Unstable market conditions are continuously increasing challenges for brands and retailers like recently high inventory has been a major headache. Costing, lead time were always there as big issues and after exploring nearshoring, onshoring, now few of the top retailers, having high-scale businesses, are preferring to work more with such suppliers that can offer them the facility of warehousing in their own country. Through this, brands don’t want to manage warehousing or they wish to reduce their warehousing activities and expenses. At the same time, they want more ease in sourcing and immediate availability of the products. Though a few of the top leading Indian companies are having their warehouses in overseas, but now as top retailers have more thrust on the same, the pressure to have an overseas warehouse is mounting on other suppliers also. It is going to create difficulties for companies which do not have huge corporate structure but have a good amount of business with leading retailers. In fact having warehouses in buyers’ countries is now considered a big positive to become a preferred supplier.
As per the market insiders, especially those who are closely associated with buying and sourcing practices, few of the top retailers have just started insisting on overseas warehouses for suppliers but in the coming days, more retailers can opt the same route. So far the trend is seen more in home textile products but there are enough chances that sooner or later, similar practices may be adopted by apparel manufacturers also, especially for bulk and basic orders.
“Recently a UK-based retailer that is sourcing home textile products from India, has asked its India Country Manager to work more with such companies which are having their warehouse in the UK or are ready to have a warehouse there. Few of the vendors of this retailer don’t have such warehouses and now they are in fear of losing business,” shared an industry insider who doesn’t want to disclose his name.
He further added that even the price is decided by doorstep delivery (not just FOB). If a buyer wishes to receive goods at his distribution centres in a country, the price will be according to the distribution centres, so the suppliers’ cost burden is primarily related to initial warehousing and renting.
Though this new priority of leading brands and retailers will add some cost and one more step/responsibility for the suppliers, but the suppliers can try to beat the competition of nearshoring through this, especially in Europe as in some cases, EU brands are getting goods quickly from Eastern Europe.
For top suppliers, warehousing in overseas is manageable as they have resources. Companies like Welspun India, Himatsingka Seide Ltd., Indo Count Industries Ltd. etc., already have their warehouses/distribution centres in various countries but medium-level exporters, and those who don’t have resources or don’t wish to indulge in warehousing process can lose business from top retailers.
Not only suppliers, even buying houses or agents, associated with these retailers/brands, expect this to be a challenge for them going ahead as there will be less requirement of their services when goods are there almost at every brand/retailers’ doorstep and no risk will be there for brands/retailers.
Though there are not large number of suppliers working with global giant retailers or top buyers, but the volume of this business is significant and will be impacted. Going forward, this can impact sourcing from India also.
E-commerce factor
Growth in e-commerce business is also a reason that gives further push to overseas warehousing or distribution centres. Welspun India’s annual report says that the US e-commerce strategy used a fast-growth model using two kinds of e-marketplaces. The first, called Pureplay included Amazon and Wayfair where one could control the complete assortment, programmes, SKU listings and their price points directly on the marketplace sites. The second retail marketplace allowed to drop-ship to end customers directly via Vendor-Managed Inventory (VMI) in warehouses. The sales strategy centred around using fast-moving products along with well-timed spike promotions round-the-calendar. Last year, the company created a few milestones along the way like in 2021-22, it clocked revenue of US $ 12 million in US e-commerce. The company also implemented a robust yet decentralised e-commerce strategy in US and UK.
Other giants are also focusing on e-commerce like Indo Count says that it will continue to remain laser-focused to increase its share in the e-commerce and branded business both locally and globally. Himatsingka Seide has already explored the e-commerce business and is expecting to progress significantly in future.
Indian giants having overseas warehousing
Welspun India has warehouses in US and Europe. Its warehousing facilities in the US also support e-commerce businesses for shipments’ dropping. It also has distribution centres in three locations in the US (Tacoma, Ohio, Virginia) covering the East and West coasts, mid- West and Canada. Due to this, the company is able to deliver across the US and Canadian markets quickly and efficiently. The company’s warehouses are equipped with the best in supply chain management systems and its team of professionals ensure robust distribution through both direct-to-store pick-and-pack basis.
Indo Count has warehouses for retail and e-commerce fulfilment in US and UK. As per the annual report of the company, it is exporting its products to 50+ countries across the globe but USA accounts for the company’s largest market generating around 70 per cent total revenue. It has created a distribution chain comprising showrooms, design studios and warehouses in various countries.
Himatsingka also has sales offices and warehousing facilities in North America, Europe, UK.
Private warehousing
Having their own warehouses may not be viable for many companies but they can still explore private warehousing and co-warehousing. For example, a company like Saltbox offers warehouses for a certain duration and also at various locations. In isolation, bearing a warehouse cost is difficult but in co-warehousing, various companies come together in one central location where they can access both the space and services they need individually and benefit from shared knowledge and a sense of community. E-fulfilment service is another company offering US fulfilment services for Indian companies also.
