On CE - For Dealers, Distributors and OEMs of Consumer Electronics throughout EMEA

Fergal Dempsey, Head of Business Development at Exertis Supply Chain Services (SCS) will join the IFA Global Markets Expert Talks for their 2017 panel discussion theme, “Opportunities in sourcing.”

Exertis Supply Chain Services is a leader in materials supply chain design and operation for global clients. As a service provider to the consumer electronics and other industries, they take ownership of product cost, quality and delivery in a one-stop solution for new product development and rapid go-to-market.

It’s not an easy service to provide and their heritage as a member of the Exertis group (part of the $16 billion company, DCC plc) shows that they developed this service offering from their own experience.

We asked Dempsey on the eve of IFA Global Market Talks to explain more about what the service involves and which companies are most likely to use it.

What are the challenges European companies face sourcing hardware from China, the factory of the world?

You can list these obstacles and see clearly the size of task that faces companies who source in China.

• Time-zones
• Project management at arms’ length
• Selecting the right partner
• Cost and Quality Management
• Expedite Management
• Meeting regulatory requirements
• Payment terms

These tasks may be daunting to companies, large and small, that simply want to create a great product and get it to market. We take a lot of risk and responsibilities off their hands by providing an expert service.

What can a good outsourcing partner bring to the table to de-risk the sourcing process?

First, it brings people on the ground that you can trust who have established relationships with existing factories and ability to find good and trustworthy factories that meet the brand’s sourcing requirements

It also brings a well skilled and resourced team of experienced project managers, engineers and planners that will not only help you set up your supply chain, but continually improve your supply chain during this sustained period

You know our parent company is a $16bn PLC which drives a very secure and well run business. This ensures that we are a very well run and financially secure business.

Can you provide an example of a product that you have developed and delivered end-to-end?

Sure, here’s a link to a Microsoft Linx case study.

How does a good supply chain partner differentiate itself from the many solutions providers that are on the market today?

Many of the service providers offer one section of the many steps in a supply chain e.g. some companies will be good at sourcing, some will be focused on logistics and hubbing. What you need is an end-to-end provider that will look after all of your supply chain needs from concept right through to delivery. Our business helps our customers get their products made, owning all aspects of cost, quality and delivery. It fulfills into the markets where the product is required, manages the inventory in the regions, keeping inventory exposure as low as possible throughout the supply chain, localises their products as close to market as possible and wraps that entire process in a financing solution.

How does the financing model work for the brands that you currently support?

One of the biggest challenges for all businesses today is cash-flow, and one of the largest consumers of cash in a business is inventory. The ability to financnec the at inventory from the factory until an order is received that product by the end customer. There is a huge opportunity for that brand to free up all of that working capital, allowing them to reinvest that money in marketing their existing products and developing their product roadmap.

For example, Exertis SCS will buy the inventory from the factory on our terms, fulfill into the regions and hold that inventory in our warehouses close to the market. Only when the brand receives an order from their customer, do they need to order from us, at which time we will invoice them at the agreed terms. Typically this gives a cash positive model to the brand and can free up at least two months of cash invested in inventory.

Exertis is a very large distribution company. Can you explain to me how you can help the brands leverage your sister company’s expertise?

A good distribution partner is critical to the success of a brand. Exertis has one of the largest distribution channels in Europe, and with access to 45,000 doors and retailers in Europe, we can help brands get their products sold. And we in the supply chain organisation, want our customers to sell more product so that we can scale their supply chain. Therefore, it is very much in our interest to make those introductions into our sister company.

Go Exertis Supply Chain Services (SCS)

China. It's always been the dream of many exporters. And now several factors come together to make China the priority for export in 2018.

First, the time has come: The Chinese consumer economy will expand 39% from last year's levels to $6.1 trillion in 2021. That's about $2 trillion more in new consumption by 2021.

The Time Has Come, Incomes Are Rising

Income levels in China are rising, so the population of upper-middle-class and affluent families is rising as well. These households accumulate wealth, and that leads to increased spending in discretionary categories such as home, travel, electronics and entertainment.

