Long Supply Chains Created Consumer Disappointment This Holiday Season
According to a study commissioned by retail analytics firm DynamicAction and conducted by IHL Group, “out-of-stocks” accounted for $634.1 billion in lost retail sales for the retail year ended last spring— 39% higher than in 2012.
Overstocks contributed $471.9 billion in lost revenues, up 30% from three years prior. When a retailer has too much merchandise, it cuts into its margins.
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Returns accounted for $642.6 billion in lost sales in the last retail year.
According to separate analysis by DynamicAction, retailers ahead of the beginning of the Christmas shopping season, Black Friday, were already selling about 21% fewer items at full price than they did at the same point in 2014.
In total, retailers are losing $1.75 trillion from out-of-stocks, overstocks and returns.
Data from Adobe’s Digital Index said that 35% of online sales volume went toward retailers’ Thanksgiving Day doorbusters, leading to “a lot more out of stocks” on Black Friday than the firm expected.
Items that were either out of stock or running low included Hasbro’s Pie Face game and the 7-inch, 8-gigabyte Amazon Fire, Adobe said.
“It’s still tough to make high-volume consumer electronics, such as Apple products, because not enough of the components are made here,” said Harry Moser, Harry Moser, founder of the Reshoring Initiative and former president of machine tool maker GF AgieCharmilles. “Apple has said in the past it would assemble more products here if they could get the components here, the engineers and toolmakers here.”
The Reshoring Inititative is a non-profit that helps companies make better sourcing decisions with a focus on bringing manufacturing jobs back to the US.
One of the apparently lost areas of retail that Moser said is making a comeback is apparel. The US was producing a little more than 1% of the apparel it consumes and the rest was being imported four years ago. In one year it jumped to 2.75%.
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“When you dig into the cases where it happens, quick delivery, customization and response to seasonal demand were all faster with a US-based factory,” Moser said. “Coming halfway around the world? We’re talking 3 months or 6 months for those variations.”
Moser said that companies sourcing in the US, and close to the US, do not have to forecast demand for their products as much.
The Reshoring Initiative can help.
Resources for Retail Suppliers
The time is right to make more Made in USA products available to U.S. consumers. Bringing production from another country, especially a low-labor-cost (LLC) country, is increasingly feasible due to the rapid closing of the wage gap vs. the U.S. Launching a new product is always a challenge, especially for smaller companies. This webpage provides the Resources to help large and small U.S. and foreign based companies make the right decision and succeed in profitably manufacturing or sourcing appropriate products in the U.S.A. The challenge is typically to determine whether, when shifting from offshore to domestic sourcing, twenty to thirty small overhead costs come down more than the manufacturing costs go up. Based on available data, about 25% of offshored products should be profitably reshorable. The mission of this website is to help you pick the right products to reevaluate and to provide the tools to help you make that reevaluation accurately and the transition smoothly. http://www.reshorenow.org/steps-to-reshore/
Good article. This has long been one of my arguments for re-shoring American manufacturing back to USA. We can not continue to ensure on time delivery to our customers if products are to be continued to be made in distant and isolated parts of the world. The increased cost in logistics and transportation and in customer dissatisfaction will not cease to be a problem.
As an employee of Amazon I can attest first hand as to this issue, not only with the Amazon Fire, but with all products leaving an Amazon fulfillment center.
It is a misnomer to continue to call what we do as American Manufacturing.