The current economy is like one of those maze puzzles. Knowing which path leads to a successful outcome or a dead end is almost impossible. A knotted supply chain, a threat of recession, continuing inflation, a geo-political fracture between the U.S. and China, a war in Ukraine, continuing Covid worries, and a challenging political climate makes for a puzzle no one can quite figure out.
Target and Walmart are trying to figure their way through, and it’s not going well. So, they are trying to move risks and costs to their suppliers. One way to do that is to cease buying direct import from Asia and switch to ordering from their suppliers’ domestic warehouses.
Here is how a Reuters article by Siddharth Cavale and Arriana McLymore, “Target puts the squeeze on suppliers after Inventories pile up,” describes it:
Target told some vendors it will cease transporting some merchandise they manufacture in China, instead ordering the same goods from their U.S. warehouses, adding to vendors’ costs, two vendors told Reuters.
Target’s moves could be an early harbinger of pain for some of the millions of small and mid-sized general-merchandise suppliers whose products sit on retail shelves.“Target puts the squeeze on suppliers after inventories pile up,” By Siddharth Cavale
and Arriana McLymore, July 22, 2022
My read is that both retailers want to pass not only the cost of importing from China but the aggravation that currently goes with it. But reading between the lines suggests that the two retailers don’t just want domestic warehousing by their suppliers, they want to continue to pay the direct import price. How else do you explain this comment by Exploding Kittens CEO Carly McGinnis;
Carly McGinnis, president of Exploding Kittens, Inc, which makes card games in China sold at Target, said Target asked it to send its games directly to Target’s distribution centers from its; U.S. warehouses this summer. Because Target previously would pick up the games directly in China, the change adds to Exploding Kittens’ transportation and storage costs, she said.
This is not going to end well. Between inflation and pressure from two of America’s retail gorillas, toy and consumer products companies will eventually pass on the additional costs to American consumers or go out of business. That’s not good for the economy or any of us who operate within it.