The Covid-19 pandemic challenges just about everything we thought we knew about how the world works, especially the global ecosystem that retailers have come to depend on to predictably produce and deliver goods that customers want, on time and at competitive prices.
I can report that many of the world’s leading retailers are as stunned and paralyzed as the proverbial deer caught in the headlights of an oncoming car. Like the hapless deer, there will be fewer of them when the lights come back on and the doors completely reopen.
Who will survive and how will they do it?
It would be hard to imagine a scenario more disruptive to an industry as essential to the world’s economy. Like a deadly embolus of air coursing through the arteries of an otherwise healthy patient, a huge gap opened up in the supply chain at the start of the year with the national quarantine in China and other Asian “workroom” economies.
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China’s factories produce the lion’s share of low-end products like the quasi-disposable clothing and plastic goods to which we’ve grown accustomed. According to the China National Textile and Apparel Council, as of 2018 China supplied about two-thirds of the textiles used by manufacturers across Southeast Asia, and accounted for 37.6 percent of world textile exports. Less obvious, the Chinese dominate in smartphones, computers, and auto parts that the world imports or that end up in assembly plants in places like Mexico and Malaysia.
China’s massive production shutdown could hardly have come at a worse time — just as samples of new products for the crucial fourth quarter selling season were being shipped to buyers. Those samples arrived just as retailers were shutting their doors and sending employees home to shelter in place. The disruption will become especially apparent in May and June when Chinese factories ordinarily ramp up production and start shipping.
Meanwhile, in those darkened stores, this season’s inventory is aging out and some unknown percentage is going to end up in thrift stores, flea markets, and recycling facilities. In those empty buyers’ offices, samples are sitting in unopened boxes containing products that suddenly seem irrelevant in a fearful new world. Even the most optimistic guess as to when commerce will return to normal — whatever normal may look like afterward — means no one really knows what the future holds or how consumers will behave when we get there.
Or, maybe some will.
In my field of work, the one constant these days is consumers. They are still there, sheltering in place, and what they think and feel may be changing by the day, but is no mystery. All we have to do is ask.
But many retailers and brands are still hypnotized by the onrushing headlights or daunted by the shortcomings of traditional methods in the midst of an economic disaster.
Source: Forbes