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The Retail Environment 2013

The Retail Environment 2013. Erik O. Autor, Esq. President Autor Global Strategies LLC 507 Capitol Court, NE, #100 Washington, DC 20002 USA Tel. (202) 250-9580. Autor Global Strategies LLC.

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The Retail Environment 2013

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  1. The Retail Environment 2013 Erik O. Autor, Esq. President Autor Global Strategies LLC 507 Capitol Court, NE, #100 Washington, DC 20002 USA Tel. (202) 250-9580

  2. Autor Global Strategies LLC A business consultancy serving companies, associations, and governments on public policy advocacy, legal/regulatory, and strategic communications with a focus on international trade/business, corporate social responsibility, transportation/global supply chain, and customs matters.

  3. Retail Industry At A Glance ECONOMIC IMPACT • Largest sector in the U.S. economy; annual sales = $4.5 trillion; U.S. GDP = 30% • >1.1 million retail establishments; small businesses = 95% of retail industry • Wealth generator for workers, business partners & investors • Major factor behind improvements in U.S. standard of living • Significant business & tech innovator, making U.S. economy more efficient & competitive (e.g., supply chain mgt., internet sales) • Leading actor in global commerce – retailers are largest U.S. shippers; every retailer, large and small, depends on global value & supply chains

  4. Retail Industry At A Glance EMPLOYMENT • Largest U.S. employer, directly and indirectly supporting 42 million American blue and white collar jobs (1/4 of U.S. workforce) • Retail jobs cover many skills and disciplines (e.g., sales clerks, supervisors, managers, warehousemen, truckers, designers, buyers, lawyers, accountants, advertising/marketing specialists, compliance, store operations, logistics, public relations, information technology, and human resources) • Many industries depend on retail commercial activities (e.g., manufacturing, farming, technology, advertising, trucking, ports, air express, rail, warehousing) • Advancement and entrepreneurial opportunities provide a path to middle class

  5. Factors Impacting The Retail Environment THE ECONOMY

  6. The United States is emerging from its worst economic crisis since the Great Depression of the 1930s

  7. During the recession, one-fifth of U.S. job losses were in retail, and retailers constituted a large number of total commercial bankruptcies

  8. GDP Growth Below Average

  9. Unemployment High, Falling Slowly Source: U.S. Bureau of Labor Statistics

  10. Home Foreclosures Still High; Slowly Dropping

  11. Home Values Rising, But Only Back To 2004 Levels

  12. Factors Impacting The Retail Environment Consumer Behavior

  13. Continued Weakness In Consumer Spending Source: National Retail Federation

  14. The Economic Impact On Consumer Behavior • Value (price + quality) traditionally the main factor driving U.S. consumer behavior and choice • Luxury retail has rebounded reflecting a strong stock market (e.g., Nordstrom, Neiman-Marcus, Saks) • But the weak economy and job growth has slowed consumer spending generally and forced many US consumers down the value chain • Middle and lower-income consumers are spending significantly less on discretionary items • Price is a more important factor in spending decisions • Bargain stores doing well (e.g., Dollar General, Family Dollar); middle-market retailers struggling (e.g., JC Penney, Sears)

  15. With weak consumer spending in developed retail markets (U.S. & E.U.), retailers increasingly seek customers in underserved, but growing foreign markets (e.g., China, Latin America, India, Southeast Asia, Canada)

  16. Factors Impacting The Retail Environment TECHNOLOGY

  17. Growth In E-Commerce

  18. Technology Driving Sea-Change In Retailing Amazon.com one of the great retail success stories of the 21st Century and has shaken up the industry Smart phones, tablets, and on-line shopping make retailing more mobile Social media (Facebook, Twitter, YouTube, Pinterest, etc.) give shoppers instant information about products & stores Dominance of large footprint brick & mortar stores giving way to multichannel retailing Retailers have better, more individualized data about customer preferences and shopper behavior Retailers can better manage inventory & supply chains

