In the News: Fashion Industry's Battle with Returns, US Economic Trends, and Key Automotive Recalls

Ever wondered how the fashion industry is battling the challenges of high return rates? Get ready to uncover the strategies brands like ASOS are employing to manage this issue, including their new policy charging frequent returners £3.95. We also lift the curtain on the dynamic relationship between consumer behavior and economic trends in the US, revealing how increased spending and personal income growth are reshaping the landscape, all while the entertainment sector, with Oasis's reunion concert, adds an unexpected twist to the economic narrative.

Shift gears as we navigate through the automotive and economic headlines, from Ford and Stellantis's significant vehicle recalls to California's groundbreaking regulations for autonomous vehicles. We'll dissect the widening US trade deficit and its intricate ties with China, offering insights into how these trade dynamics are unfolding. Plus, we'll explore the sweeping transition away from PFAS chemicals, shedding light on the challenges and opportunities this presents for various industries. Tune in for a podcast episode packed with critical updates and engaging discussions on pivotal topics shaping our global landscape.

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Chapters

• 0:05 Global Supply Chain and Economic Trends
• 9:41 Vehicle Recalls, Trade Deficit, PFAS Transition

Transcript

Tony Hines: 0:05

Hello, tony Hines. Here You're listening to the Chain Reaction Podcast all about supply chain advantage. Now, great episode coming your way in just a moment. So stick around, stay tuned, stay informed. This is the News Roundup All things impacting global supply chains this week. Chain Reaction up All things impacting global supply chains this week. Well, I read a news story in the past week I think it was in the Times newspaper in the UK.

Tony Hines: 0:31

And it was quite interesting because they were talking about the problems with suppliers. I think it was to River Island, and I think they were talking about the retrospective discounts that the retailer was claiming, and whereas previously they'd claimed 5% against suppliers, they were now claiming 10%. And it just struck me as I read it there's nothing new here, because retrospective discounts against suppliers in the clothing industry have been around for years and years and it's almost a given. And it wouldn't surprise me if the clothing suppliers were actually building in the 10% or the 5% retrospective discount into their pricing structure where they can. But actually it's quite difficult for them to do it because of the open book accounting system that they have in their agreements with the retail buyers, and so they're even pinning them down to their costing structures. They're taking a look at the costs and they're saying, well, ok, you've got that level of cost and we don't expect any variation or deviation from that figure that you've got in that open book accounting system. So that was one thing that struck me. And then I was thinking about returns in the fashion industry, and they're pretty hefty returns in the fashion industry, and they're pretty hefty, and some retailers report that some of their returns can be as high as 30%, but the average across the board in the clothing industry generally in the UK is about 27%, and that's pretty high, but it doesn't surprise me either. And then, of course, we read about ASOS, who have gone back to customers who are making the most returns. So if you're returning nine out of every 10 items that you buy, they've written a letter to those customers telling them that their accounts are being watched, they're under scrutiny and that's probably with a view to barring those customers at some stage in the future or charging them a differential fee for returning those goods. So they'll be built into the pricing structures. Asos confirmed that it's to charge customers £3.95 for returns. If they have returned too many goods, they have to retain at least £40 worth of the order to avoid the charge for the returned goods, and that's likely to be introduced next month. The charge is £3.95, and it will only apply to a small number of customers, according to ASOS, and already retailers are beginning to charge hefty sums for returned goods, so we'll have to keep watching how this develops. I think it'll be a very unwelcome change for customers, and especially as more goods have switched to online, and I think the article I read in the Times. I think that was talking about how people are moving back to the high streets. For that very reason streets. For that very reason Consumer spending in the United States has increased by half a percent in July and the PCE price index has risen by 0.2%, which puts it at 2.5% year-on-year Core PCE inflation gains 0.2% up 2.6% year-on-year Personal incomes climbing 0.3%, and the saving rate has fallen to 2.9%.

Tony Hines: 3:57

So this is good news for the US economy, as spending is up, suggesting that the economy is firmer than many expected in the third quarter, and it's likely to lead to a half a percent cut in interest rates from the Fed Reserve next month.

