Column by Scott Thorne
Posted by Scott Thorne on December 27, 2021 @ 3:10 am CT
Following up on last week’s column, I received an email asking if there are any of the trends from 2021 that I thought would continue (see "Not Dead Yet (And Other Observations of 2021)"). Three trends come to mind:
JIT (Just in Time). According to The New York Times, 97-99% of customers reported that they had no problem finding the gifts they wanted to give during the holiday season. This was due to two major reasons: stores actively encouraged early purchases of gifts by consumers; and retailers reduced reliance on just-in-time supply chains which bulked up inventory, increasing inventory carrying costs, but cut back drastically on out-of-stocks. The disruption of the supply chain that distribution and retail have spent the last 40 years building woke up channel members to just how fragile a system the industry has built (see "JIT, ROE, and the Pretty Overblown Trucker Shortage"). I expect to see a re-examination of JIT and more retailers opting to bulk up on what they think will prove popular items earlier on in the season and reduce orders of potentially slower selling stock. This will increase inventory cost, which is what JIT developed to minimize, but "you cannot sell what you do not have." However, in 2022, the industry may view what happened in 2021 as an aberration and return to normal distribution practices (we tend to have short memories).
Nearshoring. This is more of a long-term trend and will likely continue over the next three to five years. We will likely not see actual reshoring (i.e. the moving of manufacturing plants from China and Southeast Asia to the United States), as many politicians have urged. Manufacturers and publishers generally find manufacturing costs in the U.S. too high to produce their products profitably, as least board and card game publishers do; although book publishers appear to have a much better time of it. Because of manufacturing costs in the U.S., as well as the fact that our manufacturing channels are not nearly as well designed as China’s are, it is still quite costly to manufacture products in the U.S., compared to other locations, that is why we are seeing increased movement of manufacturers to Mexico. Labor costs are significantly lower there, the supply chain is much shorter and less fragile and, thanks to the revised USMCA, companies building there have noticeable tax benefits that Southeast Asian firms do not get. Given this, we should expect to see more manufacturers move their operations to Mexico over the next decade.
TikTok. Although I still do not see the appeal, an incident this week drove home the power of TikTok to me. Space Cowboys released its Skull bluffing game several weeks ago with an incentive to buy multiple copies (see "'Skull,' More, from Asmodee"). Skull, until recently, was just sitting on our shelves. This past week, out of nowhere, we sold through all six copies. We then reordered and sold through half the reorder within one day. Turns out Skull got mentioned in a TikTok video focused on five games that viewers should check out, which proved enough to move a games that had sat on the shelf for weeks. After all, if TikTok can boost Ocean Spray sales by 10% and move Fleetwood Mac’s Rumors back to the top of Spotify Playlists on the strength of viewership of one video, we need to pay attention to it. However, that does not mean creating another TikTok, Twitch, YouTube channel, or Stitcher podcast. Plenty of people already doing that. Just keep an ear out for what other people are doing and newsjack it.
Your thoughts? Any other trends you think will carry on into the years to come? Post them in the comments or email firstname.lastname@example.org.
The opinions expressed in this column are solely those of the writer, and do not necessarily reflect the views of the editorial staff of ICv2.com.
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