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Speed to Market: now more important than Cost

Fast food, fast internet, fast coffee … it seems everything needs to be delivered to us fast these days.  We’re moving into an age where everything is driven by speed, and the Rag trade is feeling the pressure to deliver ‘Fast Fashion’ more than ever. With tech-savvy Millennials and time-poor consumers searching for more convenient ways to get what they want, when they want it, Speed to Market (STM) has become so important that Cost has become a secondary consideration.

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GST on low value goods imported into Australia

From 1 July 2018, GST will be payable on low value goods (AUD1,000 and under) supplied by overseas retailers to Australian consumers.  Under these changes, the Government will use the vendor collection model for collecting goods and services tax, where vendors (including online stores) will collect the GST on low value imported goods at the time of

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Chinese New Year 2017 – Plan Ahead

Happy New Year and of course, Happy Chinese New Year. China’s most important festival, also known as Spring Festival will be here before you know it. Most businesses in China and Hong Kong (as well as many other Asian nations) close for a week and sometimes longer in order for staff to travel to be with their families for the celebrations. This can cause delays in obtaining Customs Clearance documentation for Australian businesses importing cargo from China and elsewhere in the region.

The official date for celebration is January 28th 2017, however factories and freight forwarders will begin their vacation from January 27th until February 2nd. However, many factories do close earlier so it’s best to confirm with your individual suppliers.

The following vessels from China are due to call Australia over the period from 26th of January until the 3rd of February

Aglaia
ANL Wahroonga
ANL Wyong
Argos
CSCL New York
Xin Yan Tian
Irenes Warwick
Ital Libera
MOL Prestige
Northern Precision
OOCL Shanghai
SC Mara
Sea Pearl
Xin Yan Tian
YM Singapore

Our Chinese Agent offices will be closed on the following dates

• Hong Kong Offices Closed January 28th to 31st returning February 1st
• China Offices Closed January 27th to February 2nd returning February 3rd
In order to avoid any delays receiving documentation over this period please ensure that your supplier provides all documentation including any applicable original bill of ladings, fumigation certificates and packing declarations.
Delays in receiving documentation can result in significant storage and demurrage costs.

If you have any queries or would like more information, please call your Magellan Customer Service team member on 1300 651 888.

Fun Facts:

• 2017 is the Year of The Fire Rooster
• Active, amusing and popular within a crowd are just some of the traits associated with Rooster.
• If you are born in the Year of the Rooster, you are a hard worker and courageous, you like attention in public and you are very strong-willed
• 2017 will be a good year for romance.
• The Year of the Rooster would be a good year financially especially for restaurant owners, hairdressers and journalists
• Celebrities Britney Spears, Elton John, Matt Damon and Roger Federer were born in the year of the rooster.
• Years of the Rooster include 1969, 1981, 1993, 2005, 2017 and 2029.

 

Sources:
Brisbane Courier Mail

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The State of Global Fashion 2017 – Uncertain, Changing and Challenging

Looking back at 2016 — one of the toughest years on record for global fashion

As fashion executives around the world reported in the first BoF-McKinsey Global Fashion Survey, 2016 can be summarised in three words: uncertain, changing, and challenging.

Indeed, this has been one of the toughest years ever for the global fashion industry. Terrorist attacks in France, the Brexit vote in the UK, and the volatility of the Chinese stock market have created shocks to the global economy, which has not been this volatile since the depths of the financial crisis of 2009. Meanwhile, consumers have become more demanding, more discerning, and less predictable in their purchasing behaviour, which is being radically reshaped by new technologies. But the shockwaves have not only been external. Fashion companies have also been looking inward, implementing changes to their core operations—from shortening the length of the fashion cycle to integrating sustainable innovation into their core product design and manufacturing processes—re-evaluating the entire fashion system itself.

Perhaps unsurprisingly then, 67 percent of the executives surveyed reported that conditions for the global fashion industry have worsened over the past 12 months, a fact that is clearly borne out in the industry’s financial performance this year. Sales growth is on track to slow to just 2–3 percent by the end of 2016, with stagnating profit margins. Speculation and uncertainty over the impact of the outcome of the election in the United States could further impact sales if consumer sentiment dampens. This is in stark contrast to the fashion industry’s performance over the previous decade, which saw the industry grow at 5.5 percent annually according to the McKinsey Global Fashion Index, outpacing overall GDP growth.3

It is important to note that industry performance in 2016 has not been even across all market segments and categories. This year was particularly difficult for the luxury and mid-market players, who were hit by the slowdown in China and the US and are expected to grow at rates below the industry average at 0.5-1% and 2-2.5%, respectively. One category that is experiencing significant deceleration is watches and jewellery. While it was the fastest growing category between 2005 and 2015 – having enjoyed a compounded growth rate of 11% according to the MGFI –watches and jewellery is expected to grow just 1.5-2% this year. The luxury end of the category suffered an especially hard blow.

