This is an excerpt from Monday’s (5/24) Point of Sale retail supply chain newsletter sponsored by ArcBest.
One of my five predictions for retail supply chains in 2021 was an increased use of on-demand, custom garment manufacturing. Not long ago this was seen as a luxury process only available to upscale customers willing to pay top dollar, but that’s changing thanks to new manufacturing technologies, changing customer preferences and sustainability expectations, and mounting reverse logistics costs.
Footwear giants Nike, Adidas and Vans (VF Corp.) have proven there’s a market for personalized, custom-designed sneakers. I just made a pair of Nike Air Max 1s last week! Late last year, Amazon launched “Made for You,” a made-to-order, customizable T-shirt service.
Plans like Amazon Made for You and Stitchfix fit the ethos of today’s shoppers – sustainability and less waste. There are significant benefits for the retailers as well, including the ability to respond quickly to evolving fashion trends, keep minimal stock on hand and discount less at season’s end.
Ralph Lauren is the latest brand to roll out on-demand manufacturing with the launch of The Made-to-Order Polo feature on its website last week. It’s a straightforward offering allowing customers to choose from six designs and 24 color combinations. Customers can create hundreds of designs by choosing the color or color block of the body, sleeves and collar and customizing the sleeve with letters, words or initials through a digitally integrated experience.
Why is Ralph Lauren doing this? In its announcement, the company said this model has both immediate and long-term benefits, including “reducing product inventory, allowing for rapid fulfillment and agility in meeting consumer desires and taste, eliminating the need for markdowns.”
(Image: Ralph Lauren)
For many years Ralph Lauren has offered personalization at many of its flagship stores, including London’s Regent Street, where customers can design their own version of the classic Polo shirt, an Oxford shirt or a blazer in-store. Now, with new manufacturing techniques like RL’s “flat-knit technology” and a desire for more DTC sales, Lauren intends to recreate the rich customer experience of in-store personalization online.
Ralph Lauren posted Q4 and full-year 2020 results last week, and they left something to be desired. While many of its peers are posting stellar uplifts as Americans both return to stores and return to buying clothing, RL’s Q4 North American revenue was down 10% – off the back of an 11.2% decline in the prior year.
Final thoughts. Ralph Lauren is no stranger to excess inventory. Between 2013 and 2016, Lauren’s stock price plummeted nearly 50% as analysts harped on poor inventory management. At the time, RL had an inventory lead time of 15 months, which created three major problems. First, the company was less able to react to changing consumer trends. Second, holding inventory is not cheap. A final (and most important) consequence was frequent discounting of low-demand products and a shift toward outlet stores, which not only reduced profit margins, but also diluted the luxury brand image.
Management believes on-demand garment manufacturing is a viable option for RL to keep inventory lean, compress lead times and reduce end-of-season markdowns while meeting changing consumer desires. I can’t argue with their logic, but I will argue the price point may not attract the level of customers it needs to generate the scale necessary to make the unit economics work.
The primary reason mass customization isn’t widespread is simply the fact that it’s expensive.
This is why only premium brands have entered into the space until recently. To make it work, brands either need volume to generate economies of scale or they need a lofty price to rationalize the cost. I’m afraid that Ralph Lauren, with this offering, won’t generate the scale needed to make the model work at this price, and I’m wary of the price itself.
At $105 to $168 for a custom Polo shirt, I feel Ralph Lauren may be negatively splitting the market. At that price, Ralph Lauren won’t be attracting the value-conscious consumer. And for the premium buyers, when they spend $150 on a designer shirt, don’t you think they might want the designer’s shirt? I could be way off base here, but most people I know willing to spend that on a shirt are buying the brand, the quality and the design.
Will this work? No idea, but I love that the company is experimenting.
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