Moderate vendors are trimming costs and seeking new sourcing to keep the gains coming.
This story first appeared in the August 26, 2002 issue of WWD. Subscribe Today.
Despite the bad economy and flagging consumer confidence, middle-class Americans still need to buy clothing. And when they do, many search for bargains in the moderate market. So, while times are tough for the apparel industry in general, many moderate companies are still prospering.
When they are not cultivating new markets or trimming their budgets, moderate sportswear executives are trying to take the pulse of the retail consumer. Marty Klein, executive vice president for sales at Katkus, believes consumer confidence has hit its low point due to the recent corporate scandals and the unpredictable swings of the stock market.
“People are afraid. They’re saving their disposable income and putting it away for a rainy day,” Klein said. “If customers stop spending, that’s the end; that could cause a tremendous drop and put us into a depression.”
But as long as people are still out there buying basic, affordable necessities, moderate companies will make it through this difficult time, Klein said. He believes the federal government needs to come out with a public show of strength to punish corporations like Enron. That would help revive the stock market and push us into recovery.
“I think it will start to gain early next year — as long as we don’t have any other big surprises,” Klein said.
While they search for new niches and creative strategies to cope with the downturn, moderate companies also are looking for ways to streamline and cut costs.
At Gainesville, Fla.-based Sacred Threads, executives are thinking carefully about their product.
“We’re not experimenting much,” sales manager Charles Henderson said. “We’re trying to manufacture more wisely, and we’re sticking close to things we know will work.”
Here, an overview of how moderate vendors are piloting their businesses in the months to come.
l The New York-based sportswear firm Kaktus is seeing gains because it’s figured out how to attract retail customers who normally shop for more expensive clothing, said Klein.
“The higher moderate buyer is now shopping in the lower moderate category,” he said.
Klein said the economy is bad, but not bad enough to prevent people from shopping altogether.
“Right now, people are shopping out of need instead of greed,” Klein said.
“They’re willing to shop, but only if the price is affordable.”
Companies like Kaktus that can supply those prices are well positioned, he said. At Kaktus, the numbers speak for themselves: Sales are up 40 percent over last year.
l At the New York-based India Bali Imports, executives are employing a similar strategy to benefit from new opportunities created by the slowed economy.
For example, they decided to carve out a niche in the plus-size market by offering casual, ethnic styles at moderate prices.
“We’re trying to give plus-sized women all the fashion trends, such as peasant blouses and the Victorian look,” said owner and president Andy Mahtani.
His company has been offering ethnic clothing since 1987, but he’s finding that many other vendors are following suit with the rise of the bohemian trend.
The increased competition contributed to a 20 percent decline in the company’s sales over last year.
“Once there are more people coming into the market, your dollars get divided,” said Mahtani.
To stay in the game, India Bali Imports has cut prices.
“Our markups have gone down tremendously,” he said. “We have to be very competitive.”
l Sacred Threads’ Henderson said the company has expanded its horizons this year by attending apparel shows that were off the beaten path.
Following Sept. 11, many retailers chose to drive to smaller shows instead of flying to the majors in Los Angeles and New York. Sacred Threads followed suit, turning up at regional markets in places like Denver and Phoenix to tap into new business.
The strategy paid off with a slight sales gain, according to Henderson.
He believes consumers are still out there buying clothes, despite all the bad news about their dwindling 401K funds. Sacred Threads, which creates colorful patchwork overalls and dresses from pieces of recycled sari fabric, has the kind of bright and splashy product that appeals to impulse buyers looking for clothes that will boost their moods.
“When the going gets tough, the tough go shopping,” Henderson joked.
l Last year, the New York-based Don’s Apparel learned an expensive lesson.
Owner Samuel Dong said he designed several pieces in a beautiful — but expensive — doupioni silk fabric.
But after Sept. 11, Dong said, people lost interest in paying the prices such pieces would command.
“This year, we’re doing more cotton stretch and linen. We’re selling it at a moderate price.”
“If the consumer feels it’s a good value, it moves fast.”
So far, Dong’s strategy appears to be successful: sales are up 20 percent over this time last year, he reported.
l Other moderate companies, like the New York-based Beverly Rose, are making sure their retail clients are financially stable.
“There certainly are customers who are doing a good business, but there are others who are tight on cash,” said president Ajit Datwani. “We’re going with the customers who have more credibility.”
Both Beverly Rose and Avance International, a Walnut, Calif.-based moderate activewear company, have recently moved away from department stores in favor of specialty stores.
“Department stores are making it very difficult for companies like mine to do business with them because they have such high standards for labor,” said Avance spokeswoman Charlotte O’Dette.