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Retailers Fear Protectionism and Tariffs as 2016 Election Nears

Posted By Administration, Thursday, October 13, 2016
Updated: Tuesday, October 11, 2016


by Bryan Nella, GT Nexus


The front page of the Wall Street Journal on October 7th featured a headline that read: Globalization on the Skids. The sub-head was Finance chiefs meet amid fears that an era of free trade and investment is ebbing. Protectionism and tariffs are a growing concern not only for finance ministers and bankers, but for retailers as well. With the 2016 U.S. Presidential election nearing, retail executives expect business to be impacted by tariffs and red tape as policies move away from free trade. A survey of 250 U.S. retail executives shows that 46% expect to be impacted by tariffs and protectionist measures derived from the trade positions of the two major U.S. presidential candidates.

Both Republican presidential nominee Donald Trump and Democratic presidential nominee Hillary Clinton have said they would not support the Transpacific Partnership agreement (TPP). Talk of imposing tariffs and "adjusting" trade policies, from both sides of the aisle, is drawing concern and expectations of significant impact on business. According to the survey, the impact will be felt in multiple ways:

  • higher costs (37% of respondents)
  • issues and delays with imports (20% of respondents)
  • lower margins (19% of respondents)
  • negative impact on international growth (13% of respondents)

The survey goes on to probe how this will play out. The results show retail executives plan to take action to address higher costs of goods from tariffs. And there will be a direct impact on consumers and suppliers:

  • 36% plan to raise prices
  • 27% plan to negotiate lower costs with suppliers
  • 14% will cut out production costs
  • 8% will move production to low tariff countries

The expected impact on the retail supply network is significant. Based on the survey:

  • 44% expect higher cost of goods
  • 22% expect higher risk of delays or disruptions
  • 20% expect more red tape
  • 17% expect challenges procuring materials and resources

Yet despite the concern and need for programs to counter risks from protectionism, most retail executives say they are unprepared to address possible trade risks in their supply chain:

  • 68% have no programs in place for supply chain agility and flexibility to address incoming trade risk
  • 26% don't know if they are deploying such programs
  • Only 6% currently have plans in place to provide agility to proactively address

Only 17% of retailers surveyed are very prepared to handle tariffs on imported goods. Most retail executives don't have a handle on the volume of goods that can be adjusted geographically. Fifty-seven percent don't know the percentage of goods that can be adjusted to another region to counter protectionist measures.

Retail executives do see technology playing a major role in combating tariffs and trade uncertainty. They see multiple opportunities to deploy technology to ease some of the burdens and risk upon their supply chain as policies drift away from free trade:

  • 24% say technology can provide better communication in the supply chain by connecting trading partners
  • 23% say it can help better handle costs (assessing cost to serve scenarios, etc.)
  • 23% say it can provide greater inventory agility and flexibility
  • 17% say it can provide sourcing agility to avoid risks and costs (allows easy shift in sourcing locations)
  • 15% say it can improve risk assessment

The 2016 U.S. Presidential Election brings uncertainty to global trade. Retailers and consumers are exposed. While retailers appear to be unprepared to offset the costs stemming from tariffs and red tape, they are not powerless. Rather, retailers should address this risk just as they would any other form of risk that arises in the global landscape. Tariffs and protectionism, like Brexit or any other manmade or natural disruption, are just another form of supply chain risk that requires technology to connect partners and deliver visibility. Network connectivity can provide the foundation for operating an agile global business that is capable of side-stepping incoming risk or mitigating the impact of friction, whether it comes in the form of a trade tariff, hurricane, or a factory fire.


Bryan Nella is Director of Corporate Communications at GT Nexus, the world's largest cloud-based supply chain network. He has more than 12 years of experience distilling complex solutions into simplified concepts within the enterprise software and extra-enterprise software space. Prior to joining GT Nexus, Bryan held numerous positions in the technology practice at global public relations agency Burson-Marsteller, where he delivered media relations and communications services to clients such as SAP. In previous roles he has worked with clients such as IBM, MasterCard and U.S. Trust. Bryan holds a BA in Mass Communications from Iona College and a MS in Management Communications from Manhattanville College.

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Tags:  2016 election  globalization 

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The Future of Retail in a Globalization 2.0 World: The Four New Roads to Growth and Profit

Posted By Administration, Thursday, June 11, 2015
Updated: Wednesday, June 10, 2015

by Dr. James A. Tompkins, Tompkins International


Globalization 1.0 was born in the 80's, matured in the 90's and peaked in the early 2000's. The era was marked by "made in Asia," the growth of the BRIC economies, wealth residing in the West, the birth of the Internet and the maturation of local, regional and global supply chains.

More importantly the era gave birth to three MEGATRENDS, the rise of China first as a manufacturing hub and then as a market, the exponential growth of e-commerce and the development of the advanced globally integrated supply chains.

Retail has experienced major disruptions over the last five years. These megatrends have melded together to form a single new MEGATREND -- Globalization 2.0 – and this has completely changed how retailers and brands must operate and how they must approach making, moving and selling consumer products.

Globalization 2.0 has largely shattered close to 100 years of retail and consumer product manufacturing, operations, sales, marketing and supply chain structures, closing down the old routes to growth and profit while opening new ones.

