Fashion Product Development

What is Supply Chain Management (SCM)?

A continuously evolving management philosophy that seeks to integrate the core competencies of all business partners to reach the most innovative and efficient manner of synchronizing the steps of the product development lifecycle from concept to point-of-purchase.

Wholesale Brands

A proprietary collection marketed through sales representatives for sale in boutiques, specialty stores, and department stores. Today, most wholesale brands also market their products through their own Retail and DTC channels. Example: Free People Most wholesale businesses recognize the opportunity for increased profit that can be achieved from marketing directly to the consumer through regular price and off price company stores.

Target Market

A target market is a detailed composite of the group of customers to which a brand intends to sell if not dominate.

What is Vertical Integration?

A vertically integrated company is a conglomerate that owns or controls the companies involved in each stage of the supply chain Example: Inditex, owner of Zara Inditex is the chief investor or owner of the raw materials dying and cutting facilities. They and pre-commit to production space in factories. Through the use of PLM, designers and buyers can respond to market trends quickly and get new products to their stores in 8-10 weeks vs. the 40-50 week lead time that is standard in the industry.

What is Business Planning?

Business Planning is the act of developing the aims, objectives, and strategies for the future of a specific business The intent of a business plan is to provide structure to the ongoing process of managing the business while constantly adjusting to evolving customer expectations

Merchandising Team

Buying(Merchandising) In most retail organizations the product strategy team is called "Buying" while in most wholesale organizations the team is called "Merchandising" This team develops the creative business strategies to support corporate financial objectives The Buying(Merchandising) team is the hub of the wheel and works closely with all functional areas All product related decisions must support the strategies set forth by this team

What is the role of the Product Developer in the Collaborative Supply Chain?

Consider supplier input as to how a product or process can improve Pay a fair price rather than fight for a price that necessitates that vendors cut corners Require vendors to use processes that do not jeopardize the health and safety of workers. Help suppliers to do no harm to the planet in the course of suppling their services

Core Values

Core Values The Core Values are the guiding principles by which a company does business The Core Values articulate the manner in which a company regards its employees, business partners, and consumers Social responsibility and sustainability strategies flow from the Core Values

Methods of Engaging the Target Consumer

Crowdsourcing is the act of challenging consumers to participate in key decisions There are numerous apps and websites that allow consumers to "favorite" products Bloggers are incented to post review of products and links to shop This data is shared the brand and becomes part of the CRM data analysis

Definition of Customer Segmentation

Customer Segmentation is the subdivision of a market into discrete customer groups that share similar characteristics. Customer Segmentation can be a powerful means to identify unmet customer needs. Companies that identify underserved segments can then outperform the competition by developing uniquely appealing products and services. Customer Segmentation is most effective when a company tailors offerings to segments that are the most profitable and serves them with distinct competitive advantages. This prioritization can help companies develop marketing campaigns and pricing strategies to extract maximum value from both high- and low profit customers. A company can use Customer Segmentation as the principal basis for allocating resources to product development, marketing, service and delivery programs.1

How Customer Segmentation Works

Customer Segmentation requires brands to: Divide the market into meaningful and measurable segments according to customers' needs, their past behaviors or their demographic profiles Determine the profit potential of each segment by analyzing the revenue and cost impacts of serving each segment

Why are demographics so important?

Demographics are factual datum that can be used to group millions of people into a very broad or very narrow market segment Those who belong to a market segment are highly likely to have similar buying patterns It is critical to consistently revisit demographic data to identify shifts in behavior Buying behaviors among demographic groups changes with each generation

Businesses within mature industries rely upon differential advantages to succeed

Differential Advantages may include: Low Price Superior Quality Unique product features or esthetics Minimal carbon footprint Unique Fit Speed to Market

Finance Team

Finance The Finance team is responsible for all corporate accounting activity and sets the overall corporate financial objectives The Finance teams owns the management of the P&L While the Finance team is accountable for overseeing income and expenditures across all areas of the company, they work most closely and consistently with the Buying(Merchandising) team

Finance

Finance (cont'd) In some companies the Planning/Allocation team reports to the Finance team The Business Development Team that oversees strategies for mergers and acquisitions and well as researching new business opportunities typically reports into the Finance Team

General trends that impact Consumer Behavior

Fit Masstige Quality vs. Quantity The importance of brands Wear now clothing Ethical fashion

What are Generational Cohort Groups?

