Inflation in the People’s Republic of China reached a three-year high of 6.5 per cent in July – bad news if you are sourcing product there.
And, according to a survey by Barclays Corporate, that accounts for more than one third of UK retailers – a sizeable proportion of whom say they will stick with it through thick and thin.
The Barclays report found that about half of retailers would only look for new source locations when forced to do so, and a further 24 per cent said they never look for new countries from which to import stock.
Which is a bit surprising in view of the fact that the retailers said cost was the dominant factor in choosing a source location. Some 91 per cent ranked it above all else. Quality was ranked second by 72 per cent, while 15 per cent identified logistics providers as a key driver in choosing a supply location.
Of course, the question is: if you are going to move your sourcing away from China, where would you go?
The most likely country is Vietnam – 13 per cent of retailers tipped Vietnam as their future source of choice for clothing, footwear and accessories as well as industrial wholesale items. It has lower labour costs than China, though the transport infrastructure is not as well developed.
Beyond that, there is little agreement. Spain, Belgium, Israel, Hong Kong, Romania and Brazil were all mentioned.
Richard Lowe, head of retail and wholesale at Barclays Corporate, said: “The challenge for rival destinations such as Vietnam, is that China still offers great value and other countries will be hard pushed to take pole position.”
But having made the decision to source from China, it would be a mistake to expect that supply chain to be a permanent structure.
It is all too evident that change in the region will continue and there are opportunities to be had.