5 Challenges Fashion Retailers Face on Marketplaces

eCommerce has enabled the fashion retailers to connect across various segments of consumers. The approach could be through own webstore or marketplaces or by choosing the omni channel way. Marketplaces are a suitable choice to increase the brand visibility instantly, with comparatively less marketing effort that could go in for own webstore. The marketplaces have a very high traffic inflow to their websites every hour, considering the marketing efforts done by them to get more traffic. By creating new offerings, exclusive deals, reminding on best deals through various communication channels, etc.

It is an effective channel for sellers to mark their presence and increase business scope. But with the growing eCommerce business, fashion retailers also face multiple challenges while selling across  various marketplaces.

Let us discuss some of them:

1. Inventory control     


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Fashion retailers always look to maximize the inventory they have, so that selling across multiple channels can be accessed. As the demand of goods is dynamics in nature, ‘demand forecasting’, becomes a challenge. Other than that, selling across multiple channels is highly confusing. Some of the common challenges faced during inventory control are:

  a) Inaccurate analysis of the inventories:

Inventory record inaccuracy,and the difference  between the recorded inventory quantity and the actual inventory quantity physically available on the shelf, is a problem in retailing.  Inaccuracy may occur in many forms, such as inaccurate quantities, inaccurate storage locations, inaccurate pricing and inaccurate identification.If the demanded product lines across marketplaces is not in accordance to SKU, it could affect the profitability immensely. Inventory uncertainty could have a big impact on the sales.

One of the many reasons for inaccurate data accumulation is lack of coordination among different departments  . By using a centralized system, it is possible to integrate information from multiple resource centres, store them at one place and curate insights that would be useful for decision making.

  b) Lack of customized system:

At times unorganized inventory management system, in not able to collect the right data at the right time, which further results in inaccurate inventory levels. The system has to be designed to suit the product genres. Suppose we use a general software available to manage inventory, it might not be effective as desired for fashion apparels, where the designs, patterns, style change every season, the stocks have to be highly organized, as same products also have multiple sizes, etc.

c) Managing Multiple marketplaces is confusing:

The biggest challenge with inventory is lack of standardised process management across multiple marketplaces.It  is  difficult to keep your stock levels in sync at all times across all channels. Suppose a retailer has 1 or 2 of an item, but has listed them in 3 or 4 places, there is sometimes a sold-out item is again resold, which is not good for customer relations. This often results in spending nearly double  the amount of time trying to create and maintain listings.

Each marketplace has to be dealt as a separate channel to ensure smooth functioning. There are ways to address this issue by choosing eCommerce business enablers like eShopbox who create a platform for retailers to transact on multiple locations using a single platform.

2. Accounting and reconciliation


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Taxes are complicated, the calculation involves full track of SKU numbers and other than it is difficult to keep track of taxes paid while billing to the marketplaces. The taxes are paid in advance while billing to marketplaces on the billing price, which later is impacted in case discounts are giving on the products while billing to the end consumers. This results in loss in VAT as it is paid in advance while billing by the retailers.

When selling in marketplaces retailers often face challenges of billing and discount policy. As per a seller of Jabong, whenever a retailer sells his product to Jabong at an MRP of INR 1000, upon this flat 40 percent is charged by Jabong, leaving the retailer with a payback of INR 600. Moreover there is no clarity upon the process by which Jabong decides on discounts to sell the product online. They can claim to have sold the product at INR 800, in that case retailer is left with only INR 480.

In another instance, Myntra‘s reconciliation is done only in the month ends and then report is shared to the retailers. Suppose a retailer has sold three product to Myntra at INR 1000, 2000, and 4000 at different time period during a month. The full reconciliation and payback amount is cleared only by end of the month. This delay in accounting as discounting and billing information is received at the end of the month hampers the cash flows and also it takes around 45 days more to clear the payment.

Irregular payment trend can disrupt the functioning of the manufacturers or fashion retailers, as they need constant cash flow to keep their operations running, so that they would be able to supply to multiple marketplaces.

3. Platforms used by marketplaces are different

The marketplaces do not follow a standardised operating model. Each of them have their own procedure of functioning. There are marketplaces which sell fashion apparel only, whereas some sell multiple categories of products. There could be lack of category based customizations in the multi category marketplaces, which would be a limitation for fashion retailers.

The operating procedure would create a confusion for the fashion retailers as they have to take a different approach in terms of dealing with all of them and also ensure their customers get an uniform experience altogether. Though it is difficult to keep stability along various platforms, choosing a customized approach of dealing with all of them through a single platform and ensuring growth would be an ideal scenario.

It is tedious to establish connect with end customers as a seller, over the marketplace. Each marketplace follow a set of guidelines defined by them. So, the dependency on the marketplace increases due to this.

4. Logistics and supply chain

Fashion retailers selling on marketplaces have to follow the delivery guidelines, packaging standards, timelines, etc of the marketplaces. In some cases the delivery is done by the marketplaces directly where retailers outsource to marketplaces.

In some cases, where the dependency of delivering is on the marketplace and if the items are not delivered satisfactorily, it hampers the goodwill of the seller as well.

Logistics constitutes to almost 50% of the operational costs, for which some fashion retailers prefer to rely on the marketplaces and pay charges. This reduces the margins earned as well as increases the dependency on the marketplace.