But in spite of these and other challenging circumstances, fashion remains one of the key value-creating industries for the world economy. If it were ranked alongside individual countries’ GDP the global fashion industry would represent the seventh-largest economy in the world.4

Moreover, 2016 also saw many exciting changes: the advance of digital, the launch of “see-now, buy-now”, and a thorough creative shake-up at fashion houses.

Outlook for 2017: Glimmers of recovery

In 2017 we expect the global fashion industry to see the glimmers of a rebound.

This recovery has several foundations. First macroeconomic indicators, including GDP growth forecasts, are projected at 3.4 percent compared with 3.1 for 2016, however these have not been adjusted to reflect the ongoing impact of important political shifts in the United States and the United Kingdom.

Second, the investment community and the fashion brands themselves forecast improvement across the industry next year. Some 40 percent of executives we interviewed for this report expect conditions for the fashion industry to improve in 2017, compared with the 19 percent who reported

improving conditions in 2016. This is particularly true for the major players within each of the market segments and product categories. Many of them have already undertaken significant cost-cutting and restructuring exercises, and are now primed to capture the benefits. All things considered, we fashion industry growth could increase from 2–2.5 percent in 2016 to 2.5–3.5 percent in 2017, although the days when the industry outpaced GDP growth by more than 1–2 percentage points, as it has done over the past decade, seem to be over.

Performance will vary according to the individual dynamics of specific market segments and categories. Value and affordable luxury are likely to be the big winners, both outpacing the industry average at a projected 3.0-4.0 percent and 3.5–4.5 percent growth, respectively; however, all of the market segments—except for the discount market—should see a slight sales growth improvement of 0.5–1.5 percentage points.

Product categories are expected to grow in line with the overall industry average, but the biggest winners will be those companies with coherent channel strategies and clear value propositions. Athletic wear is positioned to be the absolute category winner, maintaining 6.5–7.5 percent sales growth, albeit no longer growing at a double-digit rate overall. The affordable luxury segment seems likely to continue benefitting from consumers “trading down” from luxury, while signs point to the continued growth of the value segment in line with the international expansion of large global players.

In short, the industry now has the opportunity to stabilise and reset. Next year’s success stories are most likely to come from those that are already planning for the year ahead. They should do this in the context of the following trends that we believe will shape the fashion industry in 2017.

DOWNLOAD THE FULL REPORT HERE

10 TRENDS THAT WILL DEFINE THE FASHION AGENDA IN 2017

INTENSIFYING VOLATILITY

Volatility is the new normal. Geopolitical instability, terrorism, Brexit, and stalled trade deals will all increase a pervasive sense of uncertainty in the global economy.

CHINA’S COMEBACK?

China’s fundamentals, including growth of the middle and upper classes, remain strong and the government’s new fiscal policies are expected to improve conditions in 2017, but uncertainty remains.

URBAN ENGINES

City-based strategies trump country-based strategies: a new class of rapidly growing wealthy cities in newly influential markets are becoming central to the evolution of fashion.

SHREWDER SHOPPERS

Working harder to keep up with smarter shoppers: “always-on” consumers are becoming ever more sophisticated, more technology-driven, and harder to predict.

GENERATION CORRELATION

Opportunities to serve the young and the old better: fashion companies should consider how to fine-tune and diversify the way they approach both retired and millennials consumers.

THE WELLNESS DIVIDEND

Feeling good is the new looking good: more fashion players can start profiting from the wellness movement rather than competing with it.

CHANGING THE RHYTHM

Disruptions to the fashion cycle: expectations set by the faster pace of fashion and consumer desire for instant gratification must be addressed to deliver fashion immediacy.

ORGANIC GROWTH

Investing more to nurture local clientele: 2017 has the potential to be the year of organic growth based on deeper relationships with existing clients rather than geographic, channel,and store network expansion.

UPSTREAM TECHNOLOGY

Digital innovation goes behind the scenes: digitisation is a key to supply-chain efficiency, lower procurement costs, and enhanced sourcing opportunities.

OWNERSHIP SHAKE-UP

Emotionless reappraisal of brand portfolios: fashion conglomerates can be expected to further intensify their focus on big brands, creating space for other brands and industry outsiders such as private equity and family owners to acquire targets.

