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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

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.

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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.

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

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.

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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?

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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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