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How Kanye West Can Run a More Profitable Fashion Empire
Only someone as outspoken and perhaps egocentric as Kanye West could manage to overshadow himself just hours before dropping a long-awaited album. Mr. West did just that by taking to Twitter, in the midst of his release of
The Life Of Pablo, to announce that he was $53 million dollars in debt.
His announcement has the rest of the Internet wondering: Just how did he dig himself such a big hole and how could he have avoided it? That is, besides quietly making music and enjoying the profits privately with his wife and children.
Of course, Kanye is not just a musician and artist, and not just married to infamous mogul Kim Kardashian, but a designer and entrepreneur whose endeavors into the unforgiving world of high fashion has taken a toll on both his brand and his bank account. As recounted by Vanity Fair, Kanye has put a lot of time and money into various projects: There was the line of G.O.O.D. (his record label) merchandise in 2009, his attempt at high-end women’s wear in 2011 that never made it to stores (and allegedly cost $30 million), his collaboration with Nike on Air Yeezy sneakers (which were successful but not lucrative for the rapper himself) and more recently his work with Adidas, which has resulted in multiple “seasons” of elaborate and sometimes questionable clothing and shoes.
While his Yeezy line with Adidas has been by far his most successful fashion endeavor, it hasn’t endeared him much to the common people: His most recent line, Yeezy Season 3, featured some
downright laughable price tags. Some notable examples include a camouflage trench coat for around $2,500; a “destroyed” sweater for over $2,200; and a hooded jacket for $1,700. Even for high fashion, these numbers are ridiculous. For Kanye, who in earlier incarnations made his fame by being a man of the people, it feels like an insult to those who could never afford such prices.
If Kanye is looking to recoup his losses by jacking up his prices, it isn’t working: His recent designs have been bashed by critics, and recently high-end department store Barneys
slashed prices on some items, discounting the “destroyed sweater” by more than $700. The rapper claimed at one point that his “next season”
will be more affordable than in the past, though it’s unclear if he meant Season 4 or the recently released and exorbitantly priced Season 3. Regardless, is that possible if he’s really so deep in debt?
[Tweet "If Kanye is looking to recoup his losses by jacking up his prices, it isn’t working."]
It is realistic to create clothing and shoes that are more affordable without asking Mark Zuckerberg and other billionaires for handouts. One answer lies not in cutting salaries of laborers or finding the lowest-cost shipper. It comes in finding an automated inventory management system that helps lower the carrying costs of inventory while predicting future demand and ensuring there is always enough on hand to meet the public’s needs.
Consider Amazon: The world’s biggest retailer didn’t become a monster success with a great marketing scheme or with vastly superior products. They utilized a
barcode-based inventory management system to become more efficient, to the point where they can literally place incoming items on shelves at random, and allow their database to direct workers with the best routes through the warehouse to complete orders. Rarely does Amazon find themselves out of stock on high-demand items (even during the holidays, which is key to retaining customers) despite the fact that they ship out billions of products a year.
The costs of designing, unveiling and selling a fashion line are much different than those of a jack-of-all-trades online retailer, of course. As Jonathan Reed of CS Global told Vanity Fair:
“For a large show, you’re thinking about venue expenses, set and stage expensive, audio and special effects, labor costs, which at a place like Madison Square Garden, which is union, is more expensive. This can run into seven-figures very quickly… That doesn’t include any of the talent, models, hair, makeup, stylists. That’s its own huge bucket, another easy seven-figures.”
While the one-off costs of putting on a massive show at a famous arena are large, the costs of production for a successful clothing line are ongoing and can be a drain on the bottom line if done ineffectively. Here are a few ways that an automated inventory management system cuts costs:
- Maintain lean inventory: Rather than producing large quantities of inventory in case demand is high at a future date, a lean inventory is one that has just enough on hand to meet orders. By “pulling” rather than “pushing” inventory, liquid cash isn’t unnecessarily tied up in unsold goods that may end up sitting on the shelf, losing value and requiring price cuts. A balanced inventory turnover ratio is a crucial business metric that helps maximize profits.
- Reduce other carrying costs: The costs of holding on to lots of inventory don’t stop at opportunity cost. They include investments in storage space, security, service, insurance and planning time, as well as stock out costs. For someone like Kanye, security and insurance costs will likely be premium to protect a highly sought after product.
- Fewer logistics errors and limitations: Companies that use manual processes to track inventory often run up against manual input errors. These errors lead to unneeded re-orders, false information submitted for audits and loans that can lead to fines and other extraneous costs.
Kanye is going to be fine: It’s common for brands and companies like his to go into debt, and for someone with massive earning power, $53 million is not unlike the typical American going into debt by
getting a mortgage. He can make plenty of that money back by touring for his new album. The question is, can he make smarter decisions about production and inventory going forward? Absolutely. An inventory management system is what makes good companies great and has saved many an entrepreneur from the embarrassment of tweeting at Mark Zuckerberg asking for a handout. Kanye, and others who are finding themselves in the red, should give it a try.
How could implementing a dedicated inventory management system help your business?
