Jennifer Marks -- Gifts & Dec, February 28, 2005
It's a funny old world. As the structure of the industry continues to morph post-quota, some significant changes are taking place. Chief among them is the fact that the ability to manufacture product — wherever that takes place — is in some cases less of a selling point than a supplier's ability to handle other functions related to the business.
First, there is the issue of design. And it's a contentious issue, with suppliers complaining that their designs are being ripped off by customers who take their ideas into retail-direct programs. But suppliers are also working with retail-direct units on design specifically — and being paid for it. Some have even suggested that in the future supplier revenues won't be coming so much from the wholesaling of goods, but from royalty fees for design.
Supply chain management is another function retail-direct teams increasingly look to suppliers to handle for them. The job is also being pushed onto overseas suppliers. As several Indian manufacturers noted in HTT's Feb. 21 issue, retailers are asking off-shore factories to open distribution centers and offices in the United States to support fulfillment. (Here come the chargebacks!)
Finally, there's the concept of retail-direct itself. As we've noted before, a lot of retail-direct business is being run through the same supplier base retailers have always used. But because the programs are being put together by offices in Mumbai, Karachi and Shanghai, they're coming together at off-shore prices and being classified as retail-direct business.
Ultimately, the changes are going to require new financial modeling on all sides. Retailers will carry more overhead as they build out their product development teams. Suppliers may need to reallocate resources they had previously invested in product development to bolster supply chain support functions.
The ground is shifting under everyone's feet.
Correction: In my Feb. 14th column about the Home Fashions Product Association's referendum on market dates, I mistakenly wrote that voting “on the timing of the New York Home Textiles Show will close on March 1.”
Timing for the New York Home Textiles Show — which takes place at the Jacob Javits Center — is not up for a vote. Neither the show nor its organizer, George Little Management, are involved in the HFPA's open ballot initiative. The vote concerns only the timing for the showroom-oriented New York Home Textiles Markets.
My apologies for the error.
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