Professional Documents
Culture Documents
The fashion apparel business is traditionally characterized by intense competition and short product life cycles. Recent
marketing literature has also focused on the increasing importance of retailing. Retailers are beginning to assume a central role in
the configuration of supplier networks, being operators who act globally either in terms of market seeking or resource seeking.
At this stage a set of problems emerge. In particular, we focus on buyer-seller relationship due to the rise in new formulas in
clothing retailing with production management models differing from the traditional systems. These new trends seem to have a
significant impact on the upstream relation in the supply chain, due to vertical integration in some industrial functions
(designing, sourcing, quality control) by retailers. For this reason, the paper investigates how retailers manage their relations
upstream in the supply chain, focusing on the balance expressed in terms of alternatives between lean/agile sourcing strategies,
local/overseas suppliers and product/range complexity.
I n the nineties there was a significant shift in the proposed long before the actual time of consumption. Second,
manufacturing of apparel to low wage countries throughout there are firms that compete with one another on the basis of
the world. Over the past few years in some cases retailers have their ability to rapidly adjust to the fashion trends imposed by
sourced products internationally in order to achieve a cost others, thereby ensuring speed to market and supplying
advantage. In other cases, domestic markets have been products already known to be a market success. These firms
selected on the assumption that the longer the chain, the more compensate for the lack of product planning by virtue of a
a significant part of the merchandise bought must be cleared production management model whose main characteristics are
out through discounting with a relevant impact on revenue. rapidity and flexibility. Thus the key factors for success in
Recent marketing literature has focused on the key questions these two different groups are different: in the first group, the
in choosing a global sourcing strategy or, instead, a domestic ability to influence fashion trends is often associated with a
supply chain. The focal position of apparel retailing appears strong brand image, while in the second, devising effective
symptomatic of the transition from a production-driven to a time to market formulas plays a much more important role.
market-driven characterization of the apparel manufacturing In this context, this present paper focuses on a series
sector [Taplin 1999]. This observation is in tune with a of problems that emerge from two research hypotheses
tendency already noted in diverse geographic contexts, where concerning the trade-off between complexity due to managing
it has likewise been found to evolve hand in hand with a the fashion content of the product sold and complexity due to
change in the structure of retailing. managing the supply chain. As first hypothesis, we assume
Traditionally, the framework of competition in the that retailers faced with a global sourcing strategy tend to
textiles/clothing sector is described by dividing operators into diminish the complexity by decreasing the fashion content of
two different strategic groups in terms of production the product sold, even from a technological point of view (in
management models. Firstly, there is a group identifiable as terms of raw materials either fabric or yarn). This hypothesis
clothing operators (either manufactures or retailers) seems to emphasize the retailer’s preference in choosing the
characterized by elevated capability of forecasting and cheapest sources worldwide in order to maximize gross
margin. As second hypothesis we assume that in order to
∗
decrease time to market, retailers may choose sourcing
Simone Guercini is Associate Professor in Marketing at the University of
Florence, Departement of Business Science, Via delle Pandette 9, 50127
alternatives that may not bring the cost advantage of a cheaper
Florence, Italy phone: 055-4374704; fax 055-4374910 e-mail: supplier but do offer the advantage of diminishing logistics
simone.guercini@unifi.it. Andrea Runfola is PhD Student in Marketing at the costs and lost sales. Redesigning planning processes to
University of Urbino, Departement of Business Science, Via delle Pandette 9, minimize the impact of inaccurate forecast can lead retailers to
50127 Florence, Italy phone: 055-4374688; fax 055-4374910 e-mail: choose those alternatives which result in a faster supply chain
andrea.runfola@unifi.it
Simone Guercini and Andrea Runfola share the final responsibility for the and that are not too distant either culturally or geographically.
contents of this paper. However Simone Guercini wrote paragraphs 1, 2, 4, Attention focuses in particular on the relation between product
and 6; Andrea Runfola wrote paragraphs 3 and 5.