[Image Source: eicpa.ae]

5. Competition:

Retailers often find it difficult to keep sync with the dynamics of changing pricing policy. Fixing upon the right price is a point of concern for retailers worldwide. Moreover similarity between fashion products has made this process more intense.

Some common challenges faced by retailers in this regard are:

  a) Deciding upon pricing and product options:

Pricing is an essential factor in consumer’s point of view. Retailers often find it difficult to frame the pricing module. Nowadays many product lines with same attributes are available across several marketplaces being offered by multiple brands. In such cases, pricing becomes a key differentiator.

  b) Competition between Large players and new entrants:

The friction between new brands and already established ones, leads to a challenging situation. The challenges for new brands remain with matching up to the quality of the established players, yet have considerably lower pricing. The established brands would have a challenge to maintaining consistency in quality, maintain brand value and also be competitive in terms of pricing. The marketplaces enable both of them to share space for business. So, in order to attract consumers there are multiple factors like ensuring stock availability, varied options in terms of season, color, design, fabric etc. has to be ensured all the time to stay in the real time competition.


[Image Source: demortalz]

These are some challenges faced by online fashion retailers across the marketplaces. As the fashion eCommerce is growing, the fashion retailers need to keep track of the end to end operations and be proactive in addressing these challenges or at least formulate plans to take on the issues. eShopbox has identified the pain points of the fashion retailers and has come up with various solutions to manage the end to end online operations of fashion retailers and help them to focus on their areas of expertise.

6 Advantages of Having an Exchange Policy to Reduce Returns


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Product returns in eCommerce is a hassle, both for the buyers and the sellers. An online retailer can form a strict return policy, which might turn away some customers or he can implement an effective exchange policy instead. A good exchange policy may help in reduction of returns and increased consumer satisfaction.

Lets discuss on six advantages of having an exchange policy to reduce product returns:

  1. Customers prefer products not refunds

That’s the reason they bought something from you. If they were more keen on retaining their money they wouldn’t have bought the product they seek.

Offering the customer an exchange helps motivate the buyer to refrain from refunds and choose a better product instead. Showing them that they have the opportunity to get the product they desire by just exchanging instead of returning the product purchased,  could prove to be advantage for both the parties.

  1. Convenient for buyers


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Returns occur especially in eCommerce due to unsatisfactory products. The issue may be due to improper description or misfit of the item. Buying clothes online have become easier. Still, we need to deal with issues like colour, fabric differences in the product received, etc. Providing an exchange policy would lead to less agitation of the consumer, it also helps to satisfy the customer with a option to choose a better product.

Suppose a customer buys a blue T-shirt of size L online; he finds that it is not a good fit, say a tad small. If there is an exchange policy, he could easily opt to get the same T-shirt in XL, as per the requirement. This saves time and reduces the number of iterations in the order, which could be more in case of returning the product, collecting refund and then placing a new order.

Customer would have to return the product, place a new order for the XL one and wait for it arrive and we’re in square one. This could be avoided by exchange, wherein the new product would be delivered and the old one would be collected at the same time, without involving refund transactions.

  1. Minimize Transit Cost


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The above image depicts the percentage of operating costs incurred across functions. Considering the transportation and logistics to be adding to almost 50%, it is a focus area to work on and reduce the expenditure under this head.

One more reason to opt for an exchange policy alongwith return policy, is the added advantage of minimized transit cost. If there is a solid exchange policy and the customer opts for an exchange rather than returning, the old item could be picked up during the delivery of the new. Which would be ‘pick up and deliver ’ at the same time, whereas if there was no exchange policy the old product would have been picked up, new one would have delivered in two different instances, adding up the logistics cost and reducing margin earned.

  1. Retained Consumer

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New customer acquisition involves more effort in terms of marketing, offering benefits, etc. Whereas retaining the existing customers and focussing on increasing customer loyalty would help to develop a stable business. So making efforts in accordance to customers buying from you, would help to retain them and increase chances of they returning to your webstore to buy.

With a strong exchange policy the seller can re-affirm the customer to be at ease, in case of unsatisfactory products. One can get a positive recognition from the buyer and increase the trust and thus retain the customer. Customers would have an increased urge to return to the webstore to try new products, without worrying for money refunds or hassles of product return.

“There are two reasons, why a person buys something: The real reason, and the reason they tell their partner.”

People in many instances, buy products online based on emotion rather than need. It could be for gifting to someone or buying for self on some occasion. So, we must make sure to consider the fact and reduce the hassle from our end. Motivating the buyer to make the purchase and in case, the product is not meeting the expectation, it could exchanged with a more appropriate one.

A good exchange policy ensures that the buyer can return the product if he felt so. It gives the customer the confidence and boost to buy the product from the site that has a sound and clear policy. This could be an easy and efficient way to minimise product returns. Also it help heavily on customer retention and minimising loss.

  1. Preserves Accounting Hassle

Returns goes as a Sales Return entry in accounts, thereby booked revenue is reduced, it also triggers refund process to customer, added cost of Payment Gateway for returns via PG, or process hassle of creating a check, bank transfer to customers.Also in case customers purchased the product in discount along with other products, returns can cause accounting calculation. Exchange can simply avoid these hassles by strategies such as offering  a generous return window of 30 days or longer to attract buyers or opting for extended holiday returns.

