Lane J. Anderson
Problem: An opportunity arose in a toy business to build a related accessory children’s clothing business. Target recipients were ages 3 – 12, covering a very broad spectrum of possible styles and preferences. Additionally, a very heavily skewed seasonal business and advance purchase requirements left a large potential margin for error around production estimates. The challenge was to capture this business opportunity successfully while working to avoid the risk of high obsolete or excess inventory. Strategy and execution were both critical.
Solution: Consumer research was essential to understand the desires of the potential customer. Focus groups were conducted with mothers of children 3-12 as well as with some children. We learned that while the mother would pay for the purchase and had some influence over the decision, she was very reluctant to buy something the child did not like. Grandparents would also participate in funding many of the purchases, preferring more conservative styles. Because the toy had some heirloom quality to it, customers wanted more classic clothing styles that would not go out of fashion quickly. Specific styles were researched in focus groups followed by national quantitative research. Creation of a customer panel allowed national research studies to be done relatively quickly and inexpensively. Further innovation using the web allowed initial results to be obtained within one to two weeks, rather than four to six weeks that is more typical for a mail survey.
The product line strategy that evolved from the research learning called for a mix of timeless classic styles as well as slightly more fashion forward items. All were to be designed to have at least a two-year life cycle, helping to reduce the risk of obsolete or excess inventory after only one year. Given the broad age range, styles were identified that appealed well to this range of ages, usually targeting the upper end of the range to appeal to both older and younger children. A combination of in-house and outsourced designs kept the line looking fresh without a specific “look” that would limit appeal. Sizing evolved from numerical to aggregated (XS, S, M, L, etc.) sizing to reduce the number of SKU’s. Many of the styles were designed with adjustable straps, elastic waists, or ties to easily accommodate a range of children’s sizes without increasing the number of SKU’s. Having fewer styles with higher volumes was strategically designed to create large enough order quantities to be sourced more economically.
While sourcing was initially done in the U.S., new manufacturers were located around the world. By negotiating contracts with experienced contractors known for high quality work, both product quality and cost improved concurrently. The product line developed a reputation for its classic but fashionable styling which had been tested with consumers to ensure appeal, and for its superb quality fabrics and sewing.
However, worldwide sourcing increased order lead times and often created longer response times for reorders compared to domestic sourcing. A two-year life cycle helped reduce inventory risk. In addition, a January clearance sale and eventually having an internet clearance page and retail outlet stores helped liquidate excess inventory. On the other hand, developing good relationships with suppliers allowed us to have some fabric available for the most promising styles to allow quick fulfillment of replacement orders.
The clothing business was further expanded with the strategy of creating additional clothing accessories such as matching socks, shoes and hats that became add-on purchases. This helped improve the visual appeal of the merchandising as well as create incremental sales.
Results: Starting from almost nothing, this business grew into a multi-million dollar clothing business in just a few years. The reputation for quality has been strong. Ongoing consumer research and thoughtful strategy were essential in developing the business and establishing a loyal customer base.