August 19, 2022

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Sneakers at Christmas?  Supply crisis interrupts sports boom

Sneakers at Christmas? Supply crisis interrupts sports boom

“We don’t have that.” “We don’t have it at your size.” We ask but it will probably arrive in a month. Out of stock is (saving an alarm case now) a retailer’s worst nightmare. The sport has already gone through it twice in two years: first, because the surge in demand in full confinement has outpaced supply. Now, at the gates of the most important campaign of the year, Vietnam was closed and logistics collapsed, so Jordan Airlines did not arrive.

According to supply specialists, they explained to Palco23, Vietnam is currently at 30% of production capacity affected by the escalation of Covid-19 infections: although factories in Hanoi are at 70% of production, those in Ho Chi Minh are almost closed. Other related supply poles in Asia, such as Indonesia or Myanmar, are also affected by production, while China, Bangladesh, India or Pakistan operate relatively normally.

Nike, the number one in the sector that retailers can trust with up to 70% of their supply, has already warned of the risk of a supply shortage in the last period of the year, a major quarter due to the Black Friday and Christmas campaign.

The sport shoes, star sector, is the most affected materialIt is the most exposed in Vietnam, where factories have been closed for more than ten weeks by government order and reactivation is very slow.

Without a product and at huge costs across the entire value chain, Many retailers see no choice but to raise prices And reducing discounts on Black Friday, although the margin will remain practically flat.

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“The problem is not so much the lack of a product as the lack of a product that is attractive and that the consumer wants,” explains the manager of a Spanish purchasing center. “You couldn’t do that anymore ten or fifteen years ago, when I offered the client another alternative, because today it’s not worth it: The girl who asks you about Converse just wants Converse because they’re what her friends wear and if that model falls, everything falls,” she explains.

In the sector, orders are placed a year in advance, but the brand begins manufacturing only a few months before delivery. When merchandise arrives, it also has to fill its stores first, and it’s a growing business that is fully committed to all brands driving sales to the end customer.

The usual thing is that in September, 80% of the campaign is already at the point of sale. But the disturbances resulted in cancellation or delay on the brink of death That prevent the reaction in time.

“If they tell me in time that New Balance isn’t arriving, I can ask about Brooks, but if they spend weeks telling me it’s in transit, there’s nothing I can do,” says another executive from a Spanish specialty retailer. Some executives report delays of up to a month in delivery.

Nike, Converse (also owned by the American giant), Adidas and New Balance are some of the most affected brands., especially in fashionable products, which, even if remotely produced, are demanded with less time in advance with respect to their market access. Dickers (owner of Hoka One One) and Columbia are also among those worst affected due to their heavy dependence on Vietnam.

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“When fashion enters an industry, it has good and bad things: the good things are that it gives you a rotation you never had before; the bad, that makes you a captive of that desire,” sums up another director.

The solution for chain stores and shopping centers is to anticipate orders as much as possible To make sure it is first on the list once there is a minimum production, but then its ability to interact is very limited.

After Christmas, the big question is what will happen to the prices. It seems clear that brands will pass on their increased costs to retailers, who will have no choice but to pay in the absence of the offer, but not everyone clearly sees that this increase can be transferred to the end customer. “Maybe in best seller, but if we raise prices, we are left alone and it is impossible to compete,” says one of the executives at A pure player specialized.

international feedback

The listed international retailers who recently presented their findings also coincide in citing supply chain disruptions as the main problem facing the sector today.

“The biggest challenge facing the industry is the many disruptions in the value chain,” The American Academy of Sports ruled early September in its conference with analysts.

He noted that “we have worked with all of our suppliers to ensure the flow of goods” – he specified – “given our strong relationship with suppliers such as Nike, Adidas or Under Armour, we have adequate supplies at the moment.”

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As confirms it He’s been living with fractures for eighteen months Money bills, especially in categories like bikes, where demand rose last year after booking, so it had already increased its costs and allowed it to better prepare.

Asked about this particular problem, Foot Locker emphasized in its June conference with analysts that “when disruptions are due to things you can’t control, you have to be very careful.”

Regarding prices, he noted, “It is clear that disruptions in the value chain and transportation costs mean that the entire spending structure must be followed very carefully, but we are trying to ensure that the price is right for the consumer.”