  1. Creates Inertia towards Returns

Having an exchange policy filters serious consumers to return the products and avoid consumers willing to get cash out against purchased merchandize. Having a standardised exchange policy enables retailers resistance against returns. Exchange policy could be framed in such a way that product return should not even cross in the minds of the consumers. A standardised exchange policy could easily outline different provisions for exchange of products, which further gives resistance against return.If consumers are happy with guidelines of exchange policy, it would instill more confidence on the product lines and return would never cross their mind.

Exchange policy framed with upon correct guidelines has the power of minimising product returns.

Gross Margin Return on Investment


GMROI is an inventory evaluation ratio that is used to calculate profitability. Using this, we can analyse the firm’s ability to turn inventory into cash, minus the cost of the inventory.

How to calculate

It is calculated by more than one method. We’ll see them in illustrated forms. 

Simple Formula:

GMROI=Gross Margin/Average Inventory Cost

It is calculated by dividing the gross margin by the average inventory cost and is used often in the retail industry.

For example, let’s say that you purchased the inventory worth Rs. 2,000. And, sold the same for Rs. 6,000, the profit is Rs. 4,000.



GMROI for this example is 2, you have gained twice the amount you have invested. 

Complex Formula:

(Sales Margin ÷Months Passed) × 12 Averaged Inventory Cost

Performance Benchmark

A ratio higher than 1 means the firm is selling the merchandise with a profit and if it is vice versa that is if the ratio is less than one, the merchandise is in loss. Your goal as a merchandiser must be focused on increasing the GMROI.

Who is responsible for GMROI

GMROI helps merchandisers, to evaluate if the sufficient gross margin is earned by the SKUs acquired, in relation to the investment on inventory. GMROI shifts the focus of the business from sales to profitability.

As the KPI deals directly with the profitability of the firm basis the merchandise categories, it’s dealt by the merchandisers.

Impact of GMROI

The Gross Margin Return On Investment (GMROI) has a direct impact on the way we deal with the inventory. The list discusses the impacts on various parameters


  • Stock control


Using the GMROI info we get to decide the reorder level, the threshold of maximum stocking level.


  • Deciding on Product mix & Merchandising


Utilizing the KPI we can create optimum combinations of products. Which ensures high margins that reflect in the gross.


  • Marketing Strategy


The KPI helps one focus on fast turnaround of product lines.

Using the info the merchandiser could focus on slow moving products.


  • Pricing


GMROI keeps us informed of the profitability of the current pricing. Thus, based on the numbers the prices could be tweaked.


  • Cash-flow


Low GMROI can result in the reduction of cash flow. This could occur if the procuring cost is more and the sales are less.


  • Satisfying the customers


Only if the GMROI is good the firm is running in a healthy fashion. Which then is required to give offers and discounts to keep the end customers satisfied.

Improving your Gross Margin Return On Investment

    • Possible options are, either increase the sales revenue or reduce the cost of merchandise.
    • If your investment, on the slow moving inventory, is high, it is necessary to mark down the prices to liquidate it.
    • It is prudent to set objectives for the merchandise you are buying. It is an appropriate approach to analyse and plan the procurement, the buying price, selling price and the time period of sales to clear out the stocks.


  • The few ways to keep your GMROI good is to raise prices of products that are expected to sell more, prompt use of markdownsGross Margin Return On Investment (GMROI) is the ratio of profit, excluding the amount invested In the inventory used to obtain the profit.


  • of goods not getting sold as per the expected timelines.

As we’ve seen, Gross Margin Return On Investment has a great impact on the functioning of an inventory management. Thus, it needs to considered with high regard. More importantly the calculation should be accurate as it directly reflects the profitability of the firm.

Inventory Accuracy

The Inventory Accuracy KPI compares the accuracy of your inventory by taking a headcount of items in stock and comparing it to what’s recorded in your database. This KPI requires you to perform a headcount of inventory to ensure that your bookkeeping and data management practices are in order. Inaccurate inventory tracking can result in higher costs, poor order accuracy rates, and decreased customer satisfaction.

How is inventory kept?

  – By assigning SKU Number:

A unique identification code which helps in tracking the inventory. SKU Number can be multiple for a single product in a single store, varying from the size, colour, material difference in connect to fashion eCommerce. SKU Number is important for improving the ways of tracking inventory. SKU Number also helps in connecting inventory of items across all channels and locations for easy access.

  – Bin Wise:

The products are arranged in order of the colour, pattern, sizes, etc and kept in assigned bins. This helps in easy picking and counting of the stocks. The staff working in the warehouse would be able to identify the location of the apparels as per the assigned bins.

Challenges faced

  – Stock counting in running inventory model, where pick is happening from the same shelves where inventory need to be counted


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The stock in running inventory can be managed well with aligning the process of counting inventory. Following ways can be considered.

    – Map your warehouse:

The warehouse should be well organised and each section must have different categories which should be named appropriately. Each shelf must have an updated data on the product kept on that shelf. This makes calculating inventory easy and efficient.

