At a high level, there are three supply chain models for imports:

1. D2DC – Direct to Distribution Center
2. DTS – Direct to Store
3. DTC - Direct to Consumer

The dominant model is #1: D2DC. This is the primary method used by all top 5 importers in the United States, and the vast majority of the top 100 importers.

The D2DC method takes anywhere from 4-12 months to complete -from order placed to order received. This long lead time can negatively impacts sales as it's difficult to forecast so far in advance. The consequences can be extreme as we saw in the Spring when many importers had huge inventory misses. For example Target had to write down $1 billion dollars in inventory. The market was hot when they placed their orders in October, and not when they received their products in March. The longer it takes, the harder it is to forecast, which can also result in massive waste. For example, a lot of apparel takes 12 months, and a high percentage goes straight to landfill.

Model #2: DTS was popularized by Zara . The Spanish retailer developed an integrated network they call The Cube (Figure 1) that allowed them to leverage their store point of sale direct to designers, on to suppliers, 'the cube', air freight. This process allows ZARA SA to turn their entire store inventory every six weeks. This method led to massive sales gains and profits as they rarely have to deal with obsolete inventory or even markdowns. While Zara is the OG, they now have competition from companies such as H&M and Uniqlo. Here is a great article by Brandon Levey that explains the advantages of this model. In my view, this eventually will be the way of the future for most importers, not just fashion.

Model #3 is DTC. This method also takes approximately six weeks and has been in place on a small scale for years with very small importers (i.e. Alibaba resellers). More recently companies have been trying to figure out how to do this at scale - aka Amazon for the first mile. Some big retailers such as Williams-Sonoma, Inc. and AMERICAN EAGLE OUTFITTERS INC. are also starting to explore this method for select categories.

The bottom line? After 5 years of supply chain turmoil, and an impending economic downturn, I recommend that importers take a close look at models 2&3. Simply, the ability to buy their products in the first mile just as they sell them in the last mile. Digitization, process automation, and connected networks (DNA) to enable this are now achievable and affordable. For all three models, I believe embedding DNA into imports is the key to unlocking significantly reduced costs and exposure, as well as improved sales.