As Joe Mimran ramps up for his crucial Joe Fresh fashion expansion into the United States, distribution snags need to be ironed out.
The stores don't always stock clothing sizes to meet customer demand, Mr. Mimran says. Too often, urban outlets run out of small sizes while suburban stores run out of larges sizes and are stuck with too many small ones.
The difficulties are tied to systems that track customer demand to tailor merchandise offerings to specific stores. Joe Fresh parent company Loblaw Cos. Ltd. has been working on its distribution and technology infrastructure for years, aiming to complete the key project in 2014.
In the meantime, Mr. Mimran, preparing for his single biggest expansion since Joe Fresh was rolled out six years ago, feels the pressure of having insufficient data to match customer buying patterns with inventory.
"We still have many challenges in our stores in Canada," Mr. Mimran said this week. "We still have some system constraints."
Joe Fresh is scheduled to launch its stylishly affordable offerings in almost 700 J.C. Penney U.S. department stores next spring. Mr. Mimran will have to wrestle with some stocking inaccuracies at his Canadian stores at a time when his operations will become even more complex.
"He's got a popular brand and when he makes a mistake ... it's a big mistake," said Jim Danahy, a supply chain expert at consultancy CustomerLAB. "Data is not telling the truth about what is actually selling through each individual store."
Mr. Danahy estimated that Loblaw could be losing tens of millions of dollars annually in sales from stocking the wrong sizes of its Joe Fresh apparel. And the company must take a hit on profit margins when forced to mark down prices on unwanted merchandise.
He said Joe Fresh will feel the heat even more in coming years as giant rivals, such as Wal-Mart Stores Inc. and Target Corp., begin to use more sophisticated systems called RFID (Radio Frequency Identification) which track products and sales even better.
The silver lining for Mr. Mimran is that J.C. Penney, even though it's been struggling with poor financial results, has a better distribution system than Loblaw, including RFID, Mr. Danahy said. When Mr. Mimran starts to ship products to J.C. Penney next year, Joe Fresh will deliver them to a warehouse in California and the U.S. retailer will handle them, he said.
Already he is using an outside firm to ship Joe Fresh goods to its six standalone stores in and around New York City.
"It works better just simply because it's smaller – it's much easier."
Loblaw executives have estimated that it will spend about $70-million in each of this year and next on information technology and supply chain projects.
In the meantime, Mr. Mimran has to make do with stores each getting a set number of each size for every style, even though stores have different needs based on their customer base, he said.
Even so, he has enough information to pick up on some sales patterns at his 300 Joe Fresh stores in Canada – mostly in Loblaw superstores – and six flagships in the U.S. Customers in urban centres, for instance, want more fashionable items, while those in the suburbs are looking more for basics and not ready to spend as much.
For example, a $49 printed silk blouse does well in urban locations but not in the suburbs, where a $19 polyester printed blouse does better, he said.
"In New York, they do glob on to our fashion show pieces," he said, citing a $129 wool cocoon coat with neoprene trim. "It will fly out of the Fifth Avenue or Madison Avenue store," he said. "It's a hard sell north of Bloor Street" in Toronto.