LONDON, United Kingdom — "Men's and women's polo t-shirts in 25 colours from £12.99!" Ads announcing this Uniqlo promotion have been plastered alongside London buses this month, as well as being featured front-and-centre in Uniqlo shops everywhere. Same-store sales rose 18.3 percent in May 2009 over last year for the Japanese retailer, and the company's stock hit five-year record highs.
Over at American Apparel, which uses a similar merchandising approach, total retail sales increased 16.5 percent to $78 million for the first quarter of 2009 compared to the same period in 2008. It would seem that both American Apparel and Uniqlo have managed to accurately address the mood of the market, hitting a sweet spot in an otherwise suffering sector. Although many factors play into these high street success stories, it is worth having a closer look at the merchandising strategy shared by both, offering a functional item in a variety of colours and encouraging the purchase of multiple units.
Strategic merchandising starts right from collection design and then to ensuring responsive production with quick-access to distribution channels and presenting finished products in a visually enticing manner at the point-of-sale. It requires intimate knowledge of the consumer, her spending habits and her wardrobe needs. A good merchandising strategy increases sales, boosts margins and helps reduce excess inventory. In simple terms, if a consumer needs four tops, one bottom and two dresses to renew her wardrobe in a given season, the collection's assortment should reflect these ratios.
The luxe ready-to-wear market continues to suffer in this crisis of consumer confidence and credit crunches. Already a segment with limited margins compared to handbags or accessories, further markdowns and poor performances are hurting luxury brands everywhere. And yet, merchandising responses to tough economic times have been as basic as presenting entirely black and white collections — as witnessed in the pre-Fall offering of a few brands.
Traditionally, high-end fashion collections are designed around an elaborate theme and planning is reserved for production and distribution only. Given the current economic climate and changing consumer behaviour however, now might not be a bad time to consider integrating a more responsive merchandising strategy into the design process. If luxury brands have been listening to their consumers of late, they would have heard terms such as "investment piece", "value", and "function" several times by now.
By no means should luxury brands abandon the emphasis on design or remove the conceptual elements of the process. Nor should they walk away from those special, limited-edition pieces that reflect the creative essence of a collection. But choosing a few key items and offering them in a small variety of colours to match the season's theme could go a long way in maximising floor space and boosting sales. Visually merchandised correctly at the point-of-sale, it might even encourage the purchase of multiple items.
The idea of presenting key items alongside a full conceptual collection is not new. Ralph Lauren, the master of merchandising from the level of collection planning all the way through to visual presentation, has long benefited from this two-tiered strategy and would serve as an interesting example for other luxury brands in the high-end ready-to-wear segment today.
At its best, the art of merchandising involves striking that magical balance between giving consumers not just what they want, but also what they need. At this difficult juncture in the world of luxe fashion, brands who successfully imagine the luxury equivalent of American Apparel leggings or the Uniqlo polo in 25 colours might just be the ones that emerge on the other side of this economic crisis stronger and in touch with its changed consumer.
Meeta Roy is a luxury brand consultant.