Taking Aim at Hardlines: July 2006

Friday, July 21, 2006

VF Corp sees the light! How long before others follow?

I have skipped several weeks of postings because I was uninspired, but this morning's Wall Street Journal article about VF Corp building a boat load of retail stores sparked my enthusiasm once again.
Way back before the dot bomb era, it became apparent to me that manufacturers are at the mercy of the few large merchants in each channel of distribution. As distribution consolidates, the few remaining large players can exert ever increasing pressure on manufacturing and margins are going to suffer. Add in the pressure from low cost, off shore production and it is obvious that the route to survival is by selling direct and taking the cost of distribution out of the product (roughly 60% of the selling price in many instances).
In the article about VF opening stores was the following: "These days, if you are a supplier and want to control your own destiny, you better open your own stores," says Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York retail consulting and investment banking firm.
It seems so obvious but has taken so long for anyone to act. The only area where I might differ with Howard Davidowitz is that the store might be an internet store.
The Revolution in Manufacturing is just beginning. Stay tuned.

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