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Today Bonton began its liquidation sales, by the end of August there will be no more Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's, or Younkers. It was only last month that Toys'R'Us made the same exact announcement. On top of that, Sears, J.C. Penny, Neiman Marcus, Lord and Taylor, and Macy's have all been closing many locations, and now things are looking very bad for Bed Bath and Beyond. Even Walmart closed 63 Sam's Club locations at the start of the year. Things have gotten so bad that it was barely even news when Nine West filed for bankruptcy last week. So what does this mean for the retail environment?
Certainly things aren't looking too good. Bonton is a major department store that anchors many malls. For smaller retailers in the mall, losing Bonton could mean loosing foot traffic and maybe even permanently closing their stores as well. For other struggling anchors in the mall, it might give them reason to close their store in the struggling mall. In malls that have already lost an anchor, losing a second anchor could be the end for the mall. While we have seen many big box stores in strip malls close, this is the first time that we are seeing a major department store and mall anchor close all its locations. There is a very real possibility of it having a snowball effect with the other struggling department stores.
Of course, as a manufacturer or importer, you not only have to worry about the next bankruptcy filing, but also losing a major customer. In many ways, the latter can be much worse. The proof of this is Mattel and Hasbro. Both their stocks took a major hit when Toys'R'Us filed for bankruptcy, and then another when they announced they would be closing all their stores. In fact, billionaire Isaac Larian, owner of Little Tikes and many other toy companies, tried to purchase Toys'R'Us out of fear of what its closure could do to the toy industry.
Certainly you need to be selling to online retailers like Amazon, however, you can't only focus on online. Amazon might be one of the major reasons why all these stores are closing, in fact they announced on Wednesday that they now have 100 million Prime subscribers. But to focus only on Amazon is also problematic, after all, you don't want to have all of your eggs in one basket or limit where your customers can purchase your product. Plus, many of your customers may want to touch and feel the product before they purchase it, something that isn't (yet) possible with Amazon.
Of course, selling to brick and mortar can be very scary right now. While one option might be the increasingly popular taking a discount to get paid early, doing so won't actually protect you. The bankruptcy laws require you to pay back any money you received within 90 days of a company filing for bankruptcy if it is believed you received preferential treatment. Toys'R'Us was working with C2FO to offer its vendors early payment in exchange for a discount prior to filing for bankruptcy, and you can be sure that anyone who received early payment at a discount, is now returning that payment back to the bankruptcy court. What might have seemed like a smart option at the time, in the end did not offer vendors any protection.
Really the only thing that can protect you is by partnering with someone who is doing the credit checking for you, staying on top of breaking news, and offering you insurance. While credit insurance is available for extremely large, credit-worthy accounts, it typically isn't available for smaller companies or companies that show even the slightest inkling of financial distress. Non-recourse factoring on the other hand provides you with the protection you need on the widest range of customers available.
DSA Factors has been offering non-recourse factoring for over 30 years now. When you partner with DSA Factors, we handle all of the credit checking for you as well as provide you with insurance on the receivables which we approve. As an added benefit, we help improve your cash flow by funding you the same day you ship and invoice your customers. For more information about how factoring can help your business, give us a call at 773-248-9000.
It's been almost ten years since our last financial crisis was caused by banks that were too big to fail. However, Bloomberg is warning that the next collapse will be tied to Silicon Valley rather than Wall Street. Over the last ten years the government has tightened regulations on Wall Street to ensure that we won't find ourselves in the same situation that occurred in 2008. However, there has also been a revolution in the world finance by startup companies incorporating new technologies.
While most people are aware of the new regulations that have been placed on the too-big-to-fail banks. It is now nearly impossible to get a small business loan, and even refinancing a mortgage on your home requires massive amounts of documentation that can take you weeks or months to put together. However, not many people are aware of just how large and diverse Fintech companies have become.
