Consumer Value Creates Sustainable Profits
Consumer/Buyer
Participation Determines Product Value… Direct integration with the consumer/buyer sales
offer creates value through participation in product selection and
individualization. Consumers can
individualize product and buyers can create/test exclusive and private label apparel
without inventory risk.
Product Value
Product value can have
a number of different connotations, for instance, product value to a consumer
could refer to price, fit, durability, peer aceptance or all of these and
more. Product value to a retailer or a
brand often is more related to profits or corporate identity and to a
manufacturer the term often refers to profit through ease of production and
productivity. If value relates to all
these different propositions then how does consumer/buyer participation impact
all these diverse definitions at each level of the supply path.
Consumer Value
For the consumer the ability to select and customize a
product represents the highest level of personal relevance. That personal attachment translates into a
willingness to pay more for the product because the personal value is based on
more than price. Even more important, the participation of the consumer
indicates exactly what he or she wants to buy and therefore the probability of
a final transaction becomes much more reliable.
This ability to shape the product replaces much of the desire to shape
the deal in the mind of the consumer creating a much higher attachment to the
content of the product rather than just the price. This identification with the personalized
product has both a positive value in the desire to complete the transaction and
a negative impact if the product is not readily available. This need for instant gratification is the
weakness of the online sales experience and the strength of the retail
experience however, online merchants are way ahead in mitigating this
gratification delay by providing instant downloading of products like aps,
books and financial services and heavy investment in developing technology to
provide quicker physical product delivery.
The ever present downside for both online and retail is; that in order
to satisfy this important consumer value proposition the seller must hold
greater volumes of inventory in anticipation of the consumer’s desired product
features. The only practical solution to
this conundrum is to invest in Purchase Activated Manufacturing (PAM) with it’s
integrated virtual inventory. A virtual
inventory is an endless aisle of customizable product held in the digital state
and converted to a custom physical product on demand in a Purchase Activated
Manufacturing facility. This facility
can be the paint counter at ACE or a direct-to-garment digital printer in a
retail store or a production line in the corner of the regional distribution
center.
Retailer Value
For the retailer and indirectly the brand the value of
consumer participation is simply sustainable profits. Consumer participation creates higher
sell-through of product, which directly raises profits. Selling
higher percentage of on-hand inventory helps produce higher profits for the
entire supply chain because, it reduces unsold inventory the single greatest
profit killer in retailing.
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| Based on 6000 units, Landed Duty Paid cost $18, Retail price $45, Sell through and markdowns based on current U.S. women's retail apparel averages. |
Retailers and brands
need to remember that the funds they leveraged and paid for unsold product is by far the
most expensive funds they risk whether the funds are borrowed or advanced,
selling one to pay for three is an unsustainable proposition. When sell through averages only 28.5% of
on-hand inventory (according to Accelerated Analytics, Inc. POS data),
discounts to clear inventory wreck profits.
The search for lower labor prices and the adoption of time-to-market
design software create more inventory and only make this problem more expensive
and more of a death sentence.
Summary: Participation = Value = Profits
Focusing product
decisions on the consumer with active cunsumer participation allows a retailer,
e-tailer or brand to work from realtime trend data instead of forecasts that
hope to predict trends a year in advance.
Using real time sales data and demand replenisment, retailers can tweak
product and designers can use today’s 3D design platforms to feed a virtual
inventory and PAM production with time-to-purchase restocking of 10 days or
less. This strategy reduces unsold
product losses and creates customer loyalty while insuring sustainable profits.
The New Era of Searchers vs. Shoppers
What is the difference
between today’s consumer and buyer and the consumers and buyers of the
past. The quick answer, assumed by the
pundits and today’s failing retailers, is that every consumer and B2B buyer is
shopping on line. Yet by far the bulk of
apparel actual sales still occur in a retail store. The origin of this misconception/excuse is
rooted in two key facts about the consumer purchasing experience. First, according to Forrester Research, Inc.
well over half of the retail apparel
purchases are influenced by online information and second the “social” traffic
that used to be automatic at the mall has been replaced by social interactions
online. In short visiting with your
friends is a lot easier online in a virtual world of social media than the real
world of crusing the mall.
Based on this data and
the reality of hundreds of specialty apparel retailers circling the drain, it’s
time to redefine the apparel consumer.
We are no longer dealing with a shopper but rather today’s consumer is a
searcher. The ineffecient “mall crawl”
has been replace by meta data and cookies the help explore the vast inventory
of the internet. These searchers are no
longer limited by location or local culture they can explore product from all
over the world while floating down an “amazonian” river or trekking through
“googleland”.
Today’s retail store buyer
has an even more complex reencarnation.
With the advent of the UPC code and more recently the RFID tag, stores
are capable of mapping their floorspace and tracking product purchases in real
time. Today’s buyer can get daily
reports from store operations and know product successes failures in as they
happen. Even though, buyers may get the
data to know what’s happening, there is little they can do except reducing
price to drive sales. Reducing prices
drives “deal” shopping and ultimatley kills profits needed for store operations
leading to layoffs and closings. For
buyers and merchandisers the dream state is, “never out of stock, never over
stock”. Getting to that state requires
unique product and flexable contracts that are tied to actual sales. The ability to create custom product with
supply fexibility and weekly varible shipping that can support retail searchers
and safe product availability sustaining product value and profits.
