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A Lesson in Supply and Demand

Posted in internet by tipo on January 12, 2010

Who wasn’t appalled when they found out that the H&M on 34th st, NYC was throwing away distressed inventory? The go to answer is for H&M to donate excess merchandise to charity – and it should be – but digital can prevent retail giants from reaching that point all together.

All eyes should be on Threadless. Threadless aims to keep their inventory level at zero. Each week artists submit designs in which the online community scores them from 0-5 and decides whether they’d purchase this design for a t-shirt or poster.  The most popular weekly designer receives $2,000 and is invited to the HQ to be a part of the manufacturing process. Based on the voting process, Threadless then determines how many t-shirts and posters to produce.

Retailers need to harness the same supply and demand insights from their communities. Clearly, it’s much more difficult for a company that sells more than t-shirts and posters. It is doable. H&M could publish their spring line on their .com and elicit the community’s feedback to prevent the 34th st debacle. Did one product perform consistently below average? Kill it. Did a blouse resonate more with people from Illinois than New York? Let’s amend our local distribution plans. Retailers simply do not realize the amount of insights they can gain in advance from digital communities.

Please feel free to share other companies or sites that are following Threadless’ footsteps!

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5 Responses

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  1. Thomas said, on January 12, 2010 at 10:18 am

    I agree that H&M may learn quite a bit from an/their online community.

    However, I have some doubts if Threadless and H&M are really comparable.
    Threadless is mostly an online store with an even more streamlined and simplified concept and value chain than H&M. In addition, in my eyes Threadless and H&M have two quite different groups of customers – with some overlap of course. (I just assume here that H&M shoppers aren’t that involved in all this stuff from my experience in Austria – I may be horribly wrong).

    What I want to say is that an online voting for H&M’s collection may not be very “representative” (a least not much more than some research they’ll do anyways …, http://neilperkin.typepad.com/only_dead_fish/2010/01/powerful-ideas-and-poor-conclusions.html) and that H&M is often building fashion agenda by the sheer amount of stuff they put out there in the first place. Or maybe they just don’t really care if they produce too much because it’s not really a cost driver for them.

    Cheers

  2. tipo said, on January 12, 2010 at 10:48 am

    Thanks Thomas for your very thoughtful response. Yes, I agree and acknowledged in my post that Threadless has a very streamlined inventory compared to H&M (and really any other retailer). However, gaining insights from your community that can impact product development, manufacturing, and distribution hold true for any retailer. It might be more difficult for a company like H&M, but it is doable. And to your point, H&M has built a strong community around their massive amount of content, which will make the insight process that much easier!

  3. Thomas said, on January 12, 2010 at 12:15 pm

    Thanks for the response. I’m the first to admit that you should use your community to gain insights – actively or passively.
    I only have some doubts if that could really prevent an inventory nightmare from happening, if the link between e.g. online voting and in-store demand is strong enough. But then again – I have no idea which methods H&M is using to forecast demand.

  4. swittman said, on January 13, 2010 at 7:55 am

    This is more a responsibility issue than a how-can-digital media-mitigate-this one. H&M disposing of excessive inventory is unfortunate, and Id even say unethical. There are many ways in which this clothing could have been put to good use.

    I do agree, as well, that utilizing the online community could be advantageous, but only to a certain extent. It could potentially help weed out clothing that gets a negative rating, but there are so many external factors that need to be taken into consideration. For example, the sample size, the region (inventory of HM varies from store to store, country to country), etc. Another important factor: just because a piece of clothing looks nice in a picture and is highly voted doesnt mean that will translate to real life. It will give a better sense of what designs are more accepted but it will not gurantee more sales as one cannot tell how something fits or looks on them from a simple picture. That is why the concept of Threadless works. They vote on a simple design that will look identical on the computer as it will on a shirt…and everyone knows what a tshirt looks like on them; not everyone knows what a dress, jacket, shoes, etc does.

    Lets not also forget that Threadless is a forum for external users to submit their designs. They dont have the labor issues as HM would have. HM would first have to produce a piece of clothing, hold off production on it while waiting for feedback, and then potentially scratch it all together based on what could be a minimal sample. it is definitely worth a shot to see what type of feedback they get, but i could see why retailers would not jump at this. Ít also depends on the retailers philosophy, how they gauge their demand, and forecast fashion trends in general.

    Last thought: HM always tries to adapt to the current trends (i.e. plaid starts to blow up, they have millions of plaid button down options), so i feel like they never truly have one core line per season (I mean they technically do, but their inventory always varies) It is a great idea in my opinon to use an online community, but could be quite tricky to implement, particularly with a store like HM. Perhaps it could work better with a retailer that has a more distinct, defined line per season. Finally, if i were to this id start with a small sample, such as solely womens jackets for spring or solely mens button downs, etc to first get a better sense of how this could work. ok, done. much love from germany tipo.

  5. tipo said, on January 17, 2010 at 1:36 pm

    Great great comments, Mr. Wittman. As I noted in the post, Threadless and H&M businesses are not equal. But the idea is that H&M’s business model needs to adopt digital beyond marketing and allow it to start to becoming a part of product development, R&D, distribution and so forth. Clearly this is a large undertaken as you communicated oh-so-well, but it is a necessary one. Digital allows businesses to streamline. As more and more companies hop on this bandwagon, waste will be a dealbreaker. Waste in terms of intelligence, resources, distribution and so forth. All of this will soon be consumer facing and companies need to prepare for such!


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