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by Justin Guinn,
Market Research Associate
Last Updated: February 23, 2017

Apparel shops have a unique problem with inventory. Stock is not only segmented by item and color, but by size as well. If a dress is stocked in all sizes from 0 to 16 and in four colors, that is 32 different versions of the same item. Even a men’s shirt in small, medium and large in white, ecru and blue is nine stock keeping units (SKUs). To further complicate the issue, many fashions have accessories—for example, a hat and gloves that match a coat. Apparel inventory software needs to not only track what is in stock and in which color and size, but the matching accessories. All of this information must be available to the point of sale (POS) system. For a chain store, in-system transfers is an important feature.

Customer relationship management (CRM) is also a primary concern. In addition to names, phone numbers and email addresses, the CRM system should track favorite designers and important dates such as weddings, mitzvahs and proms. Combined with sales history, the CRM should also provide a loyalty program using email, text messages and social media networks such as Facebook.

Accounts receivable is standard but should include layaway. Payroll is standard except that some stores have commissions, sales quotas, or both. General ledger and accounts payable are standard. Most stores use on-premises systems, but cloud-based software as a service (SaaS) options are available and offer an attractive alternative accounting platform for clothing and fashion stores.

Common Features of Apparel POS & Inventory Software

In addition to core business functions, retailers should evaluate the following functions to meet their unique requirements of a clothing POS solution:

Layaway The POS system should allow customers to put products on layaway and identify the item as such in the inventory system. The layaway payments should be treated as deposits in the general ledger.
Holds The clothing store POS system should allow merchandise to be placed on hold, and identify it as such in the inventory. The hold should automatically expire after a defined time if the item is not purchased or placed on layaway by the customer.
Store transfer If the store is part of a chain, the inventory system should have up-to-date information on inventory in all of the stores. If a customer needs an item that is not in stock at a particular store, the system should check all other stores. The customer should have the option to hold the item for pick up at another store or have it transferred to a store of the customer’s choice.
Inventory matrix The key to a successful apparel inventory system is a matrix of modifiers. The general description is entered once, and the sizes and colors are listed as modifiers to the basic description. The inventory must track each item as a separate SKU and maintain a separate reorder point.
Customer relationship management Because of competition from online stores, warehouse stores and department stores, these retailers have aggressively adopted CRM. In particular, they are adopting social networking by establishing Facebook pages and tweeting coupons to registered customers. The system should also track color, style and designer preferences to notify customers when new shipments are due. It is important to track special dates for targeted, personalized sale opportunities.
Customer loyalty program As part of CRM and to further solidify customer relations, many stores have customer loyalty programs. The store system should track sales history and monitor loyalty program points awarded and redeemed.
Seasonal planning Fashions and accessories change from season to season. The inventory should make recommendations for new orders. In addition, it should track existing inventory and make sales-versus-storage recommendations.
Accessory coordination Many clothing manufactures provide matching accessories, such as belts. In other cases, different manufacturers make accessories to “coordinate” with outfits. The inventory and POS system should list matching accessories on hand and available as special orders.
Split tender The system must be able to accept payment over several different methods. For example, a customer may want to pay with cash and two different credit cards. The system must properly apply the split payments to the correct ledger accounts.

Online Customers and Apparel Retailers

Apparel is one of the fastest growing ecommerce segments. Online research firm eMarketer predicts revenue around $40.9 billion in 2012, a 20 percent increase in growth over 2011. There are a number of reasons for this, including greater sophistication of online tools for shopping and a growing number of traditional retail clothing chains moving to online retail.

To be successful today, apparel shops owners can react by investing in one of the following strategies:

Produce an online storefront. Store owners can enter the online shopping game themselves. Some apparel management software vendors offer ecommerce and shopping cart integration with their system. Other software vendors, like Volusion and 3dcart, offer third-party shopping cart solutions. Retailers can then build out and optimize their website for local, regional or national customers. In this scenario, it may be worthwhile to invest in online marketing services, like consulting firms that specialize in pay-per click advertising, to gain visibility.

Improve the customer experience. Another option for retailers is to focus on differentiating from online apparel websites and improving the in-store experience. A number of POS vendors offer clothing inventory software that works on tablets and smartphones to help associates answer customers’ questions and look-up apparel options from the floor. Some mobile apparel store software can even process payments from the device. One national apparel retailer—Nordstrom—is moving to a mobile point-of-sale solution in all of its stores. Another option is to improve the experience for customers through improved signage, a more open and inviting store layout and better-trained associates.

Customer attainment is also an important consideration for these retailers. As customers transition to websites and social media to find promotions and deals, smaller clothing retailers should meet these consumers online to offer similar promotions and store information.

Market Trends to Understand

  • CRM-enabled POS. Customer Relationship Management (CRM) functionality is increasingly integrated with traditional POS systems. More and more apparel retailers are finding they’re able to fulfill their CRM and POS requirements with a single system. (Some of the benefits of integrated systems are discussed in the first section above.)
  • Internet of Things. While the IoT is very much still a nascent technology, some of its more compelling use cases are in the realm of retail. Inventory management, for example, can be improved—and to a degree automated— with peripherals such as RFID tags and scanners. Expect these systems to be more tightly integrated with other retail technologies, including POS systems, as a larger variety of stores begin exploring their use.

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