  19. Factors Impacting The Retail Environment Retail Sourcing Strategies

  20. Retail Sourcing StrategiesOverview Most recently, the Economy, Consumer Behavior, and International Trade Policy have all Influenced Retail Sourcing • Retailers are looking for ways to cut costs • Retailers are cutting back orders • Retailers are tightening up on inventories • Retailers are returning unsold merchandise • Retailers are looking for ways to mitigate higher risk However, other key factors traditionally impact sourcing decisions

  21. Global Sourcing StrategiesLanded Cost • Landed cost is a primary consideration in sourcing calculus: • Piece price (labor and inputs) • Transportation and Logistics costs • Additional Inventory • Duties • Brokerage Charges • Demurrage • Compliance • Is a balance – e.g., piece price can be higher in one location and still be competitive if other costs are lower.

  22. Global Sourcing StrategiesSpeed To Market • Speed to market is also important in the sourcing calculus, as retail has become a “just in time” industry • Retail suppliers can achieve speed to market through: • Market proximity; and/or • Reduction in cycle time from concept to market • Access to efficient transportation infrastructure

  23. Global Sourcing StrategiesCompliance • Compliance has become increasingly important in retail sourcing decisions. • To protect their brands and supply chains, retailers will avoid suppliers who cannot demonstrate good labor, quality control, security, safety, and environmental compliance records and practices.

  24. Other Factors Influencing Sourcing Consolidation • With globalization (and the end of textile and apparel quotas), retailers focus on finding the best suppliers • The result – Retailers are consolidating sourcing operations: • Sourcing in fewer countries • Sourcing from fewer factories

  25. Other Factors Influencing Sourcing Logistics • Retailers want sourcing to be demand, not supply driven. • Monitoring Point of Sale (POS) transactions is important to ensure the right product is on the shelf at the right time. • The retailer/supplier partnership in logistics decisions is also crucial.

  26. Other Factors Influencing Sourcing Competition Consolidation in sourcing has forced suppliers to focus on their most competitive products and ways to enhance their competitiveness through: • Vertical integration • Accessibility to inputs • Capitalizing on proximity to market • Capitalizing on trade preferences • Superior customer service • Quality

  27. Other Factors Influencing Sourcing Vendor Relations Retailers now seek closer, more collaborative partnerships with a fewer number of full service suppliers • Retailers have two goals: • Account for more of a supplier’s business – i.e., “Be a more important customer to fewer key business partners” • Have the supplier assume more responsibility in fulfilling customer needs and requirements

  28. Other Factors Influencing Sourcing Vendor Relations A competitive full-service supplier is able to serve a wide range of the retail customer’s needs: • Innovation – collaborating with the customer in concept design and development • Procurement and working with subcontractors • Easy access to raw materials through integrated production and flexible rules of origin • Quality, flexibility and speed in executing orders regardless of order size • Good record for labor, security, safety, and environmental compliance • Logistics and technical support • Inventory management from point of sale (POS) • Skilled, efficient, and highly-productive workforce • Reputation for good, responsive customer service

  29. Other Factors Influencing Sourcing Risk Mitigation • Over reliance on too few sourcing locations • Counter trend to consolidation • Exposure to trade actions (Antidumping/CVD/Safeguards) • Protectionism can create greater unpredictability in sourcing • Supply Chain Threats – “just-in-time” to “just-in-case”: • Volatility in Cost of Fuel • Congestion (stresses to transportation infrastructure) • Natural Disaster (Hurricane Katrina, Global Pandemics) • Terrorism, armed conflict, political instability • Labor strife

  30. Other Factors Influencing Sourcing Supply Chain Management Increasing costs, economic unpredictability, risks, and security requirements necessitate better supply chain management • Critical factors: • Good supply chain and business practices • Supply chain visibility • Close collaboration with supply chain partners (factories, carriers (ocean/air/rail/truck), customs brokers, freight forwarders, 3PLs, etc)

  31. THANK YOU!

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