The epidemic of recession is sending shivers all across the
globe affecting all the businesses irrespective of its nature. As against the
economic backdrop, credit crisis, and changes in the consumer spending pattern
has put the suppliers and retailers in jeopardy. Even big organizations have
succumbed to the pangs of the global turmoil, and have filed for bankruptcy.
Many others struggle to survive the tide through other options like lay offs,
and cost cutting.
Both suppliers and retailers face recession realities such
as bad debts, reduced consumer spending, non-availability of credit lines to
sustain their business operations, and a significant increase in markdown
money. To survive the pangs of recession, suppliers, and retailers will have to
join hands together in taking the bull by the horns.
Survival strategies:
In countenance with the most challenging period of the
recent years, it is required that the suppliers have to adjust with the
retailers regarding their business strategies in dealing with the environment. As
the retail inventories are depicting a downward trend, and discounts with a
contrary upward trend, and credit still tight, economists contemplate that
there will be a drastic modification in the consumer spending pattern. To obtain
prompt responses, suppliers, and retailers use coercive strategies for
attracting the consumers.
Financing:
Apparel suppliers will have to have
adequate back up of cash to carry them through tough times. With banks
tightening their policies regarding credit, it is difficult for the suppliers
to do so. They can considers for alternative financing methods such as purchase
order financing, borrowing against other assets, such as traditional accounts
receivable and inventory.
Suppliers are likely to face immense
margin pressure from the retailers. Suppliers need to intensify their efforts
to identify new sources of supply for better prices, and raw materials. They
have to co-ordinate with the retailers, monitor, control and collect invalid or
unauthorized detections and chargebacks from retailers.
- Reduction in Overhead costs:
Apparel manufacturers need to
identify potential cost reduction strategies, eliminate waste through prompt
analysis of operating expenses. Todays consumers live in small family, double
income households, are more informed and internet savvy, but are more time
constrained. Hence they are very particular about their shopping preferences.
Identifying the right products matching with the consumers preferences, will
help the supplier and the retailer to reduce their expenses, and also gain
sizeable profit margins.
During the period of economic
turmoil, bankruptcies are unavoidable creating a shattering effect on many
suppliers. Companies must enter into factoring arrangement, to insure against
probable losses due to bad debts. By enhancing internal collection process and
improving credit monitoring procedures suppliers can sell to retailers even in
times of financial crisis.
There are many influences that affect the bottom line
profitability of both the suppliers and retailers. Suppliers will try to
maximize the number of units for sale, whereas a retailer will focus on
offering more choices to the consumers, and will focus on launching new
products.
Globalization is a positive force in the retail industry
that focuses on overseas expansion and market growth. Despite the global
slowdown, coordinated efforts of supplier and retailer are likely to bring drastic
changes in the industry. Retail and supplier consolidation is a new trend, and
is set to evolve.
Reference:
http://retail.about.com
