KEEPING UP WITH ONGOING DEFLATION

Byline: Anne D’Innocenzio / With contributions from Alison Maxwell, Washington

NEW YORK — The economy may still be chugging along, but that hasn’t given apparel makers enough reason to increase prices.
Squeezed by department stores’ private-label programs and a belief that consumers will resist paying even a small amount more for an outfit, many moderate apparel firms have no plans to increase prices for fall. They are either continuing to reduce prices or maintaining them by turning to an expanded worldwide sourcing network to keep up the quality of their lines.
Most vendors said they were in sync with the overall deflationary trend in prices of women’s apparel at the consumer level, which couldn’t shake deflation in 1999. According to a Labor Department report, prices of women’s apparel at retail declined by 0.6 percent in 1999, after dropping by the same amount in 1998.
The story was the same in January. Prices plummeted 2.1 percent — the largest drop in 11 years. The last time women’s apparel prices dipped that low was in August 1998, when prices also declined 2.1 percent.
Much of the price deflation can be attributed to increasing foreign production and competition from stores sourcing their own private label merchandise.
Take Ken Miller, president of Young Stuff Apparel Group, which has been able to lower prices or “at worst, keep them flat.”
Tex-Ray Group, based in Taiwan, acquired 51 percent of the stock of Young Stuff last September, and the partnership has allowed the private-label supplier to tap into Tex-Ray’s sourcing network.
Tex-Ray owns factories in Mexico, Taiwan, China and Indonesia. Prior to the venture, Young Stuff had been manufacturing in Taiwan, the Philippines, Pakistan, Mexico and Turkey, though not to any significant extent, Miller said.
“Tex-Ray has better sourcing in Mexico and overseas, so we’re able to take advantage of the better prices,” Miller said.
So far this year, Miller said Young Stuff has been able to reduce prices by 10 percent compared with last year. For fall, prices range from $6 to $12.
Winnie Lung, president of blouse firm K. Arnold, said she hadn’t raised prices for the last two seasons. Blouses wholesale for $15 to $25.
The company is facing a weak blouse category, which is under pressure from cut-and-sew knits, Lung said.
“The economy is good, but it is still competitive out there,” she said. St. Tropez, a division of Carole Little, will not increase prices for fall, according to Natalie Wierzba, vice president of sales and marketing. She added that prices had been consistent since the collection was launched two years ago. For fall, prices range from $16 to $33.
“We have brought more updated fabrics for fall, like pleather,” she said. “We use rayon georgette, not rayon challis.”
However, increasing the quality of the line while maintaining prices is tricky.
“It’s difficult,” she said. “You have to learn to be smarter about sourcing. There is definitely pressure with private label.”
Two years ago, about 20 percent of the line was sourced overseas. Now, that figure is 70 percent; the key countries are China, the Philippines, Korea and India.
McNaughton Apparel Group has made two rounds of price reductions — a 20 percent decrease in 1998 and another 5 to 10 percent reduction in 1999. For fall, the company plans to maintain pricing.
“We had priced ourselves out of the moderate market,” said Lynn Fish, executive vice president of merchandising.
McNaughton’s jackets now wholesale from $20 to $25. The company has been able to increase the quality of the line by expanding its sourcing network. It uses such fabrics as stretch polyester, rayon blends, stretch wool blends and polyester tricotene.
Two years ago, the company had done all its sourcing domestically. Structured clothing is sourced in China, though production has been expanded to Bangladesh. The rest of the line is made in Cambodia, India and Guatemala.
The company has been making its soft dressing in Mexico. It does knitwear production in Jordan and Turkey, Fish said.
“We have to get competitive,” she said. “We are competing against private label in the moderate zone. It’s become a price issue.”
Since 1990, the Leslie Fay Cos. has been riding a deceleration trend in prices for both sportswear and dresses.
Ten years ago, the company, which at that time was producing its goods domestically, was struggling to churn out ensembles that retailed for less than $100. For the current spring and summer collection, a sportswear ensemble now retails for $70, noted Bob Salem, director of marketing.
“We have had a significant amount of deflation,” said Salem.
The company has been able to maintain quality by increasing offshore production, which now accounts for 50 percent of the line.
Leslie Fay has narrowed its contractors by 50 percent and now only works with about a dozen.
Leslie Fay also aims to create more value for the customer. One strategy, developed two years ago, is to put less emphasis on the blazer jacket as an outfit completer, and more focus on weskits, two-fers and cardigans, which are less expensive.
Another goal is to develop more coordinated items.
“We are putting a stronger emphasis on coordination,” Salem said. “We are offering blouses or sweaters that will relate to all the bottoms. We need to be competitive with Federated’s private label.”
Alan Bobin, president and chief executive officer of Generra, agreed that strong global sourcing was the key to keeping prices stable.
“We always like to maintain our value and price percentages,” said Bobin. “I don’t see prices fluctuating dramatically, with the exception of inflation. We’re just looking to maintain prices and keep the customer happy.”

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