And according to companies like Alibaba, consumers in these households are not just buying more, they are trading up: buying higher-quality products in certain categories, such as electronics, food, apparel, and children’s products.

Gateways like CE CHINA

Second, organizers like Messe Berlin (owners of the enormous IFA show for consumer eectronics and home appliances, held each year) have opened up convenient gateways to set up distribution in China. CE China will be held May 3rd-5th in Shenzhen.

The first of China's "Special Economic Zones," Shenzhen is the headquarters for many of China's high-tech companies, including Huawei, Tencent,  ZTE, TP-Link, DJI, OnePlus, and more. Taiwan's largest company, Hon Hai Group, has a large manufacturing plant based in Shenzhen. Many foreign high-tech companies have their China operations centers located in the Science and Technology Park of the Nanshan District. It's often called China's center of the consumer electronics industry.

Shenzhen is also an extremely fertile ground for startups, for Chinese and foreign entrepreneurs. (Including the product development base of the hardware startup accelerator, HAX Accelerator.)

18 million people a day go to Shenzhen to work or shop...so by itself, it is a huge consumer market.

Messe Berlin has appointed Global Fairs-TT-Messe to organize theEUROPEAN PAVILION at CE CHINA. Their efforts will further expand business opportunities for European manufacturers. Jan Nintemann, since 20 years the organizer of  industry pavilions at IFA, says, "We're offering the easiest way for any European brand to meet China's top buyers-- at a time when Chinese buyers are really motivated to sign up."

Best Buy now sells Barbie dolls.

This holiday season US shoppers will be without category killer Toys R Us for the first time in decades. The toy giant, once owner of 1600 stores across the world, closed its doors in USA, UK, Australia and elswhere.

In USA, last year Toys R Us accounted for up to 20% of the country’s total toy sales. With its demise, many US retailers quickly swooped in to fill the gap--and they're reporting success.

Toys R Us continues to operate as the licensor of the chain's international operations and as the majority owner of the Asian stores. 140 licensed stores in 35 countries still operate. For example, Toys R Us in Denmark, Finland, Iceland, Norway, and Sweden still run and are owned by Top-Toy.

But in USA, Target--for one example-- has more than doubled its toy offerings, even  making room for a quarter-million additional square feet of toy-related real estate across 500 stores in an effort.

Mark Tritton, Target’s executive vice president, said in an earnings call on Nov. 20 with investors. “So far this year, our toy results have exceeded our expectations in terms of sales and share.”

Target reported their stores grew 3.2% percent in the earnings period that ended Nov. 3--and they attribute part of that to toy sales.

The winners in the Toys R Us bankruptcy are any retailers that sell any toys at all--and that's why Best Buy began selling Barbie dolls.

Today there's a fine line between some toys and consumer electronics-- and retailers need to exploit it.

Now Toys R Us lenders announced they expect they will re-launch the Toys R Us retail business in USA in the future.

In the meantime, we hope it is OK that Barbie can have her stay-over at Best Buy.

Google's Alphabet Inc will buy fitness tracker and smartwatch device maker Fitbit Inc for $2.1 billion.

Google has yet to develop any big hits in consumer wearable offerings, despite an early attempt with Google Glass. But earlier this year Google did buy Fossil Group's intellectual property for smartwatch technology for $40 million.

The deal for Fitbit comes just as its Q3 earnings report (Nov. 6th) will show how Fitbit is losing its dominant share of the fitness tracking sector to cheaper products from China. In smartwatches, Apple is making good time on the high end-- and their interest in health apps puts Apple directly on the train tracks blocking Fitbit from bigger growth in high end smartwatches.

Fitbit cut its 2019 revenue forecast in July 2019, with disappointing sales of its attempt to protect its bottom line from the cheaper suppliers. The newly launched cheaper smartwatch, Versa Lite, was light in sales. Yet Google backing could drive Fitbit forward, ensuring its dominance in the middle to high end of the wearable market.  Or it could fizzle like Google's attempt with Motorola in smartphones.

The market is thinking positive: Fitbit shares rose 40% on the news and Alphabet shares also rose.