Tony Hines: 4:14

The unemployment rate in the United States is nearly at a three-year high of 4.3% in July, and that gave many cause for concern that there'd be a recession. But the economy is looking stronger, more resilient than perhaps some expected it to be. Consumer spending accounts for about two-thirds of the US economic activity, and that went up by half a percent last month, and so that's bolstered the economy. So it just goes to show you I mean really what's going to happen in economies is money's going to circulate, no good holding onto it. It has to go round and round and that makes the wheels of industry turn and, of course, keeps economic growth. The saving rate has dropped to 2.9% and that's the lowest since June 2022. It was 3.1% in June, but it's only one month, so we can't read too much into that. Many argue that consumers were holding back because of cost of living expenses and they couldn't maintain savings because they were spending more of their income. Over the past week, the dollar was lower against many currencies, but it closed on.

Tony Hines: 5:22

Friday slightly higher than expected on the week. In the UK this week there was all kinds of news that we'll just do a quick roundup of. I mean, the big news was, strangely enough, Oasis getting back together. And you might wonder why I'm including the Oasis concert on this supply chain advantage news roundup. Well, because it's so important to the economy, in a sense, because any event that is so popular and has lots of consumers clamouring for tickets at several concerts in the next year is likely to drive up economic growth and, strange as it may seem, entertainment is one area that can really drive it upwards fast, and Oasis have returned to the top of the UK charts for the first time in 30 years with Definitely. Maybe. There have been some complaints about the websites and the ticketing for the Oasis concerts, and it's all to do with dynamic pricing. Dynamic pricing is a pricing model and it's all to do with dynamic pricing. Dynamic pricing is a pricing model and it's got a built-in algorithm. So when demand goes up, the prices go up, and some 140 pound tickets have been on sale for thousands of pounds. So this is going to rumble on and cause a bit of trouble for the concert organisers, I think. So maybe, maybe, maybe we'll see Oasis back together, with lots of supply chains linked together, to put the logistics together for that tour.

Tony Hines: 6:57

Now the new Labour government in the United Kingdom is trailering lots of bad news to come. There's talk about higher taxes. They've already taken away the winter fuel allowance from pensioners and at the same time, Ofgem, the regulator for gas and electricity markets in the UK, has raised the price cap from October by 10%. So another blow for pensioners and everybody else, and lots of other unwelcome signs that the UK is in for tough times. And, of course, when you're in new government, what do you do? Well, you blame the old one for quite a long time, until you can't get away with it anymore. The new Prime Minister has already said that the budget on the 30th of October in the United Kingdom will be very painful. So there it is. Of course, none of this was mentioned in the run-up to the election that it would be like this. So it's what politicians do, isn't it? Tell you one thing, get your vote and do something else. So perhaps that's something for the United States to consider in their forthcoming elections.

Tony Hines: 8:06

There was also talk of a four-day week, a four-day working week, that is, in the United Kingdom when the government plans to increase flexible working. But many are quite concerned about the move to any shortening of the working week. And, of course, if you think about, even if you do the same hours in four days, are you as productive? And one of the big challenges for the UK economy is productivity, of course. So it'll be interesting to see how this actually plays out and whether this is supported widely or whether it is in fact rejected.

Tony Hines: 8:39

And it does place quite some restrictions on companies, especially smaller businesses, because they struggle to recruit people in the first place quite often. And it will be a reorganisation of working hours. And what do you do in occupations like retail, where you've got effectively a seven-day week? Well, you'll have to take on more staff, I suppose, to cover the four days that the other staff won't be working. I don't know precisely how this will all work out, but it seems an unnecessary move at this particular point to push this through. And workers' rights are taking some more prominence under the new government. I mean, some of this is actually good, but whether the four-day week is a good move is another matter. Think back to the 1970s when we had the three-day week, which was enforced because of power cuts, electricity. Maybe we'll head back there. Who knows? Does history repeat itself? Well, it could do. Chaining Reaction.

