NEW YORK -- The world market is here and now. And American fashion is staking its claim, from Ralph and Donna to Levi's and Wrangler.
In fact, some say foreign soil has become an essential stomping ground for future growth. Executives point out that U.S. retailing is a finite business: Some of the country's top specialty stores have disappeared and continued department store consolidation is likely. In contrast, overseas markets are comparatively untapped, particularly in the Far East.
With its growing disposable income, huge population and appetite for U.S. fashion, the Far East has been the biggest lure for American firms. Sportswear vendors say they have found it easier to establish themselves in parts of the Far East than in an economically turbulent Europe. Some also point out that Europeans still look down on American fashion, but there are indications that old biases may be wearing down.
Europe has been productive for a few top designers and for big brands like Levi's and Nike. It remains on the drawing board for further expansion for these companies and others, once its economy fully recovers from a prolonged recession.
Elsewhere, Canada and Mexico remain hot selling areas, particularly for denim firms.
Companies ranging from Anne Klein Cos., Donna Karan Co. and Ralph Lauren to Kenar, Betsey Johnson, J.G. Hook and Tapemeasure are expanding their overseas business through various arrangements, including licensing, distributors and joint ventures, as well as opening their own freestanding stores.
Unquestionably the most successful U.S. designer firm overseas, with $1.5 billion in retail sales in various markets, is Polo Ralph Lauren Corp.
"We feel we can grow all over," said Peter Strom, chairman, when asked where he saw the biggest opportunities for growth. "We can do better in every market," said Strom, particularly the Far East.
The organization is set up through licensing agreements abroad, said Strom, but business is conducted in a manner similar to the U.S. operation, with its own shops and a wholesale business.
There are 75 freestanding Polo shops -- 28 in the Pacific Rim, 14 in Europe, 24 in North America outside the U.S. and nine in South America. Only one overseas store -- the London unit -- is owned by Polo/Ralph Lauren; the others have been opened under licensing arrangements."We've gone with licensees because that's the arrangement that's just worked best for us," said Strom. Through its Far Eastern licensing agent, Dickson Poon, Ralph Lauren recently opened the first Polo/Ralph Lauren store in China. The Shanghai store is expected to be followed by a second location, in Beijing, which could open within 18 months.
"We expect to open more stores there," said Strom. "Beyond that, China -- from a retail standpoint -- is rather primitive, so we're going slowly there in terms of the wholesale business."
One of the most aggressive international designer firms is Anne Klein Cos.
"We have been pursuing the Far East market because it is booming," said Andrew Rosen, president of Anne Klein. The bulk of the overseas business is in the Anne Klein II and A Line divisions, and the majority of its international business is in Hong Kong.
"Our international presence has seen phenomenal growth in the last two years. We started in Hong Kong about five years ago and now have four doors there -- three freestanding shops and one department store location."
Anne Klein also operates an in-store shop at the Seibu department store in Shenzhen, China.
"You rent the space from them and then are responsible for all buying and merchandising. They just supply the infrastructure," explained Victoria Lam, director of Anne Klein's international sales.
Anne Klein has two freestanding stores and is in seven department stores in Taiwan. It has one freestanding store and two in-store shops in Singapore, one freestanding store and two in-store shops in Indonesia and a freestanding store in Malaysia. The freestanding stores are operated under license.
The company has been selling to Japan for three years and is in 10 doors there, including Barneys Japan. Anne Klein also does business in Chile, Kuwait, Saudi Arabia, Australia, the Philippines, Canada and Switzerland.
Plans include going into Mexico in four units of El Palacio de Hierro department store -- Durango, Coyoacon, Santa Fe and Perisur -- starting with a resort shipment this October.
Other plans include a freestanding boutique in Guam and adding two more doors in Switzerland in fall 1995. The company is also interested in entering Thailand.As for Europe, Rosen said: "We are definitely interested in the European market and will be looking at it again when the economy becomes stronger."
For some, international expansion is a way of achieving growth while keeping distribution selective in the U.S.
"We've really focused on the international business," said Stephen Ruzow, president of Donna Karan Co., "because we don't want to sell any more stores in the U.S. But we see a lot of opportunity in Europe and the Far East, and we haven't even touched South America yet. We're looking to open a distribution center in Canada in early 1995 because we have a developed business there, and we're also getting bigger in Mexico."
