Byline: Jim Ostroff

WILLIAMSBURG, Va. — American apparel makers were in a jubilant mood as they met here for their annual meeting, while up the road at the White House, President Clinton was signing a bill to give free-trade benefits to Caribbean Basin nations — a boon to U.S. companies looking to expand their apparel production in the region.
As the makers gathered at the Williamsburg Lodge on May 17-20, the heady excitement was mixed with a dose of sobering reality: The combination of e-business, international competition and emerging market forces will force them to radically change their business practices or face extinction.
Those in attendance were told by speakers that they’ve done a good job in reinventing themselves by partnering with suppliers and retailers to make production and delivery times more efficient. Except now the rules are changing again, said Peter Brown, president and ceo of Kurt Salmon Associates, an apparel and retail consulting firm.
For starters, Brown warned American Apparel Manufacturers Association members that retail consolidation is continuing, along with store demands for “better, faster, cheaper.”
“Put bluntly,” he said, “there are fewer customers to deal with, and the expectations they have are higher and so is the competition to serve them.”
At the same time, consolidation is occurring among Europe’s retail powerhouses, which have a solid and growing presence in the American vendor market. On the surface, this would seemingly bode well for U.S. makers, being an opportunity to sell to these chains for distribution in the U.S. and elsewhere.
But for practical purposes, he said, “the days of relationships with buyers will come under siege” due to the swift emergence of business-to-business networks that enable companies to bid, potentially worldwide, for products and services.
“In the next few years, your companies will be asked to plug into these exchanges, and you’ll probably have little choice but to do so,” he said. “It will be a messy, chaotic period for about five years, in which companies from around the world will be fighting for the same business, but it won’t remain the Wild West forever.”
Competition among the estimated 65 current B2B exchanges in the softgoods industries alone, as well as the need to standardize their various protocols, will lead to major shakeout and absorption in their ranks.
But just making the transition to a B2B world will not be sufficient, Brown averred, saying he foresees B2B s giving rise to “classification killers+ that is, the rise of global enterprises able to take basic products and [corner the market] worldwide.”
“B2B will release many billions of dollars in savings, but just like quick response, you will have to pass the savings along to your customers,” he said. “What’s more, B2B will put all of us under a microscope, and it will be brutal on companies that are just mediocre.”
Meanwhile, Mike Fralix, director of industry services at the Textile/Clothing Technology Corp. of Cary, N.C., also known as TC2, noted that the conversion of the design, manufacturing and inventory-control processes to digital formats does a lot more than simply speed up production and delivery.
“You can use the digital image of your product to sell it online even before it is produced,” he said, showing examples of retail and vendor Web sites that permit consumers to manipulate an image of a sweater, slacks, shirt or dress to get a three-dimensional view.
“Sure, this is time consuming+ and some people would rather go to a store, pay the same price as they would online and get the custom shirt in the same two-week period,” Fralix said. “But a lot of customers will keep coming back, and these [cyber sales] are ones you may not get otherwise.”
Wal-Mart is moving in many of the directions Brown said are needed, to judge from comments by Lois Mikita, senior vice president and general merchandise manager of the Bentonville, Ark., retail giant.
In a speech to AAMA members, Mikita said Wal-Mart is going after Internet surfers in a big way, teaming up with Excite.com to expand the retailer’s online presence. Booming sales are driving this move, she said, noting that consumers bought about $1.1 billion of all U.S. retailers’ products online last year — double the 1998 volume — and this total should soar to about $2 billion this year.
Mikita said Wal-Mart has begun developing new concept stores — which would tailor their merchandise to individual communities’ buying patterns — and mini-stores, especially where large land tracts are not available.
Even as these plans are on the drawing board, she emphasized that U.S. apparel firms should consider selling to Wal-Mart more than ever as it embarks on a major store expansion program domestically and overseas. She noted that the retailer, which opened its first non-U.S. store in Mexico nine years ago, now has more than 1,000 units internationally and is developing new concepts for this market to meet consumer needs in individual communities.
“We’ve done a lot in recent years” to upgrade quality while also stressing low prices, Mikita said. “We’re not Wal-Mart-fall-apart anymore.”