While Fintech has entered the world of factoring, its reach extends well beyond factoring into all other arenas of finance. There are Fintech companies that give out business loans, do crowd funding, give computer generated advice, and there are even virtual currencies such as Bitcoin.
The main issue with these new Fintech companies is that unlike the institutions that existed prior to the crash, these new businesses have no oversight. Not only has the government avoided regulating the industry, but the very idea of Fintech implies that there aren't humans making the credit decisions, instead decisions are made based on complex algorithms that are hosted on internet servers. Without any human input going into financial decisions, it is quite possible that businesses may learn how to manipulate the systems and receive funding that they shouldn't qualify for.
Of course the biggest threat to the industry is hackers, who have been breaking into systems and stealing sensitive information at an incredible rate recently. In fact, it was just announced today that Whole Foods' restaurants had been hacked and credit card information had been stolen. The world of Fintech has already been attacked. In 2014 a security breach put Mt. Gox, the world's largest Bitcoin exchange at the time, out of business and cost Bitcoin owners $3.5 billion in today's dollars. To make matters worse, the security breach apparently happened in 2011 and went unnoticed for three years.
While there is no clear cut solution to the problems presented by Fintech, the fact is, Fintech has had an incredible impact on the world of finance over the last ten years. Furthermore, while many Fintech companies have come and gone, overall as an industry, it doesn't look like Fintech is going to slow down any time soon.
UPDATE: Breaking News
Former Securities Exchange Commission Chairman Arthur Levitt spoke out yesterday at the Economist's Finance Disrupted conference in New York. At the conference he stated, "Fintechs tend to march to their own rules. It's a new industry with lots of failures and lots of spectacular successes. But regulation is often kind of background music, and the prevalence of scandal and mismanagement and aggressiveness is part of the backwash of innovation. Hardly a day goes by where there isn't a recording of some scandal or another"
At the same conference, Scott Sanborn, CEO of Lending Club said "We do need to take responsibility in [Silicon Valley] where there is a mentality of growth at all costs, and if you don't have the right checks in place, the right kind of board in place, and plenty of people with audit and risk experience that are providing the right kind of governance, you can have problems."
Amazon is already a retail giant, but up until recently all of their sales have existed only online. However, that is slowly changing. In November 2015 Amazon opened its first brick and mortar bookstore in Seattle, and has opened a handful more across the country in the last year. They also started experimenting with cashier-less grocery stores at the end of last year. Of course the big news came a couple of weeks ago when Amazon announced they would be purchasing Whole Foods for $13.7 billion. While Amazon is yet to open a brick and mortar furniture store, there have been reports that they are looking into doing so. If, or when, they do open a furniture store, you can bet that it will have some pretty dramatic effects on the furniture industry.
Amazon of course started off as an online book store back in 1995 and didn't turn a profit until 2001. The impact that Amazon has had on the book industry has been dramatic. They drove Borders, a 500+ store chain and former Amazon partner, out of business in 2010. Barnes and Noble has survived but is struggling. So it is interesting that the company that has been responsible for closing hundreds of bookstores around the country, and has no problem selling books online, would want to open up their own bookstores. Of course, for a company like Amazon, the cost of opening up a bookstore is insignificant, and it could be worth it to Amazon to open these stores even if the stores themselves are not profitable since they can be used as market research and for marketing Amazon's other services such as Prime. The fact that these bookstores are popping up slowly and only in several cities may indicate that indeed the stores are not profitable on their own.
Groceries, however, unlike books, have been a much bigger problem for Amazon. While non-perishable foods can be shipped, they are also heavy and shipping them can be expensive. Of course fresh produce is much more problematic, not only does it have a short shelf life, but most consumers wouldn't want someone else picking out which bananas or cut of meat they are purchasing. Then you have refrigerated or frozen foods, if it took Amazon two days to deliver your milk, it would go bad long before it arrives at your doorstep. At the end of last year Amazon started experimenting with several grocery store concepts in Seattle. Amazon Go offered cashier-less convenience stores. You simply walk in, take the food you want, and walk out, with your credit card automatically getting billed. Amazon Fresh Pickup allows customers to order food online and then pick it up at a nearby drive-thru. While Amazon Fresh Pickup still doesn't address the issue of allowing consumers to pick their own produce, it at least addresses the issue of short shelf life and refrigeration. But just like with bookstores, which also started out in Seattle, these stores are being rolled out slowly and Amazon still has an insignificant market share of the grocery industry.
