CANCELLATIONS ISSUE RILES TDA FORUM
Byline: Scott Malone
NEW YORK — Things have been tough for most of the apparel business since the Sept. 11 terrorist attacks, and the textile industry has felt the pain, as well.
Retailers’ moves to cancel orders are trickling back to mills and converters, leaving some executives facing the question of what to do with fabrics they’ve already started producing, but now worry they won’t be able to sell. Some resign themselves to this as another symptom of the brutal apparel business, while others vow to fight to have their orders honored.
That was one of the topics discussed at a recent roundtable of Textile Distributors Association members held at the group’s Manhattan offices on Oct. 17. Participating in the discussion were three converters, David Caplan, president of Metro Fabrics; Earl Kramer, president of Concord Fabrics, and Fred Wunderlich, president of Nu-Image Fabrics; one mill executive, George Shtohryn, senior vice president of marketing at Schneider Mills Inc., and one fiber executive, Ellen Flynn, vice president of marketing for the Tencel brand of lyocell at Acordis Cellulosic Fibers. Bruce Roberts, executive director of the TDA, also participated in the discussion.
Executives at the roundtable also reported that apparel brands are expressing more interest in producing in the Caribbean Basin, as a result of concerns that trans-Pacific shipping could be slowed.
Here’s some of what they said:
WWD: How has the falloff in consumer spending since Sept. 11 affected the textile business?
Flynn: Our customers, the mills, definitely they’re hearing about cancellations. Retailers are rethinking their fall buys and even looking at their spring purchases.
Caplan: We have experienced, from big orders we took from the chains, some cutbacks, which we accommodated if the goods were not already in production. But it hurts.
Wunderlich: We took orders last week at a Los Angeles market, which was the first light that we saw in the last few weeks. This week, I’ve already had some of those orders cut back and the explanation was, ‘Well, the store reduced our numbers.’ One manufacturer went back and got the order reinstated. The other said, “There’s nothing we can do, we’re sorry.” They’re not going to take what they want to cut back. So the nice order is not a nice order anymore. How do you handle that?
Caplan: I’ll give you two examples. Almost all of our goods are produced overseas. So, if we take an order and it’s a producer overseas, we will get in touch with them right away and say, “Can you possibly cancel this? Is it going to hurt you?” If he says, “I haven’t even completed the deal for the gray goods,” we will accommodate them.
On the other hand, we have an order where the goods are produced, it’s linen — which is very seasonal — the goods are supposed to be shipped right away. This apparel manufacturer called us and said he’s got a cancellation on it and this is all because of Sept. 11. I said, “There is no way we’re going to take that cancellation. We produced the goods. We have your order. It’s a legitimate order and you must take them.” And we’re going to have a fight, but he’s going to have to take the goods.
Roberts: What you just said is what the large manufacturers are able to do and the small ones are not able to do. The little guy has the problem of either accepting or being threatened with no more business down the road. They’re in a definite squeeze.
Caplan: When you’re taking the orders far in advance, if you don’t have a bona fide letter of credit and a bona fide order, particularly in this type of climate, you’re just making a terrible mistake. You can’t just take a verbal order. You need a signed confirmation and you need to enforce it.
Wunderlich: We get bona fide orders, signed orders. They really mean nothing.
You’re 100 percent right. You have an order, you gave it to me, it’s a contract. But it happens every day. What are you going to do? You can say, “I’m not going to sell you anymore.” That’s one option. You can try to work something out. But if they have been canceled by the store, then the manufacturer has accepted that’s part of business. The store has passed it to them, and they are now passing it to us. This is ongoing, this isn’t new. But why have these things become the accepted manner of doing business? Obviously, that’s a very naive comment. But why is that?
Shtohryn: A lot of the retailers are looking to what is the most logical and most local place where they can stop orders. They feel they can stop it [a local order] a bit easier and perhaps a bit quicker than they can the importer programs, in particular because in many cases, they’re extended on letters of credit on the import programs anyhow.
To put a more positive spin on what’s happening, perhaps there will be a time when the retailers start to feel a little more positive about the business. Being that the local suppliers are the ones who are able to quickly respond, hopefully we will get the opportunity to perhaps lead out of this difficult apparel business today.
Caplan: The one thing that has been optimistic lately is that there have been some signs that, since Sept. 11, people do want to buy American. They want stuff they can say is made in this country.
WWD: Has anybody here taken an order since then based on retailers wanting to have U.S.-made goods in their stores?
Wunderlich: No. I haven’t heard that directly. We have an Americana group of prints that have been very popular. We sold a little, we sampled and we will probably sell more.
No one has said directly, “We want American goods.” You would think if there was going to be any unrest, particularly in that part of Asia where there are a lot of textile mills, some business would have to fall back, here or somewhere else.
Flynn: I have specifically heard of programs that were sourced overseas that have been placed with domestic suppliers as a result of all that’s happened.
Roberts: Part of that has to do with CBI. That genuinely has generated some switching of goods from the Orient to here.
WWD: Have the events of Sept. 11 and since increased interest in CBI sourcing?
Flynn: It’s certainly going to add impetus to it. There have been a lot of people talking about exploring the region more, but I think this is going to be a catalyst for a renewed interest by a lot of the major brands in terms of seeing what kinds of opportunities can be developed down there.
Kramer: I don’t think any of us have benefited [from CBI] to any large degree. The only benefit that we may have had is with people who were doing business before in the CBI, and now say to us, “Are you using American yarn?”
For the most part, I have not seen an increase [in sales], but we do have more inquiries in the last 30 days or so.
Shtohryn: We have looked at various [cost] models on specific garment items and how we stack up against the imported product. We’ve gone through the exercise of doing the arithmetic, and I think we would be very naive if we think they [Asian fabric suppliers] do not do that arithmetic and decide to come back underneath us.
Flynn: The brands are actually fostering that because they now can see some [price] advantage when they do their sourcing form the Caribbean, but they’ll go to their other suppliers and say, “Well, if I source from the U.S. into the Caribbean, these are the prices I can get. What can you do for me?”
Shtohryn: We have had a fair degree of success in a CBI program, but it was somewhat of a long process. It involved everybody in the chain: the retailer, converter, fiber suppliers, finishing people. Because of the retailer’s true interest and true belief driving this project, we went through this, full blown from fiber all the way to the garment-development process. It’s very exciting for us.
The comment made by the retail organization was that they’d never thought they’d be sitting in the state of North Carolina having a conversation like they’re very accustomed to having with their suppliers overseas.
Kramer: Ultimately, we can’t compete totally on a price basis. There is always going to be a guy out there who is going to sell a basic product for less. We need to find a different way to bring excitement into the business.We need some special hook that’s a little bit different from price.
WWD: What’s your outlook on business for the holiday season and coming months?
Wunderlich: We have two conflicting things. An economy where people are uncertain, which means, “Are we going to spend our dollars?” On the other hand, we have a lot of people who aren’t going to be traveling. There’s a lot of vacation money, a lot of money people have decided they aren’t going to spend in the way they had planned. So the question is: Are they going to hold onto that money or are they going to go buy something?