Managing the risk of fashion – Truworths
Truworths strives to create winning merchandise ranges across its brand portfolio season after season, offering customers internationally styled, aspirational fashion and homeware of superior quality. Truworths’ proven merchandise philosophy of offering customers an extensive range of garments and styles, while offering a limited quantity of each style ensures exclusivity.
The youthful fashionable customer
Truworths targets a youthful and fashionable customer and through its exclusive market-leading ladies’ and men’s brands aims to cater for the varied lifestyle needs of this customer, from casualwear to workwear, eveningwear, accessories and footwear.
Fashion is aimed at making customers look attractive and successful and feel enthused with confidence, regardless of their age or size. This single customer view removes the risk of segmenting the market by targeting different customer profiles, and provides clarity and focus to the buying and marketing teams.
Truworths also offers kidswear and has an expanding presence in this market through its multiple exclusive kidswear brands – LTD Kids, Earthchild, Naartjie and ID Kids.
A selection of superior quality homeware is offered through Loads of Living to complement the fashion offering.
Forecasting fashion trends
The Truworths ladieswear and menswear Fashion Studios drive the merchandise forecasting process. The studios research international fashion trend information from a wide range of sources, including trade fairs, online fashion intelligence, social media and by following global and local street trends.
Merchandise designers work in partnership with buyers to track trends and formulate the main fashion direction for each new season. A design and customisation process is completed for each brand, providing direction on colour, fabric, print and trim in line with the latest emerging trends. Season-ahead travel to the northern hemisphere, which has been curtailed since the onset of the COVID-19 pandemic, together with ongoing insights from consultants in the major fashion capitals of the world, supplement these seasonal processes.
Similarly, homeware ranges for Loads of Living require the buying team to monitor local and international trends to meet the needs of discerning homeware customers.
Refer to Material issues, risks and opportunities for more detail.
Consistent fashion formula
Proven processes are followed by the merchandise planning and buying teams to manage and mitigate the risk of fashion throughout the product life cycle. This includes forecasting and interpreting international fashion trends, tailoring these trends to the South African market, designing garments, planning and assorting ranges, sourcing and engaging suppliers, delivering fast fashion and quick response to new trends and popular styles, and managing production across the supply chain until the merchandise reaches stores and, finally, the customer.
A consistent merchandise buying and planning formula is applied to every six-month season. Developed over many years, this process is constantly refined and updated to align with the growth and complexity of the business, and to continue to meet the challenges of the fast-moving and evolving global fashion retail market. Checks and balances at critical stages in the process limit the risk of fashion failure.
Garments are selected and designed to complement each range and to showcase the differentiating characteristics of each brand. Detailed planning and balancing of ranges ensures consistency of the merchandise offering and provides structure to the creative process.
Merchandise is sourced from a combination of local and international suppliers based on a carefully considered methodology that provides flexibility and reliability, and mitigates supply chain risk. At each stage in the process there are interventions to ensure that the merchandise meets the exacting quality standards that customers both value and expect.
Following the outbreak of the COVID-19 pandemic, the merchandise team developed a virtual method of creating, buying and reviewing ranges during lockdown, enabling teams to meet buying deadlines despite the restrictions.
Managing fashion risk in 2020
While merchandise strategies and processes are implemented to reduce fashion risk, new and different challenges arise each year, with 2020 creating headwinds never experienced before.
The change in lifestyle due to lockdown with people working from home and being restricted from social contact led to a material reduction in demand for smart and formalwear in both ladies’ and men’s apparel and footwear from March 2020 onwards. Conversely, sales of leisure product have increased materially across ladies’, men’s and kidswear.
The weak economic environment, compounded by the after-effects of the COVID-19 pandemic, has placed consumers in Truworths’ mass middle-income target market under intense financial strain, resulting in customers spending less on fashion clothing.
Weaker consumer demand, together with challenges being faced by certain competitors, has led to higher and ongoing levels of discounting and promoting in the market.
