Inventory "Hidden Evil" Fast Fashion Giant Burned 60 Tons Of Clothing

In lean management theory, there is a saying, "compared with the dominant evil, the hidden evil of inventory is more evil".

For clothing enterprises, inventory is a kind of honey and also a kind of arsenic.

As a honey, inventory is essentially a "lazy political thinking". It can be used to stabilize the cycle or to channel dealers, or even to turn dealers into a moat to resist risks.

In the case of better terminal sales environment, inventory is controllable and can be quickly cleared through discount sales promotion.

As a result, the stock of arsenic is not so good.

Once the sales environment deteriorates, it is easy to form inventory backlog and capital occupation problems, which will seriously threaten continuing operation.

In 2019, this winter was not easy for apparel retailers.

New Look, Topshop these fast fashion apparel brands are closing down China's channels.

The seven wolves and the noble birds are making a difficult pition. Clearing inventory and integrating channels has become the focus of the year.

H&M, the leading international tycoon of the international apparel industry, has been more vulnerable. Under the influence of China's economic downturn, H&M's earnings have been falling. Even though various inventory measures have been adopted, H&M stocks are still rising.

H&M cleaned up inventory and even burned clothes. This is exactly the same as the inverted milk during the 29-33 years of crisis.

Q4 has arrived, local brands and overseas brands are facing the last 2 months of inventory clearance opportunities window.

How to deal with the hidden evil of inventory is a test.

Closing shop tides and stocks

According to the data center of the win win business center, the number of clothing stores in the typical cities in China (commercial area 50 thousand or more) accounted for 28% of the total number of clothing stores in 2017. The number of clothing shops was 30% only to restaurants.

The data in 2018 were also not good looking. A group of fast fashion brands lost the Chinese market.

New Look, Topshop these fast fashion apparel brands have been closed down online and offline in China.

According to the third quarter 2018 earnings report, H&M stock has reached 38 billion 719 million kronor, an increase of 15% over the same period last year.

This has accounted for 33.5% of H&M sales, compared with 31.9% in the first half of the year.

Looking at Chinese local clothing leaders will find that the situation has improved, but it is still not optimistic.

Take Hai Lan's home as an example. In the 2014-2017 years, the inventory balance of Hai Lan's home was 6 billion 86 million yuan, 9 billion 580 million yuan, 8 billion 632 million yuan and 8 billion 493 million yuan, respectively, and remained at a high level.

According to Changjiang Securities data, Semir is shutting down stores.

In December this year, in order to solve the historical problems caused by the business mode, the precious birds decided to buy some distributors' channel resources and recover some of their inventory, of which the channel purchase contract amount was about 147 million yuan, and the procurement contract amount was estimated to be about 419 million yuan.

The paction is expected to reduce the gross profit of the company's main business by 200 million yuan this year.

Although the seven wolves have been improving inventory turnover over the past few years, they have achieved some success.

However.

The situation is still not optimistic.

The data of the first textile network show that the storage age of seven wolves is more than 41% of the inventory balance.

As the leading clothing enterprise of Fujian faction, the seven wolves are still digesting the remaining problems of the old mode.

Under normal circumstances, the clothing enterprises should have a healthy inventory rate of around 30%, while the average stock rate of domestic garment enterprises is 40% to 50%. The vast majority of stocks are over season goods, and the huge inventory has brought the traditional garment enterprises closer to the warning line.

The most serious problem is the inventory management.

The problem of inventory accumulation often brings about a series of problems, such as channel loss and cash flow deterioration.

1. Order mode is simple and extensive.

Under the distributor mode, retailers often make orders to distributors according to their sales situation and forecast of market demand. Distributors issue orders to the head office according to the quantity of retailers and their forecasts of the market, and the head office is directly engaged in production according to orders.

The products produced by the company only meet the needs of distributors and retailers, rather than the needs of consumers. It is very easy to take place in the wrong way of production and marketing and increase the stock.