For example, the AIO variables of Baby Boomers when they were 18-25 are distinctly different than the AIO variables of Millenials Brands that aim to cater to an age group rather than a generation must be careful to identify the changing variables as generations transition through the target age group

Business Plan

From the Strategic Plan flows the annual business plan This plan outlines the objectives for the fiscal year, quarter, and month All business functions play a roll in the pipeline Step 1: Financial and assortment planning Finance/Planning/Buying management establish the sales and profit goals Planning/Buying work together on Hindsight to analyze history The intent is to establish valuable patterns in sales that may continue

What are the benefits of M&A?

Global reach Innovation Expanded capacity Expanded product categories Increased Expertise in key functional areas including design, production, manufacturing and marketing

What is Globalization?

Globalization is the act of expanding the reach of a brand to markets all over the world. American companies manufacture 90% of products manufactured for sale in the US outside of the US. European brands manufacture the majority of their products in Europe and Asia for sale in the US and Europe. Conversely, Globalization can mean when well-known brands expand retail sales to foreign markets. Example: Saks Fifth Avenue in Dubai, Wal Mart in China

What is Horizontal Integration?

Horizontal Integration is similar to M&A because it may involve acquisitions. A business may acquire a very similar brand in an effort to gain synergy and dominate a market. Example: Talbots acquisition of J. Jill Horizontal Integration may also include the act of licensing a retired brand name to leverage customer loyalty. Example: Kohl's buys license to relaunch Dana Buchman

How are Psychographic and Demographic data collected?

In most apparel organizations, these types of data are collected and analyzed by the marketing department Today the general term for the collection, management, and analysis of consumer data is call Customer Relationship Management (CRM) CRM includes data collected from point of purchase data, surveys, data mining, video documentation, and neuromarketing

What is Diversification?

In the case of the Apparel business, Diversification means the act of acquiring or licensing the services of an entity that produces a complementary category for the purpose of expanding market share and brand recognition. Example: Ralph Lauren holds licensing agreements with manufacturers of fragrance, footwear, children's wear, bed and bath, and many more categories.

What are the benefits of PLM?

Increased collaboration between global partners A reliable central repository for all pertinent data regarding each product Reduction of work redundancies Reduction of costs Increased speed to market Greater inventory productivity in stores

Why has the industry moved in this direction?

It is consumer driven It eliminates costly processes such as warehousing It defines the product through detailed standards and specifications It requires all partners to share the risk and responsibility of producing a quality product It is dependent upon the skill of each partner to meet deadlines All of these aspects contribute to better decision making and higher profitability

Consumer Privacy

It is important to note that the Federal Government is dedication resources to establishing privacy regulations to protect consumers from invasion of privacy Most websites leave "cookies" which are small text files that remain imbedded in a device's hard drive once a website is visited Cookies allow the website to continue to track behavior every time the user visits the site regardless of whether or not he/she has an account

Marketing

Marketing The Marketing team works most closely with the Buying (Merchandising) team to develop strategies to present and promote the brand as an entity and to sell the specific product assortments The Marketing team is responsible for all consumer research and CRM activities In many companies the Direct-to-Consumer businesses (eCommerce) report into the Chief Marketing Officer

Methods of Engaging the Target Market

Marketing via an ecommerce website is one of the most effective and instantaneous ways to engage the consumer and collect data Websites track not only what consumers buy but what the view CRM data can be collected every second to build a unique profile for a single consumer that is tailored to his/her preferences CRM data in aggregate can be funneled into consumer segments to identify prevailing patterns across millions of consumers

What are Generational Cohort Groups?

