December 24, 2001,
The good news is that 2001 is nearly behind us. The daunting news is that 2002 lies ahead, and judging from the opinions of executives around the market, it promises to bring us more of the same — at least in the first half.
Many vendors say they have been running flat out simply to stay in place. And, indeed, it looks as though few made significant gains this year. The early numbers indicate that we will be seeing a fair number of flat sales reports among the top vendors in several product categories.
Looking ahead, suppliers generally don't see the situation easing anytime soon. Most retailers have had their own tough time of it, and when their year-end numbers start coming out in January, February and March, the degree of caution with which retailers proceed will likely set the tone for much of the year.
As is always the case, old issues flow from one year into the next, and 2002 will be no different. Three in particular will play a decisive role in the coming months:
Auctions: It seems nearly every sizable retailer has embraced the practice — including Wal-Mart, Kmart, Target and Bed Bath & Beyond, to name some of the more prominent practitioners in the home textiles field. The philosophy behind the exercise runs that there is always some supplier that can produce goods more cheaply than the outfit that currently has the business. However, that can extend only so far.
Eventually, the only way to lower the price on some of these goods will be to de-spec them. But with some of the more rigorous retail companies charging as much as $5,000 a pop on each item that fails to pass the spec test, reputable vendors will not long be capable of staying in the game. Those who are willing — and financially able — to hang on to business by selling at a loss will need to be rewarded with additional business at the same retailer to make up for some of that wafer-thin margin being eliminated through auction.
Inventories: This is a topic that promises to be huge in 2002, with retailers vowing to tighten up delivery schedules even further. Vendors can carry only so much inventory before they choke on it. And many vendors cannot maintain just-in-time delivery for every account in their books. This one could prompt some very hard choices, all the way around.
The import/domestic balance: Yet another issue facing retailers and vendors. There are an awful lot of companies tinkering with various formulas right now, but no clear evidence that a winning paradigm has emerged. Let's cross our fingers that this one gets figured out soon.
Will 2002 bring change? Of course it will. Every year does. However, the worst of the bloodletting is probably behind us. Yes, there will be more consolidation. But most companies will make it through, just as they did this year, with a lotta hope, a lotta smarts and a lotta sweat.
See you on the other side in 2002.
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