management and supply chain management in terms of corresponding to the model of the industrial district. Also, as
alternatives between lean/agile, local/overseas and regards the structure of distribution, independent and
product/range. A case analysis referring to the italian leader in traditional retailing maintains the largest market share, in
the retail trade is presented in this paper. contrast to the typical model in the other European countries,
where one finds an increasing predominance of large
2. Buyer-seller relationships and supply chain distribution chains and specialized chains. For example, new
management in textile and clothing outlet centers formulas developed notably later in Italy than in
other European countries like France and UK [Burresi and
The textiles and apparel sector (t/a) has long been Guercini 2003].
characterized by an elevated degree of complexity, which is The relation between industrial organization and
an inevitable part of the framework in which t/a firms have to distribution structure has been investigated in the literature.
operate. This complexity can partly be traced to behavioral Porter [1990] considers the characteristics of Italian
patterns influencing the final purchaser’s buying and distribution as a factor that can account for the competitive
consumption models, which cause considerable difficulty in position Italian manufacturers have long enjoyed in this
forecasting demand when defining apparel collections, and sector. Other authors, in more recent debate on this issue, have
partly also to the short life cycle of a typical garment. The underlined that “expert demand” can contribute to heightening
entire sector is affected by these complex interactions, which the innovation potential of firms in local district systems.
have repercussions on the strategies adopted by firms seeking As regards the level of apparel retailing in the textile-
to defend a competitive position, as it can be difficult to create apparel pipeline, the Italian situation reveals that the strategic
and maintain a sustainable competitive edge in an group of independent stores still occupies a substantial
environment where, among other things, an elevated number position. In 2002 it still accounted for over half of the apparel
of production alternatives can be found. sales for consumption on the Italian market (Table 1). This is
This framework is further complicated by the process a noticeably higher figure than in the rest of the European
of modernization of the distribution network that has taken Union, where as early as 1997 retail sales by independent
place in recent years. New formats have been introduced and points of sale already represented little more than thirty
large-scale distribution has begun to play a central role in the percent of the total. During the 1990s, in the European Union
main European countries and the American market. the weight of independent retail points of sale lost percentage
This phenomenom has occurred later and with a quite shares out of the total of apparel sales in favor of specialized
different path in the Italian context. This market is an chains, department stores, hypermarkets and supermarkets.
interesting case, due to additional country-specific factors But in Italy, independent points of retail continue to account
which need to be taken into consideration, in order to have a for over half of total sales: admittedly, there has been a
more general understanding. With regard to industrial progressive decline over the years, but much more slowly than
organization, in fact, in the Italian context a striking feature is in other European countries. According to the same sources, in
the considerable number of textile and apparel firms, most of Italy specialized chains do not appear to have benefited to any
which are fairly small, often bound by local aggregations greater degree than itinerants.
CONSUMERS
business-to-business relations [Jones 2002]. For a significant P.S.
Fig. 2 – Trade-off between lean and agile supply and indifference curve
time /
overseas time / time /
service lean
supply chain service service
supply
local agile
supply supply
chain
0 0 0
cost per unit cost per unit cost per unit
organizational expression of the commercial products that are such cases the information they convey is mainly concerned
predominant in the activity of the cooperative14. with demand seen from a sales marketing perspective
When seeking to analyze the management of the [demand side]. Other referents come from the Purchasing
textiles-clothing sector within the overall very extensive range Management, in which case they convey information and
of this retailer and to gain insight into the sourcing dynamics, aspirations coming from the (effective or potential) upstream
it is useful to focus on the process of definition of the relations in the supply chain, which reflect a purchasing
objectives at the level of the national consortium. Here one marketing perspective [supply side]15.
