TDA TOLD: PRICE SQUEEZE GOES ON

Byline: Stuart Chirls

ABSECON, N.J. — A top Bloomingdale’s executive told a meeting of textile suppliers that his industry takes full blame for promotional pricing that has shrunk profits throughout the apparel pipeline, but also told them to expect more of the same in the coming years.
“We have created our own problems through price promotions,” said Frank Doroff, executive vice president of Bloomingdale’s. “But they are a fact of life; everyone does it and we can’t stop that.”
Doroff’s comments came during the business session of the Textile Distributors Association’s annual meeting. “Textiles in the 21st Century — The Possible Dream” was the theme of the parley, and panelists included Crandall Bowles, president and chief executive officer of Springs Industries; Hal Upbin, president and ceo of Kellwood Co., and Roger Farah, chairman and ceo of Venator, formerly Woolworth Corp. The three-day meeting ended Friday at the Seaview Resort here.
“Promotional pricing is used to boost business, but its use is out of control,” said Doroff. “We ship and display merchandise before people are ready to buy it. A store is not going to be able to sell swimwear in March.”
At the same time, increasing competition from various retail channels has forced stores to fight on price, he said. “There are a lot of retail channels to compete with, from catalogs to discounters to the Internet. You need to be aggressive and promotional. The only way consumers will buy at full price is if they think they can’t get an item on sale later on.”
To preserve profits, stores demand lower prices from apparel makers, who in turn pressure mills, finishers and converters in a vicious chain that squeezes the margins of textile suppliers.
Doroff said apparel manufacturers have helped perpetuate promotional pricing. “The manufacturers have come to me: They want more floor space and don’t want to lose volume. I want my margins. That’s the game. I think a lot of apparel is overpriced, so the markdowns are built in anyway.”
Upbin told the group alliances between apparel companies and textile suppliers will be the rule, not the exception, in coming years. “There are opportunities for textile suppliers with apparel people in technical product development,” said Upbin, who noted Kellwood buys $200 million worth of piece goods annually from U.S. suppliers. “Innovation and newness are the keys. We need more value-added novelty fabrics and shorter runs, so we can respond to trends quickly.”
Upbin said technology — such as electronic data interchange, which has become an essential part of the manufacturer/retailer relationship — must be extended to textiles.
“We do not have EDI with mills, and it’s not right. If we had CAD/CAM design links with mills, we could develop electronic samples of fabrics, which would allow us to take time out of the product development process, cutting costs. By working together we can improve scheduling and fill factories. By taking advantage of off-peak production times, we can get better pricing, instead of beating you [fabric suppliers] over the head.”
To further cut lead times and costs, Kellwood is consolidating its fabric purchasing across its many divisions as part of its Supplier Management Initiative program.
“Kellwood uses 200 million yards of fabric a year, and we have to find ways to do it better,” said Upbin. “One way is to use fewer suppliers. Larger orders mean that we will have better quality and pricing. On the other end, we can drop-ship bulk orders of fabric for our cutters and contractors to reduce costs.” The program is already saving $1 million per month, said Upbin.
Strategic alliances with its suppliers have been key to the explosive growth of Kellwood’s Sag Harbor division, where annual sales of 55 million units are expected to total $600 million in 1998.
“We are planning with vendors for a 12-month flow of goods,” Upbin said, “and we have already placed orders for goods a year out of season. The companies that survive in the coming years are the ones that act on this. You have to be smarter, quicker and cheaper, and let’s do it together.”
Bowles acknowledged, “The textile market is more competitive than it has been in years. There is an increase in the fashion orientation and variety of goods, even at lower price points. It will continue, and we will have to build our strategy around that.”
Farah, who is engineering a massive rebuilding of the former Woolworth’s global infrastructure, said technical textile products are providing the retailer with a means to increase prices at retail.
“Value-added fabrics, such as Malden Mills’ Polartec or Nike’s Dry FIT [a moisture-management product], command a premium at retail over regular fabrics,” Farah said. “We will be using these same fabrics in our private label programs going forward. Fabric innovations and the marketing that goes with them have enabled us to move up pricing in a way that fascinates me.”
Technical fabrics will account for 30 percent of the product mix at Colorado, Venator’s new outdoor/adventure store format.
Like Kellwood, the retailer will focus on streamlining its production pipeline to improve the flow of goods. Venator recently built a 150,000-square-foot warehouse to service its Eastbay athletic apparel and footwear catalog business so it can fill orders within 24 hours.
It will spend $1 billion for 2,000 new or remodeled Foot Locker stores and other stores in the next three years. And Venator has agreed to acquire sporting goods colossus The Sports Authority, which receives 25 percent of its $1.5 billion annual sales from apparel.
“We want to be a major player in every channel and will need suppliers who can work with us to achieve that goal,” Farah said.

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