Members of a generation share a unique profile The AIO variables of a Generational Cohort may evolve over time as the generation passes through life stages but core values remain constant It was once believed that the behavior of an age group remains constant regardless of generation This is not so

Key Business Functions

Merchandising Design Buying (Merchandising) Planning/Allocation Production Finance Operations Marketing

Merchandising and Design

Merchandising Under the umbrella of Merchandising there are several teams who work together on the strategies for product creation and distribution Design The Design team works most closely with Buying(Merchandising) and Sourcing. This team creates the product concepts, color and pattern schemes, and unique styles.

How else do mature businesses compete?

Mergers and Acquisitions (M&A), the act of acquiring or joining forces with another entity, gives a business increased advantage by expanding and or maximizing market share.

Components of a Strategic Plan

Mission Statement The Mission Statement is the DNA map of the business The reason for the existence of the company is the core of the Mission Statement The Mission Statement may evolve subtly over time but should not change substantially The Vision and the Core Values flow directly from the Mission Statement

Consumer Analysis and Segmentation

Niche Markets are micro segments customers who are extremely aligned relative to age, income, ethnicity, or lifestyle Examples Lane Bryant markets to plus size women J. Jill markets to mature women (50+) By focusing on a niche market a brand has a greater opportunity to build loyalty as long as customer expectations are consistently exceeded

Trouble Shooting

Ongoing: Trouble Shooting Throughout the pipeline from concept to production, Design, Buying, and Production meet to discuss progress Many adjustments are made to accommodate production challenges, costing challenges, and new trend information At all times the team is striving to deliver the most desirable product and the ideal time and ideal retail price

Operations

Operations The Operations Team oversees general business operations including but not limited to facilities management, legal, and human resource management Both the Operations and Finance Teams may work in tandem under the guidance of the Chief Operating Officer

Methods of Engaging the Target Market

Other methods include: Style Testing Wear Testing Focus Groups Surveys Brands provide incentives (discounts, free merchandise, free delivery) to encourage participation in these activities

What are the risks of M&A?

Oversaturation in the marketplace Brands within the portfolio cease to be unique Internal cannibalization Examples: The Limited, Gap, Liz Claiborne

What is Product Lifecycle Management (PLM)

PLM is the current methodology of SCM used in the apparel, accessories, and footwear industries. PLM captures, manages, visualizes, and disseminates product-related information from initial concept to a product's retirement. PLM is typically implemented through a software program that is shared by all members of the supply chain.

Planning and Allocation

Planning/Allocation The Planning Team works most closely with the Buying(Merchandising) and Allocation teams Depending upon the corporate structure the Planning/Allocation team may report to the Chief Merchandising Officer or the Chief Financial Officer The Planning team is responsible for establishing the merchandise sales and margin plans but they are not responsible for operating expenses

Allocation Team

Planning/Allocation (cont'd) The Allocation Team works most closely with the Planning and the Buying(Merchandising) Team The Allocation team is responsible for supporting the financial goals of the company by identifying the needs for merchandise by store They are responsible for setting up modules to determine how many units per style should be purchased

Companies use Customer Segmentation to

Prioritize new product development efforts Develop customized marketing programs Choose specific product features Establish appropriate service options Design an optimal distribution strategy Determine appropriate product pricing

Production Team

Production The Production team works most closely with Design and Buying(Merchandising) The Production team must ensure that initial margins meet or exceed financial targets The Production team sets the strategies for raw materials development, vendor allocation, and compliance as well as overseeing technical design

Production Team Continued

Production (cont'd) Depending upon the organization, this team may be known as Production, Sourcing, or Product Development and Sourcing Example: URBN has two teams, Product Development (PD) and Production reporting into Global Sourcing The PD team is responsible for raw materials development and technical design The Production team is responsible for vendor allocation strategies and compliance

What are Psychographics?