The Business of Fashion and McKinsey & Company © 2016

DOWNLOAD THE FULL REPORT HERE

Source: McKinsey

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HOW TO DECIDE THE RIGHT SHIPPING METHOD FOR THE GARMENTS YOU IMPORT

Garments imported from Asia and elsewhere represent a large percentage of clothing sold in Australia’s $30 billion fashion industry. Retailers are always looking for ways to gain an advantage over their competition.  With continuous pressure on margins and emerging technologies shaping customers’ demands for speed to market and garment presentation, the need to do so has never been more urgent.  An obvious place to find opportunities to optimise for a competitive edge is in the supply chain. Importers can remove considerable time and cost from their supply chains by reviewing their decision-making around garment shipping methods.

As anyone who is in the business of importing garments for retail sale will tell you, one of their most crucial supply chain considerations is how to ensure that their merchandise remains in the very best condition. Consistency from origin to destination is critical, while not losing sight of the all-important speed to market.

Most importers opt to transport their garments by the traditional flat pack method where the supplier folds and packs the garments in boxes. It is cost effective, and entirely appropriate for high volume fashion.  However, flat packing higher-quality garments made from delicate or sensitive fabrics, may lead to less than ideal outcomes. Packing garments made from delicate fabrics for transit can cause crushing and creasing requiring reworking (pressing or steaming) before the retailer can display them for sale.  This may add significant cost and time into the supply chain.

Because of this, many importers of mid-market to higher-end or delicate garments prefer to use Garments on Hangers (GOH) shipping.  The various GOH methods ensure greater consistency of garment condition with reduced creasing, minimising (in some cases to nothing) preparation and reworking time in-store.  This has the knock on effect of lowering costs, as in some cases all the supplier can complete all the garment preparation at origin.

There are two different GOH garment shipping methods:

String system – In containers prepared using the string system, pieces of knotted ‘string’ run from the top of the container. Factories then hang garments in bundles by inserting hangers into each knot of the string.

garment shipping string system

aigo DC-V728

Bar system – Factories load the garments directly onto bars set up in the container – similar to a wardrobe.
garment shipping bar system

The up-front container preparation cost for both systems is usually the same. However, more garments can be shipped using the string system, effectively reducing the per-unit price. However, while the bar system carries fewer garments, there is even less potential for creasing and therefore further reduces reworking.

There are many factors to consider when deciding between the string and bar systems, including type and fabrication of garments, volume and how the retailer prefers to display the garments. The pay-off really happens in-store, when garments are unloaded direct to racks ready for the shop floor in perfect order – no further preparation needed.

Whether you need a GOH container or if flat-pack is more appropriate is not a one size fits all decision.  Sometimes the right solution will vary from shipment to shipment, volume and season.

Magellan Logistics has been navigating global fashion and retail supply-chains for 20 years.  We can advise you on the best garment shipping method for your business and arrange the forwarding and customs clearance.  Contact us today on 1300 651 888 or via www.magellanlogistics.com.au to see how we can help you stay ahead in this complex and changing environment.

Download our handy e-Guide 10 QUESTIONS TO ASK BEFORE YOU IMPORT CLOTHING BY THE GARMENTS ON HANGERS (GOH) METHOD

Exactly how are containers prepared for GOH?  Watch our video here.

Sources:
http://www.abcosystems.net/why-goh-is-a-necessity-for-better-garment-distribution/
http://shippingandfreightresource.com/what-is-a-garment-on-hanger-container/

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I Rent the Clothes on My Back: Fashion and the Sharing Economy

The new collaborative, sharing economy has given us everything from sharing rides, (Uber) to sharing houses, (AirBnB) and now according to Christine Hunsicker, it is time to look in our closets and share our wardrobe. Hunsicker is the CEO of five-year-old Gwinnie Bee clothing rental service. Hunsicker notes that the $2 trillion-dollar fashion industry is ripe for a technology disruption. The “sharing economy” as it has been labeled has disrupted every large business from taxi companies to hotels, and looks like sharing clothing is going to be next.

“A lot of people can’t afford the timeless brands new but they still appreciate the quality,” said Erin Wallace, director of marketing for Crossroads Trading and its sister store Fillmore & 5th, which has opened six boutiques since 2012.

Magellan Logistics Fashion Freight ForwarderOther brands making a success out of breaking the paradigm include Rent the Runway, Bag, Borrow or Steal and ThredUp.

Many of these new businesses are getting funding from traditional sources like individuals and private equity firms including Bain Capital Ventures but also from startup platforms such as Onevest.

Highland Capital Partners, which has more than $2 billion under management, has invested in a number of businesses including Rent the Runway and ThredUp, which focus on Millennials and the shared economy, said partner Dan Nova.   “Just about every major industry is likely to experience disruption (because of the sharing economy),” said Joe Atkinson of accounting and consulting firm PwC, whose April report that found that Millennials are among the most enthusiastic about sharing and account for almost 40 percent of those who have provided something.