If you are a retailer or consumer product brand Globalization 2.0 means you not only CAN but MUST be able to "make/buy it" anywhere, "move it" anywhere, and "sell it" anywhere.

Globalization 2.0 has found its purest expression in the birth of global disruption twins, Amazon and Alibaba. Amazon and Alibaba are changing the face of global retail.

They are the poster children for a 2.0 world. Jeff Bezos and Jack Ma both run companies that are supply chain focused, that have cool tech interfaces and who rely on China as a factory and market.

Both companies have used the 2.0 foundation to influence every aspect of global retail, branding and merchandising. Changing how all brands need to operate.

In this 2.0 environment U.S. and European retailers and brands must deploy four new strategies in order to grow and be profitable.

STRATEGY I – Reframe Your Business for a 2.0 World
This means asking three questions:

  1. Where should I make it?
  2. Where and how should I sell it?
  3. How should I deliver it?


Retailers and brands must ask themselves, how do we reset our "make it, sell it, move it" strategies in a 2.0 world?

While the answer will be different for every retailer and brand it will usually involve shifting to a model that accounts for:

  1. A mix of Asia, Latin America and the U.S. for production and sourcing
  2. A mix of Asia, Latin America and the U.S. as growth markets
  3. A new mix of hyper-localized supply chains integrated with an omni-channel and e-commerce focus on regional and global networks


STRATEGY II – International Expansion
The middle class is shrinking and less affluent, the retailers and brands serving that middle class are disappearing. The toll taken by a "race to the bottom" on pricing, influenced by e-commerce, means that, with the exception of luxury and mass market products, the old economic rules no longer apply and profit margins are narrow or non-existent. The first road to take for retail and brand growth is expansion into developing markets, in particular China. China is now home to the fastest growing and largest consumer class in the world.

STRATEGY III – Omni-channel + Borderless E-Commerce + Alibaba
Retailers and brands must expand domestically and internationally in order to grow. Growth domestically and internationally lies in transitioning into omni-channel sales. Omni-channel is the ability to present a brand, a product, an experience and to facilitate frictionless sales and returns across all channels.

Growth will also come from embracing the future that is borderless e-commerce. The recent news that Amazon has opened a store on Alibaba's B2C e-commerce platform T-Mall marks the moment that borderless e-commerce went from a "want" to a "must" for retailers and brands. The two companies are creating a world where any consumer from any country can buy from any brand or retailer from any country.

China is the largest e-commerce market in the world. Roughly 500 million Chinese shop online and that number is growing by the quarter. Alibaba is the largest and most profitable e-commerce company in the world having a touch on close to 75% of all e-commerce transactions in China. Alibaba generated $250 billion, Amazon generated $100 billion and eBay generated $76 billion in revenue, making Alibaba, Amazon and eBay the top three revenue generators in 2014.

Alibaba will soon become a major e-commerce platform, technology provider, retail facilitator and brand showcase on a global basis. Selling on Alibaba now will give companies entry and advantages in the US, Europe, India, Brazil, Russia and Africa eventually.

To fully understand Alibaba, what it has accomplished and where it is going, you need to watch "The Alibaba Effect," our extremely popular video that covers all things Alibaba.2

STRATEGY IV – Profits Through Supply Chain
During Globalization 1.0 the supply chain was simply understood as making, moving and storing products: a necessary, if little understood, business function. Globalization 2.0 now mastering the six mega-processes of the supply chain (PLAN-BUY-MAKE- MOVE-STORE-SELL) is essential. Understanding the supply chain often makes the difference for retailers and brands between profits or losses and between thriving or dying.

In a world where your customers are global, where your product sourcing is global and where omni-channel sales and e-commerce excellence are a must have, your supply chain network is a central business strategy and profit driver.

Retailers and brands need to be able to sell anywhere and at anytime, deliver anywhere at any time and be able to see and move product anywhere at any time.

SUMMARY
Retailers and brands are no longer operating in a world where the old rules, old structures, old relationships and old production and channel models work.

The companies that will survive in Globalization 2.0 will embrace a new framework for operations and strategy, expand internationally and shift to an omni-channel/borderless e-commerce channel strategy.

[1] http://www.tompkinsinc.com/alibaba-effect/


Dr. James A. Tompkins is an international authority on supply chain strategy, focusing on implementation of end-to-end supply chains that are demand driven. Jim is the founder and CEO of Tompkins International. His 35-plus years as CEO of a consulting/integration firm and his focus on helping companies achieve profitable growth give him an insider’s view into what makes great companies even better.

He has written or contributed to more than 30 books, including Caught Between the Tiger and the Dragon, Bold Leadership, Logistics and Manufacturing Outsourcing, The Supply Chain Handbook, No Boundaries and Facilities Planning. He has also fulfilled over 1,500 speaking engagement requests.

Jim has served as President of the Institute of Industrial Engineers, the Materials Management Society, and the College-Industry Council on Material Handling Education, and Purdue has named him a Distinguished Engineering Alum. Jim received his Bachelor of Science in Industrial Engineering, his Master of Science in Industrial Engineering and his Ph.D., all from Purdue University.

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Tags:  Alibaba  Amazon  Globalization 

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