The growth of e-commerce means that competition in the retail market is getting ever more intense with a growing numbers of e-tailers offering cut price deals.
And increasingly, retailers are looking at private label sourcing to drive more differentiation on the shelf and defend market share, margin and brand reputation.
According to a new study from Deloitte Consulting, private label now accounts for 18 per cent of consumer goods dollar sales. And this has significant implications for sourcing strategies and supply chains.
The study, Private label sourcing: strategies to differentiate and defend, surveyed retailers in three categories: apparel, general merchandise and grocery.
It found that the critical pressures were raising costs of goods sold – raw material cost increases and volatility; rising production labour wages and fuel price volatility.
Other issues included supply chain risk – notably risk of disruption – and availability of production facilities.
Deloitte found that across retailers, raw materials, production labour costs and transport costs accounted for 80-84 per cent of landed duty cost paid.
Potentially, there are substantial gains to be made by getting the strategy right. Deloitte identifies two trends with retailers revamping their value chain strategies and diversifying their source country footprints.
However, in such a volatile environment, it is not enough to go through the exercise once and forget it. Active management of the process will continue to be essential.