Big Players Take Notice

Clothier Louis Vuitton, with revenue at €30 billion annually is not likely anytime soon to feel the effects of millennial consumers’ clothes sharing schemes. However, large retail outlets like Patagonia have taken notice. Recently the outerwear retailer has started the “Worn Wear Rack” program, enticing customers to trade in used clothing that is in good condition for later resale. More telling of what may come in the future is that venture capital financier Highland Capital Partners has invested millions in many of the new fashion sharing startups. One of their investments, Rent the Runway, rents high end designer clothing for a subscription fee. With Forbes magazine estimating that the sharing economy has surpassed $3.5 billion since 2013, the possibilities of a large slice of the haute couture pie could be missing from the big retailers’ bottom line soon.

Not Everybody is a Fan

With disruption of economic models comes backlash. Rioting Parisian cabbies last Summer were angry at the Uber invasion in France, and the government of Singapore confiscated flats that were shared with tourists because of regulatory conflicts. This is to be expected in industries who up till now have randomly set their own prices. Entrepreneurs know that their small piece of an extremely large pie can grow. Accountants Price Waterhouse and Coopers estimate total sharing economy revenues to grow to $ 335 billion by 2025, and PwC’s Joe Atkinson theorise that every major player in the retail industry today will be disrupted by the sharing economy.

Community Comes First

Though there is profit to be made, millennials in particular want to be a part of a bigger community. This is one of the reasons they look to connective technology more when purchasing personal items. Rachel Botsman, author of the book “What’s Mine Is Yours: The Rise of Collaborative Consumption believes that millennials look first at personal connection with any business or corporate entity. With the rise of technology that can cut out middle merchants like retailers and other gatekeepers, the empowerment of younger consumers comes with the feeling that they are part of a bigger peer group.

Environmentalism is also a major driver of this trend. “Instead of paying for something and getting rid of it with no value when you are done – swap and resale gives Millennials the ability to extend the value,” says Jamie Gutfreund, chief marketing officer for Deep Focus (youth trends market research firm. “It’s efficient and it’s green.”

Indeed, 59 percent of Crossroads shoppers said “being an environmentally friendly way to shop” was one of their favourite things about the store.

Investment Precedes Profits

With Uber and AirBnB now valued at over $10 billion one can only imagine what the next few years will bring into the sharing economy. Tens of millions of dollars in capital is being now raised for the sharing of clothing, housing and other staples, with firms lining up to get into the fledgling industry. With the right kind of management, sharing pre-worn clothing can be the next big boom in this new, collaborative environment.

And, as we have seen time and time again, trends that take hold off-shore are soon replicated in Australia – what will it mean for our much loved traditional fashion retail brands?

____________________

Magellan Logistics is a locally owned, Melbourne based freight forwarding and logistics company with offices in Sydney and Auckland and a specialization in freight forwarding and 3rd party logistics for the textiles and fashion sector.  Contact 1300 651 888 or visit www.magellanlogistics.com.au for more information on how we can assist you.

 

Resources:
https://en.wikipedia.org/wiki/Louis_Vuitton
http://www.cbsnews.com/news/sharing-economy-gwynnie-bee-everyday-plus-size-clothing-rental/
http://www.forbes.com/sites/yunitaong/2014/06/23/southeast-asias-sharing-economy-start-ups-may-produce-the-next-airbnb-or-uber/#313a89cd30aa
http://www.collaborativefinance.org/sharing-economy/
http://www.businessinsider.com/r-millennial-nowners-follow-uber-with-new-fashion-trading-model–2015-5
http://www.harpersbazaar.com/fashion/trends/news/a11040/sharing-economy-fashion-apps/
http://www.businessoffashion.com/articles/news-analysis/millennials-follow-uber-with-new-fashion-trading-model

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Major changes in the international seafreight shipping market – UPDATE

Largely in response to stagnant import market conditions (see my post from September this year) and a lack of profitability in the containerised seafreight market, the industry is seeing some changes beginning to emerge.

As a follow up to my earlier article here are the updates:

  1. China Shipping and Cosco – two major carriers participating in North Asia to Australia trading are working on a merger agreement;
  2. NYK will cease to operate within the Australian containerised market effective from Quarter 2, 2016;
  3. Acquisition of APL is currently being considered by several lines including Giants, Maersk and CMA-CGM;
  4. Two major services (CKA and NEAX) from North Asia, key ports for the Australian trade will be combining into one service, the members in these two consortiums will re-allocate their capacities for the new service. This is set to take effect in Quarter 2, 2016.  As a result:
    • CKA Service will be suspended;
    • A 10% or 3500 TEU (twenty-foot equivalent units) capacity per week reduction.

