2022 Round Up (1/5): Fashion's Inventory Challenge

2022 Round Up (1/5): Fashion's Inventory Challenge


Since 2020, the fashion industry has been struggling with managing inventory. It has not been a one off situation that has resulted in retailers having either too much or too little inventory. It has been a combination of unpredictable events including a global pandemic, variable weather patterns, geopolitical risk, shifting consumer preferences, and general macroeconomic uncertainty. Recent reports on inventory stockpiles across several major global retailers has made it clear that the industry needs to change:

The result of built up inventory has been extreme discounting and an over-reliance on seasonal sales, which is damaging both from a brand equity and sustainability standpoint. Nike, which previously forecasted 10% revenue growth through to 2025 slashed prices to get rid of unsold stock and cut its revenue forecast in half. Lululemon announced that they were sitting on an 85% year-over-year increase in inventory, of which only 45% was core styles.

To counter the promotion of excess consumption, some retailers engaged in anti-black Friday campaigns to encourage initiatives like resale, sustainable refills, and charitable donations on sales. While discounting and seasonal sales are not new strategies, for brands peddling sustainability commitments there is a clear need to enable responsive and flexible processes to reduce obvious overproduction these  strategies are looking to counter.

The current lack of responsiveness is the result of processes that have not been updated for over half a century. Fashion’s globalised supply chains which were built to take advantage of cheap labour require high production quantities and long lead times. Following periods of low stock and high demand, many brands over estimated on 2022 orders. This, combined with not receiving stock at the right time has resulted in the high inventory figures and the obvious need for disruption across existing processes to better predict and accurately stock. 

The Business of Fashion and McKinsey’s, State of Fashion 2023 reported Future-Proofing Manufacturing as one of the fashion industries top ten imperatives. It reported on-demand manufacturing as the third most important strategy to address supply chain challenges as a way to ensure that only items that will be sold are made. This was preceded by near-shoring and forming strategic partnerships with suppliers, both of which are components that can support on-demand manufacturing and create a more flexible and agile apparel production system.   

A key factor to enable these new systems is digitisation across the supply chain, especially if brands start to solve the inventory challenge by moving towards small-batch production. Brands need to be closer to trends to understand what products are selling and be able to create these products in “real-time” to support growth. In order to do this, they must be well connected to their suppliers and invest in the technologies required to execute this strategy.  

If there’s anything the past few years have taught us it’s that accurately predicting consumer demand while accounting for unforeseeable external circumstances is nearly impossible.  A constantly in flux external environment leading to variable consumer spending patterns only makes the need for on-demand apparel production more clear. At Unmade, we see a demand-driven apparel industry as the solution to managing inventory and keeping up with market fluctuations. Producing only what customers will buy and creating products that can keep up with evolving consumer preferences is both a financial and environmental imperative and we’re excited to be part of building an industry solution to one of fashion’s biggest obstacles.  

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