Psychographic research helps marketers understand the motivational and cognitive or non-conscious drives of a target audience4 Psychographic variables are attributes relating to personality, values, attitudes, interests, or lifestyles. Sometimes they're referred to as activities, interest, and opinion variables4 or AIO variables Other traits measured in psychographic research include reference groups, life stage, personality, class consciousness, motivations

Why are Psychographics so important?

Psychographics are less about facts and more about feelings Psychographics measure emotional responses to stimuli that motivate consumers to seek certain products Psychographics, like demographics, are ever evolving and must be reviewed regularly As social, political, and economic climates shift, consumer behaviors adjust to meet the demands of the moment

Social

Social-Environmental Environmental justice and natural resource stewardship Social Standards of living, education, community, equal opportunity Economic-Social Business Ethics, fair trade, worker's rights

Step 1

Step 1: Financial and Assortment Planning continued Allocation works on unit assortments by store the tie back to the Buy Plan This is to safe guard against too much or too little of a product on hand in any store Assortment Planning for the digital channel is treated as a single store Due to the global reach of the digital channel, there is typically a dedicated team that analyses and assorts this "store"

Financial and Assortment Planning

Step 1: Financial and Assortment Planning continued Planning/Buying work together to establish the specific goals by department and classification They plan Sales, Markdowns, Initial Markup, Markdowns, AUR, Maintained Markup, and establish the Buy Plan The Buy Plan is a matrix that outlines the number of styles and at what price points and initial markup are needed to meet the goals of the business Basic Replenishment, if applicable, will be planned at this time. Basic Replenishment is a category that is offered year round in the same color and size range

Step 2

Step 2: Product Assortment (Line Adoption) Design, Technical Design, and Production work together to create Fit Samples and associated costing Production/Buying/Design review the Fit Samples on model and discuss the first round of costing It is the objective of Production to meet the Initial Mark Up goals and delivery dates established for the business Styles are approved for production or rejected for resubmission

Step 3

Step 3: Buy Review Buyers present Design, Production, Planning, and Marketing with their final assortment Frequently new information has surfaced and Buyers request Design and Production to fast track new ideas The objective is that the Line Plan and Financial Plan are both met before final management sign off Marketing begins the process of preparing digital and instore campaigns

Step 4

Step 4: Production Production reviews the preliminary costing and establishes and a sourcing strategy Production places the final orders with the nominated factories Several rounds of fitting with Design and Buying take place before all styles are approved A sample set is provided to the Marketing team for photography Production and Design often travel to the factories to supervise production and trouble shoot The objective is that all orders arrive on time and on standard

Step 5

Step 5: Delivery and Distribution Orders are shipped from the factory to the port of departure, to the port of entry, to customs, and ultimately to the distribution center Inspections take place at the factory and at the distribution center to ensure that the product meets standards Allocation reviews the initial plans and makes adjustments accordingly Product is packed by store and delivered accordingly Product for digital is made "live" Marketing campaigns launch

What are Demographics?

Studies of a population based on factors such as age, race, gender, ethnicity, religion, economic status, level of education, occupation, income level and region Segmenting a population into demographics allows companies to assess the size of a potential market and also to see whether its products and services are reaching that company's most important consumers.5Census data is an excellent resource for researching demographics

Key Elements

Summary of key elements within the Strategic Plan The Mission, Vision, and Core Values are the overarching and most stable elements of a Strategic Plan The more volatile and evolving elements that adjust year over year are: Sales and Profit Market Position and Competitive Advantage Target Customer Channels of Distribution

Summary of Key Elements

Summary of key elements within the plan (cont'd) Breadth and Depth of Product Mix Brand Portfolio and Image Managing Investments and Growth Strategies Strategic Partnerships Corporate Culture and Social Responsibility

Sustainability

Sustainability During this past decade, the notion of Sustainability has emerged as a necessary element of all strategic plans Customers are demanding more and more information regarding how corporations address the following issues as they relate to humans involved in the supply chain

How Customer Segmentation Works Continued

Target segments according to their profit potential and the company's ability to serve them in a proprietary way Invest resources to tailor product, service, marketing and distribution programs to match the needs of each target segment Measure performance of each segment and adjust the segmentation approach over time as market conditions change decision making throughout the organization2

Strategic Business Plan

The Strategic Plan is developed by the executive leadership team and should be directly tied to the mission, vision, and values of the company The Strategic Plan is the core document that details the annual targets for sales and profit and the road map to ensure success All corporate decision making must be driven by the objectives of the Strategic Plan Most companies draft 3 or 5 year strategic plans that are calibrated on an annual basis

What did Product Development mean historically?

