Top 3 Themes You Need to Know and Act on From MAGIC's February 2018 Conference

In the fashion industry, MAGIC is the most comprehensive biannual marketplace event, where retailers meet twice a year. MAGIC is tailor made for connections, where subject-matter experts and industry players exchange ideas and create a clear future path.

Our CohnReznick Consumer Products partners attended the MAGIC Conference and wanted to share with you their top three insights from the event. We look forward to seeing you at the next MAGIC conference in February 2019!

1. Opportunities opening for financing- As the direct-to-consumer ecommerce business is becoming a dominating force in the industry, commercial bankers are developing financing options for direct-to-consumer and ecommerce companies. Traditionally these companies have had a tough time obtaining traditional commercial bank financing, because they are asset light and lack traditional forms of collateral. Some of the commercial banks we spoke to are focused on providing financing options to this fast-growing marketplace - most notably for companies with private equity involvement in their ownership structures.

2. Wayfair Ruling and Implications- Direct-to-consumer and ecommerce companies are relevantly unware and unconcerned about the impact of the recent Wayfair ruling, as they don’t believe sales tax is a significant factor in a consumer’s decision to purchase online.  However, many companies aren’t prepared for the compliance requirements expected to be brought upon them as more states look to require them to collect and remit sales tax for online sales.  Many believe that the additional compliance burden and related costs unfairly impact smaller companies that will need to invest in resources to ensure compliance.

3. Tariffs – Tariffs if levied can certainly impact holiday retail season. To avoid potential tariffs, certain companies attending the conference were either trying to bring goods in early before their items were hit with tariffs as well as exploring alternative sources in their supply chain as a long-term solution. For example, some companies have begun outlining, where cost savings could be implemented to offset the high tariffs and have begun discussions with their customers about passing along the cost or splitting the costs. Many companies also have begun lobbying their local politicians and even have gone to Capitol Hill to protest the imposing of tariffs as they see their business as vulnerable given the already difficult retail environment. Per Bicycle Retailer and Industry News, while there has been much negative press regarding the tariffs when you look closely the RMB has fallen 8% in value which makes a 10% tariff a manageable 2% impact on cost of goods.¹