The Global Financial Crisis (GFC) was not only caused by the excessive greed of a few elite banksters; it is the end result of numerous factors that include in particular the globalization of trade and the inherent consequences on European employment caused by the outsourcing of labour intensive production.
If free trade has been the greatest pacifier the world has ever known, it is certainly not the perfect system and I doubt if our societies will be governed by the same rules 100 years from now!
The European Fishing Tackle Trade is being particularly affected by the GFC for reasons intrinsic to the way we conduct our business.
_Because each stock unit we purchase is generally unique and vendors do not carry any stock of complete items; it normally takes a supplier a minimum of two months to receive the necessary components and produce an order. This lead time is only exceptionally shorter. It is generally much longer with lead times of three to four months being the most common practice. Worst case items such as hooks sometimes taking up to a year to produce.
_Because production is mainly outsourced to the Far East, and depending on the proximity of a major European harbour; it takes between 25 and 45 days for goods to be delivered from door to door through an economical route.
These two factors associated with small volumes per item are a major cause of the permanent high levels of stock needed to operate in the market, a cause of enduring pressure on company cash flow.
_Free market economies, easy access to competitive sources and regional differences have caused the development and the commercialization of such an excessive number of items of Fishing Tackle that a good European tackle store needs to carry 30,000 Stock Units (SKUS) in order for the shop manager to feel he is covering all possible demand from potential customers in the area.
It is a clear that the utter indigestion of product available in the market is a direct cause of the excessive inventories, the appalling stock turn and the disproportionate payment terms that affect the financial stability of all the companies involved in the distribution of Fishing Tackle in Europe.
The credit crunch imposed by the banks in their desperate struggle to improve their balance sheets has now worsened the cash flow situation, forcing many distributors to attempt to decrease their inventories at a time when consumer demand is at an all-time low.
Many companies in our trade are already suffering the consequences: Tackle shops are closing in all European markets at an alarming rate, with dire consequences for the distributors and the manufacturers in the long run.
Will the European trade have enough foresight to evolve to the necessary level so as to survive and develop in what will be left of the market once this recession is over?
We are ultimately once more dependent on our retailers which in most markets are structurally disorganised and under-capitalised.
The fact that our business environment is a passion sport causes retailer product selection and purchases to be subjected to personal taste and knowledge instead of being directed by market acceptability.
The lack of working capital and proper stock management tools at retailer level create a demand for lengthy payment terms that distributors have to grant to keep their market share on the shop shelf.
These long payment terms spread through the market through competitiveness and successful companies are often the ones that can give 180 days’ terms, with no relation to the quality or the marketability of the product they offer.
For the distributor, the explosive equation of high levels of stock associated with slow receivables has now reached its critical point. The GFC has only acted as a catalyst.
There can now be only one way forward for our companies if we wish to evolve to a profitable future:
_Drastically decrease inventories by reducing the number of SKUS we offer to the market and teach our retailers to perform the same exercise.
Selling Deep and Narrow instead of Shallow and Wide is a difficult assignment; but do we really need to market every size of every model of lure in 15 different colours, carry 20 sizes for every type of swivel and the same for hundreds of shapes of hooks? Moreover: Do retailers need to stock exactly the same item in three or four different brands, in different parts of the store?
On top of the fact that excess SKUS in a product line cause a permanent strain on cash flow, they are also a great misuse of energy. In times of global warming, our nature-related industry should be actively working to reduce the global ecocide caused by the surplus of consumer goods and the waste it generates.
Overcoming the obstacle that exists between the importer/distributor and the final consumer will be the path to follow in the upcoming years.
Although a reduction in the number of retailers in each market may create a temporary decrease in sales; market demand, if it stays constant, will redistribute to the remaining stores, increasing their health in the long run.
Retail stores will however either have to become attached to distribution groups or be forced in one way or another to rent-out their shelf space to the brands and the distributors. The companies that do not achieve this will ultimately fail as they will either be pushed out of the retail shops by their competitors or squeezed out of business by their banks.
Nevertheless, we must all be aware that these assertions do not include the further negative effects that may be caused by a general decrease in our market.
Assuming we overcome water pollution, anti-angling legislation, fish stock depletion and the decline in the overall number of recreational anglers, those of us who remain may come out stronger in the long run.