In the current environment consumers are seeking value and increasingly buying on promotion. This places pressure on sales growth in Truworths which has historically managed stocks well and has been able to contain discounting at reasonable levels.
Truworths faces a perennial challenge in managing the impact of the volatility of the Rand/US dollar exchange rate on product pricing as approximately 55% of apparel is imported and US dollar denominated. Increasing local sourcing partially mitigates the currency exposure (as most fabric for local production is imported) while offering the added benefit of quick response.
The ongoing strategic fabric and volume consolidation process is aimed at containing inflation to further mitigate the impact of exchange rate volatility. Other benefits of this consolidation process include improving the value offering to customers, ensuring high-quality standards, strengthening relationships with key suppliers and managing the complexity of multiple brands and buying teams.
Despite the most challenging operating environment in many decades, stock levels in Truworths were well managed. Gross inventory only increased 3.1% despite the trading restrictions and stores being closed for five weeks during lockdown, with no winter over-stock and no impact on the gross margin which increased slightly to 55.6% (2019: 55.5%).
Expanding brand portfolio and ranges
New brands and ranges are constantly developed to increase customer appeal and demand. The merchandise team continued to experiment with the product mix within the new Context brand, including the introduction of small local skincare brands.
2021 will see the continued expansion of the brand portfolio, with the launch or relaunch of new brand concepts developed over the past year.
- The Identity Superstore aims to build on the success of Identity and include the recently launched ID Kids range and introduce a 9 – 14-year-old range to bridge the gap between younger kids and adult ranges. The introduction of the Superstore will coincide with the launch of an e-commerce platform for Identity to grow sales to this younger customer segment and capitalise on the expansion in online shopping in South Africa.
- Hey Betty is targeted at the young urban fashion lover and the relaunch of this young lifestyle concept will combine great value, casual products with in-demand brands and lifestyle accessories.
- The Kids Emporium, together with a full online offering, will combine upmarket kids brands LTD Kids, Naartjie and Earthchild and a new baby range of LTD Kids, including baby accessories and gifting.
- A new menswear concept aimed at the better-priced youthful fashionable casual menswear market.
Technology driving efficiencies
The product life cycle management (PLM) system introduced in 2019 has been implemented across all merchandise divisions, providing the buying and planning teams with visibility of the entire product development process.
The system aims to optimise procurement and supply chain processes, providing merchandise teams with a tool to identify and address delays at any stage in the process and implement procedures to mitigate against these issues arising in the future.
PLM ensures that more detailed merchandise briefs are provided to suppliers, resulting in more accurate product samples being designed and developed, ultimately reducing timelines, improving speed to market and potentially achieving better prices.
The internal Sourcing Division, which is the largest supplier to Truworths, has been integrated onto the PLM system. Owing to the scale of the integration project, compounded by the complexity of the national lockdown, the supplier integration component of this project was delayed. Additional suppliers will be linked to the system in the year ahead and this online collaboration is expected to further reduce production lead times.
The upgraded Truworths core merchandise management system was implemented in the second half of the 2020 financial period. As the system was launched during lockdown the project was managed remotely from offshore by the implementation partner. Despite these challenges and the scale of the implementation, minimal business disruption was experienced. This system provides a core underlying processing engine which will enable easier integration with new systems such as the point-of-sale system currently being developed, incorporation of e-commerce, greater flexibility for promotions and loyalty campaigns, and the integration of business acquisitions.
Superior quality fashion
Truworths is synonymous with quality fashion, with industry-leading metrics for low levels of quality-related customer returns.
The quality assurance team partners with local and international suppliers to ensure merchandise is manufactured to consistent quality and prescribed standards. The implementation of the PLM system should further enhance quality assurance by providing greater visibility of the products’ progress through the quality process and enabling more detailed reporting and analysis.
During the COVID-19 crisis interim virtual quality assurance processes were implemented to counter the impacts on the supply chain partners and prevent delays in quality assurance processes.
The in-house fabric and garment testing laboratory, accredited by South Africa’s Council for Scientific and Industrial Research (CSIR), ensures that the laboratory’s methods and results are aligned with international standards.