Strategic decisions are often made which have direct and indirect consequences for the people have associated with those businesses. In the Retail industry, save wholesale store closures, there is nothing more disruptive on a human level than when a Retailer announces that it is going to be sourcing it products direct.
Retailer prices are being squeezed like never before. The internet has introduced a low-cost operating model which undercuts store prices and Retailer’s margins are consequently lower than ever. As a result, many are putting huge pressure on their supply base, to the point where they decide that it is more economically viable to source products in-house.
This trend has been prevalent over the past ten years – first in food, then DIY, and lately fashion has increasingly jumped on the bandwagon. In the summer of 2014, Marks and Spencer’s (the stalwart of the British high street) announced a project to source 60% of its clothing direct.
When a Retailer sources direct from factories, redundancies were inevitable. This has sparked profit warnings far beyond our shores. From Israel to Bangladesh, the shockwaves are being felt.
But what does it mean for companies in the UK who have supplied M&S for decades?
They are now forced to seek new business with the rest of the high street, looking to differentiate their business, but many will fall by the wayside. Whole teams have disappeared, and businesses are restructuring to make themselves attractive to new customers.
In terms of people, traditionally when M&S have been supplier changes in the past, employees have been able to step into their next role working for a competitor or fellow M&S supplier and possibly broaden their product knowledge. Now this is no longer possible, and there are hundreds of people in the market wondering how to make the move from the supply side into Retail. It seems that is the “safe” move to make.
There is no doubt that M&S needs to boost its design team and a few top management roles have been filled from their suppliers. This sourcing experience is crucial, so for the lucky few this has been a fortunate development. Social compliance, sourcing and costings are some of the key areas where skills are especially transferrable.
The shifts in the marketplace will not slow down. The UK “middle man” supplier is gradually disappearing and although there will always be a place in the market for them, the size of the pie is getting ever smaller.
There is however a light at the end of the tunnel. Offshore manufacturers are setting up satellite offices in the UK, with a view to supplying M&S directly. In addition, those with supply chain and commercial experience are increasingly seeing the internet operators as a destination. In this way, they will be eating into the profit margins of the retailers that once deserted them for this very reason.
Strange how the world works sometimes….