Tony Hines: 9:41

The National Highway Traffic Safety Administration, the NHTSA, said on Saturday that Ford will have to recall 90,736 vehicles as engine intake valves in those vehicles may break while driving. This recall impacts 2021-22 Bronco F-150, edge Explorer, lincoln Nautilus and Lincoln Aviator vehicles equipped with either 2.7 litre or 3 litre nano EcoBoost engines. Dealers will need to perform an engine cycle test and replace the engine as necessary, free of charge, according to the regulators. Stellantis also has some significant recall announcements this week on its trucks ram pickup trucks one and a half million of them worldwide and that's due to a software issue that can disable the electronic stability control system. It affects certain 2019 and 2021 to 2024 models. Chrysler vehicles approximately 1.2 million in the US are being recalled due to a software malfunction in the anti-lock braking system, which can increase the risk of a crash. Jeep vehicles Stellantis is also recalling 32,863 Jeep Gladiator and Wrangler vehicles due to potential internal short circuits of the instrument panel cluster. And then there are airbag issues, which involves another 332,000 vehicles, including the Alfa Romeo Guglia and Stelvio, fiat 500e and 500X and the Jeep Renegade due to a seatbelt connector issue. This is all part of Stellantis' ongoing efforts to address safety concerns and ensure vehicle reliability.

Tony Hines: 11:32

The California Department of Motor Vehicles said on Friday that they'd issued a draft regulation on the operation of autonomous vehicles on highways, and this is securing the way to incorporate self-driving trucks on long-haul deliveries. The agency said it would initially require safety drivers for both light and heavy duty operations. The draft regulations come at a time when autonomous driving technology is facing increasing scrutiny from safety regulators over multiple cases of crashes and accidents in vehicles where the technology is used. A Waymo car struck a cyclist in the city intersection earlier in the year and San Francisco saw a serious accident last year which led to the removal of about 1,000 cars from the road. Autonomous trucks have had some success with big rigs along pre-planned routes, but as the routes become more complex, there is some concern by regulators and, of course, some community groups. Vw announced this week that its cars will have chat GPT integration by 2025, but it still has labour relation problems and wage negotiations with no resolution as yet.

Tony Hines: 13:04

The US trade deficit has widened to 78.8 billion in July. That's about 7.9% increase. Imports have jumped 2.3% and exports just 0.4%. It's the highest level in more than two years In July, as businesses likely begin to import more in anticipation of the Christmas period and, because of the higher tariffs on goods, trade, could be a drag on economic growth. It will likely put pressure on the gross domestic product in the third quarter and GDP growth is likely to remain stagnant or fall. But it's not really a cause for concern yet because we have to take the year on year figures and we'll have to see how it plays out.

Tony Hines: 13:52

The trade gap increased by 7.9% and that's the widest since May 2022, according to the Commerce Department Bureau of Economic Analysis, the June figure was 73.1 billion and the July figure 79 billion. Imports from China, which include petroleum, have increased 2.8 billion and there's also been a rise in imports of non-monetary gold. The deficit with China has increased 4.9 billion to 27.2 billion US dollars and exports to China fell by 1 billion dollars, with imports advancing 3.9 billion. The US has had a difficult time with China over the past few months and it's placed tariffs on lots of imports coming from China to try and dampen demand Chain reaction.

Tony Hines: 14:45

Well, you will have heard me talk about PFAS those forever chemicals on the Chain Reaction podcast quite a few times in the past year or two.

Tony Hines: 14:54

And those are the chemicals that don't go away. They're in our bodies, they're in the rivers, they're in animals, we ingest them and it takes thousands of years before they will actually fade away. So they affect human life, animal life and, of course, the whole ecosystem the bad for the planet. So let's take a look at PFAS and what you need to know. Per and polyfluoroalkyl substances, known as PFAS, are synthetic chemicals known for their resistance to heat, water and oil, often called forever chemicals. They persist in the environment and have raised significant health and environmental concerns. In response to growing regulatory pressures and environmental concerns, companies are beginning to phase out PFAS. Notably, 3m has announced plans to exit PFAS manufacturing by the end of 2025. This move is part of a broader strategy to innovate and adapt to new regulatory landscapes and stakeholder expectations. So what's the impact on supply chains? Well, the transition away from PFAS is expected to have several impacts on supply chains Increased cost, developing and implementing alternative materials, supply chain disruptions. Industries that heavily rely on PFAS may face some disruption as they adapt to new materials and regulatory compliance. Companies will need to ensure compliance with new regulations, which may require changes in manufacturing processes and supply chain logistics. So which industries is it going to affect mainly? Well, it will significantly affect textiles. It's used in water and stain resistant fabrics. Electronics, essential in the production of semiconductors and other components, automotive and aerospace. It's used in various parts and coatings in medical devices, utilised for their non-reactive properties and in packaging employed in food packaging for its grease resistant properties.

