Discussion: Burning Stock H&M Is Only A Microcosm Of Oversupply In Garment Industry?

Born in Sweden, the world-famous fashion brand has won the 2016 BrandZ world's most valuable brand top 100 list. It has a thousand honors and a H&M. In the past two years, it seems that it is not easy and heavy inventory. I do not know when to add the last straw to the camel.

Sales growth stagnation, so that the H&M inventory scale further expanded.

In the first half of 2018, H&M inventories reached 36 billion 333 million Swedish kronor (US $4 billion), up 13% over the same period last year.

It has accounted for 31.9% of H&M sales, compared with 28.2% in the same period last year.

In order to clean up the stock and protect the brand image, it would rather burn or donate than sell the price, which is also the fashion of the fashion industry (Burberry burned about 250 million yuan).

Behind this "big money", it also reveals a bit of helplessness of the current fashion brands.

A leaf falls and knows the autumn.

The encounter of H&M and Burberry is actually a common problem in the whole garment industry. In fact, the discussion on the current inventory problem of clothing industry is already in the firing line.

Trend misjudgement + long tail merchandise extrusion: inventory risk caused by backward operation mode

"The most worthless part of clothing industry is stock," which has been widely circulated in the industry. It also shows that inventory is common in the clothing industry.

In terms of classification, inventory can be broadly classified into two categories: invisible stock and explicit stock.

The so-called dominant inventory, that is, the enterprise's own hands, warehouses are stacked with unsold clothes; and invisible inventory refers to the inventory of the hands of large distributors of enterprises, which are scattered in the hands of distributors, often easy to be ignored by manufacturers, so it is known as invisible inventory.

In fact, the problem of inventory is not properly solved, which is also a precursor to the problems of many enterprises. The negative reactions usually arise from the following aspects:

1. affect the cash flow of enterprises: the stock of goods is backlog seriously, and goods can not be changed into money. A large amount of inventory can easily lead to the poor flow of funds within the enterprise. The short term cash flow may affect the normal operation of the enterprise and the new product release. If the long-term improvement is not achieved, it will lead to the collapse of the enterprise directly. In the history of business, the huge number of collapse due to the cash flow problem is numerous.

2., the cost of storage and pportation is high: increasing the amount of storage and pportation, storing the stock for one day, and having one day's storage cost, occupying space and shelves, increasing the labor cost of the staff, and wasting the capital of the enterprise.

3. the longer it dragged on, the faster the clothes in the warehouse might be derogated, and the more difficult it was to turn them into profits.

In terms of invisible inventory, the existence of dealer inventory is bound to hinder the circulation of new products.

It can be seen that the inventory problem has a deep impact on enterprises, and a little carelessness will lead to the whole body.

The reason why the inventory problem is getting worse is that the following reasons are:

On the one hand is the direct cause of inventory.

1. trend judgment error: the clothing market is changing rapidly, especially the changes in user preferences and popular elements are too fast. Besides, there are quality problems, such as quality, price, style, season, region, foreign trade factors and terminal management, which eventually lead to high inventory problems.

2. the "crowding out effect" of long tail products: the rapid development of the garment industry has resulted in many similar brands and high repetition rate of products. In the past, the understanding of fashion factors and the control of clothing production were not so strong. Clothing manufacturers could only rely on some surface data or so-called experience to judge that in the game of boutique and multi category, they were more inclined to the boutique.

Today, however, the clothing industry's product design should be based on data rather than data. The value of the popular clothing is important, but the potential value of the long tail is self-evident. Many times, the sales volume of the long tail clothing category is far greater than these so-called "epidemic factors", which forms an embarrassing situation that the money is changed to tail goods.

On the other hand, the fundamental reason for the inventory problem lies in the backwardness of the garment industry.

In fact, many traditional businesses, including the clothing industry, pay attention to scale effect and gain in the form of volume.

The success of these enterprises is attributed to the realization of scale effect, and the fall of enterprises is often caused by enterprises falling into the trap of scale economy.

But for the time being, there are numerous kinds of clothing stores, which leads to countless brands and clothing styles. The repetition rate of products is very high, which leads to a kind of "industrial homogenization", which leads to more and more stocks.