That of course has all changed with Amazon's buyout of Whole Foods and its 460+ stores across the nation. In a matter of seconds Amazon made a major move not just into the grocery industry but into brick and mortar retail. They instantly gained hundreds of locations around the country where customers can pick up orders, drop off returns, and do their shopping all at the same time. They also can roll out some of their new technologies on a much larger scale than they have done so far.
With Amazon apparently solving their grocery problems, that leaves only one other industry where Amazon is struggling to get their foot in the door, the furniture industry. While furniture may not go bad like fresh fruit and vegetables, it has its own challenges. First of all, it is a major purchase, even the cheapest pieces will cost you at least a hundred dollars, and if you are updating a room you can expect your bill to be in the thousands. When making such a large purchase consumers are going to take their time to shop around to make sure that they are getting exactly what they want. In the case of upholstery and bedding, consumers need to touch and feel the product to make sure that it is comfortable. Furthermore, many furniture purchases are custom orders where the consumer picks the colors and finishes they want. As a result retailers are not able to stock the merchandise but instead need to order it, meaning it could take anywhere from 4-12 weeks for the consumer to receive the merchandise. This doesn't work well with Amazon's goals of reducing delivery time from two days to two hours. But of course the largest problem with furniture is delivery. Furniture is bulky, heavy, and easily damaged. While it can easily be transported to distribution centers and stores, it is delivering it the final mile into the consumer's home that presents the greatest challenge, along with assembly for items such as beds that would not be able to fit through doorways if they were delivered fully assembled.
So of course the next question is what will Amazon do? Amazon has committed to selling furniture; they have opened up showrooms in both Las Vegas and High Point. While it is possible that Amazon may experiment with opening its own stores, it is likely that when they are ready to make the jump into brick and mortar furniture, they will buyout a furniture retailer. Of course, there are very few furniture retailers that have locations nationwide like Whole Foods, but Amazon doesn't necessarily need to purchase a furniture retailer. Purchasing a department store might make greater sense as they are larger, have more locations, and would allow Amazon to sell other merchandise that is difficult to sell online, such as appliances and clothing.
If you start looking at department stores, Amazon has a lot more opportunities as many of the department stores are struggling, mainly due to having to compete with Amazon and other online retailers. Purchasing Macy's would give them access to 800+ locations around the country. JC Penny would give them over 1000 locations. But most interesting is perhaps the department store that has told its investors that it may not be able to keep its doors open. If Amazon were to buyout Sears, not only would they be able to purchase it at a bargain price, but they would immediately have access to over 1500 retail locations and a wealth of real estate all around the country.
Of course all of this is just speculation, what isn't speculation is that Amazon is going to do something in the furniture industry. There is talk of them using technologies such as virtual reality or augmented reality so that you can picture what a particular piece of furniture would look like in your home. Another possibility is offering delivery windows within hours of when you make a purchase in their store. But whatever they do, it is going to be big and everyone is going to have to keep up with Amazon if they don't want to lose out.
While retailers will face stiffer competition, they may also benefit from the new technologies that Amazon brings to the industry. If existing furniture stores are able to adopt Amazon's technologies, they too could use those technologies to increase sales. Of course, the real advantage to traditional retailers comes in the area of customer service. A company like Amazon will never be able to provide personalized service and most likely wouldn't have trained salesmen who know about all the products in their store, instead they will probably rely on Amazon reviews like they do in their bookstores, and perhaps a specific customer's buying trends. While Amazon may already know if a customer is looking for a more traditional or contemporary look based upon their online purchasing patterns, a traditional salesman can simply ask the customer what they are looking for and forget about all the algorithms. By offering exceptional customer service and a knowledgeable staff, current furniture retailers should be able to compete with Amazon and would definitely do better in customer retention.
