Reducing Risk & Improving Innovation with Corporate Trade: the Apparel Industry Example
Innovation is the name of the game in today’s business world. And there’s good reason for that. Depending on who you ask, the percentage of businesses that fail within their first 10 years of operation is upwards of 96%. This means that companies who don’t innovate and find new ways to leverage current trends could be doomed.
Take the apparel and retail industry as an example. If you think about it, innovation is even more important in retail than in many other industries. For example, with almost half of consumers in the United States starting their search for products on a mobile search engine, retailers have to constantly keep up with changes in consumer behavior.
But with innovation comes certain risks. Sure, when you invest in new products, move to more efficient suppliers, and forecast aggressively, there’s plenty of potential for success. However, there’s also plenty of potential for disaster if things go wrong. That’s why risk reduction should be an essential part of any innovation strategy in apparel, retail ore elsewhere. And one great tool for risk mitigation is to use corporate trading services from a trusted partner like Sherwood Integrated Solutions.
What is Corporate Trade?
When you’re thinking about reducing risk, corporate trading programs should be at the top of your to-do list. Never heard of corporate trade or just unsure of the details? No problem! In a nutshell, corporate trading, also known as corporate barter, is a platform for increasing efficiency and value while decreasing risk. When taking part in corporate trading, you’ll work with a high-quality firm that will add the greatest value with the least disruption to your existing processes.
In a trade, the trading firm will provide you with many services including marketing, advertising, and helping you sell your products and other assets. Instead of an entirely cash transaction, these trades are structured using cash, barter, and trade credits as the currency. This is done in order to reduce the transaction costs of the services you are purchasing and increase the revenue of the assets you are selling. And this is crucial if you’re an apparel company like The Gap that spent approximately $578 million on advertising in 2015. You want to achieve the highest ROI wherever possible.
A quality transaction will result in no reduction of the quality of services being procured, no distribution issues with the assets you are selling, and no disruption to your existing processes. All in all, it’s a fantastic way for an apparel or other company to liquidate underperforming assets, reduce inventory, increase efficiency in procurement of vital services, and focus on the innovation you need to stay successful.
How exactly does corporate trading help to mitigate risk, using the apparel industry as an example?
There are three main areas in which corporate trading helps apparel companies reduce risk: the supply chain, the marketing plan, and the sales cycle. Let’s address each area one at a time to explain the ways corporate trades can support your business.
- Supply Chain
- The Risk: When an apparel company forecasts for the coming quarter or year, the production and distribution of goods is based on completely unknown demand. Even though the apparel industry is absolutely huge around the world (worth approximately $3 trillion), nobody knows exactly how much demand there’s going to be for certain clothing items ahead of time. If your plan is too weak, you might find yourself with too many empty shelves and the lack of profit that goes along with them. If your plan is too bold, you’ll find yourself with warehouses full of unsold merchandise because demand was too low.
- The Hedge: When it comes to supply chain management, corporate trading partners, like Sherwood Integrated Solutions, reduce that uncertainty of demand by providing a dedicated sales channel for your unused assets. If you find yourself with too much inventory, a corporate trade can help you get rid of those assets and not lose your profits.
- Marketing Plans
- The Risk: The fact of the matter is that it’s expensive to launch new clothing lines and support them with an adequate level of merchandising and a variety of marketing channels. It is costly to advertise online, on air, and in-store, In fact, last year alone US retailers spent a total of $16 billion on digital advertisements in the hopes of increasing their business. The risk an apparel company takes is that these marketing programs might not pay off with increased profit in the end.
- The Hedge: Corporate trade financing generates more bang for your buck by increasing your potential reach and effectiveness of your advertising efforts. This is accomplished because barter agencies can strategically acquire premium media inventory and other services through trade; this gives you the opportunity to have your traditional, broadcast, and digital advertising activated more efficiently than otherwise.
- Sales Cycle
- The Risk: When retailers create their sales plans, they can be overly conservative in order to avoid unsold merchandise and customer returns. This could lead to less profit than the business might potentially earn.
- The Hedge: When you work with a corporate barter firm like Sherwood Integrated Solutions, you can ensure that slow-moving inventory receives a full wholesale price as an alternative to loss or liquidation. At the end of the day you’ll be able to continue pursuing a much more aggressive and optimistic production plan to support your sales strategy.
The Overall Benefits of Corporate Trade: Everybody Wins
How does corporate trade help you stay on top of the major trends shaping the apparel industry? It helps because all stakeholders in the value chain will have have a little less to worry about and will be able to focus on confidently achieving their objectives:
- Manufacturers will be more confident that this season’s production of apparel can be sold through with fewer returns and markdowns.
- Factories can operate closer at capacity, confident that orders will be filled.
- Retailers can procure more goods from manufacturers.
- Retailers can fund more grand openings of new stores, promotions of new merchandise, and displays for customers to see.
- Marketers can invest in more marketing campaigns and improve their ROI on those campaigns.
- Executives can invest in more travel, overhead, R&D, and even philanthropy, thanks to increased profit.
Put corporate trade into your 2017 plan.
If you want to reduce risk in 2017 and beyond, while being able to focus more on innovation, corporate trading companies, like Sherwood Integrated Solutions, can help you get there