The Bottom Line in Fashion

The Bottom Line in Fashion

The Bottom Line in Fashion: Knowing When Discounting Will Save Your Profits

Fashion is fickle. Trends change from one day to another, and it’s all a retailer can do to keep the right lines on hand to generate foot traffic and satisfy shoppers. Knowing when to discount certain inventory is salient in determining whether a retailer will make or break a brand, and it also can have an impact of the retailer’s bottom line.

Actually, consumer hunger can be gauged more easily than retailers may realize, and that’s with social media. A retailer’s ability to monitor social media using artificial intelligence, particularly sentiment analysis, can put it ahead of the game.

The headlines tell a sad story for fashion retail: Macy’s closing stores, J.C. Penny closing stores… and then there’s celebrity lines being suddenly discounted or removed from a store altogether. It’s enough to cause nightmares for even the savviest of retailers in the fashion world.

 

Discounting’s Affect on Luxury Brands

According to BMIResearch.com, based on research from Bloomberg Gadfly and BMI, merchandise discounting has kept profits down for luxury brands such as Ralph Lauren, Prada and Yves St. Laurent. This is said to be due to excessive inventories, which goes back to the inability of many retailers to track public sentiment and know how a brand is seen in the eyes of the buying public.

“Over the coming quarters, we expect the luxury clothing and footwear segment to continue to experience slowing growth as discounting practices continue,” according to an article published by BMI late last year.

“Discounting in the sector is largely being driven by excess inventories in key retail such as department stores, which are experiencing a stark decline in footfall. Underpinning our views, department store, Macy’s, same store sales have been on a sustained decline since 2015- declining by 3.9 percent in Q315; 4.8 percent in Q415 and 6.1 percent in Q116. Slowing sales lead to rising inventory levels, which then induce department stores to offer discounts in a bid to stimulate footfall.”

One major factor is the pattern of millennials, which seem to basically reject luxury brand price points in retailers, much to the credit of discounters such as Outnet, Gilt and YX Net a Porter.

Millennials are major users of social media, so the monitoring of social media using key phrasing via sentiment analysis could very well provide a retailer with information on what styles and brands are popular, and just as much, what’s not.

 

Inventory Levels Set to Change Across the Board

According to FranchiseHelp.com, fashion retailers are moving toward reducing inventories.

“… retail stores are now shying away from deep inventories with a broad selection of products and are instead focusing on a narrower spread of specialty items. Since shoppers can access such a wide swath of products online, retailers are finding strength in focus.”

Competition is at an all time high, especially in lieu of the buying public’s addiction to social media and keeping track of who’s wearing what, and who has the best price for the best products.

It’s become increasingly important to track sentiment on social media to keep in touch with a public becoming increasingly selective on what it buys. In other words… focus.

Using the artificial intelligence tool sentiment analysis, where key words are tracked on social media and in the news, a retailer can get a leg up on what’s trending, and then use that information to not only gauge inventory, but also have a better sense of what pricing will drive footfall.

Sentiment analysis and computer vision can be used to determine how customers respond to various colors, brands and images.

 

Reducing Inventory, Increasing Sales

Retailer Ross was able to carry seasonal profits into the new year, as reported by CEO Barbara Rentler. “We are very pleased with our better-than-expected sales and earnings results for the fourth quarter and fiscal year, especially given our strong multi-year comparisons and the highly competitive and promotional holiday season. Our results continued to benefit from our ability to offer customers great values on a wide assortment of gifts and fashions for the family and the home,” she said in an article on Fashion Network.com.

She went on to say that the gains were driven by “above-plan sales.”

Close competitor TJX Companies, which owns TJ Maxx, Marshalls, Home Goods and Sierra Trading Post, was another winner on the seasonal retail front and has high hopes for this year. One of the things TJX did was reduced its inventory while offering above-plan sales as well, it was revealed in an company online press release.

 

Gauging the Public Key to Success

Social media provides a unique opportunity for fashion retailers to get a sense of what the consumers want and what will drive foot traffic to their brick and mortar stores as well as online. And the best part is that it won’t take a team of social media whiz kids to find this information out.

Sentiment analysis tools from Vector have been developed to key in on what’s trending on social media, as well as the news. These tools can provide information that will enable a retailer to decide on what inventory to carry as well as how much of it, and what kind of pricing will mean success.

 

About Vector
Vector is a natural language processing application that performs information extraction on millions of news stories per day. It provides high value to any quantitative researcher, adding a collaborative-authoring work flow in perfect synergy with the most powerful and unique faceted search in the business. For more information, please visit www.indexer.me.

Useful Links
Vector website: http://www.indexer.me
Press kit: http://www.indexer.me/media-kit.html

About Indexer
Indexer is a tech start-up in the artificial intelligence space and has a focus on computer vision and natural language processing technologies.

 

 

 

 

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