From a vendor's point of view, Amazon stores can potentially open up more possibilities. Smaller vendors, who have trouble getting floor space in the showrooms of larger furniture retailers, may have an easier time getting floor space in an Amazon showroom. While certainly Amazon could offer everything online, it will be limited in what they can display in their showroom by the amount of real estate they have. Unlike traditional furniture retailers who buy from a handful of vendors, Amazon purchases from everyone and that of course is what sets them apart.
If Amazon's bookstores are any indication of how they do business, products that perform better online will have the upper hand. At Amazon bookstores there is a very limited selection of books, and the selection is not based on which books Amazon's buyers feel should be on the shelves. Instead the book selection is all determined by algorithms which look at sales volume and customer reviews of each book. As a result, a category that has a more limited selection but sells modestly well may get more shelf space than a hugely popular category that offers a much wider variety of books to choose from. For example, Amazon bookstores have an excellent selection of recipe books which individually sell well online, but a very limited selection of fiction, a category that performs incredibly well as a collective group, but not as individual titles. Furthermore, where a traditional bookstore will feature every book that Dr. Seuss ever published in their children's department, Amazon bookstores would probably only have one or two of his books that sell extremely well online, if any. There is no reason to believe that Amazon wouldn't take the same approach in a furniture showroom.
This could be huge for niche manufacturers. While overall your sales volume may look insignificant when compared to someone like Ashley, if you have a single unique product on the market that sells very well, it is quite possible that it would get floor space in an Amazon showroom. While Ashley may offer 1000 different products, it means that each product only gets a thousandth of Ashley's overall sales volume, and your single product receives 100% of your sales volume. As a result, your single product would have better sales numbers than any individual Ashley product, and if it receives positive customer reviews, it would perform better in Amazon's algorithms.
If there is any lesson to be learned from this, it is quite simple, online matters. If you don't want to get left behind, you need to bring your business online, and the more you offer the more you have to gain. Getting sales and positive reviews right now on Amazon could result in even greater sales volumes in the future when Amazon starts opening brick and mortar stores. If you are looking to get your product for sale online, DSA Factors is here to help. We provide factoring for Amazon receivables, as well as Wayfair, Hayneedle, One Kings Lane, Zulily, and many other online stores. Give us a call today at 773-248-9000 to learn more about how DSA Factors can help you grow your online business.
It used to be that you would purchase a product and on it would be a tag featuring the stars and stripes and would say "Made in USA". However, as our shopping habits have evolved, with more and more people doing their shopping online, and big box stores becoming pretty much the only option for traditional brick and mortar shopping, that "Made in USA" label is becoming harder and harder to find. Despite these changes and a rapidly developing global market, it should come as no surprise that the old "Made in USA" tag is becoming more and more sought after. Many Americans have even joined the "Shop Local" movement and make an effort to do as much shopping as they can at mom and pop stores in their community.
While you probably have seen "Shop Local" stickers in suburban downtowns and throughout the neighborhoods of big cities, there is a lot more to the movement than just shopping at a store whose owner happens to be your neighbor. Many of these stores will strictly source merchandise that is manufactured here in America. So by shopping locally you aren't just helping out your neighbor, but you are also helping out your fellow Americans by creating manufacturing jobs right here in the states, rather than outsourcing those jobs overseas.
Just how important is it to consumers to purchase an American made product? According to research done by Consumer Reports, eight in ten Americans would prefer to purchase an American made product over an import, and six in ten would even be willing to be 10% more for a product that was made here at home. Furthermore, two in three consumers prefer to shop in stores that advertise American made products. However, more than half of consumers still believe that American made products are too costly.