This further illustrates that the "labor intensive" characteristics of the garment industry under the influence of backward "scale effect" do not match the serious excess capacity of the garment industry, and the economies of scale have become increasingly unreachable.

In fact, the scale effect has become the past tense. Now it emphasizes the bilateral network effect of users and enterprises. This is the requirement of the evolution theory of commercial society, but the extent of the impact and the difference will be different sooner or later due to the particularity of the industry itself.

However, as long as the clothing products, are the first production after sales, no one can achieve how much production, especially the change in the environment, so even if the economic form, brand, management have better good news, can sell only 30% inventory of enterprises, is already "panda blood", inventory control rate in 50% even qualified.

In this way, the clothing industry is in fact no difference between the "unmarketable" master of the agricultural product on Taobao, and it is bad for the character of "helping us".

A solution to the problem is that the solution to deviating from the essence of retailing is "seven injury boxing".

It has to be said that it is already a commonplace problem to clear up the stock in the clothing industry. Therefore, the vast number of enterprises do think a lot of ways to solve the problems.

* first is the general incineration of H&M and Burberry at the beginning.

This method is mainly targeted at these well-known clothing brands.

However, inventory is inventory, even if burned up, it does not need to pay excess management costs, but these goods are still not converted into money, but "eyes can not see the heart does not bother", how much to give people a sense of hiding.

In addition, the practice of incineration has also been questioned in public opinion.

In this regard, H&M is actually suffering.

While shouting slogans of environmental protection, they set up their own brand image; on the other hand, they incinerate their stocks, incinerate their stocks regularly, such as moldy, and fail to meet safety and quality standards, incinerate 12 metric tons of unsold clothes every year, but their incineration products are identical to those of the products sold.

This has also affected the brand image of H&M.

In recent years, the topic of environmental protection has become the focus of attention of all countries in the world. According to the survey, human activity is a major cause of global warming. In addition to exhaust emissions, plastic bags and so on, 10% of the world's annual carbon emissions come from the clothing industry.

Therefore, it is absolutely undesirable to adopt the way of burning stock.

Products produced can not be sold without burning.

This will further increase the cost of clothing originally sold, squeeze the profit margins of enterprises, inventory is in hand, clean up is very difficult, but it does not mean that it can not be sold. Once burned, it means burning money and never turning into cash.

Secondly, "to attack and defend" is to bring forth the new and bring forth the new.

In order to attract consumers' desire to buy, enterprises are constantly innovating and innovating their clothing styles, so as to arouse consumers' desire to buy, but the production of large quantities of clothing will inevitably have pressure on inventory, and the market effect is good. However, if the market reaction is not good, this means that there will be more stock accumulation. This practice is like gambling for people in general, which will cause an inventory snowball growth.

* finally, with the help of inventory clearing companies.

Most of these so-called "clear stock" companies have their own special sales channels.

But when it comes to these sales channels, it is really hard to flatter. For example, special stores and goods stalls are often the favorites of these companies.

First, do not say discounts to reduce the selling price, whether or not it can cover the cost. The most important influence is that the sales behavior will hurt the brand seriously, and it will seriously affect the sales of new products.

In this regard, apple is the best example. In recent years, Apple phone sales in China are not smooth, but even so, it will not choose to cut prices, because once the price cut, their brand value will also decline, and then want to go up is not easy.

It can be seen that the solution to the inventory problem is clear in the market, but in the final analysis, it does not touch the essence of the industry. Through the preceding analysis, we can see that these solutions deviating from the nature of clothing retailing are more like "seven injury boxing", killing the enemy and hurting themselves first.

At present, some themes of the clothing industry are relatively easy to identify, such as the three elements of people, goods and markets, but the other themes of the clothing industry are not so clear, including dispersion, flexibility and pparency.

* flexibility is mainly reflected in two aspects, one is how retailers adapt to changing trends and consumer needs.

The importance of this point is obvious in the future prediction of personalized customization.

On the other hand, if the market suddenly changes or the supply exceeds demand, how to flexibly adjust production is also a test of the enterprise.

* Decentralization: the dispersion of user needs can be replaced by another word: fragmentation.