What does this mean for importers?

  1. While the merger between CSCL and Cosco, pending acquisition of APL, NYK’s withdrawal and the combined service clearly indicates a lack of performance in the Australia trade, some industry wisdom view this as a positive change;
  2. Shipping lines are optimistic that the containerized shipping market may gradually swing back and become “vendor’s market” rather than a “buyer’s market” as it is at present;
  3. Seafreight rates are likely to increase over the course of the year and will probably fluctuate less than what has been experienced since the GFC in 2008.

With the potential for higher freight rates next year this will impact importers who are already struggling with the impact of the weakening Australian Dollar, making some imports unviable.  However, as most of my customers say, the freight rates are not really influential on purchasing product from overseas, rather they consider it to be an additional cost. This just makes the need to ensure competitive freight rates even more crucial to their bottom lines.

For a confidential discussion about freight rates and all your logistics needs, please get in touch with me via email or call 1300 651 888.

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Supply & Demand – Influences that shape your supply chain solution

Supply & Demand:  In the Supply 101 section of the latest issue of RagTrader Jeff Kershaw and Joe Carbone advise on the importance of understanding both the drivers and impacters of supply chain decision making in the pursuit of a bespoke and efficient solution that achieves both business and brand goals while at the same time meeting customer needs.

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PROTECTING YOUR SUPPLY BASE

Most companies do not regard their supply base as intellectual property but they do so at their peril. Protecting your intellectual property is essential in this day and age as it provides a company or individual with a competitive advantage over other players in the industry.  Exposing your supply base to your customers can have dramatic consequences – the worst of which is the danger of your customer going directly to your supplier.

Australian retailers are well placed to deal directly with offshore manufacturers and indeed most of them have some direct supply in their product offerings. If you are currently supplying the larger retail chains with product you source from overseas you will have noticed an increased pressure to provide that product on an FOB basis rather than the traditional free into store approach. One of the dangers of agreeing to provide product on an FOB basis is the potential exposure of your supplier information to your customer – who could then quite realistically become your competitor.

Normally, when shipping goods from, say, China to Australia a bill of lading is cut with the consignor and consignee details listed on the bill. In normal circumstances the consignor would be the offshore manufacturer and the consignee would be the name of the entity that is to take delivery of the product. In the above FOB scenario the consignor would be your supplier and the consignee would be your customer. So it is easy to see that in this case your supply base is exposed. However, Magellan Logistics can help you with protecting your supplier information by manipulating the documentation to provide you with comfort that your valuable IP is being hidden.

The export documentation will be produced as normal and used for clearing the goods through the offshore Customs authority. However, once export formalities have been completed Magellan Logistics will raise a separate house bill of lading to indicate that you are the consignor and your customer is the consignee. Further, the invoice accompanying the shipment will be the FOB invoice raised by you on your customer. This documentation will be used to clear the goods through Customs in Australia. In this way, your supplier information is hidden from your customer and should go some way towards providing you with peace of mind.

As this is an extremely commercially sensitive area of concern we suggest that a Standard Operating Procedure (SOP) should be developed to ensure that all stake holders are fully aware of their obligations at each step of the way.

If you would like to discuss this issue further please contact Jeff Kershaw on 0418 543 994 or at jeff@maglog.com.au

AS ALWAYS – MAGELLAN LOGISTICS IS HERE TO HELP

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Chinese May Day Holidays

Chinese May Day Holidays are one of the major holiday periods across China. Most businesses and Government agencies will close during the period 1st May thru 3rd May inclusive (excluding Hong Kong).

Magellan’s China offices will be either closed or on skeleton staff during this time.

Please note the following when planning shipments.

SHANGHAI

Holidays from 1st May, returning  4th May.

AIR Cut off 30th April  (for both freight and documents).

SEA Cut off as follows:

ETD: 1st May , Cut-off: 27th April 18:00

ETD: 6th May , Cut-off: 29th April 18:00

Most other China offices will also be closed in line with Shanghai.

QINGDAO

Holidays from 1st May, returning 4th May.

AIR Cut off 30th April  (for both freight and documents).

SEA no change,  schedules remain unchanged.

HONG KONG

Holidays 1st May only.

AIR Cut off 30th April (for both freight and documents).

SEA no change, schedules remain unchanged.

Should you need clarification, or options available for freight movement around this holiday period, please contact the Magellan Customer Service team on 1300 651 888 or info@maglog.com.au

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