Logistics
Fat Face’s products are all sourced and manufactured in a number of Far Eastern countries, including China, India, Bangladesh, Pakistan and Cambodia.
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The distribution centre in the UK is in Havant, Hampshire. This is not far away from their head office in Portsmouth.
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Speed to market for Canada: Moving goods by ship is the most cost effective however it is not the most efficient in terms of speed to market. Air freight would be more efficient however too costly for a high-street brand and detrimental to the margin potential. Therefor a greater part of shipments from the suppliers’ factories could go directly to distribution centres in Canadian markets, that support stores in their geographic vicinity independently of national borders. This benefits Fat Face’s plans to expand in the US
Cost - A potential reason for failure could be not calculating the correct currency conversion rates.
- Transportation costs: Moving goods by ship is the most cost effective, having a distribution centre in Canada would mean the distance travelled is again more cost effective.
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- Internationalising distribution centers: Additional overhead costs must be weighed out against the shorter distance traveled from the suppliers factories to a Canadian distribution centre as well as the various duty tax rates to see if it is profitable.
- This involves re-ticketing the labels. The requirement that Canadian label information be provided in English and French creates extra costs for U.K exporters.
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- The global average import duty rate for clothing into Canada is 16.6%. - DutyTaxCalculator, RetailCouncilofCanada
The additional costs of transportation, DC and import duty, means prices would have to be increased. The impact of this must be considered as consumers are aware of price increase resulting in a bad reputation for the retailer.
Import Country
Sales Tax in Canada
Sales Tax in UK
Duty Rate of imported clothing into Canada
Bangladesh
5%
20%
25%
China
5%
20%
16%
India
5%
20%
10%
United Kingdom
5%
20%
12%