A new wave of anxiety is sweeping across the industry, with the spread of the coronavirus in China and uncertainty about the United States’ trade relationship with the country.
To explore the issues that are top of mind for executives, FN sat down with Steve Lamar, who this month assumed the roles of president and CEO of the American Apparel and Footwear Association, to discuss five of the big topics circling the shoe industry at the beginning of 2020.
The Impact of the Coronavirus
“An immediate impact we are seeing right now in China will be on the domestic economy and its retail market. A lot of stores are closed, mostly retail in the affected provinces, and while Chinese New Year tends to close some retail stores anyway, [the closings have been] extended even further now because of the coronavirus. As China begins to open back up again after the New Year, then you’ll start to see what that impact is on production and cargo. It’s new, so there’s understandably a lot of fear, and if you put out information that’s not necessarily substantiated, it begins to fuel a crisis. We’re in the process of asking our members, ‘What are you telling your employees to keep them safe? What are you experiencing? What can you share with us?’ We want to be as helpful as we can, so we’re in this information-gathering stage right now.”
How Tariffs Factor In
“Lunar New Year was earlier this year, and a lot of companies wanted to get products shipped early. That intersected with the dates when the tariffs were set to fall from 15% to 7.5%. They were trying to manage whether they were going to have too much product arriving at a 15% tariff rate or if they could hold it until it was dropped to 7.5%. At the time, several companies wondered if they made a mistake shipping all that product too early. Now, they’re probably a bit relieved because it gives them extra time to get their mitigation techniques in place.”
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U.S.-China Trade Relations
“The good news is that we have more predictability. The bad news is that predictability includes tariffs. A lot of people have come to the conclusion that they don’t see these tariffs going away and this might be around for quite some time. Knowing that, it’s going to incentivize people to build that into their cost structure. Everyone’s got different ways of handling it, but I think you’re going to see those costs work themselves into contracts with suppliers or find their way into pricing and [that] might hit shelves as soon as the 2020 holiday season. This phase one deal raises as many questions as it answers. What we wish to see is tariff elimination.
Whether you agree or disagree with the president, there’s an element of his thinking that embraces the concept of tariffs as a way to generate revenue and create long-term balance. He sees tariffs as a way of accomplishing his political objectives. Given that mindset, it’s hard to nudge him off of that view, but we’ll keep working. There are a lot of people in Washington who disagree with that view, so we’re working with them to make sure he understands how we can move on to the next steps.”
The Sustainability Movement
“This year, I think we’re going to see a lot of discussions around sustainability. April 22 marks the 50th anniversary of Earth Day. You’ve seen the industry at large undertake a lot of commitments to sustainability. What people thought of as a marketing concept five years ago is much more woven into our DNA. It’s also the beginning of a new decade, which presents an opportunity to see what else you can do to help the environment. There are a number of technologies, production procedures and materials already out there — very different from what we had even a few years ago. The ability to be more sustainable is going to be more attainable. There are pioneers in the industry that have created a pathway for others to follow.”
Making Environmental Progress
“A challenge that we all have as an industry is that there are some companies that want to ensure they can accomplish something before making a public commitment. It’s great to say you’re reducing our water usage or cutting down on chemical output, but what steps are you actually taking to do that? It’s not just about talking the talk until you can walk the talk; that may be seen as an empty promise. Some of those companies are sitting on the sidelines because they’re still exploring the best options to be sustainable. I’m just thrilled that there’s so much more attention being drawn to this. We have our summit in March with a whole day dedicated to sustainability.”
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