NEW YORK — Swimming with the big fish has become a survival contest for privately owned small and midsized innerwear companies.
Following a decade of high-profile bankruptcies and frenzied mergers and acquisitions in the intimate apparel sector, a bustling intimate apparel industry once filled with hundreds of independent wholesalers has been whittled down to some three dozen firms with annual volume ranging from $5 million to more than $90 million.
These firms are faced with the tough challenge of competing with the marketing muscle and financial clout of apparel giants such as Sara Lee Corp. and VF Corp., as well as private label retail programs, for their share of the $12 billion innerwear market.
For the nine months ended March 31, sales at Sara Lee Corp.’s intimates and underwear unit rose 3.4 percent to $13.13 billion from $12.71 billion. The division’s portfolio of brands includes Hanes, Bali, Hanes Her Way, Wonderbra, Just My Size, DIM, Lovable, Playtex, Champion, L’eggs and Pretty Polly.
Intimate apparel is VF’s second-largest line of business after jeanswear, representing 17 percent of its $5.5 billion volume in 2001. It’s broad brand array includes the Lily of France, Vassarette, Vanity Fair, Bestform, Lou, Bolero, Gemma and Exquisite Form proprietary brands, and the Natori, Nike and Tommy Hilfiger licensed lines.
Executives at the smaller firms outlined a survival guide that has kept them afloat amid the continued pressure from the major chains on chargebacks and markdowns.
The key strategies include:
Implementing cost-effective measures, such as cutting out midlevel managers and fine-tuning sourcing for lower production costs.
Experimenting with innovative merchandise, even if it means testing ideas in limited quantities for specialty operations or providing exclusives to a particular retailer.
Less employee turnover, thus producing loyalty and incentive in a family-type working environment for workers. Also delegating multipurpose responsibilities that will bolster an employee’s expertise and productivity.
Updated technology enabling smaller firms to better service retailers and compete effectively on replenishment issues.
Diversification of channels of distribution and getting more involved in private label programs.
The existing roster of privately held businesses that have weathered the fierce competition in the last 10 years or so includes: Jockey International, Carole Hochman Designs, Natori Co., Fernando Sanchez, Charles Komar & Sons, NAP Inc., Richard Leeds International, Miss Elaine, Madison Maidens, Lady Ester, Shadowline, Flora Nikrooz, Farr West, Priamo, Mary Green, International Intimates, Vandale Industries, Sara Max, St. Eve, Karen Neuberger, Host For Her Inc., Nick & Nora Confidential, Character Inc., Cuddl’Duds, Va Bien, On Gossamer, Glamourize, Cupid, Esleep, Ariela-Alpha International, Fashion Forms, Jonquil, White Rose, Claire Pettibone, Parisa, and Felina, which recently acquired the long established Jezebel name in bras.
However, that doesn’t count several dozen new U.S. firms hoping to land the big buy from a major retailer before maxing out lines of credit the first few seasons, all the while praying financial resources will hold out long enough to ship the goods. A number of these aspiring beginners who do not have Madison Avenue showrooms attempt to gain recognition at trade shows, such as the Intimate Apparel Salon in New York and in Europe at The Salon International de la Lingerie in Paris and the Lyon, Mode City show in Lyon, France.
Among a long list of companies that have disappeared from the lingerie landscape since 1990, either through bankruptcies or acquisitions, are Barbizon, NCC Industries, Smoothie Inc., Trueform Inc., Eve Stillman, Slumbertogs, Periphery, Deena Inc., Gilligan & O’Malley, Swirl, Robes of California, Royal Robes, Boutique Industries, Jennifer Dale, Evelyn Pearson, Val Mode, David Brown, Blanche, Body Drama, Brandywine, Ralph Montenero, Keyloun Inc., Circa 2000, Dutchess Lingerie, Iris Lingerie, Gruppo Intermoda, Michelle Nicole Wesley, Mina Koo, BettyWear, Pucker Up and Lady Lynne.
The biggest shakeup, though, has taken place in the foundations industry, where powerhouse companies such as The Warnaco Group and Maidenform Inc. have tackled bankruptcy proceedings, while other longtime companies have been gobbled up by corporate giants like VF.’s acquisition of Bestform Foundations, and Sara Lee’s purchase of Playtex Apparel. Then, there’s Fruit of the Loom, whose operations were sold with much fanfare to Warren Buffett’s Berkshire Hathaway company in early May for $835 million.
Maidenform has made a successful emergence from Chapter 11, while Warnaco remained mired in bankruptcy proceedings and many of its brands are said to be for sale.
Josie Natori, chief executive officer of Natori Co., said: “I think it’s proof 25 years later that we know what we are doing and we are still here. We have a pretty large share of the designer sleepwear business and a presence in foundations at Bestform. There is a place for big companies because they’re really into a basic commodity business and they have their niche and we have ours.
“Large public corporations are geared to mass volume. They wouldn’t even begin to entertain the number of [stockkeeping units] we do because we are in the fashion business and can move a lot faster. This [sleepwear] field has traditionally and historically been dominated by more entrepreneurial companies, even as the accessories and children’s wear businesses have.”
Natori, who founded the company with her husband, Kenneth, with a $100,000 investment, began selling embroidered peasant shirts from her native Philippines. She made her first successful foray into the innerwear industry after Saks Fifth Avenue picked up the item as a sleepshirt. Since then, the company has grown to include the luxe Black Label Natori brand of sleepwear and daywear, a moderate-to-better White Label Natori sleepwear label, contemporary sleepwear and daywear bearing the Josie name, upscale handbags and slippers, and a licensed line of Natori bras licensed to the Bestform unit of VF. There is also a private label line of sleepwear and at-homewear called Cruz.
