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Principles of reshoring development in luxury goods sector1


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Figure 1

Push and pull factors determining back-reshoring and near-reshoring decisions in the luxury goods industry.Source: Own elaboration.
Push and pull factors determining back-reshoring and near-reshoring decisions in the luxury goods industry.Source: Own elaboration.

Reshoring premises in the luxury sector in the respective luxury pyramid tiers

Tier Luxury fashion Luxury cars Luxury jewelry
Absolute Luxury – home production base as the core value. Offshoring activities kept secret, reshoring communicated only when offshore production is publicly disclosed and condemned. Luxury – home production base as one of the core values. No need to reshore: assembly at brand heritage country, control over SC in producer's hands. Producer is the brand owner Bringing the mining of gemstones, silver, gold, etc. home not possible. Local design and production add value mostly to niche – local brands.
Aspirational Bringing production home (back-reshoring) adds COO value; near-reshoring regains control over SC, makes SC more flexible and consumer demand responsive Defragmented SC; production dispersed all over the world, many suppliers concentrated around assemblies. Assemblies placed in lower-labor-cost regions. Some finishing activities, aimed at changing COO into luxury home base, visible. Production place not regarded as very important, offshored mainly to Far East countries. The brand owners are mostly distributors, to a much-lesser extent, producers themselves. Some early signs of near-reshoring visible, mainly due to quality problems. The consumers’ attention is mainly on the gems’ origin, although SC sustainability plays an important role.
Accessible Reshoring drivers are mostly push factors: the method of regaining control over the SC, diminish the risk of international SC, transport costs, and time etc. Brand's COO is usually outside the traditional luxury home base; Far East production location accepted as a price concession for accessible luxury More often near-reshoring than back-reshoring drivers both push and pull factors: the method of tightening control over the SC, diminish the risk of international transport costs Reshoring drivers mostly are push factors; the method of regaining control over the SC, diminish the risk of international SC, transport costs and time, more flexible and consumer demand–responsive SC

Examples of back-reshoring and near-reshoring

Company name Company country Host country Reshoring (back-/near-reshoring) country Reshoring (back-/near-reshoring) year Push factors (drivers) Pull factors (drivers) Source
Manufacture of luxury wearing apparel

Burberry United Kingdom China United Kingdom 2015–2018

Control over the SC

Little attractiveness of host countries

“Made-in” effect

Risk of brand counterfeiting

UK Investor Magazine[2016], The Businessof Fashion [2016], The Guardian[2015]
Paul Smith United Kingdom China, Far East United Kingdom 2014–2015

“Made-in” effect

Brand value

The Weekend Australia [2014]
Piquadro Italy China Italy 2014–2017

Production cost increase in offshore locations

Delivery time and logistics costs

Organizational flexibility

Poor quality of offshore production

Proximity to customers

- “Made-in” effect Crivelli [2016a]International Leather Maker[2017]
Prada Italy China Italy, CEE 2014–2015

Delivery time

Organizational flexibility

Control in their SC

- “Made-in” effect Corriere Della Sera[2014], The Prada Group [2017]
Benetton Italy Croatia Italy 2015–2016

Product/process innovation

Loyalty to the home country

- “Made-in” effect Ganz [2016], Business Insider[2017]
Falconeri Italy Romania Italy 2015 - Poor quality of offshored production - “Made-in” effect Crivelli [2016b]

Jewelry, watches, and accessories

The Forever Companies Jewelry Group US China US 2015

Mistakes in offshore location

Poor quality of offshore production

Unattractiveness of the offshore market

The occasional catastrophes

- “Made-in” effect Forever Companies [2015]
Mauboussin France India France 2013–2016 (France and Italy)

Delivery time and logistics costs

Poor quality of offshore production

Proximity to customers

Unattractiveness of the offshore market

“Made-in” effect/

Sustainability/corporatesocial responsibility

Le Point [2016], Dromard [2016]

Automotive industry

Tesla Motors US Japan US 2017

Proximity to market

Automation/technology

Ecosystem synergies

Manufacturing/engineering joint innovation (R&D)

- Image/brand Galas [2014]
McLaren United Kingdom Austria United Kingdom 2017, 2018

Proximity to market

Technological innovation kept at home factory

- Image/brand Peters [2018]