Dive Brief:
- G-III Apparel Group plans to build dropshipping capacity as retailers demand more flexibility and service from apparel wholesalers, CEO Morris Goldfarb said on a Tuesday earnings call.
- "We are not structured for dropshipping, but we will be," Goldfarb said. The company is hiring dedicated talent and searching for real estate to relieve retail customers of the burden of shipping e-commerce orders of G-III goods.
- G-III, which owns DKNY, Dockers, Donna Karan, G.H. Bass, Karl Lagerfeld Paris, Wilsons Leather and others, is leaning more toward wholesale in 2020. The company announced the closure and liquidation of 110 Wilsons Leather and 89 G.H. Bass stores in June, in a $100 million restructuring plan.
Dive Insight:
Shifts in retailer inventory management have changed the role of wholesalers, and with it, the supply chain capabilities they need to build.
Goldfarb called dropshipping "an essential need," because lean inventories at retail stores mean that wholesalers need to be ready to replenish on demand and quickly.
"Our responsibility in the mix will probably be to hold on to replenishment inventory, which is not something we would love to do, but it's a necessary evil ... for our way of doing business," Goldfarb said, describing the future of apparel wholesale.
Inventory management has been the thorn in the side of apparel retailers for years — exacerbated by shifting consumer demand and store closures during the pandemic. G-III customers like department stores have kept inventory as lean as possible to avoid margin-eroding markdowns.
Holding allocated replenishment inventory, and moving it quickly when called, is how G-III can best support the shift to digital channels among apparel retailers, especially troubled department stores, Goldfarb said.
Department stores have been some of the slowest retailers to optimize e-commerce fulfillment operations. Relying on dropshipping is one way to pass on some of that work to vendors. G-III's coming investments signal the company's confidence that dropshipping is here to stay beyond the pandemic.
"As you know, we started as a coat company, a lot of what we do is product that is shipped hanging, and it's a far cry from what needs to be done to efficiently handle the cost structure ... that entails dropshipping to the consumer. But we're on it. Come back to me in a year, and I'll have an answer for you that is a little different than today," he told an analyst Tuesday.
