February 3, 2022
SKU Proliferation for Apparel Merchants: Understanding When To Take Action
This blog post was originally published by Deliverr, which is now Flexport. The content has been adjusted to fit the Flexport brand voice and tone, but all other information remains unchanged. With the merging of Deliverr’s services (DTC fulfillment, B2B distribution, and Last Mile delivery) into Flexport’s existing international freight and technology services, we’re now able to provide merchants with true end-to-end logistics solutions spanning from the factory floor to the customer’s door.
Merchants can experience SKU proliferation as their business grows and customer demands change and expand. For those who specialize in apparel, adding merchandise to your inventory based on trends, seasonal essentials, and new collections can create a need for additional SKUs throughout the year. Keeping up with customer demand for variety in sizing and color choice also leads to more SKUs in order to build a more diverse inventory.
As eCommerce continues to grow, online merchants must strive to provide customers with an assortment of products that meet their needs. But by offering too many options, retailers run the risk of being bogged down with so many SKUs that it becomes impossible to know which items are in demand versus those which aren’t moving. Without thoughtful analysis on how inventory is performing in terms of sales, your business can’t continue to run efficiently.
SKU growth is an inevitable part of selling items that change with style and seasonal trends. What can apparel retailers do to keep their inventory relevant and interpret data for maximum sales? Let’s consider the warning signs that your SKU proliferation is impeding your ability to manage inventory and what your team can to do get back on track.
Know When To Take Action
Increasing the number of products offered to consumers is an exciting time for retailers as they continue to grow and expand to meet buyer demands. With this comes not only a need for additional SKUs, but also the physical space to store additional inventory. This means your storage costs and fulfillment budget will undoubtedly increase. When storage costs are climbing, it’s a crucial time for your team to determine if there is dead stock that is costing you money to store and hindering the growth of your brand. If your storage costs continue to skyrocket, it’s time to think critically about how the volume of SKU numbers is impacting your warehouse and fulfillment operation. These decisions can only be made when data from SKU performance is manageable.
Unfortunately, with SKU proliferation, teams can find themselves drowning in data that is too cumbersome to analyze due to the sheer volume. Two major things will happen:
- Warehouse inventory is going to increase as additional items are added, which raises the complexity of filling orders.
- Pickers now have a much larger pool of product, which increases errors and slows fulfillment.
When SKU data is manageable, warehouse organization can be optimized to make the most of the available space and help the process run smoothly. If you can no longer make informed decisions because of the quantity of data, it’s time to take action.
Manage SKUs Before They Become a Burden
When increasing the number of SKUs for your business is unavoidable, managing new products can become an obstacle without the proper management system in place. In order to continue to offer fast and effective fulfillment, SKU performance data must be available to determine how to proceed with inventory.
A third-party logistics company can manage fulfillment, while providing warehouse space that grows along with your business. Since a warehouse network has the storage available along with top of the line organization systems, your stock remains visible and accounted for. When utilizing a fulfillment partner like Flexport, inventory management is available in real-time with SKU specific data and replenishment features. See the screenshot below that shows how it works:
An effective inventory management system will help you identify the items that are no longer moving and are taking up valuable space in your warehouse. It also helps to plan for items that are moving quickly to avoid stockouts. Instead of having capital tied up in items that aren’t selling, your team can make strategic decisions based on SKU perfomance. This is especially important for apparel merchants that are adapting to changing trends and consumer demands. Before launching a new collection, consider the items that are already available in the warehouse. Is there an opportunity to phase out some stock before adding additional product?
Making way for new products is imperative when stocking clothing, shoes, and other accessories. Retailers need to have a plan in place to continually evaluate the products that are being stored to determine their performance level. Accurate, up-to-date data on the performance of particular SKUs allows teams to have critical conversations about items that are performing well and what is no longer serving the brand going forward. Without this critical analysis, storage and fulfillment costs will skyrocket as more product is added. Not only will more space be needed to manage the additional merchandise, but efficiency and accuracy also deteriorate when SKUs are abundant.
For apparel merchants, it’s about finding a balance between offering customers adequate options while also being able to maintain practical fulfillment and storage costs. Being able to offer a wide range of products is only valuable if the customer is still met with the same efficient and accurate order fulfillment they have come to expect from your brand.
With continued growth comes an opportunity for your business to provide more buying options your customers. In order to keep merchandise relevant and in demand, your team needs this data to zero in on the trends, sizing, and design that appeals to consumers. Before launching new products, consider past sales data to drive your decisions and prevent future fulfillment obstacles.
To combat any negative effects from SKU proliferation, it’s vital to have a strong fulfillment team to keep up with order demands. By having an inventory management system that can decipher SKU performance levels, your team is better equipped to create inventory strategies that increase sales. Having clear data to consider as well as communication with your fulfillment team can keep your operation running smoothly with maximum efficiency. Be sure to have a plan in place for future growth and how your team can be prepared to meet the challenges going forward.
The contents of this blog are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. We do not guarantee, represent, or warrant the accuracy or reliability of any of the contents of this blog because they are based on Flexport’s current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This blog has been prepared to the best of Flexport’s knowledge and research; however, the information presented in this blog herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this blog.