Catching the Right Wave for Your Brand: Made-to-Order vs. Upfront Inventory
Exploring Made-to-Order vs. Traditional Inventory Management: Choosing the Right Approach for Your Business
Navigating the fashion industry as a novice designer can throw up a gazillion questions, one that might soon cross your mind is: Should I shell out for initial inventory or wait for orders before manufacturing? Well, fret not my freelance fashionista, because we've whipped up this treatise to help you find your way.
First things first, you gotta know your sales channel like the back of your hand. In our last posts, we dissected the three main sales channels out there (selling online, popping up, and wholesaling), but let's recap:
- Online Sales (including Drop Shipping): From your website or via social networks like IG/Facebook, your customer is either a ready-to-rock-and-roll buyer who wants their purchase ASAP or a luv'ly lingerer who's prepared to wait for your haute couture.
- Brick-and-Mortar (Pop-Up Shops included): The retail location of your dreams (or your tiny bedroom for now) needs merchandise to sell like it's going outta style.
- Wholesaling: The catwalk of steel meeting the runways of style, where you sell your fabulous fabrics to retailers who'll put them up for grabs in their boutiques.
To clarify your inventory doubts, let's delve into each sales channel scenario, one by one:
Online Sales
This one's a pickle:
- If you sell more of a unique, detailed, and exclusive collection online, it's perfectly reasonable for you to let customers know that their unicorn garment takes a lil' time to weave, build, and braise. Offer them some extras like branded swag or discounts for future purchases to keep 'em happy while they practice their patience.
- But if you're peddling more of a commodity-type item, like swoon-worthy leggings or athleisure, your customers ain't got time to wait for the slow and steady, and your fast-paced competitors are not gonna lose any shut-eye!
- Meanwhile, when drop-shipping, you gotta have your goods ready to roll out right when the orders roll in. With your customer and the drop-shipper looming over your head, there's no room for asking patientsly to wait 'til you sew the seams and stitch the stones.
Brick-and-Mortar
No contest here: you gots to have your gear ready to sell when you open up shop. But if you fancy hostin' a trunk show (a one- or two-day event in a boutique), you can grab your samples and pre-orders while getting up close and personal with your customers. It's like a meet-and-greet with yuki-onna serving ice cream.
Wholesaling
If you don't mind splittin' the profits with retailers and crankin' out heaps of styles, wholesaling's the way to go. You get a whopping three-to-six months to whip up your collection before the retailers place their orders, which is pretty much trad'itional made-to-order. Custom minimum order quantities and per-style costs make your budget as crystal clear as our mission statement.
Festivus for the Rest'a Us
- Pros of typical Online Sales: Get paid immediately, keep all income (y'know, bar the online commissions), and see your collections' popularity IRL.
- Cons of typical Online Sales:'ve gotta cough up cash for inventory before you can tell if it's gonna fly outta the warehouse or flop like a fish outta water, your stuff might end up lyin' unworn in your spine, and if you're vendin' through a third-party ya' gotta split the dough equally with 'em.
- Pros of Brick-and-Mortar Sales: Get your hard-earned cash before anyone's taken a taste, and you can win your customers' hearts with a friendly face and knowin' theirnames.
- Cons of Brick-and-Mortar Sales: You still gotta invest in inventory upfront, take risks on styles y'hope will sell, and, if yer rentin' out a fancy-schmancy boutique, bring out the cushions for those wallet-drainin' build-out costs.
- Pros of Wholesaling: Time is precious, and you'll get plenty while preparein' your product, the retailers'll pay for your garments the moment they receive 'em, and you don't need to play Markdown Master when your products run outta steam.
- Cons of Wholesaling: Ya gotta sell yer collection at a price that retailers'll eat up, ya might 'ave to pay a commission to a sales rep or showroom, and you'll need to find a way to get your products in front of the right peeps.
Wrappin' It Up
We didn't sugarcoat it, it's a complicated question, but we reckon this post unraveled the knots for ya. The key to your fashion future lies in a shrewd strategy before you start the manufacturing process.
