Why are we often sold out?

Hello everyone,

Today I'm going to share with you a very complex topic among fashion brands: stock shortages and sales forecasts. .

And behind the subject of stocks, I'm going to tell you about a nasty monster that's just waiting for a gap to devour the brands and swallow them whole: the BFR .

It is a subject never addressed by brands, perhaps due to a lack of transparency or fear of talking about its weaknesses, but also because it can seem difficult to explain.

But I think that everyone will be able to understand our issues at the end of the video and the article, and that this will allow me to dispel some preconceived ideas!

“Why are your products running out of stock so quickly?”

BonneGueule is growing, and more and more of you are placing a first order with us, and more and more of you are re-re-re-ordering. Between 2017 and 2018, this represents 65% of orders.

As a result, we are also producing 65% more clothing, in order to be able to meet your expectations.

I know that it's sometimes annoying not to find your size on a piece of clothing that you have a little crush on, but it's not something that happens systematically for us either!

For example, some products sell out very quickly, while others are less popular and can take a year to sell out completely. And it's impossible to know which ones in advance. ...

For the oldest among you, you must also remember a time when collaborations were sold out in 24 hours on the majority of launches!

That's why we raised funds in 2015 from business angels with the promise of limiting the phenomenon, and we have largely kept our promise. Some quick sell-outs still annoy some readers, but it's still much rarer than in the past. .

But unfortunately for you and for us, this is something that will continue to happen from time to time, because as I said, it is impossible to predict precisely the success of a product, whether at BonneGueule or at any other brand...

“It’s 2018, there are tools or analyses to predict demand, right?”

Frankly, I would love to tell you that there is a foolproof method: it would make our lives much easier. Alas, in practice...

From the outside, it seems possible to predict the success of a product: " I was sure that this one would work better" , " It's obvious that a slightly different color would work better ", " It's logical that this garment is a hit, it's a basic in any wardrobe ". And in general, we're not too wrong. We do big statistical analyses, we interact with you continuously, we use our intuition.

But very often, there are also unexpected results. Causes that are less taken into account and that turn out to have big impacts (as in the theory of black swans ). Or too many factors, with correlations that are sometimes positive, and sometimes negative. . Or simply big statistical deviations, which suddenly cause all the shirts in S to go away at once! And in the end, these events are impossible to predict!

Take for example the case of leather jackets: two colors, beige (classic) and fir green (daring): boom, the most classic color is a hit.

1 year ago, superfine merino sweaters. A blue (classic) and a burgundy red (daring). And there, bam, it's the most striking color that wins hands down .

There are many examples, and we are talking about double the demand, sometimes more. How do we know what quantity to ask our workshops for under these conditions?

All brands face these problems. Whoever could invent a reliable method to anticipate people's sizes and desires would earn millions by offering their solution to brands...

This does not prevent us from doing very in-depth sales analyses, particularly for the distribution of sizes (we call them Gaussian functions in mathematics) and the approximation of quantities, and this already helps us enormously. We even have an internal data analyst (Simon) who produces studies for us.

And I could also tell you about external causes! Do you know that we have three times more visits to the store on a launch Saturday with sun and 25°C, than when it rains or it's 35°C? Do you know that when a production delay forces us to release the pieces at the end of the month, we sell fewer? ? Or that a football World Cup where France is doing well turns people away from clothes for 15 days? ? And all these different effects, and many others, combine with the first ones, and can have notable impacts on a launch.

Without being fatalistic, we want to and can improve further, but we will never be able to reliably predict the success of the next 20 items of clothing (and therefore order the right quantities for the big day)...

“Why do you produce so little?”

I wouldn't say that we produce "so little". We produce the right quantity, since despite a few sell-outs , we generally always have sizes on new products a few days after launch.

If we take the example of the latest launch, we still have all the sizes of the sailor sweater and the new jeans!

• Henley (€150): 214 pieces produced, 213 sold, 1 in stock
• Linen-cotton sailor sweater (€140): 299 pieces produced, 185 sold, 114 in stock
• Berto stretch jeans (€95): 585 pieces produced, 183 sold, 402 in stock

Compared to our first henley with Fleur de Bagne, it is simply too risky to plan large quantities on pieces that we have never produced, and which we have never talked about in the media!

I know it was gone in a few hours, but it's always easier to give the lottery result after the draw.

Because it's really a piece that we considered risky, in the same way as very seasonal products (Bermuda shorts, linen shirts, very warm coats), products with a very strong design (raspberry-colored double-breasted blazer, white pants), or our other very first times (bleach jeans, sneakers).

And to finish with a last counter-example, we still have almost all the sizes on other strong pieces:

Yes, it also happens to order too much stock of some pieces in the year!

"Why not produce more? There is no risk since you sell everything!"

First of all, as I just explained, you should not believe that "we sell everything" .

But then you might be wondering why not plan on saving some extra on the best pieces?

Well, if we wanted to offer customers some kind of insurance against any sell-out , we would have to increase orders (and therefore stocks) of all parts. .

We would go from this:

to this:

A stock that is impossible to finance

The first problem is that all this stock would have to be financed. This would represent a lot of money "tied up" in the form of clothes waiting to be sold.

And that's where Working Capital comes in. Basically, it's the company's tied up money:

• money paid to weavers and workshops to order fabric or reserve production slots
• stocks already produced, in transit , or already delivered
• the part of the 3x payments that we will only receive next month and the following one

And this Working Capital only grows as growth continues.

