks at Target, sometimes available as an MUP (Multiple Unit Pricing). What do all of these products have in common? They are all basics. A basic is a product offered year round by a retailer. These are styles that are consistent sellers and generally do not succumb to changes in fashion trends. Will white socks ever be chastised on Fashion Police? No.
Basics can drive a significant portion of sales within a company and display more regularity in selling velocities than their non-basic counterparts. While processes differ amongst retail companies, basics are generally managed separately from non-basic styles, and often require specialized planning tools to ensure adequate inventory levels. The number one goal for planners when it comes to basics is to ensure basic styles, in all sizes, are always 100 percent in-stock. Low inventory levels can lead to both missed sales and a poor customer experience. How frustrating is it when all you need is a short sleeved white t-shirt, but when your cursor hovers over your size, you see the ominous slash mark indicating zero stock? Let’s discuss some ways retailers can prevent this from happening through basics management.
Get the Facts Straight
The number one goal in basics management is to always be in-stock, in all sizes. The second goal is to carry the right amount of inventory that maximizes margin and productivity. This means not being too heavy in inventory ownership, prompting promotional activity to drive turn, or too light in inventory, which can lead to missed sales should product performance unexpectedly peak. While conceptually this seems like a simple goal to achieve, it can be quite tricky to achieve the “perfect” inventory positioning, particularly for newer companies with minimal historical selling data. This brings me to my first point, which is to truly get the facts straight about your basic styles. Understand the ideal inventory ownership of your basic styles, either using a turn rate or days/weeks of supply metric. Be very clear about the lead times required of the initial order of inventory to the receipt of inventory. Anticipate any fluctuations such as Chinese New Year, which can significantly delay garment production. Use the promotional calendar to predict any fluctuations in basic selling and thus inform inventory decisions.
Create a Basics Forecast
Once you have all of the key facts related to your basics it is time to create a basics forecast. While some retail companies have extensive forecasting tools and may even have planners dedicated to managing basics, it is common for smaller, newer companies to have homegrown, Excel-based tools for forecasting and tracking basics performance. Regardless the level of tool complexity, a forecast should take into account anticipated unit sales, inventory lead times, and ideal inventory ownership. This allows for receipt recommendations based on anticipated sales results.
Track Basics Performance
It is wise to discuss basics performance metrics on a weekly basis, particularly if the basics contribute substantially to total volume. A best practice is speaking to performance during Monday business review meetings to ensure that cross-functional partners are present to discuss any reactive product push strategies. When recapping basics performance, it is helpful to understand sales performance versus forecast, current inventory levels and how they compare to ideal inventory levels, and upcoming changes to the promotional calendar that can impact your future forecasts. Using this information, one can decide whether additional receipts are needed, if forecasts need to be adjusted given current sales trend, and if any levers need to be pulled to move through current inventory levels.
For more information on how to accurately forecast demand, make adjustments to a plan, and overcoming the challenges of inventory planning, download A Guide to Inventory Planning. To learn more about how Stitch can help you with inventory planning, learn more about our product here.