We thought we were an on-demand fashion brand. But this concept always seemed elusive, difficult to explain to clients/investors/press. Mainly because it got confused with pre-order, which is selling WHILE producing not BEFORE producing.
But then the insightful NotBoring newsletter on TikTok came out, coining the Real-time fashion term. And we realized this concept explains way better our vision of becoming a stockless fashion brand. The vision of only producing what has been previously sold. The vision of being a retailer built upon real time demand from clients and not product supply like traditional retail.
Of course we’re no Shein. To begin with, we’re 9.9Bn short in sales. Also their value proposition to the client is way different: they offer the trendiest pieces at the lowest possible price. We offer high quality made in Europe, exclusive designs and minimal impact at affordable prices.
But we share operational traits, we share the obsession of not burying money into stock:
- Production based on first-party data: views, taps and add to carts
- Adjust production real-time based on real-time sales
- Produce only what sells: 3-7 days from design to online, 10-20 days client delivery
- Digitize the whole supply chain: orders directly from PoS to the factory floor
- Reduce waste, upfront investments and stock risk to the minimum = lower prices
- Operations become the best marketing: constant new products at very affordable prices kickstarts the growth wheel.
How laagam operates?
What Shein does with tons of technology, we currently do manually. But you know, do things that don’t scale.
We have validated our model. We can sell €100k/month without stocking up. We have hooked thousands of customers monthly, waiting impatiently for Wednesdays to discover our new products: 50% of total sales in 2021 come from recurrent customers.
We’re currently here:
- Clients have one week to buy products: from Wednesday to Wednesday.
- On Thursdays, we order from our local suppliers only what has been sold.
- Product takes between 15 - 25 days to client.
- We reduce the logistic cost by eliminating stocking, our warehouse only packs and ships.
How will laagam work?
We want to arrive here:
- We decide how long a product is available based on demand.
- Daily ordering based on real-time sales, no more weekly batching.
- Product takes between 5 - 10 days to client.
- Eliminate our warehouse altogether: suppliers pick, pack and ship the orders.
How? First by reducing timings, by being able to serve our best sellers of the weekly drop (what we call A products) in 7 days. We hope cutting waiting times by more than half encourages even more sales of these top performing products and helps us acquire new customers (our main challenge).
This will be done by transforming our current pure FIFO supply chain into a kanban supply chain with supermarkets of intermediate stock. Instead of waiting until the sale campaign ends for production (on Wednesdays), we have defined KPIs based on historical data that automatically detect A products after 24h of live sales: views, add to carts and units sold.
Once an A product is detected, we order raw materials and production starts right away. So to begin with, we win 7 days from not having to wait until the drop ends on Wednesday. Secondly, by producing while we’re still selling the product we can adjust fabrics stock in real time.
Because printing/dying fabrics is the most time consuming process of production, by always having upfront just enough stock to sew what is selling we are ahead of the curve. This saves us another 3-4 days.
The logical conclusion of this system is that we could transform A products into roll-over products available without time limitations. This in turn will help our overall sales as we’re currently leaving a lot of money on the table by “killing” our best performing products after just one week of sales.
In the long term thanks to enough volume, we expect all products to follow this path. Thus having a very similar user experience as any other ecommerce (little waiting for your order) but with all the benefits of not having stock. Of being a real-time fashion brand.
Digitizing the Supply Chain
To achieve this milestone, we need to add tech. We are starting to make all our products digital-first: digital patterns, digital prints and designing digitally in 3D. So we can send this digital product automatically and instantly to the factory without the need of back and forth samples. And start producing final physical products without flaws.
The next step is to connect our point of sale (laagam.com) to the floor of the ateliers. To connect our clients orders directly to the manufacturer (Customer to Manufacturer) so materials are automatically replenished and unit production adjusted based on real-time demand with no human interaction.
This will be hard as hell because first we need to develop adhoc software internally and then plug it into all our network of suppliers. But where there's a will there's a way :)