    – Use of a good software instead manual counting:

There are many advanced softwares in the market which can automate inventory processes in a warehouse. Right from a handheld based device for picking and update system right as the item is picked, to an RFID environment where an absolutely correct information of what item is in which zone and in how much quantity.


[Image Source: egemin-automation]

    – Inventory handling training:

A well trained staff on product knowledge, with a well-designed process to maintain inventory and handling the common do’s and don’ts, is a must which leads to efficiency in a warehouse. Activities like occasional dry runs, Mock Drills, Process Audits to understand the level of expertise of warehouse team can aid in training them further to any new technology introduced in the warehouse.

Following are some of the essential things warehouse team must know:

  – Understanding of Products on SKU level

  – Understanding of Colour, Sizes, Basic language reading and writing (for manual work)

  – Warehouse layout, zoning, racking system must be well versed

  – Inventory process, SOPs.

  – Discipline in handling goods in shelves

Reconcile inventory every month end to take them into books as an asset or liability

  – Misplaced within nearby bins:

In huge warehouses where the products are stored bin wise there is a possibility of products being misplaced in a wrong bin and considered as out of stock on online selling portals. This error can be sorted if the bins connect to a software which has particular product feature details and prompts the warehouse keeper while placing the product in the wrong bin.

Huge companies with big warehouses must have an updated software system and trained professionals to work in handling inventory. This would lead to reduction of return of goods from customers and accurate validation of in hand stock in the warehouse.

  – Long Term or Yearly Inventory Check:

These days where people are extremely active on online purchasing, it’s very important to have inventory checks on the go so that the customer is aware of the availability of products at any time they wish to purchase it.

Moreover, companies must invest their capital in getting their inventory handling procedures efficient as that is the heart of any business in the current scenario. A frequently updated inventory can reduce confusion internally and work flow can be smoothened. Hence Inventory should be checked on a daily, weekly and monthly basis.

Inventory Accuracy 2 (1)

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How is this calculated?

– Count Method:

Inventory Accuracy = (Book inventory – Counted inventory) / Book Inventory

This method is used to count all items in inventory and compare the total with the system values.

– Gross value variance method:

Count each item and total value. Compare this to the value as per system records. Suppose you expected 100 items valued at INR 1000 each and find only 99 physically, you have INR 1000 variance inaccuracy.

– Net value variance method:

Count the inventory and the total value. Compare this to the value suggested as per system. Assign a positive or negative number to the difference.

If you find 100 items valued at INR 1000 and expected 99 items at INR 1000, your inventory is over or (+) by INR 1000. If you had expected 101 items, your inventory would be under or () by INR 1000

Handling Inventory Damage

Inventory can be damaged in different ways, like:

  – Due to accidents

  – While shipping of the product

  – Due to theft as well.

These damages can be taken care by keeping an accurate count of goods in the warehouse and by immediately entering into the database, the unavailability of number of a certain product. This would help in having an updated inventory and stock in hand as the order has been placed in a particular product online.


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This will reduce your inventory count and add to the Damaged Stock total on the inventory transaction report. The amount shown there will be the total number of damaged units multiplied by the current average cost.

The warehouse must be insured for fire and other accidents, so that the loss incurred during an accident can be recovered and helps in getting back on business easily. To avoid such major accidents company must take some measures to prevent it. Having fire extinguishers, fire alarms and the employees being trained with the fire drill are essential.

Impact of KPI

 – Performance Metrics:

There can be a determined performance metrics which can be helpful in keeping an account of the inventory in the warehouse and evaluation of the picking methods. These metrics can be organized in such a way that there can be evaluation of each and every thing that includes inventory handling.

 – Picking Accuracy:

The picking of the right product type from the warehouse, and also assuring the available quantity of product.

 – Order Cycle Time:

The order cycle time starts from the picking of the order and till the order is shipped for delivery.

 – Re order Accuracy:

With the help of a set process, there can be an accurateness in placing reorders for a particular product type in the warehouse, before the product goes out of stock.

Improvisation of this KPI

 – Simple process:

The process followed must be simple so that it can be followed every day and can help further in setting a benchmark and achievement of goals. Whether the goal is set percentage wise or in monetary terms.

 – Supply Chain Cycle:

This cycle helps to know the whole cycle from the time the order is placed till it’s delivered. Through this cycle complete information can be obtained regarding the product status.

 – Technology in the warehouse:

There are a variety of technologies available around, the technology must be chosen according to the requirement in the warehouse.

 – Ownership of Inventory Accuracy:

Inventory accuracy is the most important aspect in a business so this awareness has to be created in each and every employee in the company to get the flow of work accomplished.

If inventory handling is updated with the latest technology, it can smoothen the work process and business can develop at a faster pace as online customers have clear view of the availability of products and plan better for re-orders.

Calculating the Sell through Percentage


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This KPI is represented as a percentage, comparing the amount of inventory a retailer receives from a supplier against what is sold to the consumer, in a given period of time.

How is it Calculated

Sell-through percentage is obtained by dividing the number of units sold by the number of units that was received.

Sell through percentage = Units sold / Units Received

The higher the number gets, the better it is for the organization. Higher number may also signify more sales.


