Running the largest apparel technology company in the world gives Lectra chief executive officer Daniel Harari a perspective on globalization and automation that few can match. This year was one of the most important in the $317 million company’s existence. Lectra replaced all its major hardware and software with a new generation of tools, including smart cutters that know their own history and can be programmed remotely, 3-D software for fitting, product life cycle management software that integrates Lectra’s other offerings, and design software that makes the company’s U4ia (a de facto industry standard) obsolete. During a visit to Lectra’s New York office, Harari spoke with WWD about apparel technology, globalization and fast fashion.
WWD: How has this year been for Lectra?
Daniel Harari: Orders for new cutters are up 38 percent in six months. Our expectations were that they would be down 20 percent. Total orders were up 15 percent in the first six months of the year. Orders for new systems are up 16 percent. But we could not deliver everything. We had a significant backlog at end of September.
WWD: What percent of your business is in China and India?
D.H.: Roughly 60 percent is in Europe, 20 percent in the Americas and 20 percent in Asia…by revenue. In China we have more customers who want to establish their own brands and have their own design team and put more importance on pattern making, so we are selling more high-end design software there. India is five years behind. In India, people are very price sensitive. We have 80 percent to 100 percent of the luxury goods market, all the brand names from Chanel to Prada to Gucci. In France and Italy, our market share is close to 100 percent of this segment. The more sophisticated the product, the more we are in this market. The higher the quality [of the product], the better the savings [with our technology].
WWD: But the U.S. has no factories.
D.H.: This is what is said in the press. It is not true. After the WTO, the change was 4 percent in the States and 8 percent in Europe. What happened was that developing countries lost market share to China because China is more efficient. India is gaining market share. Other countries are losing it. Western Europe and the States did not change so much. Lobbyists make a lot of noise in the press but the reality is there are still lots of clothes manufacturers in the U.S. and Europe. What has gone was gone many years ago. For us, technology is cutting and design but not sewing. For us, the cutting factory does not change. Maybe sewing is moving to the Caribbean.
WWD: Maybe they are just sample-making factories?
D.H.: I’ve heard the story that nowhere in the U.S. has there been any manufacturing anywhere for 10 years and it is not true. It is still a very important market. A lot of U.S. retailers and brands fall in love with the full package. The quality in the U.S. is already average. Then they give it to China, where the quality is poor. The savings is not as great as they think and they need follow-up and control. Plus the cost of labor is growing 5 to 10 percent a year. The advantages are getting narrower and narrower every year. There is a lot of downside to that. What you are leveraging now we did in Europe five years ago. In Eastern Europe and Western Europe, the trend is not to push everything through developing countries but to find the right balance. There has been such an inflation [of labor costs in China]. And there are other constraints. They don’t have enough electricity because the government limits it to eight hours a day. The cost of transportation from China is also very expensive because all the boats are full. In next few years, I think you will have a better equilibrium. That’s my opinion. I am ready to bet.
WWD: Zara and H&M have been very successful with fast fashion, which is a low-tech business model based on producing close to retail. Does this mean the apparel industry doesn’t need technology?
D.H.: H&M is one of our greatest customers for patternmaking. Zara is not a customer. Zara invests 1 percent [of revenue] in technology. H&M invests 3 percent. Fast fashion is a business model people dream about but not so many people are doing it. It is hard to name a third one [other than maybe Mango]. Mango is also a significant customer of Lectra.
WWD: Does fast fashion work only in Europe?
D.H.: No. Fast fashion is very interesting model. The American market is driven by retail. The European market is driven by brands. The Asian market is driven by manufacturing. Americans don’t really buy brands — in terms of style — except for the people who buy high-end clothes, and they buy in France and Italy. With fast fashion, it’s a low-quality product but the turnover is very fast. The whole logic of it is about fashion. Whereas most American retailers sell classic clothes. So yes, fast fashion is linked more to the European state of mind. I don’t think it’s not a good model for Europe and Asia, but people are more classic here. The second thing is the market here is dominated by retailers who cannot be in that business model [such as] J.C. Penney and Wal-Mart.
WWD: In your work, do you see the Chinese buying Italian factories?
D.H.: It is starting. It’s a small percentage. Also I see Turkish and Indian [people] investing. I see some people who have succeeded in their own country buying things everywhere.
WWD: What does it mean?
D.H.: It means globalization goes both ways. And some things are a better value than in other places. Fashion starts in New York, Paris and Milan. You can do whatever you want in Shanghai but you are not in the center of fashion. Take Li & Fung. Now they are buying a company in the U.S., and they want to have their own brands and operations. I think it’s a normal trend, it’s global, and you will see more of this in the future.
WWD: What is the factory of the future? Will all our clothes be sewn totally by robots?
D.H.: No. The level of automation in most countries, starting here, is very low. Are we going to see new things? I’m not 100 percent sure. A lot of the things we should be doing will not be done. People don’t automate sewing — it will never work. Either the machines are flexible and they’re too expensive or they’re not flexible and they’re not efficient. I don’t think we will see new robots and or new types of software. We will see more efficient integration. Integration between [design] and cutting is essential. Most people are split between the two and there is not a strong link. If you want to improve fabric usage, you need to change the design.
WWD: Did you read the book “Deluxe: How Luxury Lost Its Luster,” by Dana Thomas? She argues that the quality of luxury goods has gone down because companies such as Gucci do not do things exactly as they did in the late 19th century.
D.H.: It’s totally false. With our technology today we can achieve much better quality than was achieved by hand before. [This idea] may have been true 10 years ago, but today it is not and technology is the only way for these [luxury] companies to grow and improve their quantity. Technology is really an advantage. I believe exactly the reverse. The more you are in high-end and luxury goods, the more you need technology.