Melissa M. Dunn 
There is buying, then there is buying for growth. Michaela Wessels, CEO and Co-Founder of Style Arcade, explains how to build a robust buying strategy that supports your winners and really moves the needle.
1. Prioritize your quantities
Business growth and expansion relies on creating a tiered buying strategy, where you use different levels of depth per option. When most fashion companies first enter the market, there is no historical data to base their decisions on, so they often allocate the same number of units to each style.
This practice is very restrictive, because as a general rule: 20% of the styles will make 80% of your sales. If you launch with 100 styles, by the time you hit the six-week mark, you’ll find the 20 styles that made 80% of your sales.
Understand your sell rate
To understand your weekly sales rate (WROS), calculate how many units of a product you sell on average per week. From there, simply add 20-30% to your average sell rate to estimate your upper threshold, and minus 20-30% to determine your lower threshold.
For example, if these top styles start moving 40 units per week and selling out in two weeks, you can simply adjust your high, medium, and low quantities for the following season, based on your new sell rate.
The 80/20 rule
Better known as the Pareto principle in different industries, in fashion buying and merchandising, 80% of your sales are made up of 20% of your styles.
Focus on your 20 percent
Suppose you buy 500 styles per month, choose 100 that will bring you the most sales. Once you’ve convinced your team with your data learnings, support those styles with depth.
How to identify bestsellers
Your historical performance should help identify a number of models, including the 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 the price
There is an upper, middle and lower price for each collection. To get the most out of your top 20% selling styles, you need to find a sweet spot for your customers. Understanding your pricing strategy and determining the median price they’ll be happy to part with for the styles they really want means you can allocate larger volumes where it hits and cover your margins.
3. Extend your waistline
Extending size runs can create growth. If you look at your ratio and the final sizes represent more than 15% of the total sales, then you have the option of adding a fringe size.
To test this, be sure to look at commonalities in silhouettes and colors where you want to introduce the fringe size. While all styles sold in size 14 are color-blocked, the future range indicates that a size 16 is required. Along the same lines, if size 6 primarily sells floral prints, there is an indication that you should expand to 4, but there is no indication to expand to 16.
A Style Arcade brand showed that 28% of sales in a particular category came from XS. On the team’s next purchase, they added an XXS, opening the door for them to $1.1 million a year in revenue.
4. Determine which styles are never out of stock
Fashion merchandising best practices involve constantly keeping an eye on identifying your star products. Most of the fashion brands we work with have a 20% share of styles that live all year round and dampen their bottom line.
Even the biggest high-end brands have their flagships; think of 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 a little placeholder image, the image that helps with an 80% conversion rate.
5. Proactive Markdowns
Clear as You Go (CAYG) is a retail price reduction strategy that involves recognizing slow moves after six weeks and discounting them early. Shopbop is famous for having discounts on the new arrivals page because they know the value of clearing inventory early. Cut back when it will actually move the needle and don’t be afraid to avoid aging stock.
This strategy will save you less, save your business margin and free up cash flow. It really is a win-win.
Full article originally posted on stylearcade.com. For more retail news like this, sign up to Style Arcade’s blog today.
