FLOOR-READY GOODS VEX VENDORS
Byline: Karyn Monget
NEW YORK — Many innerwear manufacturers are grudgingly accepting the latest demand from a powerful retailer: an edict by Federated Department Stores demanding that only floor-ready merchandise be shipped to its seven retail divisions.
While such floor-ready merchandise has been a standard practice for the foundations and panties industries for some 20 years, Federated now is asking the same for sleepwear, robes and at-homewear, an estimated $3.35 billion industry at retail. The practice has worked for the big foundations firms, primarily because it is the best way for manufacturers to track sell-throughs of huge, commodities-type quantities of bras, panties and shapewear at stores.
However, the dictate is upsetting for sleepwear and loungewear suppliers, who tend to be small to mid-size vendors, as they scramble to meet a Feb. 1 deadline, that was moved back from August. Vendors pushed for the delay so they could restructure their costing charts and also give them more time to reorganize distribution and production methods. Some are still debating whether to take up Federated’s option of letting the retailer do the hanging and price-tagging of the garments and be charged for it.
Federated officials acknowledged that other apparel categories have been part of its strategy to cut its own operational costs, but did not want to give a time frame or discuss charges.
Lisa Lichtenberg, vice president of merchandise technology for the Federated Logistics division of Federated Department Stores, said the retail giant wants to implement a “win-win situation” for its vendors, customers and itself.
Lichtenberg was referring to Federated’s ongoing strategy, which is called Federated Accelerated Sales & Stock Turn plan. The plan was initiated in 1992 with a push on electronic data information systems. Other elements have been added subsequently. This year’s strategy is twofold: Merchandise is to be shipped on the more durable and more expensive VICS-approved (Voluntary Inter-Industry Communications Guidelines) hangers, with metal swivel hooks. A suggested retail price must also appear on all UPC tickets, which typically have bar-coded style, color and size information.
The new hangers, according to vendor estimates, can each cost a vendor about 12 cents more, totaling 15 cents per unit. More EDI technology required to met these new standards, they say, include new bar-coding machines that can cost between $7,000 and $8,000 apiece, as well as an array of computer systems with price tags of $100,000 or more.
Charges for not meeting Federated’s requirements will be 25 cents per hanger, and 5 cents for each unit that doesn’t have a suggested retail on a UPC ticket, say makers.
That’s a big piece of change for some mid-size $15 million-to-$30 million manufacturing operations, which, some executives say, generally average an annual net profit of about 5 percent — when business is good.
Federated is not alone in seeking floor-ready merchandise. Mercantile Stores, for example, has been asking that vendors do it for several years, according to Kathy Strohmeyer, divisional merchandise manager of intimate apparel, but doesn’t demand it.
“Ticketing is something you negotiate. But, we don’t slap a charge for not doing it. That’s not our style of doing business,” she said. However, it’s not just the costs that are rankling the vendors. It’s the complications involved in creating retail tickets with a variety of suggested retails on the same item. Dismissing this complaint, Lichtenberg of Federated said, “We haven’t asked for goofy things on our tickets, or a special kind of bar code.”
Peter Gabbe, executive vice president and chief operating officer of Carole Hochman Designs, said, “All Federated did was force us to look at a new technology.” It’s part of the growing demands from retailers, said Gabbe, who is chairman of the retail relations committee of the American Apparel Manufacturers Association, but sometimes the demands become “heavy-handed.”
“You have the good ones and the bad ones,” said Gabbe. “Federated, Dillard’s and Wal-Mart show a willingness to work with vendors, and try to reduce the difficulties the changes create.” On the other hand, he said, some retailers just focus on unfair chargebacks.
Nevertheless, nervousness about the new Federated plan was obvious among manufacturers, as the deadline loomed.
“I’m hoping we’ll meet the deadline,” said Bob Wolff, chief financial officer of Val Mode Lingerie. “This was bound to happen eventually. Federated is the first to really push it.”
Some vendors feel it’s the consumers who will eventually wind up paying for this. Marc Seldin, president and owner of Miss Elaine, St. Louis, a veteran of the sleepwear industry for over 30 years, said, “I’m not going to give retailers the hangers for nothing. We’ll just have to hike the price to the consumer — there’s no free lunch.”
Harvey Gerstein, executive vice president of Miss Elaine, noted, “We’ll be needing 15 percent more warehouse space to hang garments with the new hangers. We are gearing up for the need for more space and plan to open a second warehouse in Centralia, Ill.”
The Miss Elaine warehouse in St. Louis is 150,000 square feet.
“It’s going to be a rough and tough year because of this,” said one vendor, who did not want to be identified. “The Intimate Apparel Council got the deadline moved to Feb. 1 because nobody could comply in time. We were told you either do it — or you don’t do business with us.”
Lichtenberg acknowledged there are some “smallish vendors” who are considering accepting the charges, rather than doing the hanging and the ticketing themselves.
She said some vendors “feel it’s easier for us to do these services and charge them. But by and large, the bigger vendors are doing it.”
Norman Katz, chairman of I. Appel Corp., said, “We have made provisions in our costing, but we still are considering if we want to absorb the costs.” The company produces sleepwear and robes under the Appel label, among others.
James Martino, president and chairman of Russell-Newman Inc., Denton, Tex., said: “What we recognize is that more of the burden will be pushed down the supply chain. It’s a cost that will be added to the garment. One concern we have is that the price should not be raised to absorb these additional costs.”
Martino, whose firm produces robes under the Cypress label, added, “One thing I don’t understand is why some of the stores’ private-label programs in the Orient don’t have to comply with these new rules.”
Not all executives are downbeat. Charlie Komar, president of Charles Komar & Sons, said, “I applaud the whole idea. In the case of Federated, Logistics is willing to work with manufacturers and help resolve problems. The demands are extensive, but it makes sense.”
To keep abreast of such changes and in touch with its overseas sourcing, Komar, who is vice chairman of the Intimate Apparel Council, noted his sleepwear firm has invested over $1 million since 1990 in EDI systems. The company owns production facilities in Eastern Europe and a “state-of-the-art” warehouse in Hong Kong.