Supply chain in H&M

 

 H&M is one of the largest fashion retailers in the world. It has branches in 19 countries with over 950 stores. With such a large network in retail, it is a giant in supply chain. Its major power is its efficient and integrated inventory management system. It helps the company to control the stock worldwide. The design team works with 20 production centers worldwide that have 700 suppliers.

It determines customer's interest by analyzing traditionally and with augmented reality. The company is known for its ‘fast fashion’ that delivers retail products that come newly into the market. They get ideas from wherever they can to get a balance between trend and future styles. Its retail inventory is dependant mainly on the design and production outsourcing.

 

Its strength is its ability to provide products at an affordable price which is the result from good supplier relationship and its minimal lead time. It manufactures 4/5 th of its retail inventory as advance and remaining as the trend sets. Another major characteristic is its efficient partnership. Without having any own factories, it accesses over 700 partnership companies in 20 countries.

It has 30 office to oversight partners for upcoming trends and to maintain good contact with its supplier in order to check for quality and pricing without breaking any code of conduct of the company.

The Next Big Thing in The US Retail Market: Direct Sales to Customers

    Retailers have come to understand now that e-commerce is the most secure anchor to hang on to and that omnichannel is the industry's future. Among the other developments that have emerged in retail since the COVID-19 outbreak is the increasing change from retail firms, consumer goods companies, fashion brands and even farmers across the country to direct-to-consumer sales.

    Mom-and - pop retail stores began to lose sales as millions of Americans remained confined in their homes to practice social distancing and the government closed down all but necessary retail outlets as a pandemic-prevention measure. The increase in online shopping for consumer products, grocery, food and beverages; and the increasing demand for home delivery services are driving retailers out of the shell and trying out creative sustainability business models.

    As the United States continues to be COVID-19's epicenter with over 5.44 million positive events, the economy of the nation is significantly impacted and the burden on companies to get it back on track is immense. All the country's 50 states have been getting back on their feet in the past few months. Yet a lot has changed.

    The pandemic hit the retail industry in America hard, particularly brick-and-mortar retailers, throwing a bunch of tough fight challenges at them, and some fast-emerging market trends to keep up with. At the same time, though, it has also opened up some huge opportunities for retailers to grab and stay competitive amid COVID-19's market effect.

    Manufacturers or retailers sell directly to the customer in a direct-to-consumer model without the intervention of intermediaries such as third-party distributors, wholesalers, and retail outlets for distribution. This is usually achieved by creating an online marketplace, or even a social media profile, from which customers can search and place orders. The company then ships goods directly to customer markets, using an in-house logistics facility or third-party transporters.

    Direct-to - consumer sales have been a steadily growing development for quite a while now. Web traffic to D2C pages has doubled over the last two years according to an eMarketer survey. But the pandemic has provided retailers and consumer goods firms a huge drive to sell directly to customers, triggering a massive rise in the industry.

    Fashion and clothing companies such as Levi's, Nike, and Adidas are going high on D2C sales, reinventing their online sites, launching new products on a daily basis, and offering their customers customized product choices. Top supermarkets with existing retail chains like Walmart and Publix also exploit this opportunity and sell online to meet the demands of millions of people in quarantine.

    The greatest advantage of using e-commerce to go directly to customers is that it helps companies to establish a partnership with their end-users. It also gives manufacturers and retail brands a cost-effective sale choice. At the same time, though, there is some significant competition from major online retailers like Amazon.

    Manufacturers and retailers must also consider the logistical difficulties that may occur when selling directly to customers. Not all brands have the best transport management system in place and will need to rely on logistics companies from third parties to ensure successful last-mile deliveries.

    For those with an in-house logistics system, ensuring quick and timely delivery is a must, combined with excellent customer service. Retail brands do not forget that they have set out to please the consumer 'I want it ASAP' and 'Where is my order.'

    Coronavirus has shown us that the next big thing in retail is direct-to-consumer selling, but to make it huge success brands need to strategically implement this business model. Efficient logistics is a must-have to ensure two-day and the same-day deliveries, and technology such as fleet management, order tracking, and live status updates will play a crucial role in boosting customer experience in D2C selling.

Happy Learning.. !!😊😊

The Future Group - Reliance Retail Deal

 

Welcome Readers !

