Post-season analysis: How to maximise your brand's retail profit margin

So, you want to stay ahead of the competition and optimise your product offering for more retail profit, a higher conversion rate and a more seamless customer experience?

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 Of course, you do. This should be your raison d'être with every decision you make.  

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But you won't get there with just a wave of some magic wand, this all relies on post-season analyses of sales, margins, competitors and growth. Here’s how to not miss a $3million unicorn (true story).

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Now, we know there are plenty of ways to increase profitability, from improving size availability to setting retail budgets, but there's another piece that you should start getting acquainted with pronto.  It's the post-season analysis, sometimes referred to as a post-season review or retail SWOT analysis.

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As tempting as it is to pretend the past season never existed, or ride off its coattails blindly into the future, your brand must acknowledge the elephant in the room (and we’re not talking about that sale rack, yet). Indeed, it's the all-important post-seasonal analysis.

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In this article, we're going deep on the very definition of a post-season analysis, why it's important, how best to use it, and we'll even guide you on what to look for so you can get started on building your retail strategy, today.

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What is a post-season analysis?

A post-season analysis provides your whole team with insights on the performance of a previous season, capsule collection, or marketing activation related to product performance (do you have a new core style on your hands?), trends (is low-rise really on the rise?) and buyer behaviours (did social-shopping accelerate your online store performance?).

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The findings are then used to form the basis for planning and forecasting upcoming seasons, as you nut out exactly what your growth opportunities and risks are. In other words, you can create your blueprint for success. It’s imperative to perform a post-season analysis quarterly to stay on top of changes in customer demand.

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A post season analysis is the first step in merchandise planning and buying cycle.

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These findings are then analysed to improve buying decisions with the intent to have a ripple effect on customer conversions going into the following season.

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The most common mistake? More is not more. Don’t make the assumption you need to always buy more inventory to get better results and grow your business. It’s important to understand your business so you can identify the levers to pull to effect change.

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What can you do instead?

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1. Start looking at what's driving the retail profit and shift the inventory investment for the following season accordingly. To do this, take a look at which categories, brands and products drove the most retail profit.

2. Opportunities = More Sales - learn how different colours performed, what sizes were selling out, and which prices hit your customer's sweet spot.

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3. Weigh in on how much total inventory sold at full price vs how much you bought to begin with.

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Yes, a post-season analysis can get very detailed - but the more stats, the merrier. It pays to dig deep when figuring out which products drove sales and profit, and how this will influence the future buying cycle.

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Why is a post-season analysis important?

It provides you with the foundations for the next season. It’s your marathon warm down so you don’t get injured. It’s your make-up removal routine so you don’t wake up with spots.

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On average, a retailer that performs a post-season analysis will achieve better results than one that doesn't.

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In fact, retailers can see +146% growth in profitability in one category alone after completing a post-season analysis. If that's not reason enough, we've got a few others up our sleeve:

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• Assists cash flow
• Increases sell-through rate
• Provides confidence to increase sales budgets

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How do I complete a post-season analysis?

Good question. Firstly, before kicking off analysis, brands must create a data set for the period of time you wish to look at.

Creating your data set: You'll need the below metrics for every product in the range you are analysing before you can get started:

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• Sales $ ex GST
• Sales Units
• RRPs
• Cost prices to calculate retail profit margin
• Buy units

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Select a time frame you want to analyse (e.g Q1 Jan-Mar) and then spend a good couple of hours compiling your data from all your various systems in a format like below.

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Or if you have Style Arcade, pull the below information together in less time than it takes to make a coffee using the Rollups tab.

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 Watch the video below to see how.

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Case Study: Category growth - The opportunities in getting it right‍

As a merchandise planning consultant, I used the above logic to uncover a 6X year on year growth opportunity in just one category.

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What we uncovered was there was hidden customer demand in a specific category.  

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Empowered with this knowledge from the post-season analysis,  the brand gave the customer what they wanted and in turn drove significant additional revenue.

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How do I analyse the post-season data ?

Here are some of the key metrics to focus on and what they are telling you:

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1. Category Sales mix % vs Buy mix %

Compare the sales mix % to the buy mix % to know whether you should buy more or less of the same category/colour next season.

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In the example provided below, Tops made up 36% sales mix even though it only made up 26% of the buy.  

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An over-indexed sales mix to buy mix is a success, and an opportunity.

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This indicates if you had bought more of this product or category you could have achieved more sales.

Conversely, look out for the examples where you were overstocked; these are categories where the buy mix % is higher than the sales mix % and you will need to reduce your investment in these next season.

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Using Style Arcade, Blue Bungalow were able to identify an opportunity in cardigans, which resulted in +261% growth in one quarter.