“I think the entrepreneurial spirit of a small company is very important,” Natori added. “We don’t have a chain of command. We focus on product, work closer with stores and literally baby-sit our business.”
Richard Leeds, ceo of Richard Leeds International, said, “Creativity is paramount. We are in the information age and any company that doesn’t invest time and effort in retailing analysis and in-depth consumer research won’t make it. You have to know who the consumer is. We have to constantly reinvent ourselves.”
One hit has been the firm’s novelty line of French Jenny sleepwear, with key items including Jenny Johns, a modernized, two-piece version of old-fashioned long johns, and Little Jenny Johns for girls. The French Jenny name has expanded into a new cobranding frontier with Warner Bros. cartoon characters like Bugs Bunny and Tweety Bird.
Marcia Leeds, president, said, “If you see some stores aren’t selling merchandise as well as others, you cut out those stores and sell more to the units that are selling it well. You also have to make sure you are staffed in the right areas like information systems, art design and distribution. It’s so complicated today because you also have to have support status internationally, have all of the right trends in place and through retail distribution, month after month, help retailers create an individual identity.”
Victor Lee, chief operating officer of NAP Inc., said: “One of the most important things we do is focus on design and product development, so we can offer an abundance of new ideas to retailers at any time. We continue to develop new fabrics and constantly spend a lot of money on fabric development. Excellent service and solidifying partnerships with our retailers also is extremely important.
“Technology and what we know about our customers will continue to be of great importance, especially over the next several years given the quota changeswhich will occur in 2005. Then, it will be a free-for-all.”
The firm recently launched an online site, boutiqueshowroom.com, where buyers can order directly from NAP’s three branded lines: Anne Lewin sleepwear and two licensees — Crabtree & Evelyn sleepwear and foundations, and sleepwear by Princesse Tam Tam.
Neal Hochman, corporate chief secretary of Carole Hochman Designs, said: “Compete with a Vanity Fair or a Sara Lee? I would never compete with them. They do what they do extremely well. It’s very much a replenishment business, such as underwear. But those corporations are not geared to stop and turn on a dime. I can stop, turn and step faster. You have to be a value-added resource today to prosper in business.”
Carole Hochman, design director and president, said, “We are a very diversified company creating different product for different people. When there’s an economic challenge at one level, we don’t compete with ourselves. We have the glam business with our [licensed] Oscar de la Renta sleepwear, items that people really want to wear to bed with Carole Hochman knits, and our [contemporary] Esprit line.
“Our biggest challenge isour customers, the retailers. Department stores don’t realize they will lose the people who feed them. They are not concerned about the manufacturers.”
Peter Cooper, vice president of the daywear division at Lady Ester Lingerie, said: “Sourcing combined with the lack of committees to quickly get out what’s on trend is key. But paramount to it all is being able to source properly through raw material and all other aspects, and in a timely manner to reach retailers. This keeps us competitive with large corporations, enabling us to make turns more quickly.”
Cooper added that cost efficiencies are beefed up by delegating more than one responsibility to an employee, whether it’s a proficiency in costing, production, distribution or pattern making.
Karen Grill, design director of daywear at Lady Ester, said: “Staying receptive and being open to what buyers are telling us they want is very important regarding anything new in fabrics, trims, styles and colors.”
The company features several daywear and sleepwear brands, including Wondermaid, Je T’Adore and Escapades, as well as private label.
Marvin Backer, ceo of Flora Nikrooz Lingerie, said, “We have to run our business like a specialty boutique business. We focus on a store that will accommodate our special needs and vice versa. We consider our company features very special product and we cater to special customer needs.”
Backer noted that he and his wife, designer Flora Nikrooz, spend about 10 hours a day “focusing on our business in all areas — it’s sweat and blood.” The company’s brands include the high-end Flora Nikrooz name in sleepwear and evening tops, a moderate sleepwear line called Flora Intimates, and a contemporary line of sleepwear that has a rtw flavor bearing the Flash by Flora Nikrooz label.
Nikrooz said, “It’s a passion you create within the business that drizzles down to all aspects of the company. You know each person who works here and they’re part of your team. We don’t want to be aware of the big guys. Our environment focuses on ourselves and our clientele, instead of entering into the competitive [corporate] arena where we know we won’t succeed.
“As for pricing, we don’t even entertain how much more we can give to stores in guarantees and markdowns. Our language basically is not how low a price can we do, but how can we service you better as a retailer.”
Todd Demakos, president and ceo of St. Eve said: “The number-one way to compete is with price and product. We shop Europe, Montreal, Miami and even Turkey and we put a lot of effort into research. We’ve always been diversified and distinct, and over the past 10 years, we have grown 5 to 10 percent every year in all categories.”
Price and quality of product often depends on the area of sourcing, said Demakos, noting that production for mass merchants typically is conducted in countries like Bangladesh or Turkey, while product assortments of a higher scale for major department and specialty stores are done in Hong Kong.
In addition to the Pillow Talk label the firm does exclusively for J.C. Penney, St. Eve, which makes women’s and girls’ underwear, daywear and sleepwear, also relies on a creative edge in other product categories and channels of distribution. A big item is maternity sleepwear sold under the company-owned brand New Recruit for the Armed Forces Exchange Services for the U.S. Army and Air Force.