How Crocs, Kohl’s and Other Brands Avoid Squeezing Supply Chain Margins

Over the past two years, the retail industry has been skewed by a market landscape that seems to be constantly and drastically changing. Lockdowns, supply chain disruptions, skyrocketing transportation costs, runaway inflation, the recent ripple effects of Russia’s invasion of Ukraine and a new poll showing widespread financial distress among consumers.

What can retailers and brands do to avoid being crushed by all this turmoil? It turns out a lot.

For example, Croc’s, the casual shoe brand, announced that its revenue in 2021 jumped 67% from 2020, with operating profit that more than doubled despite disruptions that included store closures. factories in Vietnam.

According to trade journal, Croc’s has benefited from an emphasis on aggressive social media marketing and “high profile collaborations”.

What about retailer Kohl’s, whose activist investors campaigned for a takeover due to its declining share price? The department store chain saw a 22% increase in revenue in 2021 and a similar widening in gross margin.

Along with leaner inventory management, the company said it has started to attract a new, younger and more diverse customer base with the launch last year of its in-store collaboration with French health and beauty brand Sephora.

Hotter Shoes, a UK-based shoe maker-retailer, went last year from a loss of almost $9m (£6.6m) in 2020 to emerging in the dark the last year thanks in part to a customer-centric redesign of its website and new partnerships with other e-commerce platforms.

What do these retailers and others who seem to have dodged a lot of bullets have in common? For one thing, they make less assumptions about what will sell and listen more to consumers about what they want and what they’re willing to pay for it.

They all highlighted brand partnerships like Kohl’s with Sephora (which closely followed Target’s partnership with beauty brand Ulta). According to an analysis by Cowen & Co., Kohl’s collaboration could be a “game changer.” Cowen said the company “skillfully transformed stores into omnichannel hubs.”

Crocs, meanwhile, started offering collaborations with cosmetics brand Benefit and clothing brand Free & Easy last year.

It turns out that retail is more than the fastest and cheapest supply on the one hand and promotional pricing and marketing on the other. Successful brands work on both sides. For example, more and more retailers and brands are collaborating with suppliers based on demand forecasts based on customer research and extensive customer data.

A study published last fall by consulting giant KPMG found that “a customer-centric supply chain is driven by visibility, relevant data and a shared commitment to customers. It also seeks to balance customer expectations with profitability, delivering the desired customer experience without under- or over-investing in capabilities. »

In practical terms, this means that winning retailers are those who strive to take the guesswork out of designing, choosing, ordering and marketing the merchandise they offer. According to Inna Kuznetsova, CEO of 1010Data, a retail analytics provider, more than 70% of retailer promotions fail because they cannibalize existing products or try to sell the wrong products to the wrong consumers.

After two years of supply chain headaches, she says more and more, “we’re seeing retailers.. sharing promotions data and improving efficiency.” Retailers are also reducing their product offerings based on real-time customer feedback and margins.

This is the approach pursued these days by luxury home furnishing brand RH (formerly known as Restoration Hardware). In a recent chat with analysts, CEO Gary Friedman lamented that supply chain issues had put a dent in the company’s plans for its spring catalog. It was supposed to come out in March with 450-500 pages. It has now been pushed back to May and will only be 300-350 pages because “things are behind schedule and I feel like it might even be later. We want to have goods in stock.

Friedman mentioned a factor that all retailers should probably consider.

“The question people need to ask themselves is, ‘Do I want to be a bigger, lower-margin company and chase sales? Or do I want to be a smaller, higher margin business and come out of it really positioned for the long haul? ” And that [higher-margin option] is the point of view that we have adopted.

Much to consider in what you have just read regarding current and future economic conditions and the consumer perspective.