What’s Next?
How valuable would your smartphone be if you couldn’t choose
the apps you wanted? Would you want
paint that wasn’t exactly the color you chose?
What if you could always be sure that the apparel look you wanted was
always a perfect fit for your body!
Those three questions
represent the three levels of apparel buying consumer participation online or
on retail store kiosk.
Level One Virtual Inventory Catalog
Level one is the VI
Catalog Level. Just like the app
catalog on your smart phone provides almost unlimited choice of product, an
online catalog of apparel choices allows the searching consumer to find their
look without hours of shopping. Pictures
of finished apparel usually shown on models and often used to offer unsold or
discounted merchandise out of season characterize current catalog page layouts.
Catalog level online is a digital version of the old mail order catalog with an
online search and purchase twist. These product displays are the easiest to
design and update. This picture or
object based format is the most compatible with multiplatform and omni-channel applications. Catalog page layouts can get highly
sophisticated with 3D/360° views, product comparison and magnification flash screens.
Catalog layouts represent product already in inventory and therefore
depend on price and features selected by the seller. Because the inventory is already purchased
and in stock the risk of profit loss from further clearance discounts and
unsold product is still very real. This application
of digital display technology can create a discount platform and if properly
synchronized with social media can drive additional sales volume. The down side is that since the product represents
the seller’s vision to the consumer/buyer the price often becomes the key value
criteria. This price-based value can
force discounting of on hand inventory to increase sell-through and in turn
drive down profits.
Level One Objectives:
·
Develop a template for the search experience and
test consumer use and reaction in store and online.
·
Build a direct HD link to 3D/360° between your design software and the catalog template.
·
Build a direct link to 2D print and piece nests
between your design software and the Virtual Inventory server.
·
Build, sample and produce your products in
process color.
Level Two Mass Customization
Level Two adds a consumer/buyer Mass Customization features to the
catalog. This user driven configurator software
allows the consumer/buyer to change colors and/or prints as well as adding
certain embellishments like lettering, edge treatments and embroidery. Although
these additions are limited to digitally manufactured choices already prepared
and tested they still represent significant customization choices to the
consumer/buyer. The configurator level
product offering level can usually be identified by a menu of user driven
choices shown in a side panel of the display screen. This menu can be as simple as “Choose Your
Color” or a complex set of colors, fonts and objects.
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| Click the link below to experience EMBODEE's "state-of-the-art" online product customizing. |
Many companies at all levels of the sourcing chain (retail, brand and
manufacturing) resist configurator level offerings because their enterprise
management software (ERP, PLM, POS etc.) is not agile enough to handle this
multi faceted data stream. Manufacturers
are also faced with creating agility in technologies previously dedicated to
the efficiency of common product volume.
Because of this resistance many online displays that look like
configurators are actually level one search plugins that help the
consumer/buyer navigate a large on hand inventory. While
this solution provides more choices it may not allow for future upgrades to
additional merchandising opportunities.
Level Two Objectives:
·
Find a configurator that places objects in a
format compatible with catalog and printer outputs.
·
Produce a HD 3D/360° rendering of the customized garment.
·
Build a search and retrieval system for
consumer/buyer designed SKU’s.
·
Create consumer specific personal collections for
individuals to reorder or redecorate.
Level Three Contour Fitting
Level three; consumer participation is based on the most important historical
value in apparel sales, the individual ultimate value of personal fit.
The ability to tailor clothing to a customer’s body shape has always
represented the ultimate value in a personal wardrobe. The digital capability of creating and
grading a garment in real time to the body shape of an individual consumer is
the key to insuring sale of apparel at full profit. A number of technologies in scanning,
measurement algorithms and 3D photographic interpretation have been able to
produce holographic visually functional models of consumers. However, creating an accurate 3D measurable
and drape ready hologram is only one third of the solution. The second piece of the solution is a 3D/360° display version of
individually fitted apparel that is of sufficient resolution and detail to
place in the personal catalog of the customer with the ability to rotate and
magnify as well as customize. The last third of the solution is the ability to
produce a 2D production pattern, and nested RIP compatible color print file
including printable placement of embellishments and accurate working sewing
instructions.
This early Microsoft Retail scenario demonstrates the ability to capture shapes and visualize products in an Omni-channel experience.
Level Three Objectives:
·
Create individual fitted catalogs for “loyalty
premium” consumers.
·
Gather fitting data for specialty micro-sizing
of new products.
·
Identify a test market base for future product
releases and embellishment choices.
After extensive testing our team has
concluded that two companies are at least two-thirds of the way to a full
solution but as of mid 2017 no seamless complete software is on the market. Unfortunately although the current software allows
PAM demand manufacturing and mass customization it does not yet support
seamless, integrated Level Three, Fitted Purchase Activated Manufacturing.
There is however current technology available
that creates the ultimate level of consumer satisfaction and engagement and
will support a level of productivity and profit that sustains jobs and domestic
manufacturing in this important segment of our economy.
The misguided reluctance and delayed action
of the current apparel industry to transition from “supply and demand” to
“demand and supply” and to directly link the individual consumer to the final
product is the primary cause of today's collapse in apparel and retail jobs.
