The Strategy of Reducing Inventory Burden

The Inventory Challenge

The accumulation of large inventories has become a significant issue. While it may appear that franchisees have fulfilled their roles, the reality is more complex. Daphne, for instance, faces a dilemma where franchisees, after completing their initial transformation, may feel victimized. This situation is not unique to Daphne; many clothing brands have struggled with inventory pressure since 2012.

The Impact on Franchisees

Daphne's regular distributors often employ a quarterly promotional strategy. For example, shoes priced at 99 Yuan for consumers might have a purchase cost of 119.50 Yuan for franchisees, excluding shipping, labor, and rent costs. Such price reductions directly impact franchisee sales, leading to collective protests. The significant stock and protests have made Daphne aware of the negative effects of their business model. As franchise contracts expire, Daphne may find it best to shed this burden.

The Broader Market Context

This conflict between well-known trademarks and franchisees is not isolated. The clash of interests due to large inventories has forced many brands to rethink their strategies. Inventory pressure has become a critical issue that needs resolution.

Seasonal Sales and Promotions

By late August, many brands, including fashion and leisure brands, offer sales promotions. Sports brands like Adidas, Li-Ning, Nike, Anta, 361 Degrees, Peak, Jordan, and Xtep also join the fray. For instance, at Beijing's Xi Dan Market, Peak's sports shoes, originally priced at 398 Yuan, are cleared out at 99 Yuan by the end of the quarter.

Understanding the Anxiety of Sports Brands

While fashion brands' clearances can be attributed to changing trends, the heavy promotions by sports brands might seem puzzling. However, mid-year financial reports reveal the underlying reasons. High raw material costs, slowing domestic economic growth, rising shop rents, labor costs, logistics expenses, and increasing cotton prices have all contributed to the high inventory levels faced by both domestic and international sports brands.

Financial Insights

Financial institutions' mid-year reports highlight the challenges faced by these brands. The combination of high costs and a slowing retail market has made it difficult for the sporting goods industry to clear inventory quickly.

Key Statistics

• High Inventory Levels: Many brands are grappling with high inventory levels due to rising costs and slowing economic growth.
• Promotional Strategies: Brands like Daphne and Peak are using aggressive promotional strategies to clear out stock.
• Economic Impact: The domestic retail market slowdown has significantly affected the speed at which sporting goods can clear inventory.

Conclusion

The struggle to manage inventory is a widespread issue affecting many brands. As the retail market continues to evolve, companies must adapt their strategies to address these challenges effectively. The ongoing conflict between trademarks and franchisees underscores the need for a balanced approach that considers both parties' interests.

For more insights into the retail market and inventory management, you can refer to authoritative sources like Forbes and Harvard Business Review.

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