This is the title of a newly published book by Jordan Ellenberg and it is an easy read on “the hidden maths of everyday life”. One example that has a bearing on retail appears in the very first chapter. During World War II, there was much debate regarding the extent to which the air force should armour plate their aircraft. Use too little armour and the planes got shot down, use too much armour and the planes were less manoeuvrable and used too much fuel. When American plan
es returned from sorties in Europe, they were often covered in bullet holes and the pattern of the holes showed that there were far more bullet holes in the fuselage as opposed to say the engines.
In fact the engines had only 1.11 bullet holes per square foot as opposed to 1.73 in the fuselage. This led engineers to consider beefing up the armour in the fuselage and decreasing armour in the engines.
A mathematician by the name of Abraham Wald was part of the group investigating this matter.
Wald’s conclusion was that the armour should not go where the bullet holes were.
The armour should rather go where the bullet holes weren’t, and this was on the engines.
His reasoning was as follows; the reason that planes were coming back with fewer hits to the engine is that planes that got hit in the engine weren’t coming back. It all seemed so obvious after Wald’s brilliant conclusion which, incidentally, he went on to prove mathematically.
The relevance to retail and especially fashion retail, is how we plan for next season.
Although many pundits including me, are talking down seasonal planning, it nevertheless is alive and kicking, despite the Zara approach of having 365 seasons a year.
Most fashion retailers analyse what sold and what didn’t sell last season and they then base their forecasts loosely bearing this in mind.
The criteria includes pricepoints, colours, sizes, fabrics, silhouettes, suppliers, and so on.
If there was no resistance to say a pricepoint of $99 for an item, the pricepoint next season may be $109, and if there was no resistance to a price of $109, next season may see the pricepoint being lowered to $99.
And so the logic is applied to the other criteria with a hefty dose of intuition and gut feel from good planners and buyers.
It is obvious that whatever is bought by a retailer is sold at a price even if that price is zero and the items are given to charity.
Therefore how do retailers measure the success or otherwise of the criteria above?
Items that sold out quickly are a bit like the planes that never came back and that is where information can be lost or misinterpreted.
Similarly, those styles that sold slowly are like the planes that had lots of holes in the fuselage.
I have found over the years that the most underutilised report among fashion retailers is the post seasonal analysis report.
In fact many retailers do not have one and some do not even know what it means.
The report aims to analyse all the bullet holes, including those on the planes, that never came back.
It is all a question of timing. At a point in time (and one can debate when this point is) one needs to draw a line in the sand and say that there is a cut off.
This cut off is designed to be at the stage when the customer had a free choice. In other words, when he or she could buy what style they liked in what colour and with all the other attributes detailed above, being available.
The most successful fashion retailers seem to have perfected their post seasonal analysis.
Those that aren’t using a post seasonal analysis or not using it to its full potential may need some help from someone like Abraham Wald.
Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702