US Apparel Retailers Stopping Orders to Vendors
Apparel retailers are postponing and canceling clothing orders, putting at risk millions of jobs in Asia just as China appears to be returning to normalcy after its coronavirus crisis.
As consumer demand plummets, the Wall Street Journal says the first to be hit by the consumer shutdown in the West are suppliers to the world's "fast-fashion" retailers, such as H&M. Because their business models depend on being able to get orders from factory floors to retail outlets in just a few weeks, those retailers are now pausing or canceling factory orders.
But those woes are likely to move to other retailers and thus their suppliers soon enough.
Supply Chain Digest Says... |
 |
| "Those companies that have those platforms in place today will succeed," Barnes said. "Stores won't go away; they'll just look different. |
 |
|
|
For example, both Primark, a retailer with stores across Europe, and Peacocks Stores, a UK retailer, have suspended or canceled orders, according to public statements and notices to suppliers viewed by The Wall Street Journal.
Mostafiz Uddin, who owns a Bangladeshi jeans manufacturer, said his factory made around 14,500 jeans for Peacocks only to receive a letter saying that the retailer wouldn't accept the order.
Visit the Retail Vendor Performance Management home page to learn more
and subscribe to the monthly newsletter.
UK retailer Marks & Spencer recently sent a note to suppliers suspending new purchase orders.
H&M said it is also evaluating "potential changes on recently placed orders." The company buys from around 1,400 factories globally, with clothing production concentrated in China and Bangladesh.
 Ulrika Isaksson, an H&M spokeswoman, said "our long-term commitment to suppliers will remain intact, but in this extreme situation we need to respond fast."
In an emotional video address to clothing brands, Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, called on retailers to at least pay for the goods they had already ordered.
Retail experts say the slowdown looks to be significantly worse than the financial crisis of 2008, because now thousands of stores have literally closed their doors, precluding selling of retail inventories at bargain prices as happened then.
Retail Supply Chain Changes from the Coronavirus Crisis
Multi-Channel Merchant magazine asked several experts their thoughts on the likely impacts of the coronavirus crisis on the retail supply chain. That includes insights from Jim Barnes, CEO of consulting firm enVista.
Barnes said one result of the reset will be "a great deal of channel compression or contraction" as manufacturers and brands that have been staying on the sidelines fully embrace direct-to-consumer commerce, especially those in consumer packaged goods.
"Now they're throwing their gloves off and boom, going into DTC if they can," Barnes said. "If I'm Nestle or Kellogg, I'm re-evaluating channels that have typically used linear distribution, from manufacturer to distributor and to retail. They need to figure out a way to bypass all that and go as direct as possible."
Barnes said manufacturers and brands, especially those with enough recognition and awareness, need to push past concerns about channel conflict when looking at adding DTC.
"At NRF this year, I spoke with a newly appointed executive that runs digital for a major chocolate manufacturer who wished she could get leadership to wake up to digital and DTC," he said. "They're all afraid of channel conflict, she told me. I said, you have an incredible brand today. Have you heard about Nike? Do you think they're concerned about channel conflict? They have enough brand awareness."
For smaller manufacturers and brands, Barnes suggested leveraging marketplaces like Amazon, Walmart.com, Wayfair.com and others. Overall, he said, supply chains have to become more compressed.
 "Manufacturers and distributors will look more like retailers and compress time from the top down, while retailers will look more like manufacturers and distributors," Barnes added. "I see supply chain compression, channel compression coming. As a retailer, I'm going direct to manufacturers and eliminate agents or distributors. It's ultimately about time compression. If I can compress time, I can provide agility in the network to respond quicker when I need to."
Barnes said there will also be an even great shift to BOPIS and curbside pickup - which already had been growing, and is now accelerating during the coronavirus pandemic.
"Those companies that have those platforms in place today will succeed," he said. "Stores won't go away; they'll just look different. We'll have a lot more dark stores and MFCs, operating BOPIS and ship from store location to minimize human interaction. They'll stock shelves at night, with a light crew to pick orders for pickup at the curb or a locker. We're already starting to see that."
Barnes also predicts store footprints in metro areas will continue to shrink, with more of them flipping to same- and next-day fulfillment centers for the area. He also said, adoption of collaborative robots will grow as fulfillment center workforces shrink and human interaction is reduced.
Walmart, Unilever Taking Moves to Protect Suppliers
Walmart is making changes to its supply chain financing program to help qualified suppliers get payments faster. The retailer is adding dedicated resources to speed up its on-boarding process and eliminate an eligibility requirement. It has also added a third banking partner JPMorgan Chase, joining Citibank and Wells Fargo.
"More than two-thirds of our 18,000 suppliers are small and medium sized businesses who could benefit from this newly enhanced program, the company said.
Meanwhile, CPG giant Unilever unveiled a 500 million euro ($543.25 million) relief program to help its "most vulnerable" small- and medium-sized suppliers as well as provide credit to select small-scale retailers.
Your Comments/Feedback
|