These include fragmentation of consumer demand, fragmentation of consumer object content and fragmentation of consumption scenarios, which make the establishment of market demand more complex and difficult to understand.

* pparency: pparency of the B and C ports, which also includes the last part of the decentralization. It refers to the pparency of the two aspects of the B side to the C side and the B side to the C side.

In the past, the development of electronic commerce was actually a kind of innovation or channel innovation, which solved the information asymmetry between merchants and users. However, in order to understand deeply, innovation alone was not feasible.

Sinks, links and fission: "technology + mode" comes together to get through the "two pulses of governor and governor".

How to grasp the timeliness and accuracy of user needs? What degree of flexibility can product and service design achieve?

In fact, with the rapid development of AI technology, the retail industry, including the clothing industry, has a profound impact, making timeliness, accuracy and flexibility possible.

The basic model of traditional retailing is B2C, which takes business as the center to carry out business activities.

And new technologies driven by new technologies such as artificial intelligence, big data and cloud services have more emphasis on finding different subdivision needs by data classification. On the basis of demand analysis, we decide production volume and quantity, that is, C2B, and decide the enterprise with user centered.

The development of technology and digitalization of user information are changing the entire apparel industry chain and value chain.

Customer information collected and analyzed can be used to customize the style, size and general applicability of garments.

However, it has to be said that the clothing industry is in fact a semi standardized industry.

Because of its more fashionable design sense, fashion women's clothing needs much more changes. The fabric and accessories are more varied and the process is more complicated.

While children's clothing is also relative to the standard, but the body data often fluctuates, the sampling cost can not be reduced.

Brand developers can't design what they want in advance without the boundaries of consumer demand, which emphasizes the timely circulation of information between B and C terminals, and can only tap people with potential demand, rather than the so-called customization.

Therefore, the management and collection of information related to the end customers become more and more important, and it is possible to change the entire value chain, from the determination of consumer demand to precise delivery.

The key lies in the following two aspects: one is the connection, the other is to connect the brand dealers, one side is to connect the sinking channels; the other is the failure rate, through the key issues related to the use of new retail technologies, and in the shortest possible time to achieve the collection and reflection of information.

And in connection with this aspect, the social electricity supplier should be the most obvious way to sink the channel at present, and the efficiency promotion is obvious.

Social interaction and strong interaction make the user's needs and changes get the fastest feedback.

The most direct and effective means is to connect the right scene with the right target.

In this regard, a lot of solutions have provided a good idea for solving the problem of agricultural products. Although the problem of counterfeit goods has been criticized for many times, the development of today's volume is ultimately successful.

What are the characteristics of SKU, high orders and short bursts? By helping producers quickly win the trust of consumers through "phenomenal" explosions.

Of course, it doesn't seem to be possible to spend too much time on clothes.

A lot of successful ideas are good, but the characteristics of "goods" have three limitations: first, the relative standard of agricultural products; second, the data are relatively stable, which is not as easy to change as clothing; third, the product is relatively high frequency.

Besides, the crowd who is outside the five rings is not particularly suited to the clothing industry.

Nevertheless, there is a way to attack jade in other hills. On the basis of this successful experience, it is a solution to make a more suitable adjustment of clothing to inventory.

For example, the love inventory that has been mentioned frequently in recent two years emphasizes the "matching mode". One side is the S2b2C mode innovation, which links inventory, distributors and consumers together. One is platform algorithm and big data analysis, and it can quickly excavate demand and put it into operation.

But as a young brand, the supply chain may be the biggest problem. As the emphasis on the network effect, the strength of the supply chain is directly proportional to the users.

In recent years, it is also actively building supply chain, category, storage and other infrastructure.

With the experience of Pathfinder, after that, many imitators emerged in the field of inventory clearing, and the emerging industry of clothing and inventory was also getting hotter.

Of course, it is impossible to wipe out inventory completely.

New retail can not completely eliminate inventory. Its essence should be inventory through supply chain, scene and human reshaping, that is, "people, goods and field" remodeling, so as to realize the efficiency of inventory clearing. By raising the information circulation of people and goods, inventory problems will no longer become a problem for enterprises to survive. Maybe this is also the correct attitude and industrial chain form of garment industry.