Survival of the Fittest:
Like specialty retailers that make up a sizeable piece of the retail landscape, the larger retailers will continue to create, build upon, and source their own brands themselves. Like life in the jungle, it is survival of the fittest.
This is a double-edged sword for retailers. They want to control their own destiny by designing and sourcing their own brands. Yet at the same time they want to off-load the cost of excess inventory and markdowns of those products. Consider how that could play into your favor.
What you as a manufacturer do to stay relevant and add value to the retailers will ultimately determine how long you can survive. We work with many private label manufacturers whose entrepreneurial approach enables their product offerings to be unique and compelling.
Further, the smartest thing you can do is diversify your assets: capital, property and people. Think about the day a buyer might call to tell you they are taking your program direct. How will it affect your business? Do you have other assets that will enable you to continue in business? It seems to me if you want to survive you will need some combination of:
· A strong national brand that can stand on its own, one that retailers have to buy because consumers demand it.
· A unique/exclusive product that cannot be sourced elsewhere.
· A multitude of brands that enable you to keep a consistent flow of business as the relevancy of brands go up and down.
· A level of service offering value far greater than a lower unit cost. Taking advantage of technology to help buyer's manage their business is one way.
· A new business model like those that own and manage brands like a hedge fund, even licensing them to manufacturers. Think about companies like Iconix Brand Group, Inc., whose main business is owning and promoting a brand portfolio worldwide.
· A strategic alliance or merger with a company with synergistic value.
· Business diversification. Some of our apparel and home textile clients have expanded into real estate. Another client has leveraged their operational skill set by offering it on an outsourced basis to other suppliers.
· Developing an online store to promote a brand and sell product.
My intention is not to paint a bleak and hopeless outlook, rather to encourage you to take stock in your business model today and see if it can be adapted to this new world. At the end of the day, as with your personal assets, a well-diversified business will enable you to weather the ups and downs of the retail business.
I would be happy to share our perspective with you, or help you strategize. If interested, please call me at 212.938.1991 x101 or email me at jlewis@ers-c.com
