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.
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.
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.
- Avoiding Bad Debts:
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.