SKU management isn’t easy to navigate for fast-paced fashion brands. Inventory management, and apparel logistics can be notoriously complicated, thanks to the wide range of product variations (different sizes, colors, and styles) they need to manage.
It’s easy to make mistakes that can lead to stockouts, mis-picks, and other costly errors that frustrate your customers and harm your brand’s reputation.
In fact, one report found that the apparel industry has among the highest out-of-stock rates of any sector, thanks largely to the complexity of SKU management. Another found that fashion retailers can miss out on about $1 trillion in sales due to stockout issues.
Fortunately, SKU management doesn’t have to be a nightmare for fashion brands. Here’s how you can overcome the unique challenges facing your ecommerce SKU strategy, and pave the way for long-term success.
Challenges of High SKU Counts in Apparel Logistics
Inventory management can be complex in any industry, but the fashion landscape deals with more challenges than most. Fashion companies can end up with hundreds, even thousands of SKUs at once. For instance, the fast-fashion brand SHEIN added around 260,000 new SKUs to its inventory in 2021.
Every product you sell as an ecommerce brand in the fashion sector undoubtedly comes with multiple variations. For instance, a single t-shirt available in six sizes and five colors results in thirty SKUs. This exponential growth can overwhelm even seasoned inventory managers.
The more products you add to your collection to appeal to a wider range of customers (and outshine the competition) the more complex fashion inventory management becomes.
High SKU counts in the fashion industry come with other unique challenges too. Organizing your warehouse becomes tricky when you’re dealing with numerous SKUs, making it harder to locate products quickly, leading to issues with order picking efficiency and accuracy. That results in longer fulfillment times, and a greater risk of dissatisfied customers.
On top of that, demand forecasting adds another layer of complexity. With each SKU representing a unique product variation, predicting customer demand accurately becomes increasingly difficult. Misjudging demand can lead to overstock, tying up capital in unsold inventory, or stockouts, resulting in lost sales and frustrated customers. You could even end up spending a fortune on warehouse space you don’t need – that’s problematic at a time when warehousing costs grew by 10.1% in the last year.
Plus, there’s the challenge of dealing with returns to think about too. Customers frequently return items due to fit issues, style mismatches and other factors in the fashion space. These returns can disrupt SKU management systems, complicating restocking processes and increasing labor costs. Efficiently managing returned items while ensuring accurate SKU counts can feel like an uphill battle.
Best Practices for Managing High SKU Counts
Avoiding the challenges of fashion inventory management and apparel logistics doesn’t have to mean minimizing the number of products you sell, and stifling your growth. Even with high SKU counts, there are steps you can take to stay one step ahead of the game.
Here are the best practices you should be following:
- Use SKU Categorization and Standardization
Studies have shown that SKU standardization can save businesses between $15,000 and $800,000 on an annual basis. Implementing strategic categorization and standardization initiatives is the key to maintaining more control over your ecommerce SKU strategy.
Start by implementing logical SKU naming conventions – for instance, you could use the format of “brand-size-color-style”. This makes it easy to identify variations at speed within your system. Grouping similar products under a parent SKU can significantly enhance organization.
For example, a “blue medium t-shirt” can fall under the same parent SKU as its various size and color counterparts. This method reduces the number of unique SKUs your team needs to keep track of, making inventory management a lot easier. It can also help your team see all variations at a glance, making it easier to monitor stock levels and sales performance. - Implement a Robust Inventory Management System
There’s a reason why the global inventory management software market is expected to reach a value of $7.69 billion by 2032 – it saves companies time and money. In the world of fashion, inventory management software ensures you can accurately keep track of stock levels and movement in real-time. It gives you a broad and complete overview of your current situation.
For the best results, make sure your IMS solution integrates with the other tools you’re using to manage products and order fulfillment, such as your ecommerce platform (like Shopify and Magento), and your warehouse management system.
