The Friday Report: October 19, 2018

Target Strategizes to Surpass Amazon and Walmart This Holiday Season

After public statements in 2017 that it planned to spend $7 billion in upgrades to its supply chain as well as to delivery options, Target customers are finding it easier and more convenient to shop online and in Target stores.  As part of these improvements, Target has implemented free two-day shipping, added services such as curbside pickup and same day delivery service in major metropolitan areas and acquired transportation company Grand Junction.

Last year, Target reported that its stores fulfilled 70% of all digital orders and forecast an increase this year.  Target has designed its fulfillment strategy by positioning its stores at the center of its digital growth, focusing on using brick and mortar retail stores to fulfill the majority of its online orders.

Read more about Target’s plans for the 2018 holiday season here.

Tariff Increases Cause More Companies to Rethink Supply Chains and Abandon China

Recent $200 billion tariff increases are causing American companies to reconsider their current supply chains.  Tariffs are making Chinese made goods more expensive.  In addition to the problem of tariffs, rising labor costs and concerns about infringement on intellectual property have caused major concern.

Developing labor markets such as Vietnam, Ethiopia, Cambodia and Bangladesh have come to the fore recently due to lower wages and costs.  With years of experience in dealing with U.S. companies, however, China has become an efficient location to do business.  China has built up its infrastructure significantly over the past thirty years and now has 13 of the world’s 50 largest ports (three of the top five).  China is a manufacturing powerhouse, producing as much as Japan and the United States combined.

Part of the issue in transitioning from China is a logistics one. Having an entire supply chain based in China, companies are finding that it is challenging to shift to other markets easily.  

Because so many components are made in China, procurement and sourcing through to manufacturing makes a major impact on the entire supply chain when moving production.

For more information on this topic, click here.

Legacy Food Companies Try to Reboot Dated Brands

As consumers’ tastes are changing to prefer healthier options and fresh foods, legacy brands such as General Mills, Conagra Brands and J.M. Smucker are evaluating new ways to engage Millennials and Gen Z buyers and revise product portfolios to reduce or eliminate slow moving products.

Consumers have shown decreased preferences for highly processed and preserved foods.  Turning their focus to other market segments such as peanut butter, snacks and coffee is hoped to yield better results for attracting a younger audience.

Big Food companies have been selling off assets, divesting portfolios to shed old brand images.

Read more about how legacy food companies are changing here.