ABFRL's Agile Inventory Strategy: Adapting to Consumer Demands with the 12-Season Model
Adapting to the
ever-changing demands of the fashion business is critical for any successful
retail organization. Since the market moves quickly, inventory management must
be flexible to keep up with emerging trends and customer preferences. One of
the biggest fashion and retail businesses in India, Aditya Birla Fashion and
Retail Limited (ABFRL) carries a wide range of brands, from high-end luxury
to reasonably priced casual wear, and serves a variety of consumers.
In this blog post, we'll look at how ABFRL used the 12-season model to increase its inventory control and agility in the fast-paced fashion business.
In
FY19, the company announced that the business is switching from a 4-season to a
12-season model.
In order to stay
competitive in the market, ABFRL must maintain effective inventory management.
It has recognized the necessity of agility in inventory management and
introduced the 12-season model to respond to consumer demands in real-time.
An excerpt
from FY22 Annual Report – “To cater to the fast-moving market and customer
demand, Your Company enabled a change in market trend by moving to a monthly
collection schedule, resulting in ‘12-seasons in a year’ model. Earlier, it was
a two-trade show model, wherein orders were taken twice a year from wholesale
partners, own retail channels, and the merchandise was produced accordingly.
However, Your Company realized the importance of being nimble in the market,
being able to respond faster to changes keeping the inventory tighter. This
move benefits our channel partners, as they no longer have to commit to
purchases eight to 10 months in advance and can place orders monthly.”
So,
what exactly is the 12-season model?
Historically a
two-season model has been used by the fashion industry, with new collections
launching throughout the summer and winter seasons. However, the industry's
rapid growth necessitates the release of fresh collections more frequently.
The 12-season
model describes the company's strategy for creating and releasing fresh
collections of apparel and accessories each month, each collection symbolizing
a distinct season or trend. This strategy enables the business to provide a
wide choice of products to its clients and keep up with the most recent fashion
trends.
Based on factors
like the environment, cultural events, and fashion trends, each season is
specifically planned to respond to distinct customer demands and preferences.
For instance, the Winter Wear collection would emphasize warm clothing and
accessories to keep consumers comfortable during colder months, while the
Festive Collection would emphasize traditional clothing for customers
celebrating Diwali, one of the most important festivals in the world, and so
on.
The highlight
of Ashish Dikshit, MD of ABFRL, during the Q3FY21 earnings call - “All our
formats whether it is Pantaloons or Madura are responding creating we have
moved to 12 season cycle. I think this has helped us tremendously because we
are agile. We are going to market more often; we are creating products in line
with the market and we are making less than the stakes because we are making
more often and smaller calls and therefore there is a constant correction and
that model while we have a beginning to build pre-Covid I think thus far have
seen a superior execution as we go forward. And as we look ahead, I think that
will be a part of very strong and better advantage for us.”
How
the company implemented it?
To implement the
12-season inventory model effectively, ABFRL uses a range of technologies,
including advanced analytics and data-driven forecasting tools. The company
also has a strong focus on supply chain optimization, with a dedicated team
responsible for managing and optimizing the supply chain processes.
Because of the
company's focus on dynamic merchandising, popular products are quickly sold out
while the slower-moving ones are actively marked down. The stock is kept
current and fresh due to this technique, which has produced a steady influx of
new collections throughout the year.
Additionally, ABFRL uses customer feedback and data analytics to create
collections that cater to its target market.
This concept
does away with the necessity for end-of-season sales and enables ABFRL to
launch new collections every month based on consumer demand.
During the
earnings call for Q3FY22, MD Ashish Dikshit stated - “We have done away with
the whole concept of two seasons. We have moved to a 12-season model and in
that we have done away with the entire concept of the end of season sale. What
this allows us to do is to do true, active merchandising of the merchandise we
have got where bestsellers keep selling out fast and it's the tail which gets
marked down actively on the real-time business through the 12 months of the
year and hence drives freshens. Many of these picks plus working closer with
the vendor partners, with mills, quick response mechanisms, vendor managed
inventory program; many of these are methods by which we are trying to keep
ourselves as nimble as possible in managing inventory.”
Examples
of other companies that employ the 12-season model
Many fashion
companies around the world use the 12-season model, which is a well-liked
retail calendar. Following are some instances of fashion businesses that have
embraced the 12-season model:
· Zara, a Spanish brand, is known
for its fast-fashion business approach and regular collection updates every
two weeks.
· The Swedish clothing retailer, H&M
releases new collections each month, enabling it to adapt fast to
shifting consumer tastes and fashion trends.
· Mango, a Spanish fashion retailer,
introduces new collections every month that each highlights a distinct
trend in fashion.
· A Japanese clothing retailer named Uniqlo
releases fresh styles every season, with each season lasting roughly 13
weeks.
The following
are some instances of Indian fashion enterprises that apply the
12-season model:
· Every six weeks, Fabindia, the
Indian retail company (famous for ethnic clothes and handcrafted goods), debuts
a brand-new collection.
· Biba is an Indian clothing
boutique with a focus on women's ethnic wear. It releases new collections every
four weeks.
· Every month, a new collection from W
for Women, an Indian fashion brand, which specializes in ethnic wear
for women, is released.
· Global Desi, an Indian fashion
retailer, that offers fusion wear for ladies, introduces a brand-new collection
every month, featuring a unique blend of Indian and Western styles.
Let’s
examine the Pros and Cons
The 12-season
approach has several advantages, including more adaptability and responsiveness
to client needs as well as a decreased risk of having too much inventory.
Companies can better respond to shifting consumer expectations and fashion trends
by releasing collections more regularly. Furthermore, regular product launches
can stimulate novelty among consumers, possibly resulting in greater sales.
However, there
are also some big disadvantages too. Product designers and manufacturers are
under additional pressure as a result of the increased frequency of product
launches, which raises production costs. It may also lead to overproduction and
waste because unsold inventory from one season could become outdated before the
debut of the products from the following season. Additionally, the increased
production volume and frequency could have an adverse effect on the environment
by consuming more energy, water, and natural resources.
However, it is
widely noted that the fast fashion industry, which includes the 12-season
model, has come under fire for its detrimental effects on sustainability,
including waste and overproduction. Many businesses, including ABFRL, have put
various strategies into place to address these issues, like using recycled
materials, reducing packaging, and giving unsold inventory to charitable organizations.
What
the number says!
ABFRL earned its
highest-ever revenue in the most recent three-quarters of FY23 of Rs 9000
crore, and its gross margins have improved noticeably from 52% in FY19 to 53%
in FY22 and 55% in Q3FY23 (TTM basis), demonstrating the beneficial effects of
the 12-season model. On the negative side, the inventory days have gone up from
180 days in FY19 to 270 days in FY22. It's important to note that this rise may
be caused by a variety of factors in addition to the 12-season model.
In Conclusion,
by responding in real-time to customer demands, ABFRL has been able to keep one
step ahead of the competition since adopting the 12-season model. The methodology
has led to better inventory control, fewer markdowns, and more earnings. ABFRL
has been able to maintain its position as a leader in the Indian fashion and
retail sector thanks to its commitment to sustainability and ethical production
methods as well as its adoption of the 12-season model. ABFRL's dynamic
inventory strategy will be essential in adjusting to shifting customer
expectations and staying competitive in the market as the fashion industry
continues to change.
Comments
Post a Comment