65% of US retailers increased domestic production following COVID-19 says research

Survey suggests that US manufacturing base is receiving substantial investment, as 24% of respondents said they had established domestic production for the first time

In a new research study from Blue Yonder and Coresight Research investigating retail localisation and agility, 65% of retailers expanded their local and domestic manufacturing sources during the COVID-19 pandemic with the aim of better supporting their supply chain.

Domestic manufacturing and sourcing has been increasingly popular for retailers as a result of COVID-19, with 41% of retailers expanding their domestic manufacturing, 24% establishing this capability for the first time and just 17% making no changes to their strategy around manufacturing and sourcing.

Another driver is the desire for better quality control. Thirty-four percent of respondents ranked this as their number one benefit they hope to achieve from a nearshoring strategy. This was followed by 23% aiming for shorter lead times, 22% desiring better inventory management, 14% wanting to match product to local demand, 6% to reduce risk, and just 2% for tariff avoidance.

Despite lockdowns and indefinite store closures, 45% of consumers still prefer to shop in-store, with just 18% preferring online shopping, and 37% enjoying a mix of the two. Due to this, retailers are planning on investing heavily in technology to keep their consumers safe, as well as improving their warehousing. In fact, 62% said their IT spending would include technology for “assortment, inventory, logistics, and warehousing”, 47% for “customer data analytics / loyalty programs” and 41% for “in-store tech for inventory and customer tracking”.

Nonetheless, as e-commerce grows as a percentage of their business, retailers are also investing in adding warehouse space (26%), automation technology or autonomous vehicles (29%) and flexible last-mile options like buy online, pickup in-store (BOPIS), curb-side pickup, contactless delivery (26%).

There was a disconnect, however, between what retailers believe consumers want and what seems to actually drive the consumer’s purchase decision – 68% of retailers felt their consumers valued products made in the US, whilst only 19% of consumers sought out clothing or footwear made in the US during the pandemic. Another focus for companies that seemed not to be high in consumer-consciousness was on sustainability, with 66% of retail respondents believing the brand’s environmental sustainability was important, and 60% considering their social impact. However, just 17% of consumers sought out environmentally friendly or sustainable clothing or footwear during COVID-19.

Other discrepancies also appeared in what consumers were looking for compared to what retailers believed they valued included promotional pricing and sales, where 64% of retailers believed this was important, but only 32% of customers looked out for this, and quick deliveries, which was a focus for 63% of companies, but just 22% of consumers.

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