At ProfitPeak, we work closely with fashion retailers across the world, and one pattern is impossible to ignore: the brands haemorrhaging margin are rarely losing it on the shop floor. They are losing it months earlier, in the spreadsheets and gut-feel decisions that shape what gets ordered, when, and how much.

Here are the decisions that hurt the most.

1. Over-ordering to "play it safe"

The instinct to avoid a stockout is understandable, but over-buying is consistently more expensive than under-buying.

According to McKinsey, the fashion industry destroys approximately $500 billion in value annually through overproduction and markdowns. Excess stock does not sit quietly on a shelf; it occupies cash, warehouse space, and ultimately gets cleared at discounts that can reach 40 to 70 per cent off the original retail price.

The problem is compounded by the fact that many brands still set open-to-buy budgets using last year's performance as the primary input. That backwards-looking approach fails to account for shifting demand signals, new competition, or changing consumer behaviour.

Our recommendation: Replace static, history-only forecasting with a model that layers in current sell-through velocity and forward demand signals, so your open-to-buy reflects where the market is heading, not where it has been.

2. Buying too broadly across the range

Chasing trend coverage often leads brands to spread their buy too thin. Instead of going deep on proven performers, teams are tempted to introduce dozens of new styles each season in small quantities. The result is a range full of styles that never reach the sales velocity needed to be profitable, while best-sellers stock out early.

Research from the Boston Consulting Group found that simplifying the product assortment can improve gross margin by 10 to 15 per cent in retail environments.

Fashion brands that concentrate their open-to-buy on a tighter range, backed by data on what actually sells, consistently outperform those chasing newness for its own sake.

Our recommendation: Use style-level performance data from prior seasons to identify your top quartile performers, then weight your buy towards depth on those styles before allocating any budget to new introductions.

3. Poor size and colour profiling

Size and colour ratios are where enormous margin is quietly lost. A style can sell through 90 per cent of its total stock, yet still go to markdown because the remaining units are all in size XS or a colourway with low demand. The brand records the sell-through as a success while still discounting.

Industry estimates suggest that poor size profiling accounts for up to 30 per cent of avoidable markdowns in apparel.

Getting the ratio right requires granular analysis of past sales by SKU, not category-level averages.

Our recommendation: Build size and colour ratio curves at the SKU level, segmented by store or channel, and review them each season rather than carrying forward assumptions that may no longer reflect your customer base.

4. Reacting to stockouts with emergency reorders

When a style takes off unexpectedly, the pressure to chase it is real.

But emergency reorders placed outside the planned production window typically carry 20 to 35 per cent premium costs in expediting, air freight, and supplier surcharges.

What looks like a revenue opportunity often delivers thin or negative margin by the time the units arrive. The brands that manage this well are not faster at reacting; they are better at anticipating. They use real-time sell-through data and early season signals to reorder closer to the initial buy window, not after the moment has already peaked.

Our recommendation: Set automated sell-through triggers at the four-week mark so that reorder decisions can be made while production slots and standard freight options are still available, protecting both margin and lead times.

5. The compounding cost of delayed decisions

Every week a clearance decision is delayed costs margin. A garment marked down in week six of a season will recover significantly more than the same garment marked down in week twelve. Yet many brands wait for end-of-season reviews before acting.

We see this consistently: the margin gap between brands that make inventory decisions on a weekly data cycle and those that operate on a monthly or seasonal review is material, often representing three to five percentage points of gross margin.

Our recommendation: Establish a weekly trading rhythm with a standing review of slow-movers, and set pre-agreed markdown triggers by week and cover so that clearance decisions are systematic rather than reactive.

Let us help fashion retailers like you make smarter inventory decisions using real-time trading data.