Let us consider Cotton shirts for this scenario. They are all time favourites and sell a lot during summer season. Let’s say we initially had 100 Cotton shirts and at the end of the first week we sold 15, which is a 15% sell through. The second week we started with 85 and sold 10 which is a 12% sell through. At the end of the first month we sold 40 which is a 40% sell through and now we have 60 left. 40% is the sell through for the month.

However, if something is not selling at 10% per week, perhaps a markdown is needed or conversely if it is selling 25% per week, then maybe we should get a re-order assuming it is not seasonal.

Owner of this KPI

This is jointly owned by Merchandisers and the Sales team. While the merchandisers are responsible for ensuring  sufficient stocks are in place, the sales team ensures it gets sold off before the ageing period starts or the season gets over.

Impact of this KPI

 – It helps in deciding the stock level for seasonal merchandise, as the focus remains on how to clear the stocks of seasonal merchandise by the end of the season.

 – It gives a better control for deciding on accurate stocks and forecasting sales.

 – It helps to decide on the replenishment timelines and reorder levels.

 – This KPI gives information to decide on whether expansion plans are feasible or not.


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The above graph depicts the cost per sale vs sell through rate of four different products. It can be observed that increased sell through percentage reduces the cost incurred per sale, whereas less sell through would add to the costs.

How to improve this KPI

– Enhancing Sales

    – Analyse and understand the conversion ratio of the number of times products added to the cart, to actually being purchased.

    – Ensure accuracy of the product wise actual sales information.

    – Reduce the time taken to update the stocks and update on website.

– Merchandising

    – Process the damaged and returned goods and update faster.

    – Identify the top products as per their sales pattern, view the daily performance and plan the replenishment.

We understood the importance of the sell through percentage KPI and how we could make use of it to take an informed decision in maintaining the balance between sales and inventory.

Understanding ‘Days of Supply’ as a supply chain KPI

‘Days of Supply’ is the number of days, stock in hand for SKUs shall be over, as per the present rate of sales. It can be also represented in months, weeks, etc.


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Days of Supply = Total Inventory / Average daily sales


Total inventory of Formal Shirt = 2000

Average sales in a month = 500

Average daily sales = 500 / 30 = 16.66

Days of Supply = 2000 / 16.66 = 120 days

The calculation may be further refined by taking following into account

1. Cancellations or Returns of GOOD Stock

2. Potential variance of sales in the coming days due to seasons, festivals, essentially arriving at an actual sales for each SKU in time to come.

For a visual representation, please watch the following video.

[Video Link: https://www.youtube.com/watch?v=94Wu-FtGfjU&t=1m32s]

Performance benchmark

The performance of this KPI can be measured by comparing the predicted value with the actual value on a weekly, fortnightly and monthly basis and understand the deviations.

Largely the deviations may occur when sales trend is dynamic due to growing or declining sales, inorganic sales led by occasional reasons, etc.

This KPI shall provide a steady value for products that have steady sales and do not get impacted by market / social situations.

For Example, a typical blue jeans is expected to have a relatively steady sales rate in comparison to a seasonal Manchester United T-shirt stock.

The below graph gives an indicative idea how the days of supply varied over a period of one year in comparison to the previous year.


[Image Source: eia]

Owner of this KPI

The key responsibility of monitoring this KPI is of the merchandiser or buyer for the product category as it is his responsibility to ensure the availability of stock to meet consumer demand and their commercial targets for the SKU and Category

Impact of this KPI on business

  – If the estimated value is over estimated?

Means, if “Days of Supply” is higher than actual, shall lead to Out of Stock situation and generate customer dis-satisfaction. For consumable products it may lead to consumer going towards different brand in order to meet their demand

  – If the estimated value is underestimated?

If “days of supply” is less than actual, it may lead to false inventory replenishment alarm and may lead to over investment in inventory. The same may lead to cost of Stocked goods like warehouse, maintenance, damage, etc. And in case of manufacturing it may lead to overproduction

  – Issues with not knowing this KPI

Not knowing this KPI, the business is shooting in the dark when it comes to Supply and Demand matching.  It shall result into either higher cost of running the business as above option B or frequent out of stock situations as Option A.


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Improving this KPI

In order to improve performance with respect  to this KPI, it is essential to check upon the relative values which are needed to calculate days of supply.

Below are some points on improving this KPI:

– Ensure accuracy of the product wise sales forecast.

– Analyse on the product performance Weekly, Monthly and basis the YoY data as well as estimated statistics for the current year/month/week.

– Identify the top products as per their sales pattern and view the daily performance. Accordingly the days of supply should be updated to avoid missing out on sales of fast moving products.

– Ensure to have a minimum and maximum threshold value for each product as per feasibility in terms of warehousing as well as revenue.

We understood the importance of the days of supply as a supply chain KPI and how we could make use of it to take an informed decision to optimize the cost and not missing out on the sales opportunities.

What is Inventory to Sales Ratio?

Understanding the play between Inventory and Sales gets critical in managing the business of Retail, especially for Fashion Retail. Inventory to Sales Ratio (Also known as inventory turnover, stock turn) is an important measure to help, this.

