The world apparel sourcing market is in a state of flux. Major U.S. retailers and branded wholesalers face the option of buying garments from thousands of factories in more than 100 countries that supply the American market.
To some major importers, the need to keep track of where the best-quality garments and lowest prices can be found, as trade rules change and the U.S. consumers are concerned about whether garments are made in sweatshops, seems like a major distraction from designing enticing merchandise and predicting what shoppers are going to want six to 12 months in advance.
The options available to buyers are expected to grow next year, when the 147 members of the World Trade Organization drop their quotas on textiles and apparel. For apparel firms trying to focus their resources on marketing and merchandising, one common solution to the production puzzle is turning over all or some of their sourcing functions to an outside vendor that can coordinate every step, from product development to manufacturing to shipping.
Hong Kong-based Li & Fung Ltd., with 2003 revenues of $5.5 billion, is one of the world’s largest and best-known sourcing specialists, but it has plenty of competitors. These companies are specialists that book production time at factories and oversee the manufacture of billions of garments a year. They generally don’t own their own factories or any production assets, an approach they say makes them more flexible and adaptable.
Here are profiles of four midsized sourcing firms, each of which sells about $1 billion in goods a year. Since every $1 worth of goods these companies sell on a freight on board basis typically translates into $4 of retail sales, together these firms handle the production of garments valued at about $16 billion annually.
HONG KONG — William E. Connor & Associates Ltd. was founded in 1949 by its namesake as a small purchasing office in Tokyo for non-Japanese clients.
His son, William E. Connor 2nd, known as “Chip,” took control of the expanded global product sourcing and marketing company in the early Eighties. He soon moved the headquarters to Hong Kong. The younger Connor is chairman and chief executive officer, and is a major shareholder.
“Our business model is one of adding value where value can be added and supporting large organizations who choose to outsource global sourcing,” chief financial officer William Mills said. “We represent only the interests of, and only receive compensation from, our clients.”
He said Connor has a zero-tolerance attitude when it comes to “breach of legality” or human-rights violations at its factories.
About 50 percent of Connor’s business is in apparel, while the other half is focused on home textiles and other home-related categories, such as furniture and lighting. The company has sales at manufacturer’s cost of about $1.6 billion, Mills said.
The company manages “every aspect of sourcing for its clients,” according to its Web site. Connor serves about 75 clients ranging from retailers in North and South America, Europe and Australia to direct-mail firms, manufacturers and importers.
The privately held company employs about 1,400 people in 35 offices in 20 countries. — Vicki Rothrock
NEW YORK — Newtimes Group Holdings Ltd.’s sourcing strategy is based on a simple fact of the apparel business.
“Everyone wants to have a very expensive look at a very inexpensive price,” said Helen Leung, president and ceo of the company’s Far East Development arm.
While it seems like a simple concept, executing on that model requires a team of about 1,250 people buying goods from more than 300 factories around the world.
Newtimes, with headquarters in Hong Kong and Taipei, was founded in 1971 as a buying agent. Today, it operates as a full-service supplier of completed garments to U.S. apparel brands, producing everything from bridge-priced knitwear to moderate-priced jeans for women, men and children. The firm’s sales currently exceed $1 billion, according to sources close to Newtimes. Executives declined to name their customers, but Jones Apparel Group is said to be a major client.
With Chinese manufacturers expected to gain market share next year after the nations of the World Trade Organization drop their quotas on apparel and textiles, the company is currently building up its staff in China, according to board chairman George C.V. Ling. The company has 250 employees in China and has built a training center in the southern city of Dongguan to train quality-assurance managers.
“We recruit graduates in China and train them in China or Hong Kong, but the goal is [that] we want to send them back to China,” Ling said. In 2005 and 2006, he added, “we will conservatively allocate more to China as requested by our customers, in case quotas are reimposed on China.”
The terms of China’s accession agreement to the WTO allow the U.S. to reimpose temporary safeguard quotas on Chinese imports for a period of up to three years, if those imports cause market disruption.
Newtimes has 13 branch sales and administrative offices, and an additional 22 quality-assurance centers around the world, throughout Asia.
