I love visiting trade fairs in my line of work. It’s a place to meet friends and well wishers,
develop new contacts, exchange views with industry informed, get new leads and it is
also a place to make interesting observations…
This time around too, JIAM threw a googly that ‘German retailers are actively looking to shift production back to their country’. I have not deliberated on which product categories, but it was said in so many words by three sewing machine suppliers in separate conversations… that got me thinking. I recalled the recent success of the ‘Made in USA’ pavilion at Magic, Las Vegas with over 50 local manufacturers showcasing their products. It was the most visited area at the Source Zone and all major retailers from JCPenney to Target supported the concept, even the Government pitched its support.
Only recently I also came across a letter of a famous designer brand sourcing from India addressed to its equally reputed Indian buying office with a stern warning to improve on late deliveries and quality, with a clear hint that now onwards the brand intended placing fewer orders with the buying agent as they were looking to move back production to Europe… It made me think whether this is actually a good idea for the retailers, considering that production cost are much higher in the EU…
The realities are indeed interesting… fashion is changing very fast and it is increasingly becoming important for retailers to buy as close to the season as possible; buying locally takes just 6 weeks as against the average 16 weeks lead time from India. Again, sourcing locally would mean selling at original mark-ups with little need for markdowns, while holding very little or no inventory, both of which brings in greater profits.
That’s not all, the retailers also save on custom duties payable and commissions paid to buying agents. Besides this, they also don’t have to pay tax for any of the shipments that move in and out of the country…
Assuming that all these advantages surpass the ‘higher’ cost of production, which was the original reason for the shift in production to Asian countries and where now the cost of labour, infrastructure and logistics is on the rise… it is time for the industry to introspect! There are a lot of ‘ifs’ and ‘buts’ at this point of time and maybe the concept is still too ahead of time, but it is something that the industry needs to deliberate upon.
This time around too, JIAM threw a googly that ‘German retailers are actively looking to shift production back to their country’. I have not deliberated on which product categories, but it was said in so many words by three sewing machine suppliers in separate conversations… that got me thinking. I recalled the recent success of the ‘Made in USA’ pavilion at Magic, Las Vegas with over 50 local manufacturers showcasing their products. It was the most visited area at the Source Zone and all major retailers from JCPenney to Target supported the concept, even the Government pitched its support.
Only recently I also came across a letter of a famous designer brand sourcing from India addressed to its equally reputed Indian buying office with a stern warning to improve on late deliveries and quality, with a clear hint that now onwards the brand intended placing fewer orders with the buying agent as they were looking to move back production to Europe… It made me think whether this is actually a good idea for the retailers, considering that production cost are much higher in the EU…
The realities are indeed interesting… fashion is changing very fast and it is increasingly becoming important for retailers to buy as close to the season as possible; buying locally takes just 6 weeks as against the average 16 weeks lead time from India. Again, sourcing locally would mean selling at original mark-ups with little need for markdowns, while holding very little or no inventory, both of which brings in greater profits.
That’s not all, the retailers also save on custom duties payable and commissions paid to buying agents. Besides this, they also don’t have to pay tax for any of the shipments that move in and out of the country…
Assuming that all these advantages surpass the ‘higher’ cost of production, which was the original reason for the shift in production to Asian countries and where now the cost of labour, infrastructure and logistics is on the rise… it is time for the industry to introspect! There are a lot of ‘ifs’ and ‘buts’ at this point of time and maybe the concept is still too ahead of time, but it is something that the industry needs to deliberate upon.
