Retailers Work to Improve Importing

BCST Staff, August 22, 2005

Home textiles retailers see 2005 as a year when they refine and expand their import activities in this market's increasingly competitive field.

With few exceptions, specialty home textiles retailers are lagging behind their full-line counterparts in the direct import piece of the business, according to the first annual Home Textiles Today survey of home textiles retail imports.

Making the situation even more complex is the way many of the major retailers address the import equation, making clear-cut definitions between direct imports by the retailers and other import processes even more blurred than ever before.

And as the supplier segment of the industry continues its shift from U.S.-based manufacturing to a plethora of manufacturing scenarios offshore, the issue of how a retailer obtains a specific product — direct or indirect — is increasingly subject to debate.

While retailers such as Ikea and Pier 1 traditionally are global players in direct sourcing across the store, department stores, specialty retailers and discount department stores are essentially gearing up to full sourcing mode.

Some retailers have been especially outspoken in identifying their percentage goals by company, including Target with a clear objective of increasing its current percentage of direct imports beyond the current level of 25 percent to about 30 percent in the next several years.

JCPenney, with its powerful sourcing arm, has direct-to-store replenishment programs in six countries, with towels and sheets among the key items. The result of this program is no investment in inventory.

And the billion dollar JCPenney Home Collection — which includes the Chris Madden Home is a Haven program — is part of the company's total $7 billion sourcing initiative.

On the other hand, retailers like Anna's Linens are just beginning to assert themselves in the sourcing arena, with the company projecting a four-fold increase in imports up to 2,000 containers this year, compared with 500 in 2004. Direct imports accounted for a bit more than 20 percent of the company's home textiles business.

Similarly, Linens 'n Things is accelerating its import activities this year, pegging the figure for this year to be considerably above last year's slightly less than 20 percent of the volume.

But Bed Bath & Beyond, because of its store distribution system, apparently does a minimum amount of direct importing, beyond special promotional events.

At Federated, the home textiles private brands — Hotel and Charter Club — are directly sourced by FMG, the company's product development and sourcing arm, while merchandise bought by Macy's Home Store merchants can be either directly sourced or sourced through a vendor here.

Direct imports also appear to be on the increase at Brylane Home, a catalog division of Redcaps USA, part of the global PPR empire with extensive buying activities around the world. Brylane apparently is tapping in to the parent company's sourcing expertise.

But as the world of importing, whether home textiles or apparel, is growing, the classic definitions of the types of business arrangement are blurring, become murkier as one tries to define them, many key retailers explain. In many cases, it's a matter of trying to compare apples, oranges, pineapples and kumquats — there is no clear definition.

The initial key as to whether a purchase is a direct import or a purchase from an import supplier is essentially the mood of the moment. Major retailers, from Wal-Mart on down the retail rankings, will often select an item, then decide how they want to receive it — direct in the country of origin or shipped to this country for distribution at their home base, or via distribution by the supplier or a mix of all of the above. As one experienced retailer observed, “It all depends on the benefit we achieve.”

Then there is the issue of defining an offshore source versus an importer/domestic supplier that brings merchandise in from around the world. In the burgeoning global market, offshore manufacturing companies are establishing an American face — an office here to take care of everyday issues. There are the long-standing American companies that have only offered product that they designed and produced offshore, and then there are the importer rep companies that have set up shop to help retailers facilitate their activities overseas.

Wal-Mart, it appears, is trying to initiate replenishment of home textiles on a direct basis, as is Target. But behind the scenes in the retail arena is the percentage buyer's P/L — in some instances, apparently up to 8 percent. In order to encourage more direct sourcing participation, several retailers are exploring moving those charges away from the buyer's top-line account.

And as U.S. retailers of all sizes seek direct import opportunities, there is the quiet challenge of ensuring that their suppliers are in compliance with all American regulations — from chemicals used to labor laws.


Company Name 2004 home textiles sales ($millions) 2004 home textiles est. imports ($millions)
* The definition of “direct imports” varies by retailer. Many count FOB or POE shipments from third-party suppliers as direct imports along with direct-from-factory orders placed by retail buying offices.
Source: HTT estimates
Wal-Mart $3,490.0 $873
JCPenney 2,852.0 570
Target 2,600.0 650
Bed Bath & Beyond 2,470.0 123
Linens 'n Things 1,347.0 265
Kmart 1,182.0 118
Federated Dept. Stores 764.0 152
Sears 615.0 30
May Company 563.0 57
Company Store Group 220.0 65
Anna's Linens 214.0 43
Ikea 205.0 205
Brylane Home 170.5 60

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