Li & Fung proves nimble

Hong Kong-listed global supply chain management company Li & Fung has proved nimble weathering one of the most challenging retail environments for many years.
Yet despite an overall increase in trading volume, its revenue for the year ended December 31 fell 2.4 per cent to US$18.8 billion for the year.
Mainly servicing US and EU brands, department stores, hypermarkets, specialty stores, catalogue-led companies and eCommerce sites, the family-led company reorganised during the year with the aim of delivering innovation and product differentiation while focusing on client solutions.
Growth was strong in its e-logistics division, thanks to the eCommerce boom, and with an unprecedented drop in ocean freight rates, its logistics network grew in both turnover and unit volume.
Adding to the difficulties of the year were political uncertainties in Europe and Asia. Meanwhile, increased competition from fast-fashion, off-price and eCommerce players continue to challenge retail customers, resulting in margin pressure across the board.
Turnover eased by 2 per cent year-on-year to $18.8 billion, largely because of soft macroeconomic conditions and the challenging retail environment.
Turnover in Asia decreased by 2.5 per cent to $2 billion, with distribution being hit by the slowdown in China, geopolitical issues in Southeast Asia and Asian currencies depreciating against the US dollar.
However, Li & Fung’s logistics network continued to grow in Asia, largely thanks to support by new contracts and expansion, particularly into Southeast Asia.
Across its trading network, the company served a diversified group of customers including brands, department stores, specialty stores, clubs, hypermarkets and pure-play eCommerce ventures. The network covers more than 40 economies, and the top three sourcing countries continue to be China (more than half of products), Vietnam and Bangladesh.
The company’s entrance into Indonesia, Japan and Korea also began to generate positive contribution, and it launched a regional distribution centre in Singapore.
“Globally, our industry is going through an unprecedented structural change, led by the changing conditions at retail,” says group CEO Spencer Fung, the great-grandson of the company’s founder.
“Retail is becoming more competitive as more eCommerce players enter the marketplace, and global competition overall is being augmented by cloud computing, mobile connectivity and cross-border logistics.”
He says consumer preferences and buying patterns are also changing, led by millennials and the newer Generation Z.
“The way these consumers discover, socialise and finally make a purchase decision has had immense consequences to brand loyalty, to sustainability and to the sharing economy… the speed of change is only increasing as we look ahead.”
Li & Fung is partnering with companies that offer technology and innovation to create products “with more excitement”, and has simplified its structure and business to improve speed and flexibility.
“With fewer acquisitions in 2015 compared to previous years, we have been very focussed on growing organically and increasing our market share with our existing customer base,” says Fung.
“All indications point toward a challenging 2016, but I am confident we will weather these changes as we build for the future.”

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