CIT: Factoring Provides Flexibility to the Apparel Sector
The Great Recession changed the face of the banking and finance worlds for many businesses in the apparel sector. Over this period, many business owners turned to accounts receivable factoring to access flexibility in lending and the expertise a factor can provide through the complete supply chain. These are some of the insights expressed by Marc Heller, Northeast regional manager and international manager, CIT Commercial Services, in “The State of the Apparel Industry” (cit.com/heller), the latest piece of market intelligence in the award-winning CIT Executive Insights video series. (cit.com/executiveinsights)
“Retailers experienced a difficult holiday season and a very tough first quarter,” said Heller. “Weather had a major impact on retailers, and in turn the suppliers, during the holiday season and well into the spring. Thankfully, we’re beginning to see an uptick in the sector due to rising consumer confidence.”
Certain retail sectors are doing well while others are facing challenges. The luxury markets continue to be strong, while department store business remains stable. Lower-end retail markets are softer with specialty stores experiencing the brunt of the softness.
According to Heller, here are some near-term trends to watch for:
- M&A Activity Provides for Expansion: It’s very difficult for companies to grow their business through organic growth so acquisitions are continually being considered. Recent acquisitions have focused on acquiring regional expertise. The luxury business in China today remains one of the best examples of this trend.
- Fall and Holiday Season Is Important to the Apparel Industry: Back to school, fall and the holiday seasons are critical to the apparel industry. They are a barometer of consumer confidence and a gauge as to what consumers are buying. Traditionally, these are the busiest times of the year for most retailers.
- Replenishment Has Changed the Supply Chain: In general, suppliers have become more conservative and manage their inventories better. If business is difficult, retailers can defer or cancel orders. Most retailers have changed to what’s called replenishment which puts the burden on the vendor to hold product for when a retailer needs it. This in turn has caused vendors to become more astute in how they manage the retailers so that they don’t end up with too much inventory.
- E-commerce Is Affecting the Apparel Industry: Although brick and mortar is here to stay, e-commerce continues to grow. However, there is an associated expense for logistics which will put pressure on many retailers. Even though Amazon is really a logistics company by nature and the site’s growth is concerning to big retailers who continue to work on their own websites and online businesses to better compete.