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Newsletter: February 2008
Sourcing Practices of US Small Business Retailers
In the United States, there are approximately
63,000 apparel and accessories stores. As the U.S. apparel industry is
largely dependent on manufacturers in other countries, foreign sourcing is
not a choice but a necessity in competitively offering apparel and related
products to customers.
A survey was carried out from fall 2006 through
spring 2007 on US small-business retailers (having 1 to 500 employees).
The Survey Results reveals:
How do these small businesses locate
manufacturers for their apparel?
A higher percentage source their products from
foreign manufacturers through independent intermediary agents (a trading
company, import broker, buying office, etc.) in the US rather than directly
from foreign suppliers. Over 40% use intermediary sources in the United
States to find foreign manufacturers for 51–100% of their merchandise. A
notable majority (68%) do not source directly from overseas manufacturers
without the assistance of intermediary agents for any of their products.
Who makes most of the products these small
businesses sell?
Brazil, Canada, China, Vietnam, Germany, India,
Italy, Japan, Korea, Mexico, and Thailand are among the top manufacturers.
Trade shows are a key source of information on foreign sourcing
for small businesses in addition to buying offices, chambers of commerce,
trade publications, sales representatives, professional contacts, the
Internet and e-mail, and word of mouth. Benefits of
Foreign Sourcing
§
Increased profit margins
§
Effective way to develop private
labels
§
Greater variety of products provided
by foreign manufacturers. Quality, delivery
time, customer service, and custom-designed products were not cited. Top 10
barriers to Sourcing from Foreign Manufacturers
§
Long shipping time and/or slow
replenishment
§
Limited information about foreign
manufacturers
§
Problems communicating with foreign
manufacturers
§
Difficulty in settling disputes
§
Excessive transportation/insurance
costs
§
Difficulty identifying foreign
manufacturers
§
Verbal/non-verbal language
differences
§
Increased managerial time to deal
with imports
§
Unfamiliar importing
procedures/documentation
§
Unfamiliar foreign business
practices
Reliance on Intermediaries
Basically, retailers are willing to give up some
of the profit margins they might have achieved from directly sourcing, to
have someone else take care of potential problems that might arise in direct
sourcing like packaging/labeling requirements and meeting product quality
standards/specs.
Higher perceptions of problems in obtaining credit
from non-U.S. manufacturers were significantly. Obtaining credit is a
true barrier to retailers that wish to source from abroad.
The study found that retailers who believed poor
standards for labor practices to be potential problems and therefore
barriers were less interested in sourcing from foreign manufacturers. This
finding suggests some level of awareness among small business retailers
concerning social responsibility issues and that these issues do, in fact,
influence their tendencies to do business. It appears that small retailers
are attempting to use intermediaries as buffers. |