2, the level of supply chain management is backward.

Domestic clothing enterprises seldom spend money and material resources to build their own fine supply chain, but also lack of supply chain management talents. This makes the information sharing of each node in the supply chain poor, unable to achieve timely and accurate information pmission and communication, and can not organize production and sale in time according to market demand, resulting in product backlog.

Changjiang Securities mentioned that the cyclical fluctuations brought by inventory will even affect the pace of production and sales in the next 2-3 years.

Changjiang Securities showed obvious cyclical fluctuations in the life history of seven wolves and rolls. The approximate stock cycle is 2-3 years.

In fact, the data form of the first textile network basically proves this judgement.

Red and black of inventory strategy

Inventory management is essentially a comprehensive problem of enterprise finance, marketing, distributors, supply chain and a series of links.

The seven wolves have mentioned in the earnings interpretation, "for the existing stock in the past quarter, the company will flexibly use a variety of channels, such as EFC factory stores, e-commerce channels, organize large-scale temporary sale, and so on, to accelerate inventory digestion over the past quarter."

Basically, we can see that clothing companies clean up inventory routines, of course, these strategies are also facing various troubles.

1, crazy discount + e-commerce promotion

However, Ali Jingdong such platform to carry out a big promotion often need to buy traffic, which is a large marketing cost for the enterprise.

Buying inventory is not a permanent solution. It may even be a "bloodletting inventory". The more companies sell, the more they will lose.

Especially in the case of cat and Dog Wars, online inventory will even face two choices of distress, which is not the best way to clear inventory for enterprises.

2. Special sale in large shopping arcade.

The big trumpet calls "factory direct selling, all 80 yuan". The big probability is special sale.

Especially during the Spring Festival, supermarkets often sell special stores in three or four line cities.

Frankly speaking, the inventory efficiency is not high enough, and may even overdraw the purchasing power of consumers, affecting the sales of new clothing.

So you often see the sale on the online special occasions: there are 9 months in the 12 months of the year, and the profit margins of clothing manufacturers will be dragged down.

3, stock as a promotional gift to dealers.

That is to say, manufacturers pass on inventory by way of channel incentives and bundling sales.

Some clothing manufacturers will even introduce bundled and bundled inventory inventory strategies.

For example, the purchase of 500 thousand can be discounted at a discount, tying 100 thousand stock, or even giving away stock.

It not only increases the loyalty of dealers, but also encourages them to buy more goods.

The problem is that this kind of thinking is "no matter what the dealer's life and death" is, so that dealers are regarded as "lakes", so that they can play an inventory adjustment role.

This strategy tends to magnify the inventory problem, and many stocks will last for 2-3 years in dealers, affecting dealer's purchasing power.

4, C2B mode, "pre-sale + custom + OEM" to control inventory.

In the case of too many disadvantages of conventional strategies, some clothing enterprises choose to reform the management mode to solve the inventory problem.

For example, D2C -- a global designer integration platform.

Although this mode can indeed guide users and users to recommend good products to each other, it reflects users' life needs and purchase tendency, and provides the direction of supply and demand for designers and platforms.

However, the "pre-sale + custom + OEM" mode is very difficult to start, and the product cost performance is general.

This is indeed a pioneering project for clothing control and management. From the perspective of China's large and popular consumer groups, it is still relatively small.

5, of course, the most extreme case is burnout.

Burn it!

This is the most impossible way to clean up inventory for clothing enterprises. Inventory needs to occupy the warehouse, rent is the cost, pportation is cost, sales or cost, and no one wants to be pferred to the distributor, and even more will occupy the dealer's stock. The best way is to burn down.

According to fashionunited, a Danish television program called "Operation X" sent reporters to track the whereabouts of the goods that H&M could not sell. It was found that the clothes were pported to a waste disposal company by group.

H&M, in the name of public welfare, reclaims clothing in the hands of consumers and burns unmarketable clothes all over the world.

