FROM THE DESK OF DEBORAH WEINSWIG

About That New “Buy American” Program On Monday, January 25, US President Biden signed an executive order called the “Build Back Better” recovery plan, which tightens the rules for US government procurement and aims to strengthen domestic manufacturing. The new bill follows on from a bill introduced by New York Representative Carolyn B. Maloney in July 2020 requiring domestic production of personal protective equipment (PPE), aimed at building a domestic stock of PPE for future outbreaks, in addition to enhancing domestic manufacturing base for medical equipment. The “Build Back Better” order is designed to make it more difficult for government agencies to procure imported products; it also updates the definition of US-made products, increases local-content requirements, and provides better information on small and medium-sized enterprises (SMEs) for bidding on government contracts. While the effect of the order is likely to be small (foreign-made products accounted for just 5% of the nearly $600 billion in direct purchase contracts for goods and services from government agencies in fiscal 2019, according to the US Government Accountability Office), it demonstrates the government’s intention to improve domestic manufacturing and provide assistance for SMEs. What does “Made in America” actually mean? According to the US Federal Trade Commission (FTC), “all or virtually all” significant parts of products must be made in the 50 states, the District of Columbia, or US territories and possessions, in order to be labeled, “Made in the USA.” Thus, the product should contain no—or negligible—foreign content, per the FTC. In addition, the product’s final assembly or processing must also take place in the US, and the determination also includes an analysis of the geographic allocation of manufacturing cost. Intended patriotism aside, the term “Buy American” carries quite a bit of historical baggage. This recent recovery plan is the latest in a series of programs that date back to the Boston Tea Party and the American Revolution, with many emerging before and during World War II. The exact definition and interpretation of “Made in the USA” leaves numerous pitfalls for retailers that seek to leverage it in their advertising campaigns. Walmart has long promoted products labeled as “Made in the USA,” including a “Buy American” campaign in 1985, but the company has been the target of accusations alleging inaccurate claims of products’ provenance. With more than 100,000 SKUs (stock-keeping units) at Walmart stores in the US (as of 2018), it is a herculean task to police the origin of each of such a large number of products, making it virtually impossible to label every single SKU accurately. There is the question as to whether US consumers really want US-made products. The decline of US manufacturing coincides with the rise of discount mass merchants, indicating that consumers prefer low prices over economic patriotism. In a recent Coresight Research survey conducted with Blue Yonder, seeking out US-made merchandise was the fourth-highest consumer priority, after free shipping and finding the lowest price and quickest delivery. In the same survey, retailers ranked domestically made products as the number-one consumer desire—representing a mismatch in perception of consumer expectations versus reality. Still, there are numerous benefits to retailers and consumers from a limited return of domestic manufacturing. For retailers, onshoring diversifies their manufacturing base, offering some mitigation to trade disputes and shipping bottlenecks. Having manufacturing close by also enables retailers to respond more quickly to changes in consumer demand, paving the way for just-in-time manufacturing, which creates less waste and drives efficiency by better matching demand and supply. Many of the same benefits accrue to consumers as well. With closer manufacturing, consumers can obtain more on-trend items—possibly personalized and customized—sooner, while also appreciating the appeal of improved sustainability due to less waste and reduced shipping distances. Political connotations aside, “Buy American” offers numerous benefits for US-based consumers and retailers and is likely here to stay. Onshoring or nearshoring makes even more sense in the current environment, which has experienced wide swings in consumer demand, and with trade friction likely to remain a constant theme, as trade and manufacturing directly translate to jobs and consumer incomes.

US RETAIL AND TECH HEADLINES

L'Occitane Files for Chapter 11 Bankruptcy (January 26) Reuters.com

• The US division of beauty and wellness retailer L’Occitane filed for Chapter 11 bankruptcy on January 26, and announced plans to downsize its physical store fleet. The retailer plans to shutter 23 underperforming stores immediately, according to court papers.
• The retailer, which currently operates 166 boutique stores in the US, stated in a press release that its business “continues to be impacted by disproportionately high store rent obligations that are no longer tenable.”

Christopher & Banks Receives Bid from Lender for Its E-Commerce Business (January 26) RetailDive.com

• Bankrupt women’s apparel retailer Christopher & Banks has received a stalking horse bid from term loan lender ALCC, LLC, an affiliate of Hilco Merchant Resources.
• According to the terms of the bid, the purchase price for the company’s e-commerce business would comprise the value of the term loan ($8.1 million) as well as other assumed liabilities. Per the agreement, competing bids would have to be higher than ALCC’s bid by at least $650,000 to be considered.

Belk Reportedly Plans To File for Bankruptcy (January 25) CNBC.com

• Department store chain Belk is likely to file for Chapter 11 bankruptcy under an agreement that would see its lenders take a majority stake, according to news agency Bloomberg.
• The retailer, which was acquired by private equity firm Sycamore Partners in 2015, will reportedly undergo prearranged debt restructuring, if the talks are successful.

Tractor Supply Appoints Mathew Rubin as Senior Vice President and General Manager of Petsense (January 25) Company press release

• Rural lifestyle retail chain Tractor Supply announced that it has appointed Mathew Rubin as Senior Vice President and General Manager of Petsense. Rubin will replace previous Vice President Steve Neibergall, who announced plans to retire from the company following a successful leadership transition.
• Rubin will report directly to Hal Lawton, President and CEO of Tractor Supply, and will also be a part of the company’s Executive Committee.