Inventory to Sales Ratio means how much we are selling and how much are we stocking in comparison to what we are selling. On one side, we do not want Out of Stock when demand is there, while on the other side, we do not wish to overstock and increase costs. To get the answer to what is the right stock one must have to meet the demand, as well as not stock more or less, this KPI is helpful.


[Image Source: evanhoe]

How to calculate

Inventory to Sales Ratio and Inventory Turnover differ in their name and calculation.

Inventory to Sales Ratio = Value of Inventory in hand at the end of a period / Value of Sold inventory in that period


Inventory Turnover = Value of Sold inventory in that period / Value of Inventory in hand at the end of a period


If an apparel retailer has an inventory of 800 shirts of INR 1000 each and the total sales at the end of the month is 1 Lakh

Total Value of inventory at month end = 800 * 1000 = INR 8,000,00

Total Sales at the month end = INR 1,000,00

Inventory to Sales Ratio = 800000 / 100000 = 8:1 OR 8.0

Considering this example, if the ratio for coming months is increasing more than 8:1, it would imply that that the sales is dropping as the inventory is higher than the sales or we have indented more inventory than the estimated sales.

How to interpret

“Inventory to Sales Ratio is a macro level indicator of “Whether I am stocking more than I should ?”

Higher the Ratio, Higher is my Stock level in comparison to what I have sold, hence I have stocked more, or sales have declined.

Performance benchmark


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The industry standard benchmark for inventory to sales ratio for the retail apparel industry in India is 8.08 as of first quarter of 2015.

If more amount of inventory has been purchased during the year, the company will have to sell more to improve its Inventory to sales ratio. If the company can’t sell as per the forecast, it will incur storage and other holding costs.

Reducing inventory to sales ratio implies that the business is in good health. This could be used to compare with the industry average, as well as with the key competitors.

Lesser the Inventory to Sales ratio, better is the situation for the business.

Owner of this KPI

The optimization of this KPI is the responsibility of the merchandisers and sales operations to ensure operational efficiency towards service the sales and managing cost of inventory.

Impact of this KPI on business

– Inventory to sales ratio could be a strong indicator of the cash flow status of the organisation. It may guide a merchandiser for not overspending on inventory and identify the saleable inventories.

– It can signal potential problems in the cash flow. An increase in the inventory to sales ratio month after month would indicate that investment in inventory is growing more rapidly than sales or sales is reducing. This would be an indication of an approaching cash flow issue.

– Similarly, if we observe a decreasing inventory to sales ratio month after month, it would depict that the investment in inventories is reducing or sales are increasing.

Ways to improve inventory to sales ratio

Inventory planning could be used to forecast what customers want and when they will want it. This may lead to an optimized inventory to sales ratio. For better forecast and future demand, it is feasible to follow industry trends, news, surveys and past sales data analysis, to determine the trends.

There are some steps to improve this ratio:

– Having an optimized pricing strategy for the products could lead to a stable demand, which in turn will boost sales and inventory turnover perennially.

– Investing in products that sell consistently could help you. Some products take long time to sell, while others get sold faster. So the decision should be taken by analysing the trends.

– Increasing the demand for product lines having weaker response by offering sales promotion, discounts, etc. to liquidate the inventory faster.

– Keep recycling the same investment on buying, which keeps the average investment low. For instance, instead of buying a product worth INR 1 Crore, one can purchase product for INR 50 Lakhs; sell the purchased amount, then indent again.

We have gone through the Inventory to sales ratio KPI, how it indicates about the cash flow situation and ways to improve this KPI.

7 Ways to Minimize Product Returns in eCommerce

Product returns add up to be an unexpected and hefty expense for eCommerce businesses. These occur only if the customer is not satisfied with the product/service or processes of the company. Returns are prominent in fashion eCommerce, as the customers want to try dresses or might not be able to equate the product ordered on webstore with the one delivered to them. There are several ways to reduce product returns for your eCommerce website.

eshopbox[Image Source: eshopbox]

Ways to reduce product returns

  1. Exactness of product descriptions

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First things first, the product information must be precise and clear. By going through the provided description the customer must be able to feel the intimate details of the item. When it comes to fashion products, size, material and fit must be expounded clearly.

If the description is substantial, there’ll be less assumptions by the buyers. And, thus no broken promises and fewer returns.

  1. Clarity of Product Photos

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Showcasing the product in the right light balance is essential. Products look different in terms of color, when viewed on different screens. Use of right lighting during photography, to give an actual look of the color of the dresses is important. Also, pictures from various angles, display the product properly and can make the buying decision easier. The usage of 360 degree images boosts authenticity of the products and is more appealing to the customers. Taking this proactive measure will help in reducing returns occurring due to mismatch in expectation of color or designs.

  1. Make use of Product Reviews as an information guide

7 Ways to Minimize Product Returns in eCommerce eshopbox american[Image Source: americanapparel]

Display product reviews in an unbiased manner. Even if the reviews are slightly negative, make sure the customers are able to view it properly. This gives a genuine representation of the product. The store can officially reply or sympathize for the negative responses to show the care to the customers and mention the corrective measures taken to address the situations. Product reviews are the most effective ways to convince the reader to buy and clarify the functionalities and worthiness of the product.

