Rising raw material and labor costs overseas could put a crimp in the nation’s retail recovery.
That fear emerged last week at the Emanuel Weintraub Associates seminar, which was themed “You’ve cut costs. Now grow the top line” but was sparked by a flurry of comments about potential rising retail prices based on cotton shortages and increased labor costs out of China.
“Price increases are coming and, at this point in time, they will be difficult to deal with,” said Andrew Cohen, chief executive officer of Nine West Inc. and a panelist at the seminar, who noted Nine West is moving some production out of China into lower-cost countries such as Bangladesh and Sri Lanka.
“We are feeling a lot of pressure on raw materials, particularly wool,” said James Ammeen, chairman of Haspel Worldwide. “There is a lot of talk about labor, but we are able to resist that.”
“The cotton pressure is real,” added Bob Skinner, ceo of Smart Apparel. “Cost increases from the wholesaler to the retailer are a real subject. It’s going on as we speak.”
Jill Granoff, ceo of Kenneth Cole Productions Inc., said, “We are not seeing any capacity issue in China,” though alternative sources of supply are being examined, including Bangladesh and India.
“It’s a double whammy,” Emanuel Weintraub, president and ceo of the consulting firm that bears his name, said after the seminar, which was attended by 100 executives, two thirds at the president level or higher.
Companies can generally absorb rising labor costs, which represent 13 to 15 percent of the total price of imports, Weintraub said. However, raw materials could be 55 to 60 percent, he added. The cotton shortage is a result of increasing demand, particularly in China. “No one thought of China as a consumption country,” Weintraub said. “Incomes in China are getting higher and higher. The Chinese want to live like we live.”
Regarding the retail climate, Peter Sachse, chairman and ceo of macys.com and Macy’s Inc.’s chief marketing officer, in his presentation said, “Everything is looking a little bit better on a one-year basis. On a two-year basis, our industry is still having a difficult time.”
Macy’s is striving to get loyal customers shopping more at the store, but without increasing the marketing budget. “We will not be spending more money than last year and, quite frankly, we spent significantly less last year,” said Sachse. However, Macy’s is launching a new “tender neutral” loyalty program, meaning customers get rewards regardless of how they pay; has formed a team that meets eight times a year to take on “everything that has to do with customers,” and has a database with 2.9 billion customer transactions to customize assortments by door and customize communications to customers, including sending out more than 6,000 variations of a “hot list” catalogue where the balance of merchandise can differ.
Macy’s is creating Webisodes to spotlight its brand exclusives. There’s one with Martha Stewart invading a frat house, getting grossed out and taking the boys shopping at Macy’s to clean up their place, which was shown at the seminar. “I’ve never seen Martha more charming,” commented Gil Harrison, chairman of Financo Inc.
Steven Tanger, ceo of Tanger Factory Outlets Inc., said his company has some corporate debt, but no mortgage debt on its properties; has never laid off an employee, and cited his company’s slogan, “In good times, people like a bargain. In bad times, they need a bargain.” The real estate investment trust saw sales climb 3.1 percent for the quarter ended March 31, with a comp gain of 10.6 percent, and is proceeding with a project in North Carolina.
Cohen of Nine West, which is owned by Jones Apparel Group Inc., said his firm can grow because it has the platform to build products to sell across distribution channels from Wal-Mart Stores Inc. to Nordstrom Inc. “The consumer is ready to spend again, but needs a reason to spend,” he said.
The Nine West operation includes a wholesale, retail and international licensing component. He expects that in about six months, the company’s retail business will be 70 percent value oriented and 30 percent in the specialty arena.
Neil Cole, ceo of Iconix Brand Group Inc., provided an overview of his firm, which includes 25 company-owned brands. Total annual retail sales are $10 billion, and will hit $12 billion following the closure of its latest acquisition, the Peanuts brand. The firm seeks lifestyle brands that often end up as exclusive to certain retailers.
Dr. Anastasia Xenias, senior international trade specialist at the U.S. Department of Commerce, said apparel exports have increased 12 percent year to date, with the biggest gains to the U.K., France and Australia. Her office assists companies in their export strategies, including due diligence on overseas partners, labeling requirements and trade duties. President Obama’s objective, she noted, is to double exports within five years to support two million jobs.
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)
@heriethpaul and @gracebol have a moment on the @victoriassecret fashion show 2017. See every look from the runway on WWD.com. Link in bio. (📷: @giovanni_giannoni_photo) #wwdfashion #victoriassecret #VSFashionShow
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia