MIXING BEST SELLERS AT UNIONBAY, SERGIO
Byline: Kristi Ellis
SEATTLE — Steve Ritchey, president and founding partner of Seattle Pacific Industries, the maker of Unionbay and Sergio Valente apparel, wakes each morning with one goal in mind: hit records.
Ritchey applies the recording industry metaphor when he talks fashion, in particular, when it comes to taking the next pair of jeans “platinum.”
The odds of a big hit may be in SPI’s favor this year, as the $375 million company prepares to leverage its brands and launch an aggressive expansion of its licensing program.
“It’s OK if I hit platinum every now and then, but I just want hits that sell every week,” Ritchey said.
In the new 38,000-square-foot design and product development space here, with its 180-degree view of Lake Union, for which the apparel is named, Ritchey and his team laid out SPI’s growth plans to WWD, while hosting a large group of retailers who came to town last month to solidify fall buys.
With 380 employees, SPI produces four Unionbay categories — juniors, girls’, young men’s and boys’ — as well as Sergio Valente, a better/contemporary denim division, and Reunion, an upscale men’s wear brand.
The new lake-front facility in North Seattle includes 20,000 square feet of trade-show space. The company also has a 300,000-square-foot distribution facility in Kent, Wash. The key strategy this year centers on its licensing program, which is less than two years old. Master licensing agreements include more than 100 retail units in Taiwan, South Korea, Indonesia, Japan, Singapore, Dubai, Mexico and Chile.
SPI is close to signing a master licensing deal in Canada with Buffalo Inc., which will manufacture and distribute merchandise from Unionbay’s four divisions, as well as other categories SPI licenses in the U.S.
The company now has six domestic licenses for Unionbay, including footwear, socks, backpacks, innerwear and sleepwear, belts and small leather goods, optical and sunglasses.
To leverage the SPI brands, Cathie Underwood joined the company in 1999 as vice president of licensing, with a special focus on the junior and young men’s Unionbay brand.
“The initial plan is to license ancillary sportswear products domestically,” said Underwood, adding that the company plans to sign a number of other Unionbay licensing agreements this year. Among the categories being considered are junior and girls’ swimwear, junior and young men’s outerwear, fragrances, plus infant and toddler lines.
In 2002, SPI plans to venture into licensed products with Sergio Valente in categories such as footwear, eyewear, handbags and fragrance, Underwood said. Sergio Valente, the contemporary designer jeans label that became popular in the late Seventies only to disappear by the mid-Eighties, reappeared in 1997 on a limited basis, under the SPI umbrella.
Building on consumer awareness and the sexy fit and bull-head logo, SPI retooled the Sergio line in 1999, invested $2 million in an ad campaign and broadened the product offering and distribution. The brand has its own e-commerce site, svjeans.com, which launched in March 2000. SPI closed the Web site a month ago to revamp it, and plans to reopen it by the end of the month.
Founded in 1981 as a young men’s and junior denim company, SPI has weathered several structural changes.
The debut of a collections business in young men’s and juniors in 1986 nearly “ran [the company] into the ground in 1989,” said Ritchey. “At the same time, interest rates were through the roof and business was terrible.”
That same year, SPI, which had 550 employees and eight divisions, eliminated three divisions — misses’, active and skiwear — cut down its workforce to 280 people and moved from a 70,000-square-foot building to a 20,000-square-foot space.
“We got rid of the clutter,” said Ritchey.
The next major change came in 1996, when SPI reinvented its image to capture a hipper, edgier market — a focal point of the company’s current image campaign.
With the help of Toth Brand Imaging, the Concord, Mass.-based ad agency, SPI threw out Unionbay’s conservative, basics approach and reinvented the image into a fresher, urban style. Toth keyed into teen culture by tying the label into music imagery and the street vernacular.
“Even in the last five years, we made mistakes because we thought our customers were getting modern,” said Ritchey. “When the Y2K thing happened, we thought everyone would be in Prada-looking clothes.
“But we realized when everyone woke up on Jan.1, 2000 that nothing was different,” he said, referring to recent collection items with which the customer could not identify.
SPI changed its marketing approach once again last year from an image-driven to a product-driven campaign. Ritchey said the “small advertising” budget of $10 million to $15 million a year covers print, billboards and television.
Unionbay ads, shot by Dewey Nicks, are hitting the March through May issues of Teen People, Seventeen, CosmoGirl and Spin. Reunion ads are running in GQ and Maxim and Sergio Valente is appearing in In Style, Vogue, Ocean Drive, Nylon and Jane during the period.
The fall ad campaigns for the three divisions will run July through September in those publications, as well as on television.
“Our teen customers don’t have the money that the elitist trendsetters have, but they are still edgy,” Ritchey noted.
SPI also reaches teens through its Web site, unionbay.com. The portal lists general product information, bestsellers, horoscopes, chat lines and games. E-commerce, however, is not part of the plan. But Ritchey said he is considering establishing a business-to-business Web site to track orders from overseas factories and retailer reorders. He has ruled out in-house software development, opting instead to hire a B2B Web services provider in the future, although he declined to disclose when.
Annually, SPI turns inventory about 15 times and imports 30 million units from Asia, Southeast Asia, China, Pakistan and Mexico. Approximately 70 percent of the firm’s production is offshore, while the remainder is domestic.
Some 60 percent of Unionbay’s $325 million volume is represented by juniors. Sergio Valente and Reunion combine to add another $50 million, which brings SPI’s total volume to about $375 million.
Gearing up for back-to-school and fall, Unionbay will offer 95 junior sportswear styles compared to about 140 styles in the past, opting to focus the collection. The emphasis for the season is on narrow legs and low-rise denim, according to Kim Owen, account executive for juniors.
In denim, Unionbay offers 25 to 30 styles, wholesaling between $18 to $21, according to Barry Bates, president of juniors, who became president at the beginning of the year after serving a half-decade as senior vice president. For fall, Sergio will offer low-rise boot cut and straight leg jeans in dark, vintage, washed-out indigo and antique washes, jumpsuits, copper studded and leather appliqued jeans, lambskin jeans and rabbit fur coats on the upper end.
In early February, SPI hosted 78 retailers at the Seattle headquarters at “pre-Line,” a four-day buying session the company hosts twice a year. SPI books 70 percent of its fall business at this event, Ritchey said.
Getting their first look at SPI’s new digs, buyers and divisional managers from retailers such as J.C. Penney Co., Saks Inc., Federated Department Stores, Nordstrom, Kohl’s, Gottschalks, Bon Ton and scores of specialty stores sat down to write business.
“Everyone has been talking about denim, which is more fashion oriented now,” said Mark B. McDevitt, divisional merchandise manager of juniors for Penney’s, which carries Unionbay in 300 of its 1,100 doors. “But there are also exciting things in twill and corduroy, and Unionbay is one of the players.”
McDevitt, who is “bullish” about back-to-school, said key denim items that are currently checking in Penney’s stores, and will continue through back-to-school, are frayed waists, belted styles and lace-ups.
“How many kids have lace-ups or belted jeans in their closets?” he asked rhetorically. “Last year, every retailer wanted to be in business in the number one jean, which was a 21-inch flare, but you can’t do that this back-to-school.”
He said Penney’s is on a mission to find more bestsellers.
“The three big guys [in denim] are LEI, Paris Blues and Mudd, and most major retailers have them,” said McDevitt. “You have to have a point of difference, and Unionbay gives you that. It really rounds out the assortment.”
Indeed, many retailers at the event booked denim that is flared, stretched, washed out, leather trimmed and featuring waistbands that are studded or cut out completely. Other fabrics include corduroy and twills.
The number-one-booking sweater is a turtleneck striped across the chest with a rubber bar-code logo. Knit tops, ranging between $9 and $13 wholesale, are also key items.
Alan Rudominer, divisional vice president for Fresno, Calif.-based Gottschalks, which carries the brands in all its 79 doors, said pre-line allows for a “deep analysis” of Unionbay’s fall offering.
“You have an incentive to place orders here,” he said. “My buyer came up here with a buy plan yesterday, with how many tops and bottoms per door and per delivery she needed, and she just filled in the blanks.”
He said his buying team is keying into waist treatments and belts, as well as colored bottoms. A year ago, denim was not successful at Gottschalks, according to Rudominer, but the 21- and 23-inch flare, low-rise denim jump-started the business last July.
“Unionbay is coming off an absolutely outstanding fall  for us,” said Rudominer. “We ended up with a vendor margin of 40 percent versus 38 percent a year ago, and that is way above the departmental average.”
These kinds of reports from retailers give Ritchey and SPI hope that the growth in licensing will translate into a hit year for the company.
“We have huge businesses with retailers,” he said. “We want to make sure that we plan it with them now, from the smallest door to the biggest door, so that we come out with a profitable picture at the end of the year.”