Rethinking Allocation Metrics in Fashion Retail

Our analytics mission isn't just about crunching numbers; the bonus fun challenge I get to tackle is deciphering the story behind those numbers. Like a good editor, part of my job is to identify when the wrong story is being told.

In some cases, the problem is a disconnect between the intended conclusion and the narrative pieces used to tell that story — when the metrics and measurement devices don’t build to the resolution that they should.

So for today’s “book review,” I’m going to explore a narrative that comes up all the time as we support fashion and apparel brands: the allocation story. It’s probably a familiar one for those reading, but spoiler alert — it might be time for an update.

Just looking for guidance on how to calculate allocation error?
Read my other post.

TL;DR — The allocation story

The conclusion of the allocations story, the fairy tale ending, is a simple one: get the right products to the right places at the right times. The path there? Not so straightforward.

To tell that story, we need to pinpoint how successful the one, final choice we made was — and compare it to the countless options we had at our disposal when the journey began.

And if telling that story wasn’t difficult enough already, the metrics commonly used to help tell it often miss the mark. Sure, sales, gross margin, and inventory turnover are important, but do they truly reflect whether we nailed the allocation process? Are they telling the story we think they’re telling?

Among these possible narrative-driving metrics, one in particular calls out for editorial review.

Frequently cited across our customer base as an indicator of allocation success, in-stock rate is a metric that feels like it’s telling the right story. But in-stock rate is not a straightforward measure of allocation effectiveness; it's intertwined with buying decisions that the allocator (in most cases) has very little control over.

When we try to tell allocation stories using in-stock rate, we’re unnecessarily sharing our protagonist’s spotlight with a background character. It’s like we’re retelling The Devil Wears Prada but focusing on Andy’s relationship with Nigel instead of her conflict with Miranda.

Could that be an interesting story? Absolutely. But it’s not going to win Meryl Streep a Golden Globe.

So our goal for this book review is to find the metrics that will help our hero, the allocator, get the story they deserve. We’ll leave buying for another round.

Notes from the editor: Finding the right story for allocation measurement

What does the right allocations story look like?

Well first, it needs to be compelling — the narrative elements need to add up to the resolution we want to communicate: right stuff, right place, right time. But it also needs to be actionable.

As I mentioned at the start, measurement for measurement’s sake is a waste of everyone’s time. Great analytics act as a sounding board. We want to provide allocators (and their managers) with the insights needed to make smarter and faster decisions — while capturing more and more full-price revenue.

So the Syrup allocation story is all about allocation error. Simply put, this metric reflects the percentage of total demand missed due to inaccurate allocations.

A “good” version of this story occurs when allocators are increasing (or maintaining) availability while decreasing allocation error. When allocators read it back to themselves before Monday review meetings, they should have a story that's not just about what was sold but what could have been sold if they had perfected the allocation.

For the technically inclined, our approach involves a somewhat complex series of equations — and in typical Syrup fashion, we calculate it at the most granular level: by item, by store, by date.

Specificity is the key to success, something you’ll notice not only in our analytics strategy but also in how we approach forecasts and recommendations.

Allocation error is defined as the percent of total demand that was missed due to inaccurate allocations. Missed demand (or lost revenue) is considered if:

• There was no inventory available
• A lead time ago, there was enough inventory across both stores and DCs combined to have at least one unit in every store

Lost revenue is estimated based on the average daily revenue from the last few weeks. The story is much the same as we break demand down into its constituent parts.

In sum, this methodology, while complex, is invaluable. For one, it is less directly influenced by the overall buy. Going back to our movie metaphor, we’re focusing the camera more squarely on Andy and Miranda.

In addition, it incentivizes smart allocation strategies. The model penalizes taking an “allocate out everything” approach where less focus is placed on mapping supply to demand at each store. This is possible because of our more granular approach.

Finally, the model helpfully weights high-selling, high-revenue products and stores — the cast of characters we want to prioritize in our success story.

Why telling the right story is so important for allocation success

Why the obsession with allocation error? Because allocations represent a golden opportunity for retailers to increase revenue and reduce inventory waste. And while this mission-aligned outcome is a good one to pursue, the reason we’re thinking so much about the story requires going a little deeper.

Allocations are where the artistry of retail planning meets the precision of analytics. Rethinking allocation metrics isn't just about finding the right set of numbers; it's about empowering allocators to confidently make decisions with the right blend of personal experience and actionable data.

Making data actionable first requires ensuring we’re telling the right story — otherwise, we risk sending allocators off to chase decisions that don’t meaningfully improve important metrics like sales and margin.

It's about embracing the complexity, honing in on the nuances, and ultimately, driving better business outcomes.

My team and I partner with our customers constantly to think critically about the metrics that matter. It’s one of the most rewarding elements of my job. Ultimately, all of us at Syrup want to make our customers more successful — and one of the best tools we have to make that happen is through strategic collaboration with the people making important inventory decisions every day.

I hope this allocations book review gives you a good sense for how we think about analytics, for sure, but also for how we approach our partnerships. And allocators: it’s time to make you the hero of your story. I’ll bring the updated metrics, you bring the popcorn.