The document discusses strategies for increasing margins on non-consumable products at a confidential retailer. It focuses on a global sourcing strategy to source these products from various low-cost locations around the world like China, Central America, Indonesia, Vietnam, Pakistan/India, and emerging markets. Key details provided on sourcing from China include labor costs and specialties of different regions. Central America is noted as a source for chemicals, consumer goods, paper products, and textiles. Specific commodity exports from Indonesia are also outlined.

1. Confidential Retailer
• The move to increase margins on non-consumables is
paramount given the current state of the business and
the movement of increased business in consumables at
lower margins.
• The following slides focus on a Global Sourcing strategy
to address non-consumable product categories sourced
in worldwide locations to drive higher margin dollars.
• Unknown variables include current sourcing structure
at Confidential Retailer, % penetration of Globally
Sourced Products, sales and margin goals.
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Submitted by Nora Gomez

2. Brazil Southern
Non-Food Global Sourcing
5% China
4%
Central America
10%
Pakistan/India
5%
Southeast Asia- Central China
Indonesia 38%
8%
Vietnam
7%
Northern China
Western China
18%
5%
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3. The China Factor
• Southern China (primarily Hong Kong and Guangdong Province): This area specializes in
production for goods that have sophisticated design. The factories with the most experience are
usually joint ventures with Hong Kong and Taiwanese business partners. Labor costs in this area are
the highest and production in Southern China focused on high-value products. This region is lowest
in importance for Confidential Retailer
• Central China (Shanghai): With a population of over 230 million people within the four-hour
driving radius of Shanghai, its strength is in labor. Local Chinese entrepreneurs developed most of
the factories in this central coastal area and it is easier to negotiate production rates and varying
quantities with these factories. In addition, cost of labor is approximately 15% cheaper than in
Southern China. Core competencies in this region are focused on apparel, home
textiles, glass, ceramics, home decoratives and toys. The port of Shanghai further makes this an
excellent hub for sourcing. This region is highest in importance for Confidential Retailer
• Northern China (Qingdao and neighboring areas of Beijing): Joint venture factories in northern
China are mainly Korean influenced. Many vendors are also run by the local Chinese
entrepreneurs. Labor and infrastructure costs are approximately 25% cheaper than Southern China
with strong expertise in metal, apparel, home textiles, ceramics and glass. This region is second
highest in importance to Confidential Retailer due only to its development of factory base.
• Western China (Chengdu): This area is similar to the Shanghai region of 20-25 years ago. Workers
from Szechuan returned to this region and brought back production expertise to start their own
businesses. This is an emerging opportunity for Confidential Retailer
• Hard Goods sourced from China are mostly not subject to quotas of antidumping by the U.S., so its
importance in the production of hard goods was not insignificant.
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4. Beyond China…Central America
• Central America-Honduras (San Pedro Sula-the industrial
capital), Guatemala, Costa Rica, Nicaragua, Dominican Republic, El
Salvador
• Chemicals-
Pharmaceuticals, fertilizers, cosmetics, plastics, rubber, polymers, medicati
ons, insecticides. Costa Rica is the US leading Central America export
market in the sector accounting for 41% of total US chemical exports.
Under the Caribbean Basin Initiative (CBI) and the Caribbean Basin Trade
Partnership Act (CBTPA), all Central American chemicals exports will
continue to receive duty free treatment.
• Consumer Goods-Toys, furniture, appliances, various recreational and
sporting goods. Costa Rica is the US leading export market in this sector
accounting for 30%.
• Paper and Paper Products-Costa Rica and El Salvador are the leading US
export market in this sector accounting for 35%.
• Textiles and Apparel-Guatemala, El Salvador, Honduras, Costa Rica and
the Dominican Republic are Submitted by Nora Gomezexport market in this sector 4
the leading US

5. Beyond China…Indonesia
• Cocoa-The third largest producer of cocoa in the world after Ghana and the Ivory
Coast. The Island of Sulwesi accounts for 50% of cocoa exports yielding
$700m/year.
• Coffee-Harvests 500,000 tons of beans per year, selling 65% overseas. Fifty
percent of these beans are exported through the Lampung port in Sumatra.
• Furniture-Key areas include Surabaya for garden furniture, Jepora for wood based
and teak based furniture and Cirebon and West Java for rattan.
• Palm Oil-Produced from the Palm plant in Sumatra, Central Kalimantan and North
Sulawesi.
• Textiles, Apparel and Textile Products-Produced in Java, Banten, Jakarta Special
Province.
• Stationary Non-Paper
• Spices-Black and White Pepper, Cinnamon from Jambi and West Sumatra, Tobacco
from North Sumatra and Java, and Nutmeg from Maluku to name only a few.
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6. Beyond China…
• Vietnam-Key supplier of wood, glass, shoes, gardening
items, seasonal products.
• Southeast Asia-Key market for wood and furniture.
• Pakistan and India-Key markets for Apparel, home textiles and
handicraft items made of metal. These areas are limited by their
ability to produce for the mass market for most of the product
categories for hard home goods.
• Brazil and Mexico-Key markets for food and
beverage, chemicals, electronics, furniture and
furnishings, gifts, hardware lighting, rubber and plastics, tools and
toys, textiles and leather, office and school supplies, paper and
personal care items.
• Emerging parts of the world-Poland, Czech Republic and Russia
mainly driven by lower labor costs, these areas are still
underdeveloped but assuredly emerging as a key part of a global
sourcing strategic plan.
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7. Differentiating Factors of Successful Retailers
Emerging Customer Needs
and Product Opportunities
Consumer testing that
Marketing must showcase
reduces risk of product
how the offering is different
innovation
and fundamental to the
customer’s lifestyle.
Inventory Management
Product Development and
Capabilities that can shift
Sourcing that balances
products to the places of
savings , quality and
greater demand and
commercial appeal
maximizes prices.
Tight Relationships with
Sourcing Vendors that
enable manufacturing to
scale up quickly and
quality to be maintained.
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8. Agent/Trading Company/Factory Direct
Trading Company
Agent Factory Direct
• Often third and fourth party
• Direct Factory Relationships • Direct Factory Relationships
relationships
• Large Retail Customer Base • Avoid third party loads
• Smaller Customer Base
• Package Deals • Package deals
• % Load
• % Load • Products
• Products
• Products • Certifications
• Certifications
• Certifications • Factory Profiles
• Factory Profiles
• Factory Profiles • Quality Control
• Quality Control
• Quality Control • Services and Support
• Services and Support
• Services and Support • Government Support
• Trading Services
• Government Support
• Represents Factories
• Represents Customer
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