Suppliers a Retailer's Best Friend
December 18, 2006,
A softening real estate market. Rising wages at factories in China. Wavering consumer confidence. And yet, most of the suppliers HTT contacted for our story on the outlook for the first half of 2007 were optimistic.
From 2000-2005, the supplier community condensed, consolidated, and constricted. Some businesses collapsed, clearing the way for new players, who walked into the market equipped with overseas manufacturing resources and shiny new equipment. Off-shore and domestically, partnerships were struck, joint ventures signed, and new ownerships transacted.
After a long night in the woods, suppliers have thrashed their way through to the other side. Now, it is the retailer community that is merging, purging, and looking for a new way forward.
Macy's: trying to leverage cost synergies across a broad national base, while simultaneously crafting a merchandising plan that can play equally well in Terre Haute and South Coast Plaza.
Wal-Mart: trying to spice up the mix with some Targetization without also diluting its essential Wal-Martiness.
Target: trying to figure out how to do it all by their lonesome — without assuming all the risk by their lonesome.
Dollar General: trying to overhaul its strategic plan after decades of operating with a clear sense of mission.
Family Dollar: trying to woo a less economically distressed consumer than its core shopper.
Gottschalks: trying to explore “strategic alternatives,” including a possible sale.
Linens 'n Things: trying to find a new un-BB&B formula.
Pier 1: trying to find a new un-Pier 1 formula.
Sears/Kmart: trying to..? Aside from trying to make their major shareholder exceptionally wealthy, I haven't a clue.
With so many major accounts so screwed up, how much can they really afford to brush off their “middleman” suppliers? How many of those delicious co-op dollars, open order discounts, chargeback fees and markdown bucks can they forego for the alternative of true direct sourcing?
Suppliers are and always have been more entrepreneurial than most retailers. They are more intimately involved with the art of product creation and more sensitive to shifts in the wind.
There is always money to be made, even in a “down” market. There are enough “down” retailers out there right now to furnish nimble suppliers with a nice living.