Accenture: Retailers need to move away from cost sourcing obsession
As sourcing costs rise, fast-fashion retailers are struggling to stay competitive. But many are taking the wrong approach.
Retailers looking to combat challenges by shifting sourcing and production to more cost-effective markets are chasing a temporary fix to a bigger problem, according to a new research report from Accenture. Retailers that take this route risk damaging operational performance, product quality and corporate social responsibility.
"Consumers have more transparency and choice than ever resulting in an extremely competitive environment for brands and retailers who cannot afford any shortfalls with regard to latest trends, at most competitive prices, technical innovation, quality, and most appealing overall assortment structures," the report stated.
The report advises retailers need to move away from a sourcing cost obsession. Instead, they should focus on reinventing their operating model to uncover value in their supply chains.
Key insights from Accenture's 13th Global Souring Reference study include:
Country cost-shifting isn’t the answer to long-term growth: While shifting sourcing volume to more cost-effective countries (i.e. Bangladesh, Pakistan, Indonesia, Western China, Cambodia) might hint a way out of the gross margin trap, this is but a temporary fix as all sourcing countries become more expensive.
Technology’s role in uncovering value: Digital technologies can enable better collaboration, visibility and control across the entire value chain, improving product innovation, time to market, reliability, execution and quality. And technology will be a key enabler in helping retailers realize improvements in sell-through performance, stock turns, markdown, and gross margins.
Top priorities for global sourcing leaders: Speed-to-market is the number one priority for global sourcing leaders, followed by social and environmental compliance, quality and innovation management.
Cost challenges only set to worsen: As consumer demand for personalized and customized fashion rises, retailers and fashion brands will need to find a way to serve this market on a mass scale, all while keeping costs down.
Retailers looking to combat challenges by shifting sourcing and production to more cost-effective markets are chasing a temporary fix to a bigger problem, according to a new research report from Accenture. Retailers that take this route risk damaging operational performance, product quality and corporate social responsibility.
"Consumers have more transparency and choice than ever resulting in an extremely competitive environment for brands and retailers who cannot afford any shortfalls with regard to latest trends, at most competitive prices, technical innovation, quality, and most appealing overall assortment structures," the report stated.
The report advises retailers need to move away from a sourcing cost obsession. Instead, they should focus on reinventing their operating model to uncover value in their supply chains.
Key insights from Accenture's 13th Global Souring Reference study include:
Country cost-shifting isn’t the answer to long-term growth: While shifting sourcing volume to more cost-effective countries (i.e. Bangladesh, Pakistan, Indonesia, Western China, Cambodia) might hint a way out of the gross margin trap, this is but a temporary fix as all sourcing countries become more expensive.
Technology’s role in uncovering value: Digital technologies can enable better collaboration, visibility and control across the entire value chain, improving product innovation, time to market, reliability, execution and quality. And technology will be a key enabler in helping retailers realize improvements in sell-through performance, stock turns, markdown, and gross margins.
Top priorities for global sourcing leaders: Speed-to-market is the number one priority for global sourcing leaders, followed by social and environmental compliance, quality and innovation management.
Cost challenges only set to worsen: As consumer demand for personalized and customized fashion rises, retailers and fashion brands will need to find a way to serve this market on a mass scale, all while keeping costs down.