CONVERTERS PONDER PRIVATE LABEL PUSH

Byline: Michael McNamara

NEW YORK--As apparel manufacturing, like retailing, becomes more consolidated, fabric converters are debating whether to go more deeply into private label and exclusives than into open-line collections.
The increasing costs of raw materials, which are cutting into margins, have heightened the debate.
Some converters said that through private label and exclusive offerings they can generate margins of 40 to 45 percent, in contrast to open-line offerings, which often mean margins of no more than 20 to 25 percent.
In converter terminology, private label means fabrics developed directly with retailers for their own private label apparel lines. Exclusives are fabrics developed jointly with apparel manufacturers from the gray goods on.
Sometimes, a converter will take a pattern from its open-line collection, which it shows to all comers, and modify it so it becomes a specific look for a particular customer. This is not what is commonly meant by an exclusive.
Converters said that by creating private label or exclusive fabrics, they become partners with retailers and manufacturers. That, they said, is crucial.
But exclusives and private label have hazards as well as benefits.
Converters warned that creating exclusive designs or working with retailers can be costly. If patterns aren't selling well, orders may be discontinued after one shipment and a converter could be left with thousands of yards.
If the pattern is a print, a converter might also be left with an unusable screen costing as much as $7,000.
Many converters argue that while their margins are smaller, open-line fabrics have a better chance in the market.
"Private label is an extremely intimate sell," said Barney Kelley, principal of Nuance Textiles, a $30 million print converter here that generates 60 to 70 percent of its sales through private label or exclusive programs.
"There are very few good people out there [in retailing], on the textile end of it, that really understand and know how to deal with private label or exclusive accounts," Kelley said. "Our people need to understand the technical part of the business and really have to keep on top of the situation. Followup is crucial."
Kelley said that when his firm enters into an exclusive or private label arrangement, the cost of the screen is figured into the program.
"You have to price everything accordingly," he said. "The margins are better in exclusive or private accounts, but you can get buried. That's why your salespeople become so important."
Michael Garson, partner at JBJ Fabrics, a converter here, said his company focuses on open-line collections. When doing exclusive or private label programs, "the downside is much greater than the upside," he said.
"For us, if we create about 60 prints and get six really good ones out of them, those are pretty decent numbers," said Garson, who added that JBJ, a print specialist, "doesn't have a high rate of returns."
"When it comes to exclusive programs," Garson continued, "manufacturers are generally easier to work with because they have a better understanding of the strengths and limitations a textile company possesses than retailers. They are more realistic."
Garson dismisses the notion that costs are more easily passed on to private or exclusive customers. "In the print business, a major investment is in engraving," Garson said. "It takes a great deal of volume to amortize the cost of engraving."
Garson said roughly 70 percent of JBJ's business is through open-line fabrics and 30 percent through custom engraving. The company does do "a substantial business in custom coloring" of open-line fabrics.
"With our library of 12,000 engravings and an investment of 50 to 60 new patterns per season, we can give everybody a unique enough look so they'll pretty much have an exclusive pattern," Garson said.
Phil DeLuca, president of Duet Textiles, said his firm "tries to do a combination of both exclusive and open-line goods. We're all getting killed. Anything we can do to get some costs back, we'll do it."

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