Since 2012, 60 tons have been destroyed.

For international brands, burning is nothing but a scandal. It is a public deception.

Social e-commerce eliminates inventory

In 2018, almost all of the e-commerce industry started remodeling the supply chain of apparel enterprises through social networking mode.

Social networking providers are helping Chinese apparel companies eliminate inventories.

A lot of products can be spun together, and the products can be sold through the WeChat 900 million user relationship chain through clustering mode. A large number of demand will be gathered in a short time to simulate and predict the future needs of consumers, and pass the prediction to the upstream manufacturers.

Taobao sells every day, and is also learning the group mode. Simply speaking, it is users who assemble Taobao in factories every day, and then make substantial adjustments to the products according to Taobao's feedback on consumer data and suggestions, so as to reduce commodity prices.

The S2b2C mode that loves inventory is more concerned about the management and coordination capabilities of the whole link, and how to speed up the efficiency of the whole link pfer, and enhance the control ability and flexibility of the whole chain of the supply chain.

The real advantage of social business is socialization, data and systematization.

1, social networking.

Every day, Taobao uses the social system in Taobao, and enters the WeChat social networking system by sharing the code.

A lot of things are organized in the WeChat group.

There are three roles in the S2b2C social business model, namely S is the clothing supplier, B is the distributor, and C is the terminal consumer. The main role of love inventory is to build a platform to help the upstream suppliers find enough purchasing agents.

This kind of social distribution system forms a fission spread through the trust relationship in the WeChat group.

2, data analysis.

You can make forecasts, production, warehousing, sharing, Order Booking each ring through the ERP system docking the underlying data, monitoring and analyzing the full link data orders, and the cost, effectiveness and quality data can be clearly identified in the system to improve the efficiency of the social electronic business.

Clothing companies can take these data to predict sales volume, and even know how much sales of each type of clothing actually sell and how much should be produced.

3, systematization.

Social networking providers, especially S2b2C social networking providers, have the real advantage of making supply chain management a system.

Love inventory is more concerned about the management and coordination capabilities of the whole link, and how to speed up the efficiency of the whole link pfer, and enhance the control ability and flexibility of the whole chain of the supply chain.

Its goal is to provide unified logistics capability standards and service standards.

This system can help many small and medium-sized manufacturing enterprises to sort out the supply chain SOP, and all the supply chain problems are clear at a glance.

Under the blessing of social business, the selling cycle of the brand inventory of love inventory platform is 48 hours, and the return period is only 7 days.

For clothing enterprises, they can quickly return to the blood at the end of the year to prepare for the renewal of spring styles in the coming year.

It can be said that whether it is Ali, many spells or love inventory, are helping enterprises to eliminate inventory.

In 2017, Ali founder Ma Yun said in an event that the first duty of rookie networks is not to express express speed, which is a consideration for express companies.

The most important purpose of rookie is to help small and medium enterprises to eliminate inventory, thereby promoting the efficiency of the real economy.

To eliminate inventory, the most fundamental problem is to change the supply chain, and accurately predict the sales forecast, upstream procurement, plant production, intelligent warehousing, warehousing, replenishment, and so on, so that enterprises can have a good idea.

So you can see that the local quality clothing brands like the seven wolves, the noble birds and Semir almost all favor the platform of many spells and inventory, because these platforms actually help these enterprises "upgrade the business operation system".

In May 2003, Harvard Business review published Nicholas Carle's article entitled "IT Doesn 't Matter" (IT is no longer important) causing great controversy.

This article was born in the burst of Internet bubble.

This article can also be used to describe the dividend period that China's Internet is about to deplete.

However, the so-called IT is no longer important, and it may be more appropriate to switch to "Internet is no longer important".

The Internet has passed through the golden age, followed by the silver age, helping traditional enterprises upgrade their operating systems, and doing business in the world is probably the most sustainable business.

What social networking providers need to do is to operate an "operating system" to turn arsenic into their honey.