For over a decade, South African retailers have considered domestic clothing manufacturers too expensive for their businesses. They have been on a hungry hunt for the cheapest possible solutions first in China, then in Mauritius Madagascar, Bangladesh and so on… But in this search, the true cost of the retailers “search, buy, search again” cycle is seldom taken into consideration.
A cheap T-shirt sourced offshore may over time become more expensive than a locally manufactured one would have been. This drives input costs up, which sets off a new search for the cheapest offshore manufacturing option which again over time becomes too expensive for the retailer. And so the cycle continues.
Let us consider some of the true costs of offshore manufacturing.
First, finding suppliers and establishing new relationships in remote locations is costly. Expensive exploratory international trips to find manufacturers require translators to overcome cultural and language barriers and the employment of a 3rd party quality controller which all add to the overheads of operations.
What about the risk of containers not arriving on time?
Secondly, buying large quantities to meet the minimum factory requirements means the shipping of large batches from remote locations using notoriously unreliable shipping lines and incurring logistics and clearing fees. What about the risk of containers not arriving on time (or at all), port delays and unforeseen storage costs due to customs delays?
These volumes then require largescale warehousing and storage as they are drip-fed to stores. The mushrooming of massive warehousing and distribution centres we see has continued to escalate, but sales continue to decline or stagnate at best. Are we not overproducing product and adding unnecessary cost and risk? Instead we should be creating a small batches of options to test the market. This would enable us to quickly adjust our buy, offer a new option or repeat the successes.
Happily all is not lost to local retailers. The local supply chain still exists. It is hardened and resilient and has survived tough times. By shifting manufacturing back to South Africa, local retailers might have the opportunity to take back the local retail market share which multinationals have used to build their UK, European and Australian empires. According to an article in the Mail & Guardian (Global brands queue to feed hungry SA, 14 July 2017), Australian retailer, Cotton On, which entered South Africa in 2011, now has its biggest global store in the Mall of Africa in Midrand.
Continued investment in new technology further enhances an ability to respond to market conditions
Local manufacturers are on your doorstep, they speak your language, they will jump through hoops to ensure that the right product is in stores and they will keep a close eye on your selloffs, collaborating on product design and manufacturing responsibly to customer requirement. Continued investment in new technology further enhances an ability to respond to market conditions, keeping assortments fresh and maximising full price sales by using quick response capabilities. How can these offshore retailers, with their remote supply chains, compete with this?
Local supply chains continue to grow as manufacturers partner with local mills, buying locally grown and spun cotton through the South African Cotton Cluster, promoting and developing local farming. They continue to grow networks of small businesses (Cut Make Trims) by offering them a pooled network of resources, reducing their operating costs and making them sustainable through CMT Clustering initiatives.
Local manufacturers employ South Africans, offering them a fair wage and a safe place to work
Finally, and most importantly, local manufacturers employ South Africans, offering them a fair wage and a safe place to work. By training school leavers, they are able to empower and upskill our youth, apart from giving them opportunities to earn an income. This money can be used to buy locally produced goods, from local retailers, oiling our economy and keeping South African Rands in South African pockets.
What counts is not what is paid to a supplier for goods, what counts is what the sale of those goods cost. Do you know the ACTUAL cost of imported goods vs the value of locally produced, proudly South African clothing?
- This opinion was written by Hilliard who has been working in retail and manufacturing for ten years
- Photo credit: supplied by Jota-Kena, a studio in Cape Town which manufactures local, sustainable fashion