HONG KONG — For the TAL Group, the solution to the escalating cost of labor in China is to become more efficient and offer more services.
TAL, a family-owned business that’s been operating since 1947, holds innovation as a critical part of its survival, said the company’s chief operating officer, Roger Lee.
Though not a household name, the Hong Kong-based company estimates that it makes one out of every six dress shirts sold in the U.S., or about 35 million shirts a year. While dress shirts make up most of the business, or about 60 percent of sales, the company also produces casual pants, outerwear and has its own lines of casual apparel.
“We focus on products that are a little harder to make with a higher barrier to entry,” said Lee, speaking at his office at the TAL head office in Hong Kong’s Tsim Sha Tsui district.
Like many other manufacturers, TAL has been able to pass on only part of the increases in materials and labor costs.
“It’s definitely gone up,” Lee said of materials and labor costs. “But the consumer will not accept a higher price so they have to figure out ways to be more efficient or to offer better product to the consumer that the consumer will buy, so our innovation fits right into that.”
Higher costs “absolutely are impacting margins,” Lee acknowledged, “but as a manufacturer, the second you don’t survive you disappear. For us to continue to get to our vision of being a world-class apparel manufacturer, we have to survive, we have to provide more services to our customers, not just producing garments. We have to give them innovation.”
TAL invests millions of dollars a year in research and development and, among other things, is known for its wrinkle- and stain-resistant treatments. The company has also invested in additional services, such as a vendor-managed inventory program that helps customers control costs by reducing inventory. The automated inventory program monitors the stock in each store and places orders automatically through weekly or monthly replenishment programs, depending on the particular store set up. The program not only tracks point of sale data, but also forecasts demand, taking into account upcoming promotions, holidays or other events. Lee said the company makes about 18 million garments as part of the replenishment program.
TAL has also worked to improve efficiency and lower costs in its own factories. The company has factories in China, Thailand, Malaysia, Indonesia and Vietnam, with each factory specializing in one or two items. About a third of items are manufactured in China, another third in Thailand, and the rest in Malaysia, Indonesia and Vietnam.
While many manufacturers have been looking to move production to Southeast Asia in the wake of rising labor prices, TAL is something of an old-timer. The company first set up factories in Southeast Asia decades ago. Lee said TAL looks for places that can provide a combination of low labor costs, a strong local management team, labor availability and good logistics.
“We do not go to the cheapest country to set up a factory for five to 10 years, then move to another country,” he said. “We go into a country to be there for longer than 10 years so we can develop a local management team.”
Training a local management team takes up to five years, he added, but is vital to creating a “sustainable model” that can be innovative, productive and find ways to bring down costs to combat inflation.
The company is also looking at new markets, particularly China. TAL commissioned Bain Consulting three years ago to look into the market. At the time, the market was only one-fifth the size of the U.S. market in volume terms, but is expected to grow rapidly.
“We know China is the future with the income level rising, with them becoming more discerning about what they want to buy,” said Lee.
Though TAL has been focused on Western clients for decades, Lee believes the company can use its experience to enter the market. That may be sooner rather than later. While many Chinese retailers have their own factories, similar to how it was in the U.S. decades ago, Lee said he sees opportunities opening up.
“We know slowly more and more customers will come to us because they want a better product and I believe the China retailers who today have factories will eventually say it’s too much of a headache,” he said. “I just want to focus on retail. Retail at the end of the day is more sexy, it has higher margins.”
TAL has a China-dedicated team now working on sales, merchandising and design.
“We are slowing seeing customers asking for a better product, so now it fits into what we’re offering,” he added.
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye