Why fashion retails should ignore sales quotes for budgeting decisions


We believe that data driven decision making will become more and more important in the years to come. One of the industries that has been playing catch-up in the last few years is fashion retail. We currently work with a great number of fashion distributors and fashion retailers and consult them on there buying decisions for their omni channel stores.

We have come to notice that many budget decisions are taken on the bases of last season’s sales and sales quotes. Most of our customers have always used last year‘s numbers to decide on how much of a certain brand to buy and nothing more. We believe that there is a more efficient way of taking budgeting decisions for fashion retail.

In this article we will explain the three most important things to consider when taking budget decisions. In essence we want you to forget about sales quotes and ignore them entirely.


These three things are crucial to your budgeting in fashion retail

The first thing is that you need to look at the long-term perspective. We have seen that products stay on vogue for a lot longer than many in the fashion industry would acknowledge. The typical product can stay in your inventory for 3 to 4 seasons. Especially basics, sweaters, Denim and jeans can stay in your inventory for a for a longer period of time than just one season.

What is important is to understand when a product is becoming an evergreen and when it is time to let it go. Understanding product lifecycles is crucial and something that can be calculated when looking at the right data.

The second thing that we look at is how fast a good sells itself off. We need to understand if the product can only be sold during the sale phase or has the ability to create a full contribution margin early on in the sales cycle. Products that are generally sold well within the half third of the sales cycle Have the potential to be re-ordered or sold even better in the year to come.

The third thing that is very important for budgeting decisions in e-commerce is understanding how often a good is returned. It can be very tempting to re-purchase a certain product again in the next season due to the fact that it has brought you a very high turnover. Turnover is great but the cost of returns is generally far greater.

If you are able to eliminate the products that have created a higher cost of return than actual margin you are able to raise your contribution margin’s significantly. This in turn will help you lower the number of returns. It will help you lower your overhead cost and spent your budgets more efficiently.


Want to find out more?

We would be glad to help you with your budgeting decisions for the next buying season. Together with our customers we have developed data driven dashboards and tools that can help you make you take sound buying decisions.

We can show you what you can do with the day that that is at your disposal at the moment as well as what would be possible if that date I would be there. We help both distributors as well as smaller and larger retailers alike and feel free to simply reach out to us.

Simply book a free appointment to continue the conversation, and ask us questions about your business.