MIAMI BEACH — The sluggish economy, heavy competition, margin pressure and shifting international sourcing scene are making life all the more challenging for apparel sourcing executives. With that in mind, Material World organized an Oct. 6 seminar, the day before the show, in which a number of industry observers offered their advice for competing in the challenging apparel market.
This story first appeared in the October 15, 2002 issue of WWD. Subscribe Today.
Speakers addressed the coming phaseout of quotas among World Trade Organization nations in 2005; the effects that the Caribbean Basin Trade Promotion Act and Africa Growth & Opportunity Act have had, and the key issue of branding. Some of their comments follow:
Mary T. O’Rourke, managing director, Jassin-O’Rourke Group, a New York-based consulting firm:
“Today, CBI countries ship 3.5 times the volume of China’s apparel exports to the U.S. There will always be 20 to 25 percent of demand from retailers in this region to reduce inventory risk and shorten lead times, especially as retailers now want 98 percent performance on replenishment and lead times of 19, sometimes 17, days.
“Central America will continue to grow. With the exception of denim, traditional apparel manufacturers are flying out of Mexico, due to problems of inconsistent deliveries, quality and lead times. Business will go to CBI countries and Asia.
“Retailers’ cost-reduction pressures will continue, despite economic turnaround. Retailers want direct sourcing with manufacturers, eliminating agents, especially in basics and items. They cite a lack of CBI full-package resources, and a lack of options for buying piece goods. There’s a big concern now with U.S. textile mills, as many are out of business or in Chapter 11. There’s still plenty of interest in the Western Hemisphere, because of the CBTPA benefits and shorter lead times. CBI sources will be strong in basic bottomweights, knit shirts, women’s wear, underwear and T-shirts, and for re-orders and replenishment. The future for the region includes the Andean trade pact, which will mean that Peru becomes more important in better quality knit tops, impacting Turkey, the Mideast and Asia. Colombia will reemerge in women’s tailored goods, and we see El Salvador as important in dress product, which grew 15 percent in 2002. Sub-Saharan Africa will have short-term sourcing advantages until 2005, then there’ll be a shift to China or Bangladesh.”
Robin Lewis, owner, Robin Lewis Inc., a New York-based consulting firm:
“Conditions are tough, and were tough before 9/11 and the recession. Any recovery is relative — there’s no great boom coming in the near future. We’ve had 40 years of consumers spending less on apparel, 15 years of decelerating retail sales, along with retail physical expansion over 20 years. Survivors will be those with a level of excellence in every activity in the supply chain. Winners will be excellent in all, and superior in at least one area. Distribution is the number one issue of the 21st century — the era of the ‘Distributor Kings.’
“Those who own their distribution — Wal-Mart, Target, Kohl’s — have tremendous power as brands….The consumer is ‘channel blind.’ They don’t care about department stores, discounters, etc. They only see a brand.”
Carl Priestland, economist, Priestland Associates, an Alexandria, Va.-based consultant:
“With the quota phaseout, China has the ability and capacity to flood the market, but what will they do? Flooding the market could threaten China’s WTO status, and the U.S. could reimpose quotas. China has other expanding export markets they don’t want to lose over textile and apparel, and they have a big domestic market with growing demand. Too much growth could strain U.S. relations and put future trade round discussions in jeopardy.
“U.S. companies need to reduce time from conception to development — and they have. But product development still hasn’t reduced time, although technology is available. Companies will have to shorten time between concept and development, adjust or be left behind. Other challenges will be capital and cash flow, as banks are cautious; exchange rates change often and fast, and consolidation at retail — with big stores, like Target — is growing. Manufacturers will have to take away market share. Marginal vendors will have trouble, as pressure mounts from consumers and retailers.”
Tom Travis, managing partner, Sandler, Travis & Rosenberg, a Miami law firm specializing in trade issues:
“This is a complicated sourcing matrix, with so many special interests. If the U.S. just tweaks the rules, it can close somebody out. U.S. trade policy has favored Western Hemisphere production, and still will, with current and future trade pacts. Mexico and CBI countries rose from 8 percent [of U.S. apparel imports] in 1985 to 36 percent in 2001.
“But now we see a shift, and every company needs to have an Asian strategy, as the quota phaseout gives China competitive advantage, and proposed free-trade agreements with Singapore, [South] Korea, Egypt, Morocco, Australia and New Zealand shift interest to the Eastern Hemisphere. AGOA, which allows any kind of fabric content in Africa, means producers can source low-cost, high-quality fabrics, making it more advantageous than CBI countries.
“The important thing is to think strategically, not tactically, to consider all factors, not just cost differences.”