There’s buying, and then there’s buying for growth. Michaela Wessels, CEO and Co-founder of Style Arcade shares how to build a robust buying strategy that backs your winners and really moves the needle.

1. Tier your quantities

Growth and business expansion rely on creating a tiered buying strategy, where you’re making use of different levels of depth per option. When most fashion businesses first enter the market, there is no historical data to base their decisions on, so often they allocate the same number of units to every style. 

This practice is highly limiting, because as a rule of thumb: 20 per cent of styles will make 80 per cent of your sales. If you launch with 100 styles, by the time you hit the six-week mark, you’ll find out the 20 styles that have made 80 per cent of your sales. 

Understand your rate of sale

To understand your Weekly Rate of Sale (WROS), work out how many units of a product you sell on average per week. From there, simply add 20-30 per cent on your average rate of sale to estimate your upper threshold, and minus 20-30 per cent to determine your lower threshold. 

For example, if those top styles start moving 40 units per week and selling out in two weeks, you can simply adjust your high, mid, and low quantities for the next season, based on your new rate of sale. 

The 80/20 Rule

More commonly known as the Pareto principle across different industries, in fashion buying and merchandising, it’s 80 per cent of your sales that is made up of 20 per cent of your styles.

Focus on your 20 per cent

Say you’re buying 500 styles per month, pick 100 that will make you the most sales. Once you’ve convinced your team with your data learnings, back these styles with depth.

How to identify best sellers

Your historical performance should help identify a number of patterns, including what silhouette your customers love, and want more of. 

Once you’ve identified your most popular shapes and chosen your best-sellers for your next season, you can simply take the historical attributes and rework them based on their past performance.

Determine price point

There’s a top, middle and bottom price for every collection. To get the most bang from your best-selling top 20 per cent of styles, you have to hit a sweet spot for your customers. Understanding your pricing strategy and determining that median price they’ll be happy to part with for the styles they really want, means you can allocate larger volumes of where it hits, and cover your margins.

3. Extend your size curve

Extending size runs can create growth. If you look at your ratio and the end sizes are more than 15 per cent of total sales, then there’s an opportunity for you to add a fringe size.

To test this, make sure you look at the commonalities in the silhouettes and colours where you want to introduce the fringe size. If all the styles selling in size 14 are colour-blocked, the future range indicates a Size 16 is needed. In the same token, if Size 6 is predominantly selling ditsy floral prints, there’s an indication you should extend to a 4, but there’s no indication to extend to 16.

One Style Arcade brand showed that 28 per cent of sales in a particular category were coming from XS. In the team’s next buy, they added in an XXS, opening up a sales revenue door amounting to $1.1 million annually for them.

4. Determine never-out-of-stock styles

Fashion merchandising best practice entails constantly keeping an eye out to identify your core products. Most fashion brands we work with have a 20 per cent portion of styles that live year-round and cushion their bottom line. 

Even the biggest high-end brands have their core products; think Louis Vuitton’s Neverfull tote or the Gucci Marmont belt. The great thing about being online is that you can hide 40,000 Gucci belts behind one little placeholder image, the image that assists with an 80 per cent conversion rate. 

5. Proactive markdowns

Clear as you go (CAYG) is a retail markdown strategy that means acknowledging the slow movers at the six-week mark and discounting them early. Shopbop is famous for having discounts on the New Arrivals page because they know the value of clearing inventory early. Discount when it will actually move the needle and don’t be afraid to avoid aged inventory.

This strategy will leave you discounting less, saving your business margin, and freeing up cash flow. It really is a win-win.

Full article originally published at stylearcade.com. For more retail insights like this, sign up to Style Arcade’s blog today.