In the past 10 years, retail has undergone a massive transformation. Once dictated by the comings and goings of seasonal trends, the industry now caters to the whims of customer demands, which change more often than not.
Despite the shifting tides of retail, one thing has remained the same: retailers have always come prepared with contingency plans for those pesky “what if” scenarios. Whether it’s a hurricane in the Pacific or a new tariff imposed by a government administration, these circumstances become huge factors affecting whether retailers can successfully follow through with orders in the fastest, most cost-efficient way possible.
These days, however, retailers have even more issues to contend with, especially with the ongoing trade war between the United States and China. Businesses need to be agile to keep up with competition, changing political landscapes and any sticky, last-minute situations. And while tariffs have caused uncertainty in the past, they haven’t been the key focus of retailers’ strategic planning — that is, until now.
Tariffs Spark Contingency Planning
Any good go-to-market strategy comes equipped with some basic emergency planning, just in case unforeseen roadblocks occur. But today’s retailers know that emergency planning requires a little bit more than just your standard coverage. Now, companies realize the importance of agility when it comes to preparation for market shifts and other “what if” scenarios. It’s the difference between brands that succeed and those that fall flat to competition.
So how do companies leverage specific techniques to plan for the unexpected? And how can they ensure success by navigating unforeseen circumstances, like tariffs? Here, we’ll take a look at some of the ways retailers not only mitigate risk, but also maintain, or even succeed, their business objectives.
Calculate Costs With Pricing Tools
Technology has found a way to aid the global retail community in decreasing consumer costs while increasing margins and revenue. And this help comes courtesy of patented pricing tools provided by the likes of some of the world’s most strategic software companies. These pricing tools not only help retailers successfully navigate supply chain disruptions, like natural disasters or factory equipment recalls; they also allow retailers to analyze various tariff rates and how they’ll impact overall cost.
More specifically, pricing solutions can calculate the potential impact of cost fluctuations by country, supplier, order, program and/or item, from design phase to manufacturing. Rather than simply raising prices for consumers or waiting out the effects of trade wars, retailers can now easily forecast financial risk, develop alternative solutions and mitigate potential pitfalls before even submitting a purchase order. Also, implementing a tariff analysis tool is a great way for retailers and suppliers to keep operations on point in a volatile global trade market.
Use Your Data
Sometimes the best resource for “what if” planning lies just within reach. That’s because one of the easiest ways to prep for supply chain disruption is to review what you already know — the data. Every bit of information is extremely useful to retailers in today’s digital age, and it’s readily available.
But before the advent of digitalized data analytics, it was standard for retailers to review cost on an annual basis. Unfortunately, yearly cost analyses no longer cut it. With tides turning at the drop of a dime and political developments happening overnight, it’s almost impossible to accurately forecast pricing based on historical data only. It just isn’t a practical approach in our digitally connected world.
A company that wants to stay ahead of the curve should leverage its data consistently and discuss potential “what if” scenarios that could impact operations. Retailers should also have seamless, transparent communication with suppliers and manufacturers to mitigate risks. With this real-time exchange of information, all supply chain partners have an accurate record of data.
The simplest way for retailers to kickstart data-driven communication across the supply chain is to hold monthly analytics reviews. These team meetings can help retailers understand the various factors impacting cost and operations, and these insights can then be shared with fellow supply chain partners to enable a more cost-efficient approach to sourcing.
Agility is no longer a plus; it’s a business must. So even companies with a proper costing strategy in place need to be flexible enough to change directions on the fly. That’s why “what if” pricing tools and market solutions are so important; they allow companies to cut time from administrative tasks, giving them more time to compare various scenarios and drive strategic decisions.
For instance, imagine a brand is completely unaware of a recent tariff placed on a specific type of silk material. Without this knowledge, the brand continues its sourcing operations as usual, setting the company back thousands of dollars and slowing time to market. But when the brand fosters seamless communication among warehouses, suppliers, manufacturers and buyers, its team can proactively mitigate risk without wasting valuable time or money.
Being ready to act is a business’ best asset. Having the resources to make snap decisions and handle trade war fallout will propel any company past its competitors.
Negotiate On The Fly
The price of basic commodities — oil, cotton and sugar, among others — varies greatly. And those variations place a huge impact on retailers reliant upon their respective suppliers. Because of this, retailers spend a lot of time negotiating cost of goods from around the world, and they’re familiar with average pricing.
But even if a company secures a good price from a supplier, in most cases, they don’t realize the added overhead costs associated with the finished product. They’re simply thinking short term, and by the time a product hits store shelves, it’s far too late for the company to make cost adjustments and be profitable.
To be successful, a retailer must always be open to negotiating new deals. And planning ahead for different scenarios, like a market crash or a cotton shortage, should be at the forefront of a retailer’s sourcing strategy. Any company willing to find the best material, products or design ideas for the benefit of its bottom line must be committed to constant negotiations with a variety of suppliers and manufacturers.
Every retailer wishes they had a crystal ball to see the roadblocks coming up ahead. But that’s just not the case, nor is it a possibility. That’s why supply chain visibility and costing analyses are so important to achieving the ultimate goal: increased profit margins. Planning for the “what ifs” and leveraging different tactics and solutions are essential, and they’re key to bringing one’s company to the next level.
Sue Welch is CEO of Bamboo Rose.