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Off Target? Supply Chain Lessons From The Missoni Mayhem

By Josh Green, CEO, Panjiva

When Target revealed that Italian luxury knitwear designer Missoni would create an exclusive, affordable and limited line for the retailer, the public swooned. And when it launched early last week, they acted — selling out stores, crashing Target’s website and creating a Black Friday-like frenzy. Consumers got their hands on designer fashions for a fraction of the cost, Missoni’s luxury brand name became accessible to many household budgets, and Target benefited from immediate sales and tremendous buzz: it was a major win for everyone. Or was it?

Since the mayhem has died down a bit, a lot of questions have been raised about the success of the line and Target’s preparedness for such overwhelming demand. Finding an item from the 400-piece line became nearly impossible, spurring a secondary market on eBay that fetched tremendous markups. Although the line was expected to be available through Oct. 21, there are significant doubts on when — and if — Missoni products will be re-stocked.

According to a shipment analysis we conducted in our import tracker Panjiva Trends, there were 14 shipments of Missoni goods into the United States in August — the time during which shipments would arrive to be on store shelves for the Sept. 13 launch. However, as of the 15th of September, only one shipment of Missoni goods has arrived this month. Although we can’t predict the future, this points to a major problem for Missoni-hungry consumers: there will be very limited products available between now and the end of the limited-time promotion. And even if Target decides to extend it — though they’ve said they will not — the lag time between shipments arriving to the United States and hitting store shelves means consumers still have a lot of waiting to do.

Regardless of where your opinion falls on how Target managed the situation, there is a lot that other retailers can learn from the Missoni mayhem when it comes to managing supply chains.

Align Ordering and Promotion:
Target put considerable marketing effort behind the launch of its Missoni line — from events during New York’s Fashion Week, to a 20-page insert in the September issue of Vogue and 1960s-inspired television spots. Clearly, Target wanted to build buzz and establish demand for the products.

But based on the shipments coming into the United States, orders placed with overseas suppliers did not take this into account. In many respects, it is a game of proportions: product lines with little-to-no promotion will likely require ordering in line with average demand, but ordering should incrementally grow to support increased demand due to efforts put behind promotion.

In fairness to the retailer, the short-ordering may have been done on purpose to create immediate demand and maintain some of Missoni’s brand exclusivity. Target would not be the notable name it is today without understanding more about consumer demand than this flub points to — in other words, they probably knew what they were doing and selling out so quickly was part of the retailer’s strategy. But with countless customers now frustrated at its lack of availability, this strategy remains questionable.

Stagger shipments:
Target’s initial plans were to offer the Missoni-for-Target line until late October. So why, then, has there only been one shipment in the month of September? To keep consumers interested — and regularly returning to both online and brick-and-mortar stores — Target should have staggered its delivery dates throughout the duration of the offering. By selling out on the first day and with no more Missoni goods arriving, consumers have no incentive to visit Target stores or its website — impacting potential incremental sales the line surely would have driven.

Work with proven suppliers: Target’s supply chain and sourcing function — like that of other top retailers — is one of the most robust and sophisticated in the world. But for smaller chains with less buying power, a launch akin to Missoni-for-Target could only be executed with the best supplier partners. These partners need to be able to deliver products to your exact specifications, quickly ramp-up operations to meet un-expected demand, and be able to juggle your needs against those of other clients — which is especially hard if the supplier works with bigger customers.

The challenge, then, is knowing who the best are for your business. Tools now exist that help figure that out, and retailers should use them to answer questions like:

  • Has this supplier worked with other U.S. companies, and who?
  • Do they have experience in my industry or with similar products?
  • Is the company financially stable or is their risk of them going out of business?
  • Does the supplier engage in behavior that would go against my company’s CSR or sustainability initiatives?

Armed with this information, retailers are generally able to separate valid potential partners from those that would be a waste of time — or a potential risk — to work with.

Factor in Time Lags: What if Target had decided to extend the program or re-order due to high demand? The answer is that a lot of people would be left waiting — and perhaps interest may have waned — because it can take months from the time a product order is placed to when it is available to consumers. This is an important point for other retailers to consider: when a product flies off of shelves, what is the contingency plan for getting it back in stock quickly?

Relationships and a deep understanding of your supplier network is key. Retailers need to know how long it will take suppliers to produce items and factor in the delivery, distribution and restocking logistics timing into their order equation.

Because of problems with time lag, we’re seeing a lot more U.S. companies try to source from suppliers in the Western hemisphere to cut down transit time. From there, the best rule of thumb is to allow at least one month to get the product from the port to the retail environment, with slight variations depending on the time of year, your distribution partners, and other uncontrollable factors.

At the end of the day, the Missoni mishap isn’t about what Target did right or wrong, but what other retailers will learn from the scenario. Hopefully, a lot.

Josh Green is CEO of Panjiva, a leading intelligence platform for global trade professionals.

© 2014