International sales at Donna Karan have jumped from 5.7 percent of the total business in 1989 to 21 percent of the total business in the first quarter of 1994, according to Ruzow.
International sales accounted for more than 50 percent of the fall Collection orders, Ruzow noted.
In 1993, international sales accounted for 18 percent -- or about $80 million -- of total business. They represented 29 percent of the Collection business, and 16 percent of DKNY's business. Ruzow said he expects that within five years or so, exports could be 40 or 50 percent of the firm's total business.
The women's Collection is sold in 135 locations in the U.S. and 68 outlets internationally. DKNY is distributed in 444 locations in the U.S. and 108 internationally.
Donna Karan's international wholesale business is not handled through licensing arrangements, Ruzow said, because "you don't have as much control with licensing arrangements." Instead, sales are conducted out of New York by the two vice presidents of international sales for Collection and DKNY. They travel abroad four times a year, said Ruzow, to visit stores that are interested in placing orders. The stores in which Karan is interested are then invited here to place orders.
Merchandise is distributed worldwide through four distribution centers in New York, Hong Kong, Tokyo or Amsterdam.
"Because we control everything so tightly," said Ruzow, "there is not an increase in price beyond what the retailers see when they place an order. And the product that you see in Paris, for instance, is exactly identical to what you see here."Ruzow said he sees the most room for growth in Europe, which accounted for 1 percent of sales in 1989 and 6.2 percent this year. The Far East accounted for 3.9 percent of sales in 1989 and 13.1 percent in 1994.
As reported, there are plans for more freestanding shops this fall, including a DKNY store in London, two shops -- one for Collection and one for DKNY -- in Singapore and a collection store in Geneva. That will bring the number of units abroad to 13. Ruzow added that a Collection store is to open in London in 1995.
Unlike the wholesale business, the stores are opened through licensing arrangements, said Ruzow, because the startup costs would be too high for the company to carry itself.
Adrienne Vittadini started the international game in 1982, entering the market very slowly and with most business in Japan. According to Gianluigi Vittadini, vice chairman and treasurer of the company, "Only in the last three years have we started to grow more aggressively. Our international sales have increased 20 to 25 percent per year and currently account for 50 to 60 percent of total volume."
The company sells in Hong Kong, Singapore, Malaysia and Indonesia, with Canada and Mexico accounting for a majority of its international sales. It plans to open three freestanding boutiques next year, in addition to the three it already has in Sydney, Mexico City and Toronto.
As far as European expansion, Vittadini explained, "The market in the Far East is less difficult than the market in Europe. We feel very confident in the East, and our product is well received there. We are currently organizing to go into Europe."
Denim manufacturers say the unceasing demand for American jeans is the driving force for their international expansion. As in the U.S., manufacturers are offering European retailers all price levels for their stores. In less developed economies, U.S. names say they look for the right partner.
"Global expansion has been our primary strategy and is increasing in importance," said Mackey MacDonald, president of VF Corp. "There is a strong demand for U.S. brands, especially with jeanswear because of its U.S. heritage."While VF has a strong presence in the European denim market with its Lee, Wrangler and Maverick brands, MacDonald said that areas targeted for expansion now are Canada, Mexico and the Pacific Rim.
MacDonald noted that with the exception of the mass market, the retail structure is basically the same in Europe as it is here. He noted that hypermarkets have been gaining in popularity, and VF is supplying them with the Maverick brand.
"Our strategy in Europe is the same as it is here," he said. "We want to provide multiple brands for multiple channels." Advertising and marketing are also targeted specifically to those consumers, he said.
Closer to home, MacDonald said, Canada and Mexico are prime VF territory.
"In Canada, there's a strong Western trade, so Wrangler is good for that," he said, noting that Calgary has one of the largest rodeos in the world.
"We are also getting more aggressive on the Pacific Rim -- China, Japan and so forth. As we develop there, we use a combination of our own factories, some partners and some licensees. Our growth in Europe is about increasing market share, while our growth in other areas is about establishing ourselves."
Vic Chiarella, director of international marketing at Levi Strauss & Co., which does business in 70 countries, said Levi's is giving its women's business more attention than it has in the past. A good part of its international business is done with retail partners that build Original Levi's stores, which carry only Levi's goods.
