Offshore Suppliers: Buckle Up
Paul Thompson -- Home Accents Today, June 25, 2007
What goes up must come down, as the song goes. For offshore manufacturers who experienced an exhilarating upward climb in business during the first six years of this decade, the global roller coaster has careened onto the loop-de-loop track.
It's now been 30 months since the watershed moment of 12:01 a.m., Jan. 1, 2005, when the last of the quotas dropped off goods imported from World Trade Organization countries. Import growth in 2005 was predictably explosive. In 2006, gains were more modest by year-over-year measures, but managed to chug ahead steadily.
Business in recent months has grown tougher. Each country has its own challenges and complaints, some the result of domestic conditions, nearly all exacerbated by the anemic condition of the U.S. dollar.
Proposed legislation in Congress that would levy retaliatory tariffs and/or create federal rebates to U.S. manufacturers cheers neither importers nor offshore exporters.
A retrenchment of retail-direct business since 2006 — when retailers began relocating some programs back to tried-and-true domestic resources — also nicked global manufacturers. The lackluster performance of home across the volume-retail spectrum only adds to the anxiety.
U.S. suppliers who succeeded in holding their ground during the market-quake years can rightly say to their offshore counterparts: "Welcome to our world."
Welcome, indeed. With big-box retail opportunities tightening, several offshore manufacturers are following U.S. suppliers into the hospitality segment, exploring the independent specialty retailer sector, and scouting off-the-beaten-path channels of distribution such as consumer-to-consumer sales venues (think Tupperware).
Whatever factors beset a particular textiles-producing nation — a rollback in government subsidies, surging currency valuation, uncertain domestic stability — the signs point to another contraction among smaller manufacturers. Particularly among the offshore ranks, this time, as the United States has little left in the way of small-scale home textiles manufacturing.
You have to credit offshore manufacturers for leaping into new technologies and new fiber developments, and for recognizing fairly quickly they needed to lift themselves out of low-end production and into value-added goods to slow margin erosion.
The best and the brightest among the offshore shops run impressive operations. They would do well to heed the lessons offered by the history of U.S. mills circa 1990-2001: Grow in service to your own strategy, not to accommodate a single customer. Keep your customer portfolio in balance, no matter the temptation. And bear in mind that being the biggest doesn't necessarily make you the best.
Let the spinning wheel turn.