With China set to overtake the US as the largest fashion market in the world in 2019, fashion businesses need to try and do whatever they can to hold on to their vital market share. When you consider that the top 20 companies account for 97% of economic profit in the industry, it’s harder than ever for smaller brands to turn a profit, with the most forward-thinking always on the lookout for new and innovative ways to improve.
One area where there’s always room for improvement is software-based forecasting. In such a dynamic and unpredictable industry as fashion, forecasting has always proved problematic, but even more so now we’re the midst of a fast fashion revolution. While some businesses are focusing more on fulfilling real-time demand, moving to processes and procedures that enable responsive design, manufacture and delivery, savvy fashion businesses are investing in their forecasting capabilities. This is driven by an awareness that accurate forecasting is still, to a certain extent, the holy grail of the fashion and apparel industry. And, when you consider the shift that we’re seeing away from fast fashion towards sustainable, environmentally-responsible fashion, the need to improve your forecasting accuracy becomes more important still.
The main challenge to accurate fashion forecasting is the sheer number of variables involved. If forecasting is to have any chance of succeeding, it’s vital that the business takes into account the following factors:
With so many factors and variables involved, fashion businesses are turning to technology to help, investing in solutions that are able to deal with not only multiple factors but ever-increasing levels of complexity too. The best solutions harness multi-layered dynamics for accurate, robust forecasting right across the business.
Fashion businesses should tackle forecasting on two levels. Firstly, the family level, where you forecast for items belonging to the same category - so shirts, or trousers or handbags, for example. Historical data usually exists on this level, underpinning scheduling for production in the medium term. Where it becomes more challenging is at the SKU level, for new products, as there isn’t usually any historical data available to inform planning as these items are only created for a single season.
The most effective forecasting tools have tried and tested methods to address this issue, taking a two-step approach to tackle the problem head-on. Firstly, it’s necessary to cluster and classify these new products to forecast a sales profile in the medium term, moving on to either adopting or readjusting this profile depending on the first weeks of sales.
No historical data exists for new products, but it does exist for similar products - products with almost the same style or functionality, for example. The right tools will use this data to estimate the sales profile of the new products, taking into account descriptive attributes of both historical and new products, such as price, life span, sales period and style, to model relationships between the historical data and the descriptive criteria of related items to forecast future sales. The best tools feature built-in models which incorporate trends and seasonal factors, as well as the other variables listed above, finely tuning the results further still and applying the most appropriate algorithm for the product in question. What results are accurate, reliable forecasts providing the best possible view of the future.
Operating in such a volatile sector as the fashion industry, forecasting accuracy is vital. It’s no longer an art but a very precise science, with an accurate forecast meaning the difference between success and failure. Modern solutions have the ability to streamline your forecasting processes while increasing their accuracy. More and more fashion businesses are recognising the benefits to be had - from employing such effective solutions, to great success. Those who are still relying on forecasting methods of years gone by run a real risk of being left behind while their competitors steal that all-important market share, boosting profits and fulfilling their true business potential.
For more information on forecasting software for your fashion or apparel business, contact us at Sapphire Systems.
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