Tony Hines: 16:54

So what can you do to prefer for a world without PFAS? Well, you need to follow the following steps Do your homework, do some research and development, invest in R&D to find and test alternative materials when it comes to supply chains, have an audit. Conduct audits to identify where PFAS are used and explore the alternatives for your particular supply chain. And keep an eye on the regulations. Stay informed about the regulatory changes and ensure compliance. And finally always a good move collaborate. Work with industry partners and stakeholders to share knowledge and resources.

Tony Hines: 17:32

The timescale for the transition away from PFAS will not happen overnight. Regulatory proposals include grace periods, some extending over a decade, to allow industries time to adapt. However, proactive companies are already beginning to phase out PFAS and develop alternatives. Conclusion the move away from PFAS represents a significant shift for many industries. While a transition will come with challenges, it also offers opportunities for innovation and sustainability by investing in research, auditing supply chains and staying ahead of regulatory changes, organizations can navigate this change effectively and contribute to a better environment. And don't forget, if you want to know more about PFAS in general terms, I have a whole episode of the Chain Reaction Podcast devoted to PFAS, which you can look up and listen to listen to Now. A barrel of oil this week will cost you just $71.05, and that's down $4.41 on the week.

Tony Hines: 18:43

There was an announcement from Toyota this week that it will cut its electric car production by half. It was expected to produce 1.5 million EV cars in 2026. Europe's auto industry could face 15 billion euro or 17.4 billion dollar fines for carbon emissions due to slowing demand for EVs. That's according to the Renault CEO, luca De Meo. Automakers are facing tough EU CO2 targets in 2025, as the cap on average emissions from new vehicle sales falls to 94 grams per kilometre from 116 grams per kilometre in 2024. De Meo said if electric vehicles remain at today's level, the EU industry may have to pay 15 billion euros in fines or give up production of more than 2.5 million vehicles. A competition of markets authority in the United Kingdom has said that Google is potentially harming thousands of British publishers and advertisers by using its dominant position in the market. The accusation is that Google is using its dominance to favour its own services, preventing rivals from competing.

Tony Hines: 20:06

So this is market power of a very large tech company squeezing out its competitors, many of whom are its customers. Too Many businesses are able to keep their digital content free or cheaper by using online advertising to generate revenue, and advertisers on the websites reach millions, assisting the buying and selling of goods and services. And it's so important for publishers and advertisers on the websites reach millions, assisting the buying and selling of goods and services. And it's so important for publishers and advertisers who enable the free content to benefit from the effective competition. So this is about fairness. It's about having a fair deal when buying or selling digital space. The EU has already ordered the group to sell part of its advertising business after concluding it was harming competition, and the US Justice Department is also conducting an investigation. Google sells ad space and provides technology enabling advertisers to find publishers to sell to, and it collects data from users, which helps advertisers sell targeted ads. It's one of the most lucrative sources of revenue it generates about $200 billion globally. Google, of course, said it disagreed with the CMA ruling because the case rested on what it called flawed interpretations of the ad tech sector In the United Kingdom.

Tony Hines: 21:25

Brexit lingers on. The new rules on importations from the EU were due to be introduced in July, but they're likely to be delayed now until 2025. But there's still trouble from many of the things that happened in relation to Brexit, and one of the things I noticed this week was in the statistics. In 2019, the UK exports to the EU were valued at approximately £170 billion. By 2023, the figure dropped to around £151 billion, representing an 11% decrease in real terms, and it's likely to get worse before it gets any better. It's the smaller businesses who are badly affected, where they used to do a reasonable amount of trade with European partners exporting or importing goods. Their burden of cost has risen substantially since Brexit and they're blaming politicians for not thinking things through. So there we are Costs go up, self-inflicted wound, and, of course, the profits go down.

Tony Hines: 22:34

Well, that's it for this week. I hope you've enjoyed the News Roundup and I hope you've learned something by listening. I'll be back next week with another News Roundup. In the meantime, plenty of episodes for you to stop by and have a listen to, and we've got one on building resilience and diversification strategies out right now and you might want to drop by and pick that up. So there's a lot of stuff coming your way in the next few weeks. I'm sure you'll be interested and if you like the Change your Action podcast, don't forget to subscribe and be the first to know. You'll get a direct email from the platform on which you've subscribed and I'll tell you when the next episode is out. So I'm tony hines. I'm signing off. I'll see you next time. Bye for now. Thank you.