Godiva To Shutter US Stores (January 24) Pymnts.com

• Premium chocolate manufacturer and retailer Godiva is winding down its North American brick-and-mortar operations, according to a company statement. The retailer plans to either close or sell its 128 stores in North America, including 116 stores in the US, and expects to complete the closures and sales by the end of March 2021.
• The company expects to continue operating its retail stores in China, Europe and the Middle East.

EUROPE RETAIL AND TECH HEADLINES

UK Retailers Witness Biggest Fall in Prices Since May 2020 (January 27) Reuters.com

• The British Retail Consortium (BRC) reported the biggest drop in prices in January 2021 since May 2020—average prices fell by 2.2% year over year, driven by a 3.6% decline in prices of nonfood items.
• New lockdown measures to combat the increase in Covid-19 cases across the UK have led to a 35% decline in consumer spending reported in early January 2021, according to the Office for National Statistics.

JD Sports Explores New Options To Raise Additional Funds (January 26) Company press release

• JD Sports is exploring additional options to fund its acquisition and expansion strategies. Over the past two months, JD Sports has acquired multiple retailers including Shoe Palace and Wellgosh.
• The company is considering the launch of an equity placing in the last week of January 2021 for £400 million ($549.7 million).

LVMH Reports 3% Sales Decline in Its Fourth Quarter 2020 (January 26) Company press release

• LVMH reported a 3% decline in revenue overall in its fourth quarter in 2020. The company’s fashion leather and goods segment (F&LG) reported an 18% increase in the quarter.
• The segment increase can be attributed to the revenue rise among LMVH’s major fashion brands such as Christian Dior and Louis Vuitton, although these are still partially offset by declines in duty-free sales. The company reported a 17% decline in revenue reaching €44.7 billion ($42.2 million) in 2020 as compared to 2019 primarily due to travel restrictions and closure of stores and manufacturing sites in 2020.

Debenhams Announces Acquisition Deal by Boohoo Group (January 25) Company release

• The administrators of Debenhams UK confirmed that online upstart Boohoo Group plc has signed a deal to acquire Debenhams for £55 million ($75.6 million). The acquisition will help Boohoo to enter new markets including beauty, homeware and sportswear.
• Under the deal, all physical stores in the UK will be closed permanently once all in-store stock is cleared. The online operations will be managed by Boohoo Group.

Waterstones CEO Warns of Store Closures Without Further Business Rates Relief (January 25) RetailGazette.co.uk

• James Daunt, CEO of Waterstones, has issued a warning that the retailer may be forced to close several stores if the government reimposes full business rates after the one-year relief period ends.
• Daunt urged the government to extend the relief period beyond April 2021 or to modify the rates system.

ASIA RETAIL AND TECH HEADLINES

The Vitamin Shoppe Launches First Retail Location in Vietnam (January 27) Insideretail.asia

• US nutritional supplements retailer The Vitamin Shoppe has launched its first shop in Hanoi, Vietnam, in partnership with Kim Lien Group. Under the partnership, the Kim Lien Group operates The Vitamin Shoppe stores in Vietnam and launch wholesale distribution of The Vitamin Shoppe’s family of brands.
• The 1,500 square feet store will offer a wide assortment of The Vitamin Shoppe’s proprietary brands, including BodyTech, BodyTech Elite, True Athlete and Vthrive. Kim Lien Group is set to open the second The Vitamin Shoppe location in Hanoi later this month.

L’Occitane Opens First Sustainability Concept Store in Hong Kong (January 26) Retailinasia.com

• L’Occitane has rolled out its first “Mega” (Make Earth Green Again) sustainability concept store at Pacific Place Complex, Hong Kong. The store offers an array of products marketed as sustainable, such as the Aromachologie haircare range that packaged in 100% recycled PET bottles.
• The store also engages shoppers on reducing waste with its Sustainability Rewards Program. Customers can earn rewards by carrying out “green” activities, such as returning their empty containers (from L’Occitane or other brands) to the store’s recycling bins.

Uniqlo Set To Launch “Hub of the East” Store in Singapore in February (January 25) insideretail.asia.com

• Uniqlo is set to debut its “Hub of the East” store in Tampines Mall in Singapore in February. The new store will feature the brand’s full assortment of LifeWear products and is designed to offer Singaporeans an exciting space to share their culture with the world.
• Uniqlo entered the Singaporean market with its store opening in Tampines mall in 2009. The “Hub of the East” store is almost twice the size of the original store and spans two stories.

PG Mall Teams Up with JD.com To Expand Its Reach in China (January 27) Themalaysianreserve.com

• Malaysian online marketplace PG Mall has partnered with JD.com to sell locally made Malaysian products in China and other parts of the world.
• The PG Mall platform has around 10,000 sellers and offers an assortment of lifestyle products as well as services for local and regional markets.

Milk Mantra Appoints Sandipan Ghosh as Chief Operating Officer (January 25) FinancialExpress.com

• Indian agricultural dairy products startup Milk Mantra has appointed Sandipan Ghosh as Chief Operating Officer. Ghosh will be responsible for optimizing the entire process from sourcing to production, supply chain, sales and marketing—as well as the company’s subscription app.
• Ghosh joins Milk Mantra after his tenure of four years as a board member and Commercial and Marketing Director at Lactalis Groupe India. He succeeds Bibhu Nanda who, having completed his contractual year with Milk Mantra, has moved on to his next location.