Building Sustainable Practices: Leveraging Inventory Efficiency for Sustainable Fashion Retail

In 2023, McKinsey & Company published their findings of a five-year study analyzing whether consumers’ actions match their words, that is, whether they are, in fact, choosing to pay more for more sustainable brands when they shop.

The results were that, across many product categories, brands with sustainability-related claims saw more growth: “…Products making these claims averaged 28 percent cumulative growth over the five-year period, versus 20 percent for products that made no such claims” (McKinsey, 2023).

If anyone was unsure of consumers’ actual behavior compared to their self-reported values, this study supports that sustainability is in demand. Consumers, especially in the younger generations, are paying attention to the sustainability claims of who they buy from, and brands should see this as an opportunity to respond to that demand.

However, compared to other areas of retail, the fashion retail industry has unique challenges surrounding sustainability. These brands must be strategic and thorough to build sustainability in their practices. One rising opportunity is through inventory efficiency.

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The Challenge of Sustainable Fashion Retail: For Today’s Fashion Brands, Sustainability is Easier Said Than Done

A staggering 92 million tons of textile waste ends up in landfills each year, and in the past 15 years, the clothing production rate has doubled. But if overflowing landfills weren’t enough of a problem, clothing production also pollutes our water in the dyeing process and is responsible for an estimated 20% of global industrial water pollution.

Improving the environmental impact of the fashion industry is a goal with many facets, and it’s important that fashion brands strive for a comprehensive approach. Some aspects, like using sustainably sourced materials or ensuring the final products are of good quality so they last longer, are more straightforward for businesses to grasp. Others, like avoiding overproduction and excess inventory, are more complex.

Overproduction occurs because brands consider it worthwhile from a business standpoint, even though they know a percentage will turn into deadstock and need to be disposed of. Clothing has become cheap to produce, and by having more available, they can increase revenue and profits, even though they are paying for more inventory than necessary. Add to this the fact that there is a seasonality to the problem. Retailers don’t want to hold on to stock for too long because of the expense of storing it, and consumers want to shop the latest trends every season.

An effective solution to the overproduction problem must work with, not against, the reality of this situation — the business’ objectives and customers’ desires. This is where the strength in inventory efficiency lies, as it helps businesses do more with less inventory.

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What is Inventory Efficiency?

Inventory efficiency is how well a retailer manages its stock to meet customer demand while minimizing waste and costs. It’s about having the right products in the right quantities at the right time. Businesses avoid overstocking and understocking and can find the right balance that helps them maximize sales while minimizing waste. But this is all easier said than done. Supply and demand vary according to time and place across different sales channels. Only with a sophisticated tech solution can businesses gain continuous insights to drive their inventory decisions.

3 Essentials for Inventory Efficiency in Fashion Retail

Fashion retail brands already rely on rules engines to guide their inventory allocation, but this alone won’t help them achieve inventory efficiency. They must ensure they have a solution with the following three capabilities.

Integration with the Entire Tech Stack

The first key piece of the solution is seamless integration with the entire tech stack. Dropit approaches this system agnostically, sitting atop all existing platforms like ERP, OMS, and POS systems. This provides the foundation for a complete view of inventory and has the added benefit of easy implementation.

Unified Inventory Visibility

Existing systems in the retailer’s tech stack almost certainly update at different frequencies, which can lead to data inconsistencies. For inventory efficiency, it's essential that data is cleansed, synchronized, and standardized to provide an accurate, live picture of inventory levels across the entire ecosystem for driving decisions.

Micro-Decisions for a Macro-Impact

Finally, the solution must be capable of continuous machine learning and decision-making on a micro-scale. This enables finely-tuned allocation and restocking decisions as well as returns. Instead of treating all returns the same, retailers need to know how to best handle each one at the granular level. Over time, micro-adjustments to allocation, restocking, and returns decisions contribute to inventory optimization.

Reduce Waste through Inventory Efficiency with Dropit

Complete integration, unified inventory visibility, and micro-decisions — these three pieces are how Dropit helps fashion retail brands reduce waste, avoid overproduction, and improve their sustainability practices without sacrificing profitability.

The key to solving the fashion industry's waste problem is to ensure that every item is optimized for sale rather than becoming excess. 

To learn more about improving your inventory efficiency and making a meaningful impact on waste reduction, contact Dropit today.