Choosing Between Custom Orders or Pre-Stocked Inventory: Which Approach Fits Your Business Best?
In the ever-evolving world of fashion, emerging designers face a crucial decision: how to sell their creations effectively while managing financial risks. The sales channel chosen can significantly impact a designer's success.
For online sales, a made-to-order approach is well-suited due to its ability to minimise upfront inventory costs and avoid excess stock. This model allows designers to respond quickly to consumer demand and rapidly changing trends, which are common in fashion. However, for commodity-type items, customers typically expect immediate delivery, making inventory management essential to avoid overstock[1][2].
Brick-and-mortar sales, on the other hand, often require upfront inventory to meet customer expectations of immediate product availability and to support experiential retail. While this approach offers the advantage of getting money upfront and building a personal relationship with customers, inventory should be carefully managed to avoid overstock as demand can be unpredictable for new designers[3].
Wholesaling, with its higher risks due to upfront costs, can enable wider distribution and brand exposure. In this model, designers must sell their collection at a price point that allows the retailer to make a profit. To succeed in wholesale and make money, designers need to offer a lot of SKUs every season and invest in development[3][4].
Each sales channel has its advantages and disadvantages. For instance, online sales provide the benefit of receiving money at the moment an order is placed, keeping 100% of the income, and seeing in real time how customers respond to each style. On the other hand, the cons include the significant investment in inventory before knowing how well it will sell, the risk of making items in unpopular colours or fabrics and being left with overstock, and splitting income 50/50 with a drop-shipper[4].
One exception for brick-and-mortar sales is hosting a trunk show, where designers bring samples of their new upcoming collection for pre-orders. This approach allows designers to avoid the risk of overstock and still benefit from immediate sales[5].
For an emerging designer, the choice between made-to-order and upfront inventory sales channels depends on the sales platform and risk tolerance. Combining approaches based on channel characteristics and market data from initial sales is the best strategy for scale and sustainability[1][2][3][4][5].
In the wholesale model, the retailer pays for the garments when they receive the order. For brick-and-mortar sales, manufacturing inventory to sell on the spot is necessary. The possible sales channel options include online sales, brick-and-mortar sales, and wholesaling[6].
Typically, unless the designer plans on doing sales themselves, they will be paying a commission to a sales rep or showroom in wholesale. It's essential for designers to weigh the pros and cons of each sales channel and make an informed decision based on their unique circumstances and goals[6].
In conclusion, the sales channel chosen by an emerging designer can significantly impact their success. By understanding the advantages and disadvantages of each channel, designers can make informed decisions that minimise financial risks, manage inventory effectively, and ultimately grow their brand.
[1] FashionUnited [2] Forbes [3] Harvard Business Review [4] Inc [5] Vogue Business [6] ThriveGlobal
Emerging designers in the fashion industry are confronted with a critical decision about selling their designs effectively while managing financial risks, as the chosen sales channel has a significant impact on success. Made-to-order sales online can help minimize upfront inventory costs and swiftly respond to consumer demand, while brick-and-mortar sales often necessitate upfront inventory to meet customer expectations. Wholesale enables wider distribution but carries higher risks due to upfront costs. An informed decision considering the unique circumstances and goals of an emerging designer, the sales platform, and risk tolerance is vital for long-term success, sustainability, and to navigate inventory management and financial risks effectively.