finds extremely intense links not only with the referents of the This organizational set-up also holds true for the textiles-
individual cooperatives but also with those in charge of the apparel section, which reveals a similarity with the
points of sale. In particular, it can be noted that definition of organizational structure of some specialized distributors, such
the objectives is based on analysis of future scenarios (in as the American companies The Gap or Ann Taylor. In the
terms essentially of demand, the macro-marketing latter two companies, however, the demand side component
environment, production/supply markets). The scenarios are [points of sale] and the supply side component [purchasing
then taken as the basis on which to formulate specific office] are accompanied by a strong relation with the figure of
hypotheses of growth, maintenance or shrinking of sales; such the designer [design] of apparel collections in referencing
hypotheses are, in turn, necessary to define the target choices16. In Coop Italia this third component does plays a
objectives of the national consortium and the individual role, but it is bought in from outside through recourse to
cooperatives. As regards the textiles-apparel section, for suppliers, mainly national suppliers. Range management in
example, the analysis focuses on such aspects as the overall the sales outlets, on the other hand, is under the direct
trend of the apparel market, the main textile product responsibility of the category managers, who answer to the
innovations, the dynamics of the distribution structure, in Hypermarket Management: the category managers act as an
order to formulate a profitability target that can be achieved interface with the Sourcing Office since they are in effect
by adopting a series of concrete policies: eg. range extension, responsible for the entire process involved both in purchasing
rationalization of the stock of suppliers, reduction of marketing and sales marketing17. There are five category
purchasing costs, change in pricing policies. managers in the garment section (menswear, ladies’ apparel,
These objectives defined at a general level are then children’s clothes, lingerie and hosiery, sports and footwear),
further analyzed in the light of the type of competition faced
by individual cooperatives in each area, making use of
information obtained by involving a staff of referents in the 15
Note, therefore, the absence of a research staff specifically entrusted with
structure of the overall top management. Such referents come the task of analyzing market trends, and, instead, the presence of
partly from the Hyper and Super Management Teams (General interfunctional internal referents. This presence seems to be justified by the
unspecialized nature of the Coop Italia assortment.
Manager but also category managers), where they are 16
For an in-depth investigation of the organizational structure of some
responsible for interfacing with the sales outlets; therefore in specialized apparel distributors, see Guercini, Ranfagni and Runfola [2003].
17
The category managers’ responsibility for processes is evaluated in terms
of targets-results, defined according to a degree of detail which, at the highest
14
With reference to 2002, 57.0% of total sales was accounted for by level, starts out from the objectives of the consortium, and then descends to
supermarkets/superettes, 39.1% by hypermarkets and only 3.9% by discount the Hyper level, then to the ‘person’ sector, then to the category and finally the
outlets. On the concept of commercial product utilized here, readers are subcategory. In evaluating the entire process, clearly it is necessary also to
referred to the numerous contributions available in the literature [Lugli and take into account the responsibilities of the individual functional components
Pellegrini 2002, Dupuis 2002]. (purchasing office, for example).
Design
(Seller) External network
(Seller)
Human Resources IT innovation
Seller Seller
Promotion
INFORMATION
Seller Seller Private label
Country A
POINT OF SALES Quality control
Country B
out of a total of non-food category managers numbering about two causes, involving both the upstream relations with the
thirty . other players in the pipeline, and also the more general trends
Before conducting a more detailed analysis of involving the behavior of the final consumer. In particular, as
referencing policies and the associated sourcing policies, it is regards upstream relations, the managers of the cooperative
necessary to take a careful look at the structure of the textiles- have noted not only a decrease in costs of raw materials as a
apparel range and its relation with this retailer’s overall range. consequence of technological innovation incorporated into the
Firstly, the percentage weight of this element of the production processes, but also a drastic shift in the supply
Coop Italia range out of total hypermarket sales amounts to 8- channels, which have been transformed from a local or nation-
10%18; it is also worth noting that the non-food component wide supply chain to a global, i.e. offshore, supply chain, as
accounts on average for about 30% of hypermarket turnover. part of a process justified by a significant decrease in
Of the aforementioned 8% of textiles-apparel sales, roughly purchasing costs. As regards demand trends, on the other
60% is composed of lingerie and hosiery (men’s, women’s hand, what seems to be emerging is a growing preference by
and children’s), and roughly 30% of menswear, ladies’ apparel the consumer who wishes to buy apparel of average
and children’s clothes. The structure of the textiles-apparel positioning to purchase such garments in large distribution
range clearly derives from the unspecialized nature of the stores rather than through specialized retailers19. In other
retailer, in the sense that sales of such products represent a words, according to the managers interviewed, the consumer’s
complementary aspect of purchases by a consumer who visits expectation of a drop in the amount of resources to be
the hypermarket, or an afterthought, rather than being the allocated for personal expenditure seems to be causing a
object of a specific trip to a shop to purchase precisely that change in the composition of the typical ‘breadbasket’. For
article. That is to say, according to the interpretation put example, the non-food sector also covers other categories of
forward by the grocery distribution group, clothing does not merchandise which the consumer may not wish to forsake (eg.