There are many reasons why consumers prefer to buy products made in America. One reason is patriotism, a lot of consumers take pride in the fact that the products in their home were made in America. Consumers also like that they are creating jobs and supporting the American economy when they buy an American made product. However, the most important factor may simply be the quality of the product, most consumers believe that when they buy a product that is made in America that it is something that will last for a long time.
Despite the fact that consumers prefer American made products, the cost of labor in America is the reason why most manufacturers still prefer to produce their products overseas. It has nothing to do with America having a high minimum wage, in general most factory workers in America are skilled professionals who get paid at a much higher rate than minimum wage. In addition to this they also receive benefits such as health insurance and 401Ks, along with paid vacations and sick leave.
Then there is the question of materials, its one thing for a product to be assembled in America, but it's another thing for it to be assembled in America from parts or materials that are also American made. If a factory is purchasing metals, plastics, or fabrics that are made in America, their suppliers also have to deal with higher expenses which of course impact the price of the raw materials that manufacturers purchase.
Despite these higher costs, there are still many advantages to producing merchandise here in the USA. It isn't just the quality of the product, but also the quality control. If a product is being made overseas, the importer may have little control over how it is being made, and may not even be aware of any issues until it arrives at an American port a month after it has already been paid for. Of course the most obvious benefit is that the product does not have to be transported from overseas. This not only saves money, but it also saves time. It doesn't need to spend a month on a ship and then go through customs before you have access to it, and that's assuming that there aren't any port slow downs. You also don't need to fill an entire container in order to receive your product.
Of course the most important benefit to American manufacturing is consistency. American factories can produce goods 365 days a year. Yes, employees request time off for vacation, but those vacations are staggered so that a factory is never short-handed. In China, and other parts of Asia, factories have to shut down for an entire month as employees return to their homes to celebrate Chinese New Year. Even worse, when Chinese employees return from New Year celebrations, they tend to find a new job at a different factory. As a result you not only need to train an entire team of new employees every year, you never have any employees with the experience required to make high quality products.
When you consider all of these factors, you actually can put together a pretty good argument for American manufacturing. However, in the furniture industry, manufacturing in America becomes even more important. By offering American made products you can also offer custom made furniture, allowing consumers to choose the configuration and sizes they want along with the finishes or fabrics they want. With overseas manufacturing you would be left with lead times of art least 10-12 weeks, but with domestic manufacturing lead times may be cut down to 4-6 weeks, which coincides very nicely with how long it usually takes a home buyer to close on their new home. These reduced lead times are also very important if a replacement part needs to be ordered and your local store doesn't have any in stock.
As a result of these benefits, American manufacturing definitely plays a very important role in the casual furniture industry. According to Casual Living, three quarters of outdoor specialty shops carry American made lines, and four in ten consumers prefer to purchase American made products. The only features that are more important than where the furniture is made are price, comfort, and style. Again the main reason why consumers prefer to buy American is because they believe it is higher quality, and as a result, most high end merchandise is manufactured in the USA.
The only thing that may surprise you, despite the Shop Local movements strong grass roots efforts and social media presence, only 10% of Millennials believe that it is important to buy American made products. This number is slightly higher among Millennials that are married and have families, as well for those who live in the North and the West. However, there is another figure that does bode well for American manufacturing. 93% of all Millennials are willing to pay more for an American made product, with the vast majority willing to pay 20% more for a product with a "Made in USA" tag on it.
If you are an American manufacturer and need help making payroll or paying your suppliers, look no further than DSA Factors. Our accounts receivable factoring program can provide you with the cash flow you need to grow your business. We are family owned and operated business based out of Chicago, Illinois who provides nationwide factoring services. Your customers prefer to Shop Local, so you should to. Partner with DSA Factors and you can outsource your accounts receivable to a family owned business right here in the USA!