The first RTW fashion houses in NY were located on 7th Avenue. Designers sketched just blocks away from the factories that manufactured the product. Production managers ran back and forth between the design studio and the factory carrying sketches and raw materials. The process was slow. Products were designed a year before the product reached the stores.

Consumer-Focused Marketplace

The relationship between the consumer and the brand is essential to the success of any apparel business Customer intimacy is the art and science of understanding why people buy Brands must constantly research and study their target market to keep up with shifts in buying patterns Consumers are less loyal today than in the past and cross shop many retailers to find what they are looking for A brand that isn't meet the target market's need will fail

What is Product Development?

The strategic, creative, technical, production and distribution of goods having a perceived value for a well defined consumer group.

General trends that impact Consumer Behavior

There are over-arching significantly impact consumer behavior across consumer segments These trends are both evolving and predictable Impact of economic expansion and contraction Prioritization of efficiency vs. experience Fashion independence Comfort

What does Product Development mean Today?

Today the a new process of Product Development has supplanted the old model. Designers, Production Managers, Technical Designers, Buyers, Planners and Distribution specialists work together as a team with global manufacturing partners. The most desirable products are shipped to the store when the customer is ready to buy. The goal today is the get product from concept to point-of-purchase in 10 weeks or less.

How does PLM work?

Typically PLM is manipulated by each team working in the supply chain: Design/Product Development: Design concept, color pallettes, and prints, initial design specifications Production/Sourcing: Production Calendar, product tracking, BOM, cost targets, approved costing Technical Design: Technical specifications, garment patterns Vendor Partners: Cost and lead time proposals Buyers/Planners: Initial purchase order, approved purchase order Distribution services: Transit from vendor, customs, clearance, receipt at distribution center, transit to stores

Vision Statement

Vision Statement The Vision Statement, more commonly know as "vision", is the articulation of the idealized image of the brand as the founders intend for the entity to be perceived The Vision is a forward-looking statement that serves as a target Every company is working towards achieving the Vision

Apparel Supply Chain Structure

What are Collaborative Product Supply Chains? Interactive networks of manufacturing specialists working together to unite complimentary resources to respond to a market opportunity through creation of a specific product. Collaborative supply chains are best able to respond with flexibility and agility to to rapidly changing business needs. Collaboration positively impacts innovation, quality, speed to market and product costs.

Apparel is a Mature Industry

What is a Mature Industry? Mature industries produce products that are categorized by relatively stable sales from year to year and by a high level of competition.

What are the different types of Brands?

Wholesale Brands Private Label Brands Store Brands

What does "Acting Vertical" mean?

"Acting Vertical" is the process of using collaborative product strategies to mimic the results of Vertical integration without owning or controlling the manufacturing resources Example: Gap, Inc The brands within Gap, Inc (Gap, Banana Republic, Old Navy) internally refer to themselves as "vertically integrated" because the teams employ collaboration with business partners through PLM. They seek to control the manufacturing process by becoming the largest and most valued client of each vendor.

Generations that impact the consumer marketplace

As people are living longer and buying decisions are being made by ever younger members of the household, marketers are tracking a large number of generations today Matures or the Greatest Generation (born before 1946) Baby Boomers (born 1946-1964) Generation X (born 1965-1978) Millennials (born 1979-2000) Generation Z (born 2001-present)

Elements of Customer Segmentation

Demographic Segmentation Psychographic Segmentation Cohort Segmentation