In the bustling, ever-evolving and fast-paced world of fashion, wholesale brands and customers are engaged in an often delicate relationship where one party assumes risk.

Traditionally, wholesale transactions operated on a presales order model where customers assumed the responsibility of risk, holding surplus stock in their inventories. However, as the industry dynamics shift towards a more agile model of replenishing stock, the onus of risk has transitioned towards wholesale brands.

Discourse Fails to Acknowledge the Real Problem

The ongoing industry discourse often centres around the transference of risk, but this dialogue falls short of addressing the critical issue – the urgent need to minimise surplus inventory throughout the supply chain.

Whether excess stock resides with the customer or the brand, one party is inevitably poised to face repercussions. Rather than fixating on the question of who should bear the risk, the industry must redirect its focus towards strategies that effectively reduce surplus stock, fostering overall efficiency and resilience.

Strategic inventory management systems emerge as a potent solution when coupled with a customer-centric approach. These advanced tools provide brands with comprehensive visibility into their inventory, enabling informed decision-making on stock levels and distribution, thereby mitigating the risks associated with both overstocking and stockouts.

Moreover, these features can be leveraged to efficiently manage future production backlog, aligning supply chain planning with goods already sold in the next production order.

Placing the Customer First

In the customer-centric model, the wholesale channel undergoes a transformative shift, resembling the dynamics of retail. Brands, in this scenario, cultivate stronger relationships with customers, encouraging more intimate interactions centred around smaller orders.

Opting for reduced quantities allows customers to assume less risk while retaining the flexibility to purchase more later. To enhance this approach, brands can initiate open dialogues, inviting customer feedback on sales performance.

Brands can then leverage the insights from their customer feedback to make informed decisions about their inventory. For instance, if certain goods underperform in one area but excel elsewhere, brands can proactively buy back the stock and redirect it to regions where performance is stronger. This proactive approach not only minimises risk but also enhances customer satisfaction and strengthens brand loyalty.

Crucially, this customer-centric approach significantly diminishes risk for both brands and customers, as surplus stock can be efficiently cleared from the pipeline. Brands benefit not only from reduced financial risks but also from increased customer loyalty and more frequent orders. It establishes a mutually beneficial scenario where both parties thrive in a collaborative and dynamic fashion ecosystem.

In essence, the focus should not linger on the question of who bears the risk of leftover stock but rather on finding intelligent and collaborative solutions that foster success without compromising either party.

As the industry continues to evolve, strategic solutions remain pivotal in addressing its challenges and forging symbiotic relationships between wholesale brands and customers.

A Deeper Look

One key strategy is the adoption of technology-driven inventory management systems. These systems leverage advanced analytics and real-time data to provide brands with a detailed and accurate picture of their inventory levels. By having a granular understanding of stock levels, brands can make informed decisions about production and distribution, reducing the risk of overstocking.

Furthermore, these inventory management systems can be integrated with other aspects of planning and order fulfilment. This integration allows for a more streamlined and efficient process. The result is a more agile supply chain that can respond quickly to changes in consumer preferences and market trends.

Another effective tactic is the implementation of just-in-time (JIT) inventory management. JIT is a strategy where goods are produced or ordered only as needed, minimising the amount of excess inventory held by the brand or the customer. By closely aligning production with demand, brands can reduce the financial risks associated with surplus stock.

JIT can be particularly beneficial in a customer-centric model, where smaller, more frequent orders are encouraged. This approach not only reduces the risk for the customer but also allows the brand to maintain a leaner inventory, responding more effectively to changing market conditions. However, implementing JIT requires a robust and responsive supply chain, as any disruptions can have a significant impact on production and order fulfilment.

Collaboration and communication are also critical components of a successful strategy to minimise surplus stock. Brands and customers should engage in open and transparent communication about sales performance, market trends, and inventory levels. This information exchange enables both parties to make data-driven decisions, such as adjusting production quantities or modifying order schedules.

It Does Not Matter Who Assumes Risk

While the question of who bears the risk in wholesale fashion transactions is important, the industry’s focus should shift towards proactive strategies that minimise surplus stock and enhance overall efficiency.

Embracing technology-driven inventory management, adopting JIT practices, and fostering transparent communication are key components of a successful approach.

By implementing these tactics, wholesale brands and customers can navigate the complexities of the fashion industry with resilience and agility, ensuring mutual success in an ever-evolving landscape.

To explore more in-depth insights and practical solutions, visit the K3 website https://www.k3btg.com/resources/ and discover a wealth of knowledge tailored to the challenges and opportunities in the fashion industry.