represent a specific element of attraction for the sales outlet mobile phones, leisure commodities), and in a perspective of
(hypermarket or supermarket), since it does not correspond to scarcity of resources it may be precisely the textile-apparel
the natural vocation of the grocery sector. product that is sacrificed, or at least the threshold of
The contribution of textiles-apparel to corporate trivialization - beyond which greater care and attention is
turnover remains substantially stable over time, although it required for purchase of apparel compared to simply taking an
also appears that during the past few years this stability has item off a supermarket rack and putting it in the trolley – is
been the result of two opposing trends. Namely, on the one now higher than it was in the past. This new tendency is also
hand, a rise in the volume of sales of such products has been favored by the fact that with regard to apparel of medium
observed, while on the other, there has been a systematic positioning, the quality of Hypermarket/Supermarket goods is
reduction in the average value of the price of articles sold. It now roughly comparable to that of the specialized channels.
would seem that this phenomenon can be ascribed above all to
19
As regards the profile of the textiles-apparel purchaser, it is nevertheless
underlined that this purchaser represents a subset of the population that goes to
18
Analysis of the textiles-apparel sales in conducted here by focusing the hypermarket; therefore the average profile of such a purchaser reflects that
exclusively on sales achieved through the Hypermarket commercial product, of the population resident in the catchment basin of the individual sales
which is representative of the greater contribution to turnover with reference outlets, and it is a profile that is in effect “a little more educated, a little better
to this product typology. off, a little younger…”.
Volume time/
service
Surge demand
(high fashion content Coop Italia
products)
time/
service Coop Italia
Base level demand
(basic products)
contribution of each source in terms of reduction of lost sales as the type of production management model on the other, are
or of loss leader sales. by no means static; instead, the situation is in constant flux.
Clearly, in this regard the unspecialized nature of the Certain specific aspects are highlighted by the case analysis
retailer must be taken into account: the level of sophistication proposed here, which suggests that a greater complexity of the
of these indicators would not be in accordance with the supply chain limits the possibility of managing elevated
rationale of managing the entire assortment by adopting a product complexity, both as regards the collection and the
rather different approach from that of a specialized industrial range. This balance is expressed in terms of a lean, agile or
retailer. lean-agile supply chain. Our data provide evidence that the
current supposed correspondence between agile/lean supply
6. Final remarks chain and local/overseas supply chain is a not stable
correlation; equally, the trade-off between product complexity
In the clothing sector, retail firms are acquiring and supply chain complexity does not necessarily remain
growing importance within the T/A pipeline, which is unchanged over time. Rather, the present status of these
characterized by increasing internationalization not only in alternatives seems to be the outcome of the current phase in
market seeking but also resource seeking. In particular, today the evolution of industry-distribution relations within a
these firms can buy from suppliers who are localized in strongly globalized context.
different areas and have a variety of different capabilities.
This means that sourcing is becoming a central process in the
context of corporate functions. The decision to integrate References
industrial functions (design, purchase of semi-finished
products) is directly related to the sourcing strategy adopted Azuma N. [2001], "Pronto moda Tokyo-style –
by clothing retailers and to the chosen production emergence of collection-free street fashion in Tokio and the
management model, with its attendant choices affecting the Seoul-Tokio fashion connection", International Journal of
range. Retail & Distribution Management, vol. 20, n. 3
Our paper outlines these relations with respect to the Baden S. [2002], Trade policy, retail markets and
merchandise offered for sale by the retailer in terms of product value chain restructuring in the EU clothing sector, Prus
complexity (which concerns both the collection and the Working Paper n. 9, University of Sussex
assortment) and the supply chain. The characteristics of the
sourcing strategy depend on, but at the same time also Bruce M., Daly L., Towers N. [2004], “Lean or agile.
contribute to shaping, the characteristics of the merchandise A solution management in the textiles and clothing industry?”,
offered by the retailer. We examine several dimensions International Journal of Operations & Production
through which these characteristics may be defined, in terms Management, vol. 24, n. 2
of trade-off and mix. The relations between sourcing attributes Burns T., Stalker G. [1961], The management of
on the one hand, and characteristics of the assortment as well innovation, Tavistock, London