  1. Easily accessible Customer Service

7 Ways to Minimize Product Returns in eCommerce jabog terms'[Image Source: jabong]

Providing proper customer service improves the trust with the customer. If they need any assistance while ordering, like inputs on the discounts or need to cancel orders etc., it is necessary to aid them. By dealing with issues directly and promptly we can avoid a lot of expenses incurred from product returns.

Communicating with the customers directly over chat or call is more effective than e-mails. Responding to their queries and answering pleasingly will remove any doubt of the products from their mind. The clearer they are, the better are the chances of them ordering the right product. Thus, minimizing returns.

  1. Deliver on Time with Tracking

Satisfying the customer must be the prime goal for an eCommerce seller. As it plays a vital role in possible returns. Keeping the buyer informed about the delivery status like despatch, in transit and arrival of the order are key factors to please customers. Surprising them with quicker delivery alone isn’t enough. Only with prior information the buyer will be able to arrange for payments, in case of COD and make sure he’s present for accepting the package.

  1. Proper Packaging and delivery

7 Ways to Minimize Product Returns in eCommerce eshopbox design[Image Source: designstown]

Packaging is yet another key factor to focus on. The customer judges the seller via the packaging of the product. Customer considers that a proper packaging would have ensured the safety of the product he/she has ordered. Packaging can directly impress or turn down. So make sure the products are categorized and packed accordingly. Checking the package prior to delivery and checking with the customers if the product is intact can reduce unnecessary hassles later.

  1. Abrupt discounting pattern

7 Ways to Minimize Product Returns in eCommerce eshopbox smalltre[Image Source: smallbiztrends]

Often it is observed that whenever new discounts are communicated or promotional campaigns are scheduled, then product returns get increased. This is mainly because, the customer who would have bought a product with no discounts would certainly not like the fact that the same product is being offered at a less price. So when they find out that the product they purchased is a part of the promotional campaign run within their allowed product return window, they return the product and place the order again at a reduced price. The discounting plan or promotional campaigns should be devised in a way that it doesn’t hamper the interests of the buyers falling in the discussed time frame.

Tackling any problem requires analysis and clear cut understanding of the issue. e-tailers must frequently analyze the ratio of returns. If returns are prominent in a single locality or category of product, it is time to revamp the system. Researching on product return trends and reasons will provide insights to take corrective measures to reduce returns.

7 Ways to Minimize Product Returns in eCommerce eshopbox contact[Image Source: contactcentre]

According to The Wall Street Journal, too much product returns often signalled decreased profits and potentially deeper structural problems within the company itself. It is very important to understand the loss incurred due to product returns and take corrective measures to mitigate it and use the saved fund for a productive head.

5 Things to Improve Customer Experience on a Fashion eCommerce Store

Enhancing customer experience is an evolving process in Fashion eCommerce. To diminish the gap between customer’s expectations and service offered, the approach should be in sync with the user behaviour and feedback on the eCommerce store. In online business, effectiveness of the communication depends on the eCommerce webstore, as it is the only interface between the company and the customer.

Below are 5 things to improve the customer experience on a Fashion eCommerce store:

1. Website should load quickly


[Image Source: designwebkit]

eCommerce customers are implusive. They tend to browse multiple web stores at a time, to compare in various parameters like pricing, color options, description, photos, reviews, etc. Considering this behaviour, if one of the opened webstore takes time to load, then it lacks lustre. The customer might not return to the webstore to check on new collections or new offers, thinking that it would need time. The parameters to measure this is the time taken from the moment a user opens a new page till above-the-fold content is rendered by the browser or the page is fully rendered by the browser.

According to Kissmetrics, 47% of consumers expect a web page to load in 2 seconds or less and 40% of people abandon a website that takes more than 3 seconds to load. Below graph depicts the conversion rate vs load time of Walmart website. The trend shows how the population as well as the conversion drops with increase in the website load time.


[Image Source: webperformancetoday]

2. Product description should be accurate


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The product description is the communication between the company to customer. So, it is essential to preempt the customer’s thinking, after reading the description.

It should focus on right target group, speak about the specific benefits to the customers and should help the customer to imagine the right frame. Bland communications like excellent product, fabric, etc. should be avoided as it creates a comparative scenario in the customer’s mind.

Unlike physical stores where customers can touch and feel, online medium provides only the product page. Hence to create a great experience, sufficient information should be passed to customer. This would enable him to take purchase decision easily. The information could be elaborate descriptions, videos, multiple photos from various angles, ramp walk videos, consumer reviews, etc.

Information provided should be reassured with the Social Media connect.

3. Policies should be clearly communicated


[Image Source: techcircle]

There are multiple policies that require simultaneous attention. Policies like Refund Policy, Cancellation or Return Policy, Privacy Policy, etc. are important to company as well as the customers. Highlighting key policy norms and creating customer centric policies would help establish a stronger faith on the fashion brand. Moreover, these days several marketing campaigns are run which have their defined policy frameworks. This create a lot of confusion among the buyers as most of them do not read through all terms and conditions. For instance, during discount sale being offered, some brands mention the actual price and the discounted price clearly but do not mention anything else in the description. When the customer goes to the checkout option the VAT is added extra, thereby increasing the price. Making the customer annoyed and then drop the transaction.

