Not every vendor can stomach the thought of raising prices or lowering quality to boost their bottom line during a tough economy. Instead, companies appearing at Lingerie Americas this week are turning to more customer-friendly strategies, from tightening production schedules and inventory to making the most of vertical capabilities and investing in less costly advertising strategies.
This story first appeared in the August 25, 2008 issue of WWD. Subscribe Today.
Then again, there’s plenty of incentive to do so, given that the costs of doing business have risen dramatically.
“It all just keeps multiplying up,” said Linda Sparks, owner and president of Farthingales L.A., a high-end corsetmaker based in Santa Monica, Calif., citing the compound effect of increases in the prices of raw materials, the weakness of the U.S. dollar, shipping surcharges and duty costs.
Martha Istefanidis, president and owner of Largo, Fla.-based N-Fini, a shapewear line, noted, “Basically, freight costs have put a big strain on our profit margin.” But, she said, “We are not sacrificing quality product to lower costs.” Same goes for Sparks at Farthingales L.A. “People always advise me to ‘buy North American,’ but the materials we need are either not available or are of poor quality [here].”
Vendors are also reluctant to alienate customers with higher price tags. “Repeat customers in particular would ask themselves why they were paying less for the same item the last time they came in,” said Sparks. Nonetheless, she said she’s been forced to raise prices on some pieces from 3 to 5 percent.
At Ed Hardy, prices have actually fallen, with the average price for a panty dropping from $30 to $24. “Retailers told us we’d be more likely to sell 10 pairs [to a single customer] at $24 apiece as opposed to five for $30,” said Mary Llamas at Ed Hardy Intimates, the L.A.-based lingerie brand with a tattoo-inspired aesthetic.
Instead of burdening customers with markedly higher price tags or lesser quality, vendors are trimming costs by tightening controls on inventory and by reducing shipping costs whenever possible. At N-Fini, the task is made easier by the fact that the brand is vertical, with a factory and warehouse in Largo. But the company’s location also carries incentives for retailers that spell bigger business for N-Fini. “Retailers are finding it very positive that they can order lower minimums than what foreign factories require, in addition to saving on freight costs,” said Istefanidis.
Ed Hardy’s Llamas keeps a vigilant eye on manufacturing schedules to avoid surcharges on last-minute orders. She also tries to split shipments of a given style between air freight and marine freight to save money, a strategy that lets her plan inventory more effectively.
“I tell our domestic reps that for a faster air delivery arriving in February, we will be carrying these three colors in a certain style,” she said. “Then they can tell retailers that the next set of colors coming by ship will be available to them in March for reorders.
“That way, we are moving inventory in and out at a faster pace and retailers are happy to have guaranteed orders when they need them.”
Sparks said she has been able to conserve costs by focusing on advertising as opposed to shipping. She often splits the cost of an ad with another vendor whose product complements her own, say, by shooting a corset with a coordinating shawl made by another company. And beginning this spring, she posted pictures of Farthingales’ corsets on Web sites like MySpace and Flickr, and in doing so has lured 14 or 15 new customers to the brand. “That’s only a very small percentage of our business, but who knows where it all could lead?” said Sparks.
Vendors aren’t letting the sluggish economy slow their appetite for growth, either.
N-Fini has plowed ahead with investments in new technology , which has resulted in machines capable of producing shapewear in hard-to-find 2x, 3x and 4x sizes. “Instead of buying product in a basic range from one company and the largest sizes from another, now customers are buying all their sizes from us,” said Istefanidis.
Farthingale’s L.A. opened its first brick-and-mortar outlet this year, on Santa Monica’s Pico Boulevard. In addition, Sparks is in talks to produce corsets for three different designer labels and is overseeing the launch of a new “fashion” corset line for a trendy twentysomething customer. Sales at Farthingales are up an estimated 17 percent this year over last.
Llamas said the Ed Hardy brand will seek out additional licensing partners this year, and on the retail front, is working with the Little Rock, Ark.-based Dillard’s department store chain on the launch of an in-store Ed Hardy shop. Ed Hardy Intimates should total an estimated $3 million in sales this year, as opposed to just shy of $1 million in 2007 — a respectable gain for a company that, according to Llamas, many industry watchers predicted would fade quickly from view, recession or no recession.
“As long as we stick to our production calendar and don’t repeat any of our mistakes, we will have a longer shelf life than what many of our critics have predicted for us,” she said.