I am Sheerapthi Ramiya, 2nd Year MBA from Amrita School of Business, coming back with this week's read ! Hope my readers are doing well and I hope you enjoy :) 

This is hot news! The Future group has reached out to Reliance Retail to buy their business for an overall transaction value of Rs. 27,513 Crores! Future group owns well known brands such as Big Bazaar, Brand Factory, Buffalo, DJ&C, FBB, etc. The transaction takes place as a three-step deal:

-        All Listed Future Group companies to be merged into Future Enterprises Ltd.

-        Future Enterprises to transfer assets of retail and wholesale undertaking and logistics and warehousing business to Reliance Retail entities

-        Reliance Retail will also invest Rs. 2,800 crores for an up to 13% stake in Future Enterprises.

 

But why did Future Group sell out ?

The Kishore-Biyani founded Future group has been seeking funding support for several months as around Rs 15,000 crore is in debt to the company as well as substantial decrease in sales and cash flow on the account of pandemic and lockdown. The loss for Future Group was its excessive leverage. It did win a very small investment from Amazon Retail several months ago, however India's FDI (Foreign Direct Investment) rules restrict foreign ownership of multi-brand retail. This deal with Reliance Retail will avert any further financial crisis at the Future Group, which last averted a debt default at the minute. The Future Group deal is a big relief to banks like Bank of India, SBI, Axis Bank, Canara Bank and RBL Bank.

What in it for Reliance Retail ?

Reliance Retail runs several retail formats in the grocery, electronics and apparel space but it does not have a large reach as that of Future Group, especially in the grocery Business. With household retail brands like Big Bazaar, Fashion at Big Bazaar, Easy Day and Brand Factory going to Reliance, an in-house multi brand retail product will be obtained giving Reliance Industries an immediate edge in the retail market. The deal will lead to an stronger organised retail market giving Mukesh Ambani led Reliance Industries’ retail venture pole position in the close to over $700 billion retail sector in India. The deal will also add over 1,700 retail stores to Reliance's footprint of 10,900 stores across groceries, electronics and other formats. The deal gives a positive cash flow and will also make Reliance Retail become the largest grocery player in the country. 

 

 

What does this mean for Reliance Retail?

This deal includes - store front, warehousing and logistics. Future Groups loss is Reliance gain as it gets a readymade reach and supply chin built over the years and ready for further execution by Reliance. The execution in retail will be rolled out in months to come and also promise growth from an established platform. Access to Tier 2 and Tier 3 towns where the Future group has inherent presence in shall develop and build the overall franchise footprint in grocery, retail and lifestyle and other businesses. Over a period of time, warehousing and supply chain dynamics should aid in cost synergies and overall digitization of the Jiomart Platform. The opportunities to make a 360-degree presence through digital mediums, brick and mortar stores, supply chain backward operations should ensure Reliance Retail are able to take over the competition from global players. That's not all. The important part with the deal coming in is that they are not only acquiring the front-end stores but also the backend for retail, which is highly important because we will have the ability to earn a margin out of it unless we have a proper backend if we want to start a grocery business. Reliance doesn't have to only use warehouses, but can also use the available brick and mortar as small warehouses to strengthen their supply chain and logistics network. 

 

The Windup 

India's retail market is highly fragmented and dominated by corner stores or Kirana stores. However there is large headroom for the top 5 retailers to increase their market share from the current less than 5% to 10% - 12% in the next decade (BCG Report). Isha Ambani, Director, Reliance Retail Ventures says that the transaction will help in the evolution of modern retail in India. The will actively collaborate with small merchants and kiranas as well as large consumer brands to help grown momentum in the retail industry. This will help accelerate providing support to millions of small merchants in increasing their competitiveness and enhance their income during challenging times says the press release. 

We can see how Reliance is trying to grab every single opportunity, to strengthen its position in the retail sector with the purchase of Sri Kannan Departmental Stores a few months back which is a local departmental store in across Tamil Nadu, the Purchase of the leading retailers - Future Group Retail and collaborating with technological companies to gain a dominant position in the Indian Retail Landscape. With Reliance's introduction of Jiomart and the availability of a large network of warehouses and brick and mortar stores and also the backend suppliers, logistics and supply chain will be seamless and digitized while reducing the delivery time in the modern age of India. 

What are your thoughts about this ? Give your comments below :)

If you haven't check out my last week's read, which is about Chennai being self sufficient and self reliant during lockdown, click the link below !

https://logisticsmatters.blogspot.com/2020/08/will-chennai-become-self-sufficient-by.html

- Sheerapthi Ramiya

ASB, Coimbatore