With so much interest in tiny homes and urban living, it may come as a bit of a surprise that new homes are actually increasing in size. According to a study by Furniture Today and the US Census Bureau, the average home built in 2014 was 2,657 square feet, a 2.3% increase over 2013's 2,598 square feet. Of the 620,000 new homes built in 2014, 45% of them had 4 or more bedrooms, 36% had 3 or more bathrooms, and 31% were over 3,000 square feet.
While the average home size for the entire country is increasing, it is interesting to note that different regions are growing at different rates. Leading the pack is the Midwest which experienced 7.3% increase in size last year and a 13.6% increase since 2010. However, despite such large growth, especially in the last year, the Midwest still has the smallest homes in the country. The average new home in the Midwest last year was 2,574 square feet, up from 2,398 square feet in 2013 and 2,265 square feet in 2010.
Following the Midwest comes the South, which now has the largest homes in the country at 2,711 square feet for homes built in 2014. While this is only a 0.8% increase over 2013's 2,689 square feet, it is a 13.2% increase over 2010's 2,393 square feet.
Out West houses have been growing at a much more stable rate with the average new home in 2014 at 2,603 square feet. This was a 3.2% increase over 2013's 2,523 square feet, and a 9.1% increase over 2010's 2,386.
While the Midwest, South, and West are seeing much larger houses getting built each year, it may come as a surprise that the Northeast, which had the largest homes being built in 2010 at 2,613 square feet, has pretty much stayed level. In 2014 the average new home was 2,617 square feet, a 0.7% drop from 2013's 2,635 square feet.
With home sizes getting larger in 3 out of 4 regions of the US, this can translate to consumers buying more furniture while also looking for larger individual pieces of furniture. According to data collected by Furnituredealer.net in the first six months of 2015, the most popular dimensions for a sofa are 87" long, with a depth of 39.4", and a height of 37.6". When it comes to sectional sofas, consumers are looking for a footprint of 116.1" by 98.3" with a height of 37.7".
If you are a furniture manufacturer, it's important to keep up on housing trends and make sure that the furniture you are making meets the demands of today's consumers. If you are spending all of your time chasing down past due receivables, it's hard to stay on top of what really matters. Let DSA Factors factor your accounts receivable for you, not only will you save time and money, but we will also improve your cash flow.
* In this study, the Midwest includes Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin. The Northeast includes Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont. The South includes Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, Washington DC, and West Virginia. The West includes Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.
More and more people these days are looking for color in their homes, and this is affecting everything from paint to upholstery. While red has always been a very popular color in the home, blue is starting to pick up steam and quickly becoming the most popular color for upholstery, especially in the US.
It has become more and more important recently for furniture manufacturers to not just get your attention, but to get your attention in a split second. With so many choices, and better informed shoppers, consumer's attention spans are getting shorter and shorter. One of the best ways that a furniture manufacturer can grab someone's attention these days is with a strong, vibrant color. Traditionally the color of choice has always been red, and red is still a very good choice of color even today. But blue, a color that didn't use to be very popular, has been picking up a lot of steam recently and has become America's most popular color in the home. Especially blues that have bit of green in them and teals.
A recent survey in Furniture Today shows that blue has become America's favorite color for upholstery. 33% of Millennials (age 18-34) call blue their favorite color in the home, as do 26% of Generation X (age 35-50) and 28% of Baby Boomers (age 51-69). That is nearly one third of the market that prefers blue today, and many color experts believe that blues popularity is only going to continue to grow. However, it isn't all blues that are doing great, lighter blues still aren't all that popular in the home. It is the darker blues, such as navy, that are really becoming popular.
Of course blue's gains are coming at the expensive of other popular colors, particularly red, which had long been America's most popular color. While 30% of Baby Boomers prefer red, that percentage drops to only 23% of Generation X and 12% of Millennials that call red their favorite color. Despite losing some ground to blue, red is still America's second most popular color.