Ling said Newtimes’ specialty is offering the fastest turn time possible from its far-flung network of contract factories. To allow it to fill orders more quickly, the company will hold inventories in certain products, a practice that sets it apart from sourcing powerhouse and major rival Li & Fung Ltd., also of Hong Kong.
“We do take some risk,” Ling said. “We have to be something different from our competitor.”
The company got its start by selling to customers in the Central and South American markets, which still represent about 30 percent of its sales, though the U.S. is now its largest market.
Ling said he believes that China — where Newtimes produces the majority of its merchandise — is well positioned to grow in 2005. He believes that the Philippines, Thailand and Sri Lanka, as well as the U.S. territory of Saipan and the nations of the Middle East, stand to lose market share next year.
“China is certainly a vast country and they have a tremendous domestic market,” he said. “But I expect that they really want to expand their exports, and they have invested in the hardware and software to do so.” — Scott Malone
HONG KONG — The end of textile quotas next year will mean changes to most companies in the apparel business, but executives at Linmark Group Ltd. said the switch will not hit them in the pocketbook.
“Unlike some other sourcing agents or trading companies, Linmark does not trade on textile quota, and Linmark will not be disadvantaged by the elimination of textile quota,” said Kim Khoo, executive director.
Khoo referred to the practice of trading in quota rights. As the U.S. assigned apparel and textile quotas to its trading partners over the past four decades, initial quota allocations were based on the volume of apparel being produced within those countries. Over time, many companies’ capacity to produce apparel grew to exceed the quota allocation, turning the quota rights themselves into a valuable commodity.
Many companies that had been assigned quotas in the Sixties and Seventies eventually found simply selling the quota rights to be a more profitable and stable business than manufacturing garments.
Khoo said since his company hasn’t focused on quota trading as a profit center, lifting them will simply allow it to play to its strengths — buying and selling apparel.
“In fact, 2005 allows Linmark to focus on apparel sourcing in China, taking advantage of the business relationships [we have] in China to further generate new business,” he said.
From an operational perspective, Steven Feniger, Linmark’s ceo, in a conference call this month conceded that there is an assumption antisurge mechanisms limiting Chinese exports will be put in place after Jan. 1, but “we have no idea what the rules and regulations are going to be starting with the first of January.”
“There is a huge race going on in China” as companies start to maneuver, but “there’s an enormous shortage of quality factories,” he said.
Established in 1964 and based in Hong Kong, Linmark specializes “in the sourcing of apparel at the best price, quality and value for money,” said Khoo, adding that the group also sources home furnishing products, costume jewelry and accessories. But “we are focusing on…medium to medium-high price range casualwear, including sportswear, as in swimwear and accessories, in North America.”
In addition to sourcing, Linmark also offers services that range from social compliance audits to product development and design, shipping coordination and factory evaluations.
Clients include retail chain operators, well-known brands — such as Calvin Klein Jeans, Chaps by Ralph Lauren and Speedo, which are all distributed by Warnaco Group Inc. — wholesalers, mail-order houses and department stores in the U.S., Canada, Europe, South Africa, Asia and Australia.
“Linmark handles approximately an annual shipment volume of $800 million in FOB value,” Khoo said.
The company employs about 700 staffers in 27 offices worldwide, from the Far East and Indian subcontinent to South Africa. Feniger has 10 business directors who handle different accounts and are based at various sourcing locations to ensure a quick response, Khoo said.
Linmark is about two-thirds owned by Roly International Group, a holding company that is listed in Singapore, and was listed on the Main Board of the Hong Kong Stock Exchange in May 2002. — V.R.
HONG KONG — Lark International Apparel Ltd. was founded in Hong Kong by Ira Dan Kaye in 1963, with its focus on sourcing women’s garments for specialty stores and designers in the U.S., Europe, Africa and Australia.
The global sourcing company produces sweaters, wovens, knits, denim, children’s wear, men’s wear, designer clothing, leather products and accessories.
Clients include large department stores, designer labels and chain specialty stores. The company also caters to catalogue companies, manufacturers and importers. Lark tries to stay competitive through its substantial quota holdings, according to its Web site.
Lark also provides clients “with the convenience of a one-stop shop,” according to its site, which describes it as “a seamless integrated service that encompasses all aspects of sourcing from initial product development to final consolidation of bulk shipments.”
Lark representatives declined to comment. — V.R.