Retailer Sourcing Dilemma: Leaving China Is Complicated

Retailers, consumed by the threat of increased tariffs on Chinese goods, have publicly underscored the need to relocate sourcing from China to Vietnam, Myanmar, Bangladesh, Sri Lanka, Cambodia and other countries. Easier said than done. There’s time, manpower and added costs involved establishing alternative supply sources, and retailers fret over potential product shortages and delivery delays with everybody descending on the same new sources of supply. Achieving comparable levels of quality control, craftsmanship and productivity are also concerns. “This is a very complicated situation,” said Terry Lundgren, the former chairman and chief executive officer of Macy’s Inc., referring to retailers, generally. “It’s not easy to shift. It’s about establishing relationships and building trust and loyalty. You need to set up inspection offices with people inspecting merchandise production frequently and unscheduled. You need people to see that the products are being made properly with the right fabrics. You need to see that labor laws are being adhered to, and that standards of cleanliness are upheld. Going from one country to another, you have to relearn all this. “There could be some disruption of flow, particularly in categories like moderately priced sweaters and shoes, where China has such a large share of worldwide production.” The U.S. government

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