What is a bit more surprising than blues recent popularity, are the other colors that are starting to become more popular than red. Yellows and Greens which were never very popular with Generation X or Baby Boomers, have surpassed red when it comes to Millennials. 15% of Millennials call yellow their favorite, while 14% call green their favorite.
The other big color, orange, however is losing some steam. Orange is most popular among Generation X with 20% of them considering it their favorite color, but it drops to 13% with Baby Boomers and only 10% with Millennials.
If you are having trouble keeping up with the latest color trends, give DSA Factors a call today at 773-248-9000 and ask about our accounts receivable factoring. While we can't help you pick out colors, we can help you with credit checks and collections so that you have more time to focus on your product line, and can make sure you choose the right colors.
As the economy continues to recover, American businesses have a unique opportunity to grow their businesses as a way of preparing for the future. One of the simplest ways of doing that is through accounts receivable factoring.
Accounts receivable factoring services, often called "invoice factoring services" are a useful method of small business financing that enables business owners to budget and plan better by creating consistent cash flow. The small business sells its invoices to the factoring company at a small discount. The factoring company, in return, pays the small business, usually within a couple of days. This means that instead of waiting 30 to 90 days for customers' payments, the small business has its funds almost immediately.
Additionally, accounts receivable factoring enables small businesses to save money on their in-house accounts receivable work. Factoring companies provide not only funds, but also help collect on invoices and manage accounts receivable. The factoring company handles mailing out statements, which reduces printing, mailing, and personnel costs. As well, the factoring company provides access to advanced credit-screening tools to help small businesses decide how much credit to extend and to whom. This minimizes credit risk, again saving companies money.
The time and money small businesses save by using invoice factoring services are resources that can be put into growth opportunities. New equipment, staff training, marketing campaigns and other growth-oriented costs are easier to plan for and pay for when a company knows what its monthly budget will be, as it does with invoice factoring. The economy is improving. Will your small business be ready to meet the demand?
According to the Boston Consulting Group (BCG) recent report titled "Made in America, Again: Why Manufacturing Will Return to the U.S.", we can expect to start seeing furniture manufacturing returning to the United States. In fact BCG believes that furniture is just one of seven "tipping-point" industries that will start moving manufacturing jobs from China back to the US. The list of industries includes the automotive, electrical equipment and appliances, furniture, plastics and rubber, machinery, fabricated metal products, and the computer and electronics industries. These industries account for approximately $2 trillion in sales annually and account for 70% of all Chinese imports. Additionally this can lead to the creation of 2 to 3 million jobs in the United States.
According to BCG, Chinese wages have been rising at 15-20% per year, while the Yuan RMB has been appreciating against the US Dollar. The once enormous labor gap cost will shrink to less than 40% by 2015. As a result the industries mentioned above which have a relatively low labor cost, compared to high costs of shipping, materials, security, delivery responsiveness, and quality control, will begin to move manufacturing of products back to the US for sales throughout the Americas and Europe. The Chinese will not be closing their factories as they will still have a competitive advantage in Asian markets, but their competitive advantage will disappear in North America and most likely in Europe as well.
BCG does mention that Mexico will still have a much lower labor cost than either China or the US, and some manufacturing jobs will almost certainly go to Mexico. However the vast majority of manufacturing should be coming back to the US due to our larger skilled workforce and for logistical and security reasons in these tipping-point industries. The clothing and textile industries, however, most likely won't be returning due to their high percentage of labor costs which will allow the Chinese to keep their competitive advantage.
These changes are already becoming apparent. From 2001 to 2004 Chinese imports grew by about 20% per year. However, there have been dramatic decreases in recent years with imports flattening out and even declining in 2009, not just for Chinese imports but for imports from all low-cost nations.
At DSA Factors we are proud to support the American manufacturing industry and are ready to help out anyone, big or small, who is bringing manufacturing back to the US. We are located in Chicago and have been serving the furniture, bedding, giftware, housewares, trucking, staffing, and many other industries since 1986. We have helped many companies to grow over the years and will work with you to grow your business.