Cross Border Commerce

Why It Pays To Think Globally In The Back-To-School Market

A broken link in the global supply chain can have a wide-reaching domino effect. The new Global Payments Architecture Report explores the payment difficulties that companies face in keeping the global supply chain well-oiled and running — especially over that last mile of payment. Dabbawalla Bags founder Susan Givens discusses the cash flow challenges of operating a seasonal back-to-school business and how to manage them.

Many parents partake in a certain ritual during the month of August: the back-to-school shopping rush.

It’s that time again, when parents hit the stores to get the school supplies — pencils, notebooks, binders, backpacks and more — their kids need for the upcoming school year. It’s also a lucrative season for retailers and global back-to-school supplies manufacturers. According to some recent estimates, the approximately 29 million U.S. households with school-age children are on track to spend $27.6 billion on back-to-school supplies in 2018.

For the companies that make back-to-school supplies, though, there’s often a limited window to reach these consumers. If a backpack is not available for purchase in time for the back-to-school season, it will likely remain unsold. Fewer parents are likely to be shopping for major school supplies after the school year begins, after all.

So, what are retailers and manufacturers to do?

Some, like backpack retailer Dabbawalla Bags, approach the seasonal challenge of back-to-school shopping by thinking globally and by delivering products to the international markets in which students return to school at different times of the year. In a recent interview with PYMNTS, Founder Susan Givens discussed both the inspiration behind her company and the lessons she has learned from running a year-round school supplies business.

“It’s a juggling game every single year,” Givens said.

An Early Education In Global Supply 

Dabbawalla Bags was inspired by Givens’ experience buying backpacks and lunch bags for her own preschool-aged child.

“He was blowing through [reusable] lunch bags like once a month,” she said. “As soon as he spilled his lunch or milk or yogurt, or stepped on it in the playground, it couldn’t be washed.”

This led her to create Dabbawalla Bags, its name paying homage to the lunchbox delivery system in India, 10 years ago. The company produces and sells its own machine-washable backpacks, lunch bags, harness bags and other school accessories.

Givens quickly learned a hard lesson about producing backpacks, though. Most consumers will shop for a back-to-school backpack at a certain time of year, she said, leaving retailers like Dabbawalla Bags with just a two-month window to cash in on the demand for such products. Come September, leftover inventory loses its value.

“When I launched, I was very naïve and did not recognize that it was a seasonal company,” Givens explained.

The solution was in looking for business in overseas markets, where back-to-school time frames often differ. Children return to the classroom in January or February in nations like Malaysia and Australia, for example, while in South Korea they head back in March.

“The whole world does not start [the school year] in September,” Givens said.

Turning to international markets to help make ends meet has paid off for Dabbawalla Bags. Roughly half the company’s sales are international, she added, with products being shipped to China, South Korea, Japan, Vietnam, Malaysia, Australia, New Zealand, the Middle East and Central America.

Keeping Manufacturers Afloat

Givens’ company isn’t alone in being impacted by back-to-school shopping’s seasonality. Its manufacturing partner, a family-owned factory in Taiwan, also deals with the inconsistencies and challenges of a seasonal business. That partner earns 90 percent of its revenue from Dabbawalla Bags, meaning it is often faced with a cash flow crunch during the slower periods of the year.

As such, the pair have formed an agreement to help each other stay afloat when demand for supplies decreases. Dabbawalla Bags makes cash advance loans to the supplier to help it float during the slower season, and the supplier extends terms to Dabbawalla Bags during the company’s busy season.

“It’s a very fortunate relationship, one built on trust, and we cover each other during our respective needs,” Givens said.

Surviving The Trade War

Dabbawalla Bags and its supplier may have agreements in place to help each other stay on stable ground, but a global trade war is threatening to destabilize a wide range of businesses. Companies in the back-to-school market are no exception.

Givens acknowledged that her company has struggled in certain markets more than others in recent years. Dabbawalla Bags has seen a downturn in European sales, for example, partly because the company’s products are manufactured in Taiwan, brought to the U.S., then sent to Europe. This arrangement means said products are subject to recently imposed tariffs.

With declining European sales, Givens said Dabbawalla Bags is now focused on expanding its presence in Asia. It will be focusing intently on China, where 70 percent of its international sales are made, and is considering adding a new factory in Vietnam to keep up with growing demand.

One of the factors fueling that demand is the company’s adherence to fair trade standards. Many Asian customers appreciate that the backpacks are not mass-produced, but individually sewn, Givens noted. Her manufacturing partners in Taiwan are also highly “progressive” in terms of wages, working conditions and maternity leave — all of which are key selling points.

“Those principals are appealing to young moms in Asia coming into a middle-class economy,” she said. “It’s really struck a chord with them, which is why I think we’ve [had] a lot of success as it is.”

Givens is hoping to keep that success going by bringing Dabbawalla Bags to new global markets. As students in these markets head back to school at different times throughout the calendar year, the company has learned that it pays to think globally.

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