March core retail sales showed a 0.2% month-over-month increase.1 It’s the second consecutive month in which we’ve seen a rise, highlighting an increasingly rosier financial picture for American households.2
But while this sounds like good news, we all know the retail landscape is an ever-evolving one, and to stay ahead retailers will need to be faster – or be left in the dust.
In the first three months of the year, we’ve been paying close attention to retailers’ earnings calls, and have heard at least 12 mention “speed” when referencing product development. Why? It’s not surprising: Retailers with more frequent assortment changes are rewarded with more consumer visits, better margins and increased revenue.
But talk is cheap. While many retailers say they want to get faster, we’re noticing few are actually taking the steps to make it happen. Based on our experience, only about 40% of retailers are walking the talk.
Speed is not as simple as cutting a few weeks from the development cycle. Retailers need a cohesive strategy across many layers of their business.
Based on our review of the largest retailers (figure 1), those who have fast fashion models beat their slower peers by about 6 percentage points in margin over the past 4 years. But what is it that really puts the pedal to the floor? The answer lies in technology, process, behaviors – or all three.
Start with the development process, take advantage of tech
The development process is one area that’s ripe for rethinking. The good news is, to really enhance this area, there are a few levers you can pull:
Also, the thought of seasons for 100% of the assortment is quickly becoming archaic. Why not consider a concept of “seasonless models?” Not only does this support a 6-week (or more) reduction in product development lead time, but also a differentiated offering and - dare we say - top-line opportunity.
Imagine what monthly capsules could do to refresh an assortment if developed based on real customer insights, 6-10 weeks before hitting the floor or online. Pair that with technology such as customer opinion data and product testing algorithms like those offered by First Insight, and you could be like the retailer who, as First Insight reported, avoided $6M in markdowns and greatly reduced their development cycle.
Real speed is action
We get it. This type of change is easier said than done. However, taking the first step of looking at your product development process and finding the obvious inefficiencies will likely pay off in the long run. Don’t ignore the technology that could be helping you. Work smarter. Getting started could mean the difference between catching up to best-in-class competitors... or being left behind, breathing their exhaust.
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|Seasonally adjusted March retail sales exclude motor vehicles, gas, food services, and drinking places|