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2. Profit % vs markdown %

Your profit % is one of/if not the most important metric to track to know if you want to increase or decrease investment in a category/brand next season.

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If a product or category didn’t work for you, eg. you lost profit you could have made by spending markdown dollars to sell it in a clearance sale, then you would steer clear of similar products the following season or reduce the investment to ensure a high sell through %.

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Your intake margin, markdown and profit are all interlinked. It all starts with the intake margin (initial margin before discounting), then the product is marked down (markdown %) which leads to the final profit %.

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For those playing at home, the calculation is:

profit % = 1-(1-intake margin %) / (1-markdown %)

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Fashion Industry Benchmarks

It's always good to know how your numbers stack up to everyone else.  We've found that based on the above formula, the benchmarks for a fashion apparel brand is:

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3. Sell-through rate (ST%)

Sell through indicates the percentage of stock you sold vs how much you bought.

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Sell through rate (ST%) = sold units/purchased units x 100

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Say you purchased 100 black long sleeve tops and sold 82 of them your sell through on this item would be 82%.  

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An industry benchmark sell-through rate for a fashion retailer is around 70-75%. You ideally want to sell 70-75% of the inventory you bought in any one season.

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This will leave you with 25-30% to sell on markdown going into the following season. If a product category achieving higher than a 75% sell-through rate has over-performed, you might want to look into buying more of this next season.

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Anything lower than 60% would be considered a slow performer and future investment may need to be reviewed and adjusted.

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It’s important to consider your ST% by full price sales and markdown sales as the total can sometimes be deceiving.

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For example, you purchased 100 units of a top, and sold 40 units at full price and 30 on mark down, your total ST% would indicate 70% which would appear to be a good performance.

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However the true ST% at full price would only be 40%. You would hate to mistakenly over-invest in a similar product the following season because you thought you had sold 70 units when in fact you should be reducing the investment.

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When working for a large retailer or brand that stocks a large volume of SKUs, it's really easy to miss the detail. Particularly if you are working off excel spreadsheets.

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This is where images of products alongside your numbers is so key and can help jog your memory.  🤔 Oh yes that's right, we put that floral item on markdown...

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But without a system to automatically tell you the number of units that sold while on markdown it means you will be required to dig into data by date range to manually calculate this metric ☠️  (If you've ever had to do this, you'll realise how painful this exercise is).

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Style Arcade automatically tracks full price ST% for you,  making it easy to react in season.  By being able to see this so easily, means you can keep on top of it and ensure strong ST% result come post season analysis time.

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Note: Some items will be purchased with the aim of selling out. For instance, there may be an item in the collection that you know won't sell volume but it’s important to have it as part of the collection or range due to current trends. So you convince your planner to let you buy limited units with the intent of achieving 100% sell through 😉

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Reporting the findings

While analyzing, remember to record your findings. The findings form the foundations for the next seasons strategy and budget setting.

By the end of the analysis you should have an in-depth understanding of what worked, what didn't work, any opportunities and risks. It's important to take a helicopter view of your category and business to fully understand how macro environments impact your trading environment.

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1. Strengths, what worked?

Think categories, products, colours, silhouettes, that drove great profit for your business or over performed their sales vs buy mix. Perhaps you identified a particular shape in dresses that all achieved strong full price sell through and now know you can buy much deeper next season to drive further revenue and profit. These are the items you want to update and repeat the following season because you are certain they will work.

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2. Weaknesses, what didn't work?

Highlight any items or areas of your business that required heavy discounting and eroded profitability. You want to avoid making these same mistakes the following year. Did you launch knitwear too late in the season to achieve great results?

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3. Look for opportunities

Are there emerging categories in the marketplace that could work for your business? The success and popularity of loungewear (born during the pandemic) is here to stay, is there an opportunity for you to launch your own line? Extend your sizing to include XXS and XXL? Reduce the number of options in a certain category but increase the depth?

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4. Identify any potential threats

Threats are external forces that may negatively affect business outcomes. Increases in competitor competition or pricing wars, changes in customer behaviour and fluctuating demands can all derail your plans.  Economic factors such as recession and increased cost of living are all too familiar. Increases to shipping costs and logistics and their impact on margin should be reviewed.

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Each year, countless retailers close due to mismanaged inventory, poor buying decisions and challenging trading conditions.

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On the flip side, retailers that take the time to analyse and understand their business experience exceptional growth and mitigate any risks before they become problems in the future season.

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Don't become a statistic.

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Look back before you move forward.

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Complete a post-season analysis.

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Style Arcade make the tedious process of collecting and collating data a breeze so you can spend more time producing solid plans for future growth based on facts not feelings.  Let us show you how easy post season can be!

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Image credit: Phil Oh