Growth in retail has slowed globally and this downward trend may not end till sourcing completes its transformation. That was the message Esquel Group CEO and vice chairman John Cheh delivered at the US Fashion Industry Association’s (USFIA) Annual Apparel Importers Trade and Transportation Conference in New York City recently. Retail sales in the US have fallen in recent years and the sluggish trend has deteriorated further, notes Cheh. What’s more, e-commerce players are taking more and more market share from physical stores and getting into their own private label lines, further increasing competition, further, discounting has reached an all-time high or low, depending on how you look at it.
Last year, Cheh disclosed, citing a 2016 Cotton Incorporated Retail Monitor survey, fast fashion retailers were selling an average of 8 per cent of their apparel product at a discount, for mass stores it was 16 per cent, specialty stores 42 per cent and department stores were selling a whopping 73 per cent of their apparel at a discount.
“What’s the point of lowering your cost, squeezing your suppliers for 5 cents or 10 cents or 30 cents,” which rarely ever amounts to much more than a 1 per cent discount, Cheh explained and all the while the discounts at retail are closer to the 30 per cent to 40 per cent off mark. “The markdowns are so much bigger, so what are we talking about in terms of keeping your costs down?”
These factors all considered, Sourcing 4.0 will be the way forward for retail to work its way out of this rut. There are four key elements to Sourcing 4.0, Cheh explained: product, quality, time and price.
Where many retailers have missed the mark while they’re busy scrambling to ward of Amazon and fast fashion, is that they’re not delivering a product consumers actually want to buy. Next the focus should turn to quality, another area that for some has fallen by the wayside in the hunt for ever cheaper product from whichever country can make it. When it comes to timing, suppliers can’t be left to bear the brunt of doing everything faster. In Supply Chain 4.0, speed comes with partnership. On price, Sourcing 4.0 will mean companies consider unit labour cost, rather than labour cost alone.
