Practicality, rather than patriotism, is driving a growing number of retailers back to domestic producers.
This story first appeared in the October 16, 2014 issue of WWD. Subscribe Today.
Despite well-known domestic initiatives — such as Wal-Mart Stores Inc.’s push to increase its representation of U.S.-made products and vertical retailer American Apparel Inc.’s dedication to its own production facilities in Los Angeles, even amid its boardroom melodrama — the pace of conversion for many retailers to local from foreign sources has been slow.
Some businesses are making U.S. production part of a direct-to-consumer effort, generally through e-commerce, perhaps paying a premium for manufacturing but compensating by selling direct and eliminating the middleman’s markup.
Two of the strongest commitments to increase U.S. production have come from men’s wear specialists that own their own manufacturing, including Men’s Wearhouse Inc. and Brooks Brothers.
Men’s Wearhouse took a giant Stateside step by way of an acquisition last year: Seven months after hiring Joseph Abboud as its chief creative director in December 2012, it bought JA Holding, the company with the rights to the designer’s name. Included in the purchase came a tailored clothing plant in New Bedford, Mass., reuniting the designer with his brand and the factory he supported.
Men’s Wearhouse previously stocked U.S.-made Joseph Abboud suits, but the program expanded substantially following the acquisition.
“This is an enormous focus for Men’s Wearhouse,” Abboud told WWD. “Customers see our commercials and come into the stores asking for the ‘Made-in-America Joseph Abboud suit.’ And our position has been that we’re not proud that we simply make it in America, but we’re proud that we make it well in America. We’ll gladly put our product up against anything anywhere in the world.”
Men’s Wearhouse has used the designer name and product at the top of its good-better-best assortment, pricing the suits at $495, but that’s $300 or more below the company’s typical price point in its earlier incarnation as a wholesale brand.
“And for an extra $100, we can turn a custom suit out of the factory in three weeks,” said Doug Ewert, president and chief executive officer of Men’s Wearhouse. “The JA suits, so far, have exceeded all expectations and plans. We originally thought it would take until June to get the product into all our stores, but the demand at the stores that have it has been so strong that now it took us until October.”
The New Bedford plant is running at capacity, close to 300,000 units a year at the current pace. Abboud said capacity topped out at about 252,000 units a year prior to his sale of the trademarks in 2000.
Plans are in place to expand the plant’s output, meaning the worker head count, nearing 700, will grow, possibly by as much as 25 percent. At the time of the acquisition, the staff numbered 450.
“Doug was clear on this from the beginning” of Men’s Wearhouse’s talks about buying JA, the designer said, adding, “He told the sellers that they were working with the designer, but they wanted the brand and they wanted the factory.”
Since the skilled labor needed to produce the half-canvas suits was available in only limited supply in New Bedford, Men’s Wearhouse has set up “a bit of a university,” in Abboud’s words, that trains a half-dozen or more workers a week.
After acquiring rival Jos. A. Bank for $1.8 billion in June following a back-and-forth battle, Men’s Wearhouse could increase domestic production at its new asset. Ewert views Joseph Abboud as Men’s Wearhouse’s house brand, “but I think a great quality American-made suit would resonate well with the Jos. A. Bank customer.”
The ceo sees other opportunities to boost the representation of U.S.-made products in the Men’s Wearhouse and Jos. A. Bank stores and, for instance, will be introducing U.S.-made Joseph Abboud shoes next spring. He said, “The Joseph Abboud proposition was that we could sell the same great suit for less than you once paid for it elsewhere — we could bring economies of scale to domestic production and pass on the value.”
Could that lead to other acquisitions involving domestic production? “We don’t have the appetite to do other acquisitions right now, but we can easily do partnerships without having to buy something, like we do with Vera Wang,” Ewert said of Men’s Wearhouse’s exclusive offering of Black by Vera Wang tuxedos.
Brooks Brothers, long a champion of American style and production, had been the largest customer of the Southwick factory in Haverhill, Mass., but the plant faced the real possibility of closure as the recession of 2008 brought demand to a near standstill. Claudio Del Vecchio, chairman and ceo of Brooks Brothers’ parent Retail Brand Alliance, stepped in and bought the factory, saving 315 jobs in the process and adding to a domestic production portfolio that already boasted a neckwear factory in Long Island City, N.Y., and a shirt plant in Garland, N.C.