At Teg, we ease anxiety at fashion's uphill battle, so feel free to give us a buzz at our digits or pop in at our website. We'll help you dial those knobs till you find the sweet spot that suits your brand's unique rhythm.
A little nutmeg on the side:
- For burgeoning designers, taking stock of whether to employ the made-to-order method or put stock in upfront inventory requires weighing several benefits and drawbacks, especially in relation to various sales channels such as online markets (including drop shipping), physical retail spaces, and wholesale avenues.
Made-to-Order (MTO)/No Upfront Inventory
On the upside, MTO lets you skip upfront costs and risks tied to unsold inventory and storage since items are crafted only after an order is placed. It grants you the flexibility to test designs, hop on trends, and widen your product range without making stock commitments, providing a helpful edge to online and print-on-demand models. MTO is also compatible with drop shipping, streamlining the fulfillment process and reducing operational complexity.
On the flip side, small profit margins, bounds on product customization and control, longer shipping times, and less wholesale and brick-and-mortar appeal can temper the enticement of MTO.
Upfront Inventory (Traditional Model)
With its perks, the traditional model offers improved profit margins, full product control, consistent wholesale and brick-and-mortar sales, and stable revenue streams by committing to inventory upfront. However, monetary investments, inventory management woes, complexity, and slower adaptation can weigh on the designer's shoulders.
Channel-Specific Considerations
| Sales Channel | Made-to-Order Pros | Made-to-Order Cons | Upfront Inventory Pros | Upfront Inventory Cons ||---------------------|---------------------------------------------|--------------------------------------------|---------------------------------------------|------------------------------------------|| Online Sales (including drop shipping) | Easy automation, zero inventory risk, wide assortment | Lower margins, longer shipping times | Full control of product, potentially faster delivery | Inventory risk, high upfront cost || Brick-and-Mortar | Less suited due to lack of immediate stock | Retailers prefer ready stock; possible delays | Meets retailer demand for immediate fulfillment | Inventory holding costs; risk of overstock || Wholesaling | Difficult to guarantee bulk order readiness | Retailers require seasonal stock availability | Builds brand presence and reliable revenue | Requires large initial production and capital |
A Sum-up
Emerging designers, particularly those focused on online sales, can benefit from using MTO approaches such as print-on-demand or drop shipping due to minimal upfront expenses, simplicity, and automation, accepting lower profit margins and product constraints as a trade-off. For brick-and-mortar and wholesale channels, upfront inventory helps cater to retailer expectations, provide faster turnarounds, and offer higher profit margins and product control but demands greater financial investments and inventory risks.
A well-balanced approach that merges models—using MTO to test products and establish a brand identity, followed by transitioning to upfront inventory to expand sales through wholesale and physical retail channels—allows emerging designers to manage risk and grow effectively across various channels[1][2][3][5].
- Emerging designers engaging in online sales can benefit from using made-to-order approaches, such as print-on-demand or drop shipping, due to their minimal upfront expenses, simplicity, and automation, even though it may result in lower profit margins and product constraints.
- For designers focusing on brick-and-mortar and wholesale channels, employing upfront inventory can help cater to retailer expectations, provide faster turnarounds, and offer higher profit margins and product control, but they should be prepared for greater financial investments and inventory risks.
- Entrepreneurship in the fashion industry requires considering various factors, including finance and retail, while navigating the lifestyle market and business landscape, especially when deciding between made-to-order or upfront inventory strategies for emerging designers.
- The manufacturing industry, a critical component of the fashion-and-beauty ecosystem, plays a significant role in shaping the business models that emerging designers pursue, influencing their decisions regarding inventory management and sales channel selection.
- By adopting a strategic blend of methods, such as testing products through a made-to-order approach to establish brand identity, and then transitioning to upfront inventory for expansion into wholesale and physical retail channels, emerging designers can manage risk more effectively and grow their businesses across different sales channels.
