Supplier survey bodes well for retail sales
If the major suppliers of soft goods such as clothing and accessories to retail stores are a bellwether of the economy, then the coming months are looking to provide a jolt as 75% of these suppliers expect retail sales to significantly outpace the gross domestic product for the spring and summer shopping season.
That’s one of the major findings of a new survey conducted by Capital Business Credit.
According to the Global Retail Manufacturers and Importers Survey, the vast majority of those surveyed believe that 2016 will either be better (45.5%) than or the same (38.6%) as 2015. How much better? Seventy-five percent believe that retail sales will grow by 4% or more, outpacing core GDP growth.
"While retail sales for January and February were lower than initially anticipated, this hasn't seemed to deter retail suppliers' confidence or business activity," said Andrew Tananbaum, executive chairman, CBC. "In fact, nearly 90% of importers and suppliers are reporting reorders for the spring/summer shopping season.”
Retailers have become increasingly reticent to stock shelves if they do not believe products will sell or consumers will buy, according to Tananbaum, and the reorders mean that the major retail chains and individual stores are optimistic.
When it comes to orders that retailers are placing, the majority stated they have increased or stayed the same (78%). Approximately half (49.1%) indicated that they have increased.
Of those that stated orders have increased, one third indicated that orders increased between 7% and 10%, while 28.8% said that orders increased by more than 10%.
The Impact of the Chinese Yuan
Given that so many U.S. retail goods are produced in China, the devaluation of the yuan has been an important factor for importers and retailers to increase profitability while keeping prices low.
Half of respondents are considering increasing their Chinese production due to the strong dollar vs. the yuan. A third (37%) believe that margins may increase due to the lower cost to produce goods in China, however the majority (56.7%) do not think this will translate into lower consumer prices.
On the flip side, 71% believe that the strong U.S. dollar will impact foreign spending domestically.
"While the overall recovery from the great recession of 2008 has been sluggish, the low costs of goods produced in China has allowed the U.S. consumer to stretch their spending dollars and allowed retailers to keep costs down," Tananbaum concluded. "In our opinion, this is the first time since the recession that manufacturers, importers and other participants in the retail goods supply chain will have the opportunity to recover some of the margins they lost over the past decade."
CBC surveyed approximately 30 retail importers and manufacturers that supply approximately $800 million in goods at retail outlets throughout the United States. These wholesalers sell to all segments of the retail supply chain with the exception of the juniors market.