Despite dampened fashion sales in the UK, retail’s supply chains are still faced with immense pressure to satisfy increased consumer demand for newness in today’s buy-now-wear-now culture.
A retailer’s supply chain is integral to its ability to drive sales and healthy margins. It ensures availability and manages overheads.
However, manufacturing overseas led to a struggle to achieve short lead times, while currency volatility following the Brexit vote has forced many to absorb increased supply chain costs – damaging margins as a result.
Faster lead times
New Look’s recent woes provide a prime example. Once loved by the millennial market for its fast fashion, it seems that New Look is just not fast enough anymore.
“UK manufacturing can bring many benefits for the retailer”
While New Look has floundered, competitors such as Asos and Boohoo have brought more of their clothing production back to the UK to reduce lead times to as little as two weeks. This has enabled retailers to respond faster to changing trends.
UK manufacturing can bring many benefits for the retailer. Well-renowned UK brands Burberry and Mulberry carry out a large percentage of their manufacturing in the UK – in fact, Mulberry is the largest manufacturer of luxury leather goods in the UK.
Manufacturing in the UK allows these brands to produce high-quality ranges and pay no additional duties.
However, UK production allows retailers to be more reactive to trends, driving a higher volume of full-price sales as a result – as seen with the likes of trend-focused retailers such as Asos.
Another area of opportunity for retailers is to streamline their supply chain by bringing it in-house.
”Having shorter lead times allows Zara to trial products first, gauging customer reactions before pressing the button on bulk production”
This strategy has been pivotal to Zara’s success and enables it to transform a concept into a product within a matter of weeks. Driving newness and retaining control over its costs led to Zara’s UK sales increase 12.6% in 2016/17.
Having shorter lead times allows Zara to trial products first, gauging customer reactions before pressing the button on bulk production. Ultimately, this ensures Zara avoids any impact from heavy markdowns, and instead drives full-price sales opportunities.
Bringing a greater volume of manufacturing to the UK will enable retailers to follow a similar approach to Zara and open up opportunities for UK retailers to win back market share.
Trialling products limits any risk associated with the bulk buys necessary with overseas manufacturing to guarantee lower production costs.
However, ethical concerns surrounding manufacturing in the UK have been rife over the last few years.
While faster lead times seem like a luxury for many, the increased demand can also lead to over-capacity at many suppliers, leading many UK factories to outsource some of the volume to ease the pressure.
“UK manufacturing will eradicate any potential tariff barriers that may be imposed when retailers bring goods into the country, and prevent any losses from currency fluctuations with trading overseas”
Retailers such as Boohoo and Missguided came under fire in 2017 when one of its suppliers in Leicester outsourced production to factories where staff were paid below the national minimum wage.
Nevertheless, with Brexit looming, the possibility of retailers increasing manufacturing in the UK could be positive.
UK manufacturing will eradicate any potential tariff barriers that may be imposed when retailers bring goods into the country, and prevent any losses from currency fluctuations with trading overseas.
However, what the long-term effect of Brexit will be remains to be seen, which causes further difficulty when planning a sourcing strategy.
Consumers are also saying they want British-made products. Therefore, manufacturing in the UK could be an ideal avenue for retailers to explore, making their supply chain more agile to meet changing consumer demands.
- Gurmukh Bhamra is an analyst at Retail Week Prospect