Savvy retailers plan for popular fads

Fidget Spinners and Tulips

A major fad right now is the fidget spinner. Have you seen one? If you haven’t, go get one today. They only cost a few dollars, although premium versions can retail as high as $40. They are marketed as a stress reliever to that 12-to-16-year-old demographic, but they are spreading to a wider audience as well.

The Allure of Fads

I love fads, largely because there are such great stories around them, and many are kind of goofy and a lot of fun.

But here’s the thing. A wily retailer can make a ton of profit in a relatively short period of time by calling a fad correctly, but if they call it wrong, they can lose their shirt.

Wikipedia defines fad as:

“Any form of collective behavior that develops within a culture, generation or social group and which impulse is followed enthusiastically by a group of people for a finite period of time.”

The Most Famous Fad in History

One of the most famous fads throughout all of history was the tulip craze in Holland. Tulips were introduced in Holland in 1593. They became immensely popular, and demand outstripped supply. At the height of this fad, a single tulip bulb could cost the equivalent of ten years of income for a skilled worker. People would sell their entire lives’ worth, their homes, everything for a few bulbs. Then came the inevitable crash. By 1637 tulip bulbs were worth about the same as apples! It was a fairly long-lived fad, as fads go; from beginning to end, it lasted forty-four years.

Other more recent fads include pet rocks, the Nehru jacket, all kinds of diets, and the man bun. And who can forget dance crazes like Macarena and GangnamStyle?

Fidget spinners were introduced about April of this year and many thousands are now sold each month through all channels (web, mobile, and brick-and-mortar) and can be found in a huge variety of styles and colors. Some even come with bluetooth speakers. You can buy them at convenience stores and High Street retailers, and of course at Amazon.

But some numbers indicate the fad might have already peaked.

Can a Fad Become a Staple?

In unique instances, some fads turn into staples and create a long-term success. That happened with UGG Australia boots. Wearing this funny-looking, inside-out foot apparel started as a fad among surfers in Australia and arrived in the US about twenty-five years ago. Deckers Outdoor Corporation (DECK) acquired the brand and built it into a $2 billion business in the US and throughout the world.

Even Fads Must Obey the Second Law of Retail

Many retailers get clobbered through a fad by not managing inventory wisely; they violate the Second Law of Retail, “Turn Is Magic.”

Something like the fidget spinner has to be monitored and re-projected daily.

Even retailers get caught up in the excitement of fads, often thinking a fad will continue upward and go on forever. Sales are huge, and retailers make a huge commitment to inventory. Often they’re just too late. By the time the inventory materializes, the fad is already on the downside. The result can be a lot of leftover inventory, and markdowns must be used to liquidate it. In the worse instances, the stock must actually be “written off,” which mean it is thrown away as having no value because the fad is over and people don’t want the item at any price.

Which Brings Us to the Fifth Law of Retail, “Protect Your Downside.”

Everyone is giddy while the fad merchandise is flying off the shelves, but savvy retailers understand the importance of planning ahead for the dog days. When jumping on a fad in order to take advantage of the demand, retailers must have a prearranged plan so that when the fad dies, as it inevitably will, they can get out and move on to the next one.

If the retailer doesn’t, then they will really need those fidget spinners  “to reduce stress,” as the ads say.

Learn more about retail in my soon-to-be-released book, The Five Laws of Retail.  How The Most Successful Businesses have Mastered Them and How You Should Too. Sign up to follow my blogs and to be notified when the book is available.

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