The Friday Report: November 1st, 2019

Quick wrap up of a few hot topic newsworthy stories in the supply chain logistics industry

Zebra Technologies Increases Shift of Goods from China to Other Asian Countries

Zebra Technologies’ third quarter earnings call included an announcement about the continued movement of products impacted by Chinese tariffs out of the country.  Zebra Technologies has already shifted products that were impacted by the first three tranches of tariffs and is now in the process of moving list four products out of China to other Asian countries. A $5 million to $10 million negative impact on gross profits in Q4 was noted, even after Zebra Technologies took substantial steps to mitigate the impact of tariffs using adjustments to pricing and its supply chain.

Zebra Technologies is working closely with its contract manufacturing partners to replicate its production lines so that a large proportion of its U.S. product volume is shifted elsewhere in Asia.  Fitbit is taking similar actions.

Halloween Heralds the Beginning of the Holiday Shopping Season

It’s happening.  Halloween heralds the start of the holiday season.  According to the National Retail Federation, Halloween sales were projected to reach $8.8 billion this year, the third-highest of the 15 years during which the survey has been conducted.

Interestingly enough, most consumers are loyal to specific brands and already know what kind of candy, decorations or costume they plan to purchase before hitting the store aisles.  24% of shoppers purchased Halloween supplies or costumes online.  Diversification of shopping locations including online, grocery and specialty stores, convenience and pharmacy stores is anticipated to help capture the attention of consumers.

U.S. Fashion Industry Feels the Impact of Trump Tariffs on Chinese Textiles and Apparel

With the costs of sourcing and production increasing and protectionist trade policies causing interference, fashion companies are holding a less positive outlook for the upcoming five-year period.  According to a report from the U.S. Fashion Industry Association, 83% of the respondents indicated that they are planning to reduce sourcing from China.  This is a 16% increase over that of the previous year.  It appears that the Chinese vendors are concerned about losing business to Vietnamese competitors as half the survey respondents reported that  they were offered lower pricing for remaining with a Chinese vendor.

U.S. fashion retailers and brands paid out over $12 billion in tariffs on home textiles and apparel and an additional $3 billion on imported footwear.  Originally intended by the Trump administration to push manufacturing back to American shores, the effect has been negligible.  Fashion industry experts reported that the trade war has ramped up production costs of apparel and textiles, however these costs largely have yet to be passed along to consumers.

Tariffs were not imposed on fashion and textile goods until May 2019.  Additional tariffs were put on hold in June as a show of good faith to encourage China to resume trade negotiations.  Although retailers continue to source from China, they report that the proportion of Chinese goods has diminished with 25% now sourced from Vietnam.

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