If the first half of the year is any gauge, the global fashion apparel market is in a state of flux. Consumer spending behavior has changed to a point where formerly proven strategies simply don’t work.

Meanwhile, global sourcing, inventory management and fulfillment requirements have drastically changed as the market shifts to a consumer-centric model. A devalued Chinese yuan, which was initially seen as a negative disruption, is now fully in play and is seen as a “positive development.”

Here, Andrew Tananbaum, executive chairman of Capital Business Credit, discusses the impact of these changes and issues in the market, as well as the state of the credit sector and why companies might want to consider factoring as a financial tool.

WWD: What is the impact of the devalued Chinese yuan? How is the weaker yuan impacting U.S. importers and their Chinese suppliers and manufacturers?

Andrew Tananbaum: The devaluation of the yuan has been a positive development for the U.S. retail supply chain. Chinese factories are reporting an uptick in orders from U.S. customers. In some cases, this is resulting in increased profits.

According to Capital Business Credit’s Global Retail Manufacturers and Importers Survey, 37 percent of importers cited that margins will increase due to the lower price to produce goods in China. However, not every importer will be able to reap the full benefits of the devaluation, as the suppliers to the factories (like mills) are struggling and requiring deposits up front. So while there is a benefit for U.S. importers, it certainly can’t be categorized as a home run.

WWD: What are some of the trends you are seeing in the teen-apparel segment? Is there cause for concern?

A.T.: The teen market is soft, revenue is flat year-over-year, and is trending down. This can be attributed to a number of factors. First, teens, and their parents, are spending more on electronics and less on apparel. A teen would rather spend money on an iPhone or Android than a pair or two of designer jeans. Teens are also gravitating more toward fast fashion versus branded merchandise. They can get the latest styles at the best price points. Finally, teens are spending less time in the malls than previous generations, as they can purchase items online and, a majority of the time, return them for free.

WWD: The department-store sector also seems to be facing headwinds — including a weaker tourism business. What else is affecting this sector, and how can vendors and brands mitigate their exposure to the softness in this market?

A.T.: Department stores need to reinvent the in-store experience to meet the needs and requirements of shoppers. While online sales are certainly growing and developing, an omnichannel approach is an imperative. Today, the vast majority of sales are still completed at brick-and-mortar locations.

Additionally, foreign buyers are not spending as much at the department stores, due to the strong dollar. Moving forward, expect these retailers to condense their physical footprint, while increasing their customer service and merchandising capabilities. For the wholesalers that sell to these department stores, they should be keeping a close eye on inventory management, as smaller locations mean less shelf space for goods.

WWD: What trends are you seeing on the credit and/or lending side of business?

A.T.: We are seeing more and more retail importers seeking out financing against inventory (as opposed to purchase-order financing) than they have in the past. This is due to a shift in the way retailers are buying merchandise, forcing wholesalers to speculate. Rather than placing a purchase order six months in advance, retailers are placing orders only two to three months ahead of time. This forces importers and wholesalers to take a gamble on how much goods they need to produce overseas. Miscalculations could cause them to unload excess inventory to off-price retailers.

WWD: What are some benefits of factoring?

A.T.: There are many benefits to using a factor. A factor has deep retail expertise, as they were built for the sector. Factors are privy to trends and performance of customers and peers. Given that factors interact with thousands of retailers during the course of a year — from the larger big-box retailers and department stores to small boutiques, through their collections departments — they can also help identify new customer opportunities. This benefit is especially important to start-ups and younger companies.

With all this institutional knowledge, factors are able to expedite the underwriting process to ensure that they are providing the right financial product to meet the client’s needs and provide credit protection at competitively low rates. In addition, they can help a wholesaler/importer better understand the future prospect of his/her customers before producing goods overseas, which is why they should be engaged early in the sell side of the business.

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