Fashion Merchandising for Product Launch and Discount Phasing Strategy
In fashion, timing is key.
To fully potentialise on the current demand, a retailer has to know the exact time to launch a new collection, start a promotional cycle or expand into a new market.
If a collection is launched too early (or too late) in the season, it may result in missed sales opportunities – ultimately leading to bigger challenges such as overstocking or high markdowns.
Product newness is one of the biggest factors that affect cash-flow. In the age of peak convenience as a result of online shopping, today’s generation of shoppers demands instant gratification. However, clothing development and production is still a relatively slow process.
The typical go-to-market timeline to produce a new seasonal collection is between three to six months. Fast fashion brands like Zara and H&M invest millions of dollars into speeding their supply chains to keep up with the fast-moving trend cycle and consumer’s short-term needs.
Planning and managing newness launches are no easy feat, especially in today’s highly competitive e-commerce landscape. Some retailers have opted to shorten gaps between their product launches, moving towards six times launch a week.
Missguided is a clear example.
Here, you can see Missguided’s launch strategy in the span of a year. Seen in the chart above, the varying shades of red boxes indicate the dates Missguided launched new products on a weekly basis.
In May of 2019, Missguided launched new products nearly every day of the month – amounting to a total of 3460 new SKUs launched.
Discount phasing and launch strategy
To understand the dynamic shifts in markdown and product launch strategy, we analysed the phasing patterns of three major fast-fashion retailers, Zara, Missguided and Urban Outfitters.
In the example above, we can see the differences in launch strategies amongst the three retailers. Zara conformed to the traditional seasonality and only launched a large amount of newness in July to September, during the transition from Summer to Fall seasons.
Its discounting strategy also ties in with mid-year and end-of-year sales as we see a high number of new discounted items in June, November and December respectively.
Missguided’s phasing is much more robust with new-ins and markdowns fluctuating throughout the months. Majority of the newness was launched between March to May while high markdowns were executed in April, November and December.
On the contrary, Urban Outfitter adopted a phasing strategy that focused on a consistent amount of new-ins throughout the year, ranging from 1000 – 2000 SKUs a month. Simultaneously, it maintained minimal markdowns online with under 400 discounted SKUs in any given month.
A deeper analysis of new-ins allows retailers to track the exact day of the week when a competitor launches new products. As seen in the heatmap above, Zara launched the most products on a Thursday. Similarly, Missguided focuses its new-in launches on Wednesdays and Thursdays, although there were some variations.
Meanwhile, Urban Outfitters, launches new products throughout the week, avoiding Sundays and Mondays.
Part of the reason why retailers tend to launch products mid-week is due to online traffic increasing significantly on Wednesdays. In fact, studies show that Wednesday and Thursday are the best days to send promotional newsletters because of the higher click rate.
For markdown strategies, retailers adopt the same ‘mid-week’ approach as well. Zara and Urban Outfitters almost strictly follow the rule, with most discounts launched from Wednesdays to Fridays. Urban Outfitters’ discounting strategy is even more apparent, as you can see from the consistency of its launch days on the heatmap chart.
Missguided, however, has a less structured approach to their markdowns with varying launch days across the month. Taking a deep-dive at analysing Missguided’s discount phasing strategy showed that it commonly launches new discounted items on Mondays at a shallow range from 10% – 19%.
Then, towards the later part of the week, it launches a new batch of discounted items at a deeper range from 20% – 29%.
Missguided’s general markdown approach is to launch frequent discounts leading to a wide depths of discounts on offer at any one point online. At the brand overview level, its total discounts span from 1% to 89% off with the highest concentration of products within the 50-69% range.
We can see how different fast-fashion retailers deploy product launch and discount phasing strategy based on this comparison between Zara, Missguided and Urban Outfitters. Zara’s and Missguided’s phasing strategy is very clear – when they are launching a large number of new-ins, they markdown very little and vice-versa.
For retailers with a strong offline presence, discounting too often can lead to a diluted brand image and negative impact on profit. E-tailers, however, have the flexibility to be more dynamic with their markdowns as these discounts can often be deployed in various ways such as using discount codes, themed discounts or just by providing free shipping.
From getting the timing right to identifying the right products to launch, there are many considerations that go into preparing for the perfect launch. The key to understanding this and gain a competitive advantage is by having real-time data to analyse and track the movement of new-ins and markdowns of competitors – allowing you to make informed decisions and react in a timely manner to changes within the market.
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