The demand from Asia's rising middle-income

Contributor: Eric Linxwiler, Vice President, Business Development Americas

CBX was a recent sponsor of the American Apparel & Footwear Association Strategic Sourcing, Customs, and Logistics Integration Conference held April 13th – 15th in Washington DC.  The Event focuses on the latest Asia and International Sourcing trends, customs policies, and preparing retailers for expansion.

I was fortunate enough to attend this informative event where topics ranged from the latest Asia Global Sourcing trends, to customs policies, logistics challenges and how to better prepare for greater global expansion.

The Opening keynote delivered by sourcing executive Duncan Scott, Vice President, External Products, for footwear manufacturer New Balance revealed some insightful information I felt was worth sharing.  He explained how he expects Asia to overwhelmingly remain the world’s key sourcing hub despite rising manufacturing costs in the region.  “Asia is getting more expensive, so we have to think about what the next step is after being so dependent on Asia.” said Scott.  “Asia and India will remain sourcing hubs and I don’t expect a shift away from there.  Africa will emerge as a strong hub for low-cost commodity items, where speed-to-market is not crucial.”

He went on to further explain as Asia becomes  more expensive, there are three possibilities to be considered 1) Re-shoring of production to or near the EU and US markets,  2) Shifting of the supply chain beyond Bangladesh & Myanmar to Africa, and 3) Greater efficiency within Asia that keeps Asia competitive.

He also went on to explain how “Thanks to the Digital Revolution”, Global Consumers are better connected than ever.  Middle Class Consumers in all areas of the globe want much the same things; speed, differentiation, connectivity to a brand, high quality and great value.  He further clarified how consumer spending and middle class consumption will drive sourcing models in the next several years.  He cited that as of 2012, Japan, US and EU covered fully 60% of middle class consumption with India and China at 5% of global middle class consumption.  By 2025 the numbers are expected to equalize and by 2050 the numbers will flip.  These new consumers fall into 3 main categories:

  1. Consumers who seek individuality will pay for customization and they expect turnaround in a couple of days or at most a week.  That will require in-market production capabilities.
  2. For consumers who want to touch and feel product – they will shop at retail.  They may value brand connectivity over customization.  They will expect never-out-of-stock: – missing size or colors shipped with a few hours or days.
  3. Consumers who know what they want may order directly over the Internet.  They will expect delivery within a few hours.

So, in the end, Scott predicted that Greater Asia/India will remain very strong sourcing hubs.  He feels that Africa will emerge as a strong hub for low cost commodity items.  He also thinks Latin America & countries such as Turkey will play a niche role in Customized Speed to Market as well as the US & EU.  This will be very interesting on how this plays out and happy to report that CBX Software is prepared and will be there every step of the way with our customers.

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