Worse than that, it grows even before the growth generates a cash surplus, because the company will anticipate this growth: more stocks, but also more efficient IT systems, a larger team, larger premises, etc. .

Which brings us to a paradoxical situation: even if profitable, the more BonneGueule grows, the less cash we have.

WCR is truly the sworn enemy of growing companies.

Parts on my hands for 5 years

Let's suppose that we decide to increase the WCR further to finance additional stock. For the least demanded products, we would find ourselves with stocks hanging around for several years.

Besides, this is already the case for certain pieces, where we have 30 XS sizes or 25 XL sizes that we would like to part with. .

So much cash tied up in stock, when we could have produced new products with this money.

This is not our philosophy.

Finally, BonneGueule means consuming less but better.

Even with unlimited cash flow, what would be the point of overproducing, with the assurance of having 3 or 4 years of stock on the products where we make mistakes?

And then we burn everything for accounting reasons and to "preserve brand desirability"?

Is this really what our customers expect from us? Is this how we want to grow? How can we justify ourselves when we want to show the market that another path is possible?

An expert's opinion

Valentin, another reader who is a production supervisor in a factory , explains it very well to disappointed commentators:

“Why not raise lots of money to finance a larger working capital requirement?”

Because it would be disproportionate to overfund BonneGueule just to avoid certain stock shortages. Knowing that for those who really don't want to miss out on a garment, 99% of the time it is enough to connect at the time the email is sent .

Indeed, each fundraising represents a progressive loss of independence for the company. Today we are surrounded only by business angels, minority shareholders. Benoît and I still hold the vast majority of BonneGueule's share capital (more than 4/5), in addition to a significant share held by members of the team: it is important for us to retain significant decision-making power to carry out our company vision.

As for banks, they finance investments, if possible tangible ones, but are very reluctant to finance stocks: it is generally impossible.

“You don’t mind frustrating people?”

Well yes, absolutely.

I have also already missed some products from other brands. , or some Kickstarter, and I understand what it's like to not be able to order something you really like.

Which does not mean that we do nothing.

But as you have understood, each company has its constraints. Fashion remains a sector of intuition, creation, human relations. That is why sometimes we can fail. And besides, everyone fails from time to time, including algorithms and the enormous mammoths of fast fashion.

This does not prevent us from taking risks when they are measured.

“Why don’t you restock?”

On the contrary, we do it regularly: most of our clothes are treated as permanent items, which we re-produce as soon as the stock drops too low.

As long as we don't end up with a large stock of sweaters in the middle of August, and shorts as October approaches.

Indeed, weaving the materials, transporting them , then have them assembled by sometimes quite confidential workshops, and carry out a quality control worthy of the name, it doesn't take 15 days but 4 months.

Some brands may choose to skip steps, but that doesn't meet our quality standards. In 2018, it's become commonplace to order a book online and have it delivered the next day, but when we're talking about quasi-artisanal products, we have to understand that time is one of the ingredients of quality.

That said, we still tried to restock summer items, notably the striped cotton and linen t-shirt from June (despite significant production minimums for knitted clothing) because Julien had planned a possible restock in advance:

“Why don’t you set up pre-orders?”

This is a good question, which many have asked us, with the emergence of brands that only work on pre-order or on Kickstart, such as Gustin or Benjamin Jezequel.

We find this to be an interesting way of doing things, but it comes with another set of constraints and problems: stock availability outside of pre-order periods. , difficulty in making exchanges, inability to make advanced products because sales cycles are too short and pre-orders are often out of season, delivery delays and customer service problems...

The other problem is that in terms of quality, pre-orders are not always that good either.

Our way of doing things allows us to work, work and work on each product, sometimes with almost 10 prototypes. And the lack of rush allows us to test the clothes well, and then order special productions of fabric, often more interesting and of better quality than by drawing on what is called "stock service", which are the basic products of fabric houses (acceptable, but more industrial, and with less originality).

We would end up with less worked products, with more risks of defects, and here again this does not fit with our standards. It is a choice assumed in relation to what really matters to us

That said, we might try pre-orders on "simple" and "entry-level" products in 2019, but we don't want to make things even more complicated today, and risk doing things badly by trying to do too many things at once.

In conclusion...

First of all, thank you for trusting us and asking these questions, because it means that BonneGueule matters to you. And I always enjoy answering them!

And if I had to summarize this article in a few lines, I would say that we are exploring new economic models with BonneGueule. . Every day, we continue to refine them, knowing full well that we are not perfect, and that we will never be able to meet 100% of the expectations of tens of thousands of customers.

But in everyday life, we do the best we can with our little arms, like everyone else. So we have to accept that we don't have everything (which is the case everywhere ), even if we listen to you and try as much as possible to find solutions when problems arise.

And missing a time piece is also a kind of assurance that behind it we really do the job from A to Z, over time. We don't want to dilute ourselves by doing everything at once, and nothing really well. Multiplying distribution channels, production methods, clothing lines, that wouldn't make sense.

In the meantime, we need to trust ourselves a little to do the best we can, and continue to grow healthily.

Thanks again to all those who have been following us for a long time, encouraging us and trusting us with their style.

All that remains is for us to wish you a wonderful summer!

See you soon on the other side,
Geoffrey & Benoît