Apparel margin expectations are in the sixties for the national retailers. Margin in this instance means gross margin. Their net is not so freely discussed.
Nordstrom is a high end clothing retailer, and the vast majority of its stuff is made in China or other low-cost labor locales. Edgar filings show a gross profit margin of 31% for 1994 vs 35% for 2012. I'd wager a big part of the margin difference comes from improved purchasing power as the company's annual revenues went from $3.6b to $11.8b, its store count went from 57 to 242 and its geographical coverage went from 10 to 31 states in the ~ 20 year interval.
I suspect some of the margin difference over the years comes from retail consolidation, as regional chains become national chains, and regional chains or individual stores that can't compete go out of business or are bought out by the nationals. Fewer competitors means more pricing power. It doesn't mean that prices go up, but they might go down less in the absence of competition that went belly-up. Everybody has the same access to overseas sources of labor, but fewer competitors generally means better pricing from the seller's point of view.
posted on 05/05/2013 4:41:00 AM PDT
by Zhang Fei
(Let us pray that peace be now restored to the world and that God will preserve it always.)
To: Zhang Fei
After the passing of the late Sam Walton, his heirs took the helm and the company started becoming rather well known in vendor circles for taking on new domestic vendors (in a wide variety of areas, not just textiles), accepting their prices and terms, taking up practically all their production capacity and then putting the screws to them mercilessly. Landing that account was a bittersweet thing. Many were forced to consolidate, reducing competition but gaining efficiencies via cutting redundancies such as IT, HR, marketing, sales forces and accounting. Over time this too proved insufficient and so offshore sourcing began to be sought on the vendor side. Walmart didn't go chasing after it themselves, not initially, vendors "innovated" their way into it to remain profitable. Disintermediation came later, after vendor sources were established and producing. This was the vanguard of offshoring. I saw it, lived it. Consolidation and merciless cutting of redundancies were more or less implemented in search of greater efficiencies in order to meet the pricing demands of a huge account that had them over a barrel.
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