The past two weeks ModaRévisé has been re-assigning our handbag clients, new and old, to factories that have out-of-China facilities, such as Cambodia and Vietnam, in order to allay client fears of reduced margins as a consequence of the current US-China tariff dispute. If approved, US tariffs will affect all consumer handbags, small leather goods, and all other accessory items that are made in China.
In case you've been living in the dark ages, this tariff will jack up existing retail prices anywhere from 10% - 23%, depending on the type of materials (synthetic PU/PVC, leather, or fabrications) and the percentage of its usage per bag. And of course, no wise retailer will ask consumers to shoulder this 10% - 23% increase, thus the fear of loss of margin on the retailer's part.
So ModaRévisé is scrambling to move production outside of China but it's not as simple as it sounds. We need to re-align the supply chain so that factories located outside of China can continue to procure quality materials and meet all delivery deadlines. For those that don't know, China is arguably the only country left that has a massive and well-developed infrastructure of supporting industries for handbags and accessories. From leathers, to Pu/PVC, nylon, canvas, embroidery farm, hardware molding, printing, silicon molding, anything you can imagine on a bag they have the network of supporting industries well established since 20 years ago.
As a result, the majority of these components will still be developed in China, then shipped to our various factories in Vietnam or Cambodia. This can become a logistical and pricing nightmare if we don't manage the transition with extreme care. I get dizzy at the mere thought of a misstep, but this is the current reality of our business environment.
Thank goodness for a couple of things, however:
1) ModaRévisé is supremely fortunate to have a strong teammates to work with to make this happen, especially our manufacturing partners who were prescient enough years ago to anticipate the risk of limiting their operations to China alone;
2) If you’re not solving problems, then you’re not in business! This is, indeed, one of the greatest lessons I have learned from running my own business. As human as we are, it’s so easy to freak out when something so beyond our control, such as a looming international trade war, suddenly challenges everything we’ve worked hard to build.
But you know what? The sooner we can settle our fears and identify the things that we can control, the sooner we can see that even macroeconomic issues can be simplified, in a sense, and mined for problems that are within our means to address. In ModaRévisé’s case, for example, we were able to focus on working with manufacturing partners with facilities in countries without tariff risk.
There are certainly challenges with even that solution, but solving problems is what business is all about, isn’t it?