Supply chain challenges, inflationary pressures and recession fears are top of mind for many industry executives. From shuffling logistic strategies, start-up struggles, and consumer insights, leading industry experts shared their insights across all facets of the business at Sourcing Journal’s Fall Summit on Tuesday. Here are the top three takeaways from yesterday’s summit.
Now is the time to reimagine the supply chain
Shekar Natarajan, chief supply chain officer and EVP at American Eagle Outfitters Inc., spoke about how rising costs and shipping delays, along with the December acquisition of Quiet Logistics, convinced the company to reimagine its supply chain. “It no longer made sense to have one central distribution center in the middle of the country when the majority of its brick-and-mortar stores and web customers were along the two coasts,” Natarajan said.
The company utilized Quiet Logistics’ in-market network of fulfillment centers and moved to a new strategy of decentralization — having more facilities closer to population centers. The result: Natarajan said this move increased the company’s delivery expenses by 300 basis points, while industry wide this cost went up by 700 basis points. Natarajan also noted that American Eagle can now deliver stock to its stores 80% faster than before. “A pair of jeans used to take us 14 days to bring back in stock, now it takes us 2.5 days,” Natarajan said. “An agile supply chain has improved our efficiency significantly.”
Atmosphere at the Sourcing Journal Fall Summit. CREDIT: Kreg Holt
Consumers are still shopping despite inflation
According to Greg Petro, CEO and founder of First Insight Inc., consumers are still spending despite inflation. “Consumers are actually willing to pay more, but only on specific products, such as categories like shoes, accessories and apparel,” Petro said. Inflationary factors haven’t quite derailed the demand for apparel and shoes,” he added. But Petro did note that other categories like travel and leisure and entertainment are starting to see a decline in consumer spend, according to First Insight’s research. “The challenge now,” Petro added, “is that most companies are operating at a very high level, and don’t necessarily have a granular understanding at the consumer level as it relates to the product they sell. And ultimately, retail is about product.”
As for talk of a recession, Petro said that First Insight has found through its own research that there is a disconnect between what executive and consumers think is going on with the economy. “Around 67% of American consumers not only believe, but know, we are in a recession,” Petro noted. “This pales in comparison to sentiment across CEOs that insist we are not quite there yet. So there’s a disconnect between the decision maker and the consumer.”
Retail start-ups remaining strictly online-only is a “flawed” business model
Andy Dunn, author and founder of Bonobos, shared many personal and professional insights during his session. One of the major bombshells was his belief that the business model he pioneered with Bonobos “doesn’t make sense.” He added: “Now there’s a really big direct-to-consumer ecosystem that’s emerged since I started the company in 2007. The problem is I don’t actually think that it’s not a very good business model. Right, like, in retrospect, sometimes I joke, you know, we pioneered a business model, that doesn’t make sense. And the only way that we evolved that to make sense was doing a relationship partnership with Nordstrom, which ended up being our fastest growing channel and our most profitable channel.”
Dunn noted that any entrepreneur that asks his advice when starting a new business is to find brick-and-mortar retail partners that will pay on time and take care of their customers. “These are the best way to make real money and to scale.”