Connecting these technologies ensures you’ll maintain a centralized and up-to-date view of your inventory across all sales channels, reducing discrepancies and improving accuracy.
As your fashion business grows, or you expand into multiple regions, explore the benefits of multi-warehouse management solutions. These will allow you to allocate stock effectively based on demand, optimize shipping times, and minimize costs. - Automate SKU Management with Technology
Automation technologies are an efficiency-boosting dream come true for fashion brands. By 2030, McKinsey predicts that fashion companies will be spending up to 3.5% of their revenue on technology each year – prioritizing automation, AI, and productivity boosting tech.
Automation tools can significantly enhance your SKU management efforts. For instance, you can use automated replenishment triggers in a system to alert your team when specific size or color variations reach a predefined minimum stock level. This reduces your risk of stockouts and frustrated customers.
You can tap into artificial intelligence to help you plan for future inventory decisions, with demand-driven forecasting and predictive analytics. You can even integrate technology like RFID scanning, barcoding, and pick-and-pack systems into your process to reduce human errors and mistakes.
Embracing the era of automation doesn’t just make your fashion company faster and more efficient, it can save you money, and improve your relationships with your customers. - Invest in SKU Rationalization
Finally, while you shouldn’t be removing products from your inventory just to reduce the complexity of SKU management, you can get rid of items that aren’t helping you grow. SKU rationalization processes give you a chance to evaluate the performance of every SKU, to identify slow-moving or redundant items that just aren’t worth future investment.
This can help you to identify which items you shouldn’t be spending your money on going forward, based on buyer trends and behaviors. Plus, it means you can reduce the complexity within your fashion inventory management system, freeing up valuable space and resources.
Make time in your calendar throughout the year to identify which SKUs are genuinely driving sales and increasing customer satisfaction, and make sure they’re the ones you prioritize. Low-performing SKUs aren’t diversifying your product collection – they’re just holding you back.
The Role of Kitting and Bundling in SKU Management
One extra strategy you can consider if you’re looking for a way to optimize your ecommerce SKU strategy, and apparel logistics efforts, is the use of bundling and kitting. Kitting and bundling strategies can have significant benefits for all kinds of ecommerce brands.
They can help you increase customer lifetime value, and generate loyalty towards your brand. In fact, companies that leverage product bundles usually end up with customers with 2.7 times higher lifetime values than their competitors.
Beyond this, bundling and kitting gives you a chance to streamline SKU management. By offering product bundles or kits—such as a t-shirt and jeans combo—businesses can reduce their overall SKU counts while simultaneously boosting sales. Instead of managing each product variation as an individual SKU, retailers can create a combined offering that appeals to a wide audience.
The key to success is making sure you continue to manage these kits with separate SKUs for inventory tracking purposes, but working with a fulfillment partner that can easily “bundle” the products together for you. This ensures that you can rapidly fulfill orders, while monitoring the performance of individual bundles and products.
Fulfilling bundle orders together also streamlines the fulfillment process, increasing efficiency, reducing the risk of mispicks, and speeding up delivery times. That all leads to more satisfied customers, and the potential for higher revenue.
Streamlining SKU Management in the Fashion Sector
Ecommerce inventory management is complex, particularly in the fashion sector, where SKU counts are high, and countless variables can cause disruptions. Learning how to effectively manage your SKUs with the right standardization processes, strategies, and technologies is the key to making sure you can achieve sustainable growth in a competitive market.
The more you adopt cutting-edge technology, automated practices, and work with the right partners to help enhance apparel logistics, the more your profitability will grow. Your approach to SKU management can help to differentiate your company from the competition, and pave the way for stronger relationships with your customers.
Don’t let high SKU counts overwhelm your business, and stifle your growth. Work with a partner like Relentless Fulfillment and access the technology and support you need to give your fashion brand an edge. Contact our team today to learn more about how we can help you to master the complexity of order fulfillment in the apparel industry.
