I recently came across a company, CornerStone which has implemented a unique retail business model where the physical stores do not hold any inventory at all. All the inventory is maintained at the central warehouse from where all shipments are made. I think they should go one step further and tailor the garment only upon the receipt of an order. They also provide an online store from where you can purchase.
The business model is unique in the industry as it combines the best and worst of the virtual and real world models. Low or zero inventory at the retail store means that the cost of opening up a store is drastically low and conducive to franchising mode of growth. This also provides them the opportunity to optimize the supply chain and reduce the overall cost of production. All of this put together means that the possibility of good profit margin is high.
The flip side is the fact that customer’s who do impulse buying are less likely to buy or place orders in this model. This model would work very well for the customers who are very particular about the fit and less about the impulsive high of owning something immediate (aka, online shoppers).
If they can find ways to scale fast, the economies of scale will provide them a great opportunity to disrupt high-end fashion retailers.
Some more ideas that they could mull over:
- Tailor the garment only upon receipt of a confirmed order and then dispatch.
- Allow customer’s to book an appointment and go to their home/office to take orders.
- Aggressively franchise to gain economies of scale
- Look at the consumer gift voucher as a mode of promotion of sales
- Adapt the Zappos way of doing business for their own benefit, like
- 365 day return policy
- 2 way delivery free
- Allow customers to advocate the product from the stores directly as soon as they purchase
- Increase the product mix to include women’s wear