Carol Hochman and Peter Gabbe

Executives predict major changes in supply chains due to the global economic crisis at the American Apparel & Footwear Association's annual summit.

BONITA SPRINGS, Fla. — The economic downturn could provide companies the chance to throw away old models of where and what they manufacture and start building fresh strategies.

This story first appeared in the March 17, 2009 issue of WWD. Subscribe Today.

Words and concepts such as reinvention, rebirth, innovation and cleansing peppered private conversations and large presentations of top apparel executives at the American Apparel & Footwear Association’s annual executive summit last week.

The global economic downturn is creating pressures all the way through the supply chain, from raw materials to retail, executives said, which will fuel changes at all levels.

“We are all experiencing a recalibration,” said Peter Gabbe, chief operating officer of Carole Hochman Design Group and outgoing AAFA chairman.

Good importers will have to create even more balanced sourcing strategies globally than they already have, said Rick Darling, president of Li & Fung USA.

“This is an opportunity to rebirth your business,” Darling said. “At the end of the day, we’re talking about too much retail space. That’s coming to the fore because of the economy, but it could be a good thing.”

Mark Dillon, director, jeans project for YKK (USA) Inc., said, “This is a good time for people to do some housekeeping. This is such a mature business, it seems like we have to reinvent ourselves every few years.”

Brands will try to consolidate and reduce the number of vendors they have in the current tough times, said Benjamin Lam, vice president of Fountain Set (USA) Inc., a textile firm. “The whole sourcing platform is going to change.”

Companies are even more likely to take into consideration aspects of individual companies and specific countries in their sourcing decisions, analyzing transportation infrastructure, political stability, human rights compliance and their own internal processes, as well as environmental records, Lam said.

On the other end of the supply chain, the biggest questions are when the current economic downturn will hit bottom and if the U.S. will experience a significant evolution of the mind-set of consumers.

“If consumers go without new stuff for long enough, will it create a permanent change in the consumption of the American public?” Gabbe asked.

The current economic situation is the perfect “tsunami” of plummeting demand, falling production levels and factory closures, the executive said. But it could be a cleansing experience for the industry, said Killick Datta, chief executive officer at International Brand Partners.

“The better retailers and brands survive,” Datta said.

Some companies will hide behind the economy, Datta said, but well-run companies with good product will survive the downturn. But the hope is also that there will be room again for small entrepreneurial firms to fill in the gaps that are left, he said.

“No matter the economic conditions, everyone needs clothes,” said Kevin Burke, president and ceo of the AAFA.

Abbey Doneger, president of the Doneger Group, said, “This is not a time to hunker down. This is the time to make the necessary adjustments and focus on innovation.”

Carol Hochman, president and ceo of the Triumph Apparel Corp., which owns Danskin, and the newly named chairwoman of the AAFA, said, “There is a significant shift in what people are buying.”

The apparel industry is becoming an item-based business, she said, making product innovation more important. Retailers rely more heavily on the manufacturer to tell them what belongs on the floor, she said.

“Sometimes innovation does mean smaller,” Marshal Cohen, chief industry analyst at The NPD Group. “Sometimes innovation means slower. Sometimes innovation means cutting back. Innovation also comes as redefining who you are.”

Robert Hormats, vice chairman of Goldman Sachs International, said, “The withdrawal of consumers from active consumption, except for essentials, is likely to continue.”

The U.S. needs to change course, he said, because the country could not continue moving in the unsustainable direction it was going, even if those changes come about as a result of the current “wrenching conditions.”

Despite concerns over the role the U.S. plays globally, the soft power the country has is immense, said Nick Burns, professor at Harvard’s Kennedy School of Government and former undersecretary of state.

“The American business community has a tremendous reach,” Burns said.


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