CONVERTERS: THE MARGIN SQUEEZE TIGHTENS

Byline: Stuart Chirls

NEW YORK--Domestic converters are under siege as apparel manufacturers, themselves under tremendous price pressure from retailers, look to pass on some of their costs to their suppliers.
From the converters' point of view, it has become a game with no rules, and they contend the domestic apparel industry will be the big loser if what they call "abuses" continue unchecked.
With the Textile Distributors Association annual meeting slated for June 18-21 at the Marriott's Seaview Resort & Conference Center in Absecon, N.J., four converters gathered here at the TDA's offices for a roundtable discussion.
They were David Caplan, president of Metro Textiles; James Gutman, president of Pressman Gutman Inc.; Fred Baumgarten, president of Majestic Mills, and Martin Tandler, president of Tandler Textile.
Also attending were two textile mill executives--James Marion 3rd, president of the TDA and president and chief executive officer of Bloomsburg Mills, and John Cavanagh, president of CMI Industries--and Bruce Roberts, executive director of the TDA.

Q: Whither the domestic converter?
David Caplan: I think the converter is becoming an endangered species. One of the problems we all have is that we are working today on lower margins than we've ever worked on, and I think it all started with the retailer, who was giving the manufacturer a very rough time. Now, the manufacturer is giving us a very rough time with all kinds of what I would call imaginative deductions, which are taking away from that very low margin to start with.
Fred Baumgarten: I agree. There's become a commoditization of many of the aspects of the [apparel] products that are sold at retail, and with commoditization there is the emphasis on price to differentiate your product from another. I don't think that is in anyone's best interest in the short term and certainly in the long term. Let's face it: No consumer needs another one of a certain type of garment strictly because it's half-price. It is our job to create excitement, and we've all positioned ourselves to play a beggar-thy-neighbor role. And in that game, we're all going to wind up the loser.
Jim Gutman: The relationship between converter and manufacturer, manufacturer and retailer, seemed to have become more adversarial than ever. As a result of the squeeze in margins, and the constant focus on price as the only issue, everything has become how to squeeze the last penny out of your suppliers, it seems. This created a destructive spiral that threatens the very existence of the converter, and the textile industry in America.

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