SNEWS Special Report: A broken supply chain? The retail perspective

The quest to help facilitate the discussion around finding a solution to a badly flawed outdoor industry supply chain began with an email plea to SNEWS® in March from a number of retailers. The email called out a list of challenges to the way we buy and sell, from a retailer's perspective. After months of investigation, we found one common thread in this complexly woven tapestry: Everyone shares some responsibility for how we arrived at the current supply chain problem and everyone must act collectively to find a solution.
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The quest to help facilitate the discussion around finding a solution to a badly flawed outdoor industry supply chain began with an email plea to SNEWS® in March from a number of retailers. The email called out a list of challenges to the way we buy and sell, from a retailer's perspective:

  • too many trade shows, both regional and national exist, and yet we keep adding more;
  • early preseason and pre-show buying deadlines keep moving forward at an alarming rate;
  • rep line previews are taking longer, as is the amount of time required to write an order, sometimes as much as four days, for a single brand;
  • minimum order amounts for best terms continue to escalate in price, making them unreasonable for most small specialty retailers;
  • reps for larger brands demand time in stores from buyers and store owners often during the busiest selling seasons, right when owners and buyers need to be focused on managing their business, brands and staff; 
  • and the pressure from too many vendors -- each selling too much me-too product -- to buy multi-categories from each vendor, often leading to retailers taking on inventory they don't want or need to get best terms.

As SNEWS started to peel back the layers of the onion to work on better understanding the issues from all sides, we quickly realized there was going to be no simple answer to what has become a very complicated issue. We spent several months investigating, including visiting factories overseas, interviewing numerous manufacturers (CEOs, production managers and designers), talking with sales reps, trade show organizers and other retailers. Then we chatted with industry consultants to seek opinions, garner background information and decide how best to proceed. One common thread began to appear among the complexly woven tapestry: Everyone shares some responsibility for how we arrived at the current supply chain problem and everyone must act collectively to find a solution.

Somehow, in the headlong race over the last 15 years to chase the almighty sewing dollar, we have managed to create a production and sales cycle that is so complex even executives coming into our industry from far more seemingly complicated markets shake their heads in wonder. Few retailers and even fewer manufacturers from other industries are making buying and selling decisions a year in advance -- decisions that can make or break a season or even a year.

Order lead times have lengthened, necessitated in part because manufacturers insist they need 10 months or more lead time for greige goods (i.e., unbleached and undyed textiles). That means reps are showing up in key stores in November, asking buyers and store owners to make buying decisions for products that won't deliver until the following August, intended to sell during the months of September through December.

The problem with this, retailers told us, is they often have no real idea what will sell through this year in order to make an educated guess as to what colors and styles might sell well next year. Worse, few feel confident enough about their personal crystal balls to place orders when there is no way to gauge the economy, trends or consumer buying moods that far in advance.

In the outdoor specialty market, with few exceptions, the strongest selling season for most retailers is November through January (on average, 25 percent to 30 percent of all sales are made during this time). The second most important selling season appears to be May through mid-July. With the current ordering cycle, reps are coming into stores during the busiest selling seasons, and buyers and storeowners, and often key floor sales staff, are having to spend significant off-the-floor time in meetings. Retailers also point out that once the rep has left, their scramble is not done, as most manufacturers now are demanding paper by December for the fall deliveries and paper by late June and early July for the following spring deliveries.

If it were only as simple as viewing product and placing an order, that might be one thing, but retailers also tell us that during those same peak sales times, they have to be in contact with their sales reps by phone or email, national sales managers by phone, and in some cases, even sales VPs or company owners to ensure turns and profits are maximized and the best terms are worked out. Since every retailer is doing much the same thing, and there are only so many reps and sales managers to go around, retailers tell us that this leads to a circus of voicemail messages, phone tag dances, and games of hide-and-seek that are enormous time wasters. Multiply that scenario by 100 brands all demanding essentially the same performance and one begins to wonder how any business is getting done at all, let alone good buying decisions are being made.

Most retailers we spoke with are responding to the shifting economic climate and consumer buying habits by modifying traditional preseason and fill-in strategies to align more closely with inventory need. The majority is now allotting only 55 percent to 60 percent of their dollars for preseasons with the rest kept in pocket for fill-ins and chasing bargains. But manufacturers still seem to want retailers to essentially super-size their orders to gain the most favorable terms, we were told. And that just doesn't seem healthy either.

Retailers further explained to us that manufacturers seem to be on the same path, despite the economy, of trying to push preseasons earlier and earlier. Retailers assert that manufacturers apparently want to tie up more of the retailers' dollars earlier, so they can garner a competitive advantage and, perhaps, ensure earlier production time on the factory floors in Asia.

Not one retailer we spoke with told us manufacturers were lowering thresholds to garner the best terms -- even in this challenged economy. In fact, most manufacturers appear, according to retailers, to be insisting retailers maintain flat to increased business to earn best terms -- often requiring they take on more SKUs and a broader product mix than a retailer might wish to carry from that particular vendor. Retailers told SNEWS that while they suspect manufacturers are doing this to prevent cherry-picking of lines, this kind of business approach is not only short-sighted, it is the kind of strategy that created the overstock scenario many retailers found themselves in when the market collapsed in late 2008. And, it is this approach to force-feeding a retailer that is the primary reason why so many preseason orders were cancelled this spring, leaving manufacturers stuck with spring/summer inventory that had landed, but wasn't selling.

Additional preseason trade shows, regional shows, rep shows and moving the dates on what is currently considered our national show, Outdoor Retailer, are of no help and do nothing, really, to address the overall issue of a broken selling cycle, retailers said. The earlier the shows move, they said, the earlier still the manufacturers continue to push their reps to get in to see key retailers, and round and round the merry-go-round goes.

Retailers acknowledged, somewhat wistfully, that the days of heading to an August or January national trade show for the inaugural "show and tell" of new product, followed by the buying decisions either at the show or a month later, are long gone. There are too many brands with expanding product lines and production spread all over the globe for that to ever work again. In fact, some argued, we have too many brands to begin with now…but that's a topic for another day.

So, from a retailer's perspective, what are the solutions?

1. Stop all the show madness -- pre-shows, manufacturer preview shows, regional show additions and trade show date dancing. Less is more here.

2. Reps are welcome (begged for and wanted a number of retailers told us) in the stores November through December and June through July as long as they are there to drive sales by supporting the sales staff and working the floor, not give a line presentation. If manufacturers are creating a scenario where reps feel they need to be in the stores giving line presentations -- sometimes lasting multiple days -- then the manufacturers need to shift the order and production timelines to eliminate this.

3. Manufacturers need to realize that retailers are going to order less in preseasons, and as a result, require more with fill-ins. For retailers, it is about turns, not about how much has been preseasoned. Core products should never be out of stock.

It is VERY important, however, that everyone reading this, realizes, as SNEWS does, that the above is but one view of a very complex situation -- it is how retailers are looking at the supply chain problems. Next up, SNEWS will take a look at the distribution challenges through the eyes of the rep.

Our goal with this series of editorials is to engage the industry in healthy discussion. Perhaps open a few eyes to seeing things through a new lens, and, hopefully, help us all arrive at a series of ideas and action items that will, in the long term, lead to a healthier and more profitable industry for us all.

--Michael Hodgson

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