Strategies that direct to selling companies employ that help them avoid inventory pile up and prevent associated losses
The fashion industry has long been grappling with the issue of dead stock or unsold inventory that hampers profitability and contributes to environmental waste. However, direct-to-consumer (D2C) fashion brands are employing innovative strategies to address this challenge. These brands are shaping the future of fashion with their direct connection to consumers to kill the dead stock problem.
Before we come to the problem and its solution, let me showcase some Global Market Trends and Statistics. In 2020, D2C sales in the United States alone soared to $22.88 billion, marking a significant 24.3% increase from the previous year. The D2C fashion market in India is experiencing a substantial growth surge. Reports by RedSeer Consulting estimates the market to reach an impressive $100 billion by 2025.
Global Players are moving big-time into D2C fashion as consumers are increasingly drawn to personalized experiences, transparent practices, and more. Most importantly, also because D2C fashion is employing impeccable strategies to minimise the dead stock problem.
First, let’s understand the problem. Brands often overproduce, relying on retailers to sell their products. Inaccurate demand forecasting leads to excess inventory that struggles to find buyers. Consequently, items are either heavily discounted, donated or even discarded, resulting in significant resource wastage.
How is ‘D2C Fashion’ a solution to dead stock?
D2C brands are emerging as game-changers, bypassing traditional retail channels and establishing direct connections with consumers. This approach enables them to gain deep insights into customer preferences, enhancing demand forecasting and inventory management. D2C brands mitigate the risk of dead stock and optimize their operations by producing items based on actual demand.
So, what strategies do D2C brands employ to prevent dead stock? Let’s discuss each in detail…
- Data-driven demand forecasting: Let’s take the example of a D2C fashion brand that specializes in premium athletic wear. Through data-driven demand forecasting, the brand collects and analyses a wide range of information to accurately predict customer preferences and buying patterns. It delves into historical sales data, market trends, social media engagements, and customer feedback to gain valuable insights.
The brand’s data analytics team uses cutting-edge technologies like machine learning and artificial intelligence to create sophisticated models that identify patterns and correlations. For example, the team notes if a certain style of leggings sells better during specific seasons or if there is a higher demand for certain colour palettes among its target audience.
Armed with this knowledge, the brand makes informed production decisions, adjusting manufacturing processes to align with anticipated demand. This minimizes the risk of overproduction and dead stock, ensuring inventory closely matches customer demand.
- Limited edition and small batch releases: Imagine a luxury accessories D2C brand that avoids dead stock through limited edition and small batch releases. Instead of mass-producing designs, it creates exclusivity and urgency by offering limited quantities of unique and highly desirable pieces.
This scarcity generates excitement and demand among customers, turning each release into a coveted item. It allows the brand to gauge market response and mitigate the risk of dead stock by closely monitoring sell-through rates and adjusting future production accordingly.
- Pre-order and crowdfunding: Consider a sustainable fashion D2C brand that offers eco-friendly clothing options. It prevents dead stock and ensures efficient production through a pre-order and crowdfunding model. Before manufacturing a new collection, the brand launches a pre-order campaign for customers to reserve desired items in advance.
This approach directly validates product demand. Securing a predetermined number of orders ensures sufficient interest in the collection and the brand can then proceed with manufacturing, confident in selling the inventory.
Crowdfunding campaigns enhance a brand’s ability to prevent dead stock. Through crowdfunding platforms, the brand engages the community, showcases upcoming designs, and invites contributions. This interactive approach validates demand, builds anticipation, and fosters customer loyalty.
- Agile production and inventory management: Consider a D2C brand specializing in customizable shoes. Through agile production and inventory management, it can swiftly adapt to changing consumer demand. By leveraging real-time data and insights, it monitors inventory levels and customer preferences in real time.
For example, if there’s a sudden surge in demand, the brand ramps up production. If a product isn’t performing well, it adjusts production levels to prevent overstocking and dead stock. This agile approach maintains optimal inventory levels, minimizing the risk of dead stock. By promptly responding to customer preferences, the brand maximizes efficiency and reduces waste and unnecessary inventory costs.
Summing up
D2C fashion brands are driving a shift towards sustainability and efficiency. The vision is for an industry that minimizes waste, prioritizes sustainability, and embraces consumer-centric practices. With D2C brands leading the way, the fashion industry is poised to leave dead stock behind and enter a new era of profitability, environmental consciousness, and customer satisfaction.
Ilesh Ghewariya is the founder and chief executive officer of French Crown, a Gurajrat-based homegrown D2C fashion brand.
