CLIENT: An apparel chain with 400 stores.
In a highly stock-keeping unit (SKU)-intensive industry segment, this apparel chain had been purchased out of Chapter 11 a few months earlier by a private equity firm. The chain was underperforming and suffering from an antiquated merchandising technology infrastructure, following years of under-investment by the prior owners. Comparable sales, margins and in-stock position were trending negatively and had been for years despite a well-defined and targeted niche.
We performed a focused IT risk assessment review to help guide this company in its upcoming merchandising system replacement. As a result of this review, we recommended that the company implement this replacement in stages, based upon projected and measurable ROI, in contrast to the “big bang” approach recommended by the software vendor.
The retailer approved the vast majority of our recommendations, leading to a comprehensive merchandising ROI review, whereby we benchmarked the retailer’s merchandising processes, tools and cost with leading practices in the apparel sector. The merchandising and planning organization structures were redesigned to support strategic and business objectives as reflected by the newly developed and agreed upon performance accountabilities and key metrics. Part of the organizational redesign included creation of new positions that were key to support the business processes, which were staffed during the engagement. The client then retained our team to lead the implementation of replenishment and allocation systems, as well as the related changes to business processes, organization structure and staffing, key performance indicators, management processes as well as the necessary change management activities. We also assisted in the revamping of the assortment strategy to focus on customer attributes.
The revamped assortment strategy customized the assortment to local customer needs, leading to sustained improved comparable sales, reduced markdowns and higher gross margins. The application of relevant leading practices in replenishment and allocation as outlined above allowed the client to materially reduce its out-of-stock rates while holding inventory turns unchanged. This resulted in improved comparable store sales and return on capital.
Building on the strong replenishment and allocation foundation developed with PwC’s Retail Consulting Services, the retailer more recently has leveraged this expertise to introduce compelling competitive offerings unmatched by its competition, including a guaranteed in- stock program on select key styles. This resulted in a comparable sales increase on these styles of more than 25%, with virtually no product given customers.