Chiarella said that twice a year, Levi's brings all of its international partners together to discuss problems and trends.
"Not every trend is the same everywhere," said Chiarella. "With these meetings, our group can be aware of fit trends in Europe, fabric trends in Japan, what's going on in Latin America. For example, the trend in Europe is becoming tighter, while here it's still fairly loose. Having these meetings puts the antenna up to look at what's happening and gives our business partners the entrepreneurial zest to say, 'Hey, let's try this."'
Chiarella said there are about 1,000 Original Levi's stores around the world."We started them in Spain about 15 years ago," he said. "Now we have stores in Europe, Latin America, Asia." He asserted that it doesn't take any business away from local retailers. In fact, he said, Levi's business "has been extremely buoyant, even in economies that are down, such as England, Italy or Brazil." He declined to state how much of Levi's $6 billion business is generated internationally.
At Sasson, Stephen Wayne, the company's exclusive licensing agent, said, "Tops on the list for international expansion is having the right partner, whether it's a marketing company or a distributor. That's numbers one, two, three and four.
"In the next four or five weeks we are going to finalize a deal to go into Canada," he said. "Because some retailers up there are already familiar with the Sasson name, that's the next obvious territory." A similar deal with India is also about set, said Wayne.
Wayne said that while Sasson opened five freestanding stores in the U.S. over the last year, "that is not a high priority for international expansion."
"We're really working on solidifying the Canadian and Mexican markets because of the North American Free Trade Agreement," said Robert Rowan, vice president of international development at Bonjour. "Many of our American customers are going into those markets, although they are two very separate entities and can't be handled the same way."
He said Bonjour would like to see Canada become about 10 percent of its overall business and Mexico reach about half that "once they are developed, which will be a few years."
Countries such as Turkey and India are also growing markets, he said.
"Their major cities are just as cosmopolitan as Paris, yet there's not the tremendous proliferation of jeanswear that you get in European cities. I see that as a much easier place to make inroads than in England, say, where there are 200 kinds of jeanswear."
"There's still a lot of room to grow in the U.S., but this is a world market, and it's becoming more so," noted Gary A. Kane, president of J.G. Hook, a moderate to upper-moderate sportswear firm that plans to go forward in establishing licensing programs as well as aggressively shipping it to South America and Latin America over the next 12 months. "These days, you just can't be an isolationist."He noted that the company is aggressively pursuing the Mexican market, and plans to showcase men's wear at a trade show on July 20 in Guadalajara.
"We had been in Mexico only on an item-by-item basis, but now we are looking at major distribution," he noted, adding that the firm plans to open a base office in Mexico City, where distribution will be set up for other Latin American countries as well as South America, including Argentina, Colombia and Venezuela. Kane added that he foresees a multimillion dollar market over the next 18 to 24 months.
In the contemporary market, manufacturers say they are finding a taste abroad for their goods, and several are looking into freestanding stores.
According to Marsha Drogin, president and designer of Tapemeasure, "Overseas retail stores have definitely discovered the contemporary market." Although international sales account for only 5 percent of Tapemeasure's business, Drogin expects that percentage to climb.
Tapemeasure sells directly in England to Harrods and Selfridges, in Canada to Holt Renfrew and also does business in Kuwait, Australia, Bahrain, Bermuda, Hong Kong, Singapore, Japan, Israel and Russia.
Leon Max, president of Leon Max, a contemporary resource in Los Angeles, said, "We are opening our first freestanding store outside the United States in Beijing in two months. It's the hottest consumer market that has emerged. We do business with Canada, Mexico and the United Kingdom, and sporadically throughout Germany, Switzerland and France, although we don't have representation there. Those stores buy from our New York showroom. "We are also beginning to see some activity from stores in the Far East, specifically the Philippines, Hong Kong and Korea. We have just signed a letter of agreement with a trading company to begin searching for investors to open freestanding stores in Korea. Our licensing agreement in Japan came to an end in the early Nineties, and we are looking for another licensee there.
"Because of NAFTA and the geographic proximity of Mexico, I certainly think that market is going to undergo a boom. There will be more manufacturing there, and the wealth created in the country will get distributed to form more of a middle-class people who will be interested in our product."-- ALICE WELSH, JANET OZZARD and ANNE D'INNOCENZIO, New York, NINA MALKIN, Los Angeles
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