New Deloitte Study on Private Label Sourcing: Part I

By Patrick Burnson, Executive Editor
August 05, 2013 - SCMR Editorial

Editor’s Note: This the first of a two-part feature.

Rising and increasingly volatile costs dominate retailers’ top challenges sourcing private label goods, while changes in consumer behavior fueled by mobility and online shopping are driving the strategic importance of private label sourcing, according to a new Deloitte study, Private Label Sourcing: Strategies to Differentiate and Defend.

“Rapid population growth, skewed to developing regions, is increasing demand on raw material sources while providing new markets for low-cost labor,” said Michael Daher, principal and Retail Sourcing Practice leader, Deloitte Consulting LLP.  “Additionally, online, mobile and social channels continue to disrupt the retail landscape.  As low-cost online competitors continue to expand across more categories, private label provides an opportunity for retailers to defend their marketshare by offering products that are exclusive to their banner.  But it’s not the ‘copy and paste’ private label we grew up with—these are innovative private label brands that require more sophisticated sourcing capabilities.”

Deloitte’s Private Label Sourcing Study – one of the largest and most comprehensive to date – analyzed responses from more than 260 executives from apparel, general merchandise and grocery retailers to uncover shifts in market trends and private label sourcing practices.

The survey asked respondents to rank their top market pressures.  Respondents indicated that raw material cost increases and volatility were considered the top market pressures, followed by rising labor wages and fuel price volatility.  Raw materials, production labor costs and transportation costs account for 80 to 84 percent of total respondents’ average product costs.

Retailers’ current response strategies do not appear to directly mitigate such pressures.  Roughly 7 in 10 respondents indicate that their organization’s response strategy is currently focused on enhancing quality assurance programs (71 percent), engaging in advanced planning/scheduling with vendors (70 percent) and enhancing ethical sourcing capabilities (69 percent).

Next Installment: retailers are adopting new strategic responses that correspond more closely to the acute cost of pressure.



About the Author

image
Patrick Burnson
Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Following the lead of its Congressional Colleagues in the House of Representatives, the United States Senate yesterday approved a measure geared to keep federal surface transportation funding intact through the end of December with a nearly $11 billion stopgap fix.

XPO Logistics announced second quarter earnings and the acquisition of two companies, New Breed Logistics, a non asset-based 3PL focusing in contract logistics services, for roughly $615 million, and Atlantic Central Logistics, a 3PL provider of last-mile logistics services, for roughly $36.5 million.

The report, entitled “Outlook for the Domestic Transport and Logistics Market in 2H14 and Beyond,” takes the view that strong freight levels in the second quarter have left trucking companies in a good position: one in which they need to come up with new plans to handle rising demand. But even with that positive momentum afloat, the report observes that there are some familiar challenges intact, such as a lack of qualified drivers and the regulatory drag from the new hours-of-service rules that took effect in July 2013.

Flags of Convenience are a fact of life in the commercial maritime trade, but several European political action groups are worried that they will pose a threat to the Continent’s air cargo industry.

For May, which is the most recent month for which data is available, the SCI is -7.5, following April’s -7.5. FTR said this reading represents a still-tight capacity environment, as utilization rates hover between 98 percent and 99 percent.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.