NEW YORK – Gold Medal International has millions of dollars in socks in its North Carolina warehouse that it cannot ship to stores.
The reason? The 66-year-old family circle, the sock manufacturer cannot download enough insurance credits to cover potential losses if retailers cannot afford the products they have ordered.
Without this warranty, the gold medal, and thousands of other suppliers facing a similar problem, would be at the mercy of unpaid bills, but not shipping products to stores means wasting giant inventory sales and amortizations.The challenge will only get worse if stores can do so.they don’t shop on their shelves and shoppers can’t find what they need as the critical holiday season approaches.
“They gave me the goods, I made them. I don’t have a liquidity problem,” said Paul Rotstein, president of the New York-based gold medal for 30 years.”But if I can’t ship orders worth $12 million, guess what?I have a big liquidity problem.”
Prior to COVID-19, vendors relied on advertising credit insurance to download the warranty they needed to design products, place orders, and ship to retailers.
Now that the pandemic is creating so much economic uncertainty, many stores are in trouble and credit insurers are unwilling to take the risk.In fact, many insurers will only provide coverage on orders from large retail stores and others that have been facing each other.to the pandemic, leaving in shame a lot of small and medium-sized non-essential shops that are still looking to make their way.Months of closures that have decimated their business.
Commercial credit insurance provides money for at least $600 billion in annual sales in the United States, according to Robert Litan, an economist and lawyer, who published a report in early July on the factor for Econ One, an economic consulting firm.come with the estimated loss of $50 billion in orders that suppliers will be too reluctant to ship, Litan estimates.
Without the protection network, those suppliers, 60% of whom have revenues of $20 million or less, according to Litan, are beginning to make difficult choices about whether to improve their existing production grades or reduce orders to minimize risk, according to experts.. Training
Rotstein says his credit insurer hasn’t disposed of his primary store account policy like Amazon or Dollar General, but has reduced or eliminated the policy for maternal and dad retail outlets and many non-essential chains he has refused to name.
“Credit insurance lubricates small businesses, is the cornerstone,” Litan said, noting that credit insurance is a prerequisite for companies to have lines of credit with banks to continue their operations and avoid additional disruptions to their home networks.
Linda Wolff, owner of CPW, a women’s clothing store that has been operating for 30 years on Manhattan’s Upper West Side, said her fashion providers were looking for her and other consumers at the store to pay in advance or pay with a qualifying check, rather than paying them at the front desk.your orders. With a drop of more than 60% in the business since it reopened in June, it fears that it will not be able to track invoices and buy enough products in its store.
“You have to be hoping to make cash in order to pay for it,” said Wolff, who is concerned about the survival of his business.He said he’d only won a few autumn pieces and he’s waiting to see what the shipments will be like.the next few weeks.
James Daly, CEO of credit insurer Euler Hermes North American, said his company had to cut policy across all sectors, adding retailers, up to 15%. He pointed out that the retail sector is in the “eye of the storm”, does not call the corporations has rejected the policy. He says his business will remain cautious for at least six to nine months.
According to its report, Litan estimates that US-based ad credit insurers are in the middle of the world.But it’s not the first time They have already reduced the policy by approximately 14% in all industries this year.-19 infection rates.
Industry leaders say the pressure on industry credits is much greater than what happened to the Great Recession.
“It’s an economic slowdown, but it’s not a slowdown that had the same degrees of uncertainty and triggered this (credit) industry crisis,” said Steve Lamar, CEO and chairman of the American Apparel business group.
Lamar said he heard members in May of rumors that credit insurers were retiring, leading the industry group, as well as several other industry organizations, to send a series of letters to the Treasury Department and the Federal Reserve to advocate for protection.net for credit insurance companies. This is what several European countries such as the UK and Germany have done.
Meanwhile, vendors keep their own devices.
Jay Foreman, CEO of Basic Fun, a toy manufacturer in Boca Raton, Florida, says he has $1.5 million in unpaid retail expenses that his credit insurer would possibly not cover.Many invoices are between 90 and 100 days late. This accounts for about 1% of its annual sales.
The company, known for its Uncle Milton and Care Bears toys, worked well during the pandemic, allowing Foreman to recover 14 of the 22 employees who were on leave and plan to repair the salaries of its staff whose salaries have been reduced by 25%.
But now, falling credit insurance is hampering its growth.Before the pandemic, it had diversified its consumers into stores, but now it will probably do so in the big players.
Christa Pitts, founder and CO-CEO of The Lumistella Company, which produces toys, books and other products under the brands Elf on the Shelf and Elf Pets, says her retail orders were 100 percent covered before the pandemic.Now only 50% are covered, forcing her to reconsider who she will sell to.
“To what extent can I broadcast to a sufficient number of stores in all areas, mixing what I know is something and recognizing that not everyone will be able to do it?” She. “We are putting our retail economy in a position of attrition.”
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