Following are the essential policies related queries customer may have in mind:

  • What is the process for Cash on Delivery(COD)?
  • Can I pay with my card instead of cash for a Cash on Delivery order?
  • If i need to send you back the item, where should i send it?
  • What is the return / exchange policy?
  • Will I get a money refund?
  • Can I club or use multiple coupons and offers at once?


4. Easy facility to connect with customer care

The process of a customer connecting back to the company should be a very simple process. Companies are creating IVRs for reducing load on call centres but nothing can replace a human connect. It lends more honesty to the interaction. If call centres are overloaded, then live virtual chat facility should be a good option to respond to customers. It would reduce the discussion time and also enable to address queries of multiple customers at a time. IVRs do solve the purpose but they irritate consumers who have paucity of time and patience.


[Image Source: economistgroup.com]

The customer care executives should be friendly, well versed and knowledgeable on the processes. They should have access to retrieve data for reverting to customers faster with accurate information.

5. Smooth fulfilment and replacement option


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Easy returns are being followed by almost all e-tailers. But, to enhance the customer experience Fashion eCommerce companies have to be a step ahead for the customer’s expectation. The idea is to offer replacement, rather than having return option only. In Fashion eCommerce product returns are common due to size or fitting issues, where the customer might have interest to stick to the design pattern, color, etc. and expect just a size change or pattern change. But the process is to return the product, wait for refund and again place a new order.

Having a replacement option, wherein the customer selects the order, chooses to replace with a desired option, pays/refunded the balance amount and is fulfilled by delivering the new piece and simultaneously picking up the old one would definitely enhance the experience.

Digital India is Good for eCommerce

Digitizing a country like India was a challenge. Government services now being transparent in their delivery mechanism, multiple initiatives being driven by citizen, online business platforms are all moving towards becoming userfriendly and efficient in improving quality of life. The digital India logo below signifies the county’s digital approach.

[Image Source: digitalindiaweb]

“I dream of a digital India where High-speed Digital Highways unite the Nation; 1.2 billion connected Indians drive innovation; technology ensures the citizen-government interface is incorruptible,”Shri Narendra Modi.

Availability of information is the key to good governance and the digital platform can greatly facilitate this transformation.

Changing Face of the Indian Internet User

It took 10 – 12 yrs to go from 100 million to 250 million users currently’ says Google , the company which has taken the initiative of digitizing our lives. There would be nearly 500 million users by 2018 going by Government projections. India is now the world’s third largest internet population.

Growing e-Commerce in India

Internet based businesses have contributed only 6 % of country’s GDP, but business growth rate is improving steadily compared with other 3rd world countries.

Brands are choosing to build, reach and increase volumes on a pure play platforms or marketplace that are offering competitor products as well. Brands also have the responsibility to attract a dedicated share of audience for its own product; which it can redirect to its exclusive site at a later stage. Many brands are involved in passive selling through established platform such as Flipkart, Jabong, Myntra, etc.

As the industry is maturing, Indian consumers are learning not be driven by just cheaper price of products and discount sales on e-Commerce, but are seeking better user experience in online shopping. Brands now are studying the market dynamics carefully in order to build a sustainable model and leverage the opportunities on the e-Commerce platform. e-Commerce has brought the physical stores to consumers’ door step and benefiting the brands as well in terms of reaching out to a large consumer base including the tier II cities . It is a win-win situation for all and going further the extensive analysis on this would guide the growth through the e-Commerce route.

In India, around 60% of web users in India visit online retail sites, out of which Apparel and Accessories constitute almost 30% of the traffic. Consumers are shifting views from finding time to scout through the physical stores around the city, to access the options from devices at ease. Look and design being the most important part in Fashion, e-Commerce portals are enabling consumers to get a view of all available Apparel in various designs. Unlike, physical stores where it is quite tedious to go around checking all the options. This approach of consumer is a positive sign for brands and manufacturers to establish the connect and capitalize.

Indian fashion market is all set to cross Rs 2 lakh crore mark by the time 2020 ends. By then India is expected to generate $100 billion online retail revenue out of which $35 billion will be through fashion e-commerce” said Mr. Nitin Bawankule, Google India Director for e-Commerce and Online .

He further gave an insight as per data from Google that , every third search query on their platform is related with Fashion and Accessories and such queries are increasing at a rate of 65% every year.

Below is an insight depicting the expected industry growth by 2016.

[Image Source: slideshare.net]

Increasing Marketing scope for brands

The increase in digital approach is also enabling user access to huge collection of videos and media content. Mostly, pertaining to entertainment industry with 31.5 million viewers watched videos on YouTube making it the number one destination for videos.

Social media is the sought after web destination with majority of screen time still captured. 86% Indian web users visit a social networking site. Facebook continues to be the mostly visited social network and LinkedIn as number two while Pinterest and Tumblr are the fastest growing networks. Rather than spending huge sum of money into traditional media, marketers are tapping the potential of digital marketing for ways and means to increase reach and reduce costs.

[Image Source: onlinemarketing-trends.com]

With a bag full of initiatives by the Govt and the internet growth spearheading to the targeted figure of 5oo million by 2018, India presents a great opportunity for ecommerce players and online customers . Half the population owning a TV gives the ecommerce option more edge in promotion of brands and leveraging this grand ambition.