“We do manufacture some sport coats to hit a price point overseas, but virtually all of our Brooks Brothers core tailored product under the 1818 label is produced domestically,” said Paulette Garafalo, president of wholesale, manufacturing and international at Brooks Brothers.
Brooks Brothers was founded in 1818, making it the oldest men’s clothier in the U.S.
Unlike the JA plant in Massachusetts, all three of the Brooks Brothers plants engage in third-party wholesale businesses, Garafalo noted, although more than 80 percent of their capacity is dedicated to Brooks Brothers’ stores. The company seeks to avoid too high a concentration of its production on a single look or retailer, even if it’s part of the same company.
“And it’s also very important for our tailors and other workers to be exposed to different fabrics, silhouettes and trimming,” she added.
Production was running at about 250 units a day when the plant was purchased and now is approaching 700 units, with a target of 1,000. Included in that figure is the store’s made-to-measure program. Off-the-rack 1818 suits range from $998 to $1,298 at retail, with an average of about $1,200.
The patriotism theme is approached carefully. Arthur Wayne, vice president of global public relations at Brooks Brothers, said a U.S. flag is affixed to U.S.-made garments, and the retailer produces special “Made in the USA” magazines, catalogues and e-mails and calls out U.S.-made products on its Web site.
“This all really speaks not just to our long history, but our connection to American heritage and style,” he said. “I like to think we do it pretty tastefully. It’s authentic, and it’s our story to tell. We’re not inventing anything.”
Garafalo noted that Southwick invented the soft-shoulder construction closely associated with the brand as well as the store. “‘Made in America’ means more outside the U.S. today than even inside,” Garafalo observed. “We feel it’s extremely important to be able to say that we’re an American brand with an assortment that is both made in America and has its fashion origins in America.”
While Men’s Wearhouse and Brooks Brothers have gone the vertical route, acquiring production assets as a means to enhance their value proposition, a growing number of apparel and accessories firms are engaging in what’s sometimes called “disintermediation” — that is, taking their products directly to consumers via e-commerce and thereby streamlining cost structures that had contributed to less competitive pricing for fabrics made by U.S. workers.
“The retail business was built on access, but, as retailers moved into the suburbs and across the country, the cost structures supporting it got larger and larger, and the brands in the stores, even great old American brands, had to find ways to accommodate them,” said Bayard Winthrop, president of American Giant, the e-commerce pure-play that sells American-made sportswear basics such as solid sweatshirts and jerseys. “So, brands were moving their production out of the U.S. and chipping away at quality. Now, whether you’re talking sportswear or microbrewery beers, there’s been a real desire to invest in quality and invest in American-made.
“The access issue began to be solved when the Internet came along,” he concluded.
Launched in 2012, American Giant’s business, owned by Winthrop and a group of investors, grew sixfold last year with no marketing budget and is getting a rate of 60 percent repeat business from its male customers and, more recently, their female counterparts.
As the line has expanded, so has its manufacturing arrangements. Those started with production from SFO Apparel outside San Francisco and have grown to include three knitwear plants — two in North Carolina and one in California — that were previously running at low capacity. American Giant is making investments to help them gear up for increased business. Bottoms are slated to be added to the assortment shortly.
“One of the biggest mistakes brands have made is asking customers to make exceptions for American-made merchandise,” Winthrop said. “That shouldn’t be necessary and shows a lack of innovation in the industry. We can sell a high-quality garment for $80, put $40 of fabric and make into it and still make a 50-point margin. A conventional wholesale enterprise would have to get it made for $12 to hit that price point.”
J. McLaughlin produces 30 to 40 percent of its collection domestically at its 40,000-square-foot factory in Greenpoint, Brooklyn. That’s 2,000 to 3,000 units a week, primarily cut-and-sewn knits, as well as woven dresses and some other classifications. Adding to the domestic program in the past year, the 85-store specialty retailer started to source some domestic denim, as well as domestic upholstery fabrics used for dresses.
“Fashion trends are increasing the validity of domestic production,” said Kevin McLaughlin, cofounder and creative director.
He noted that, in some cases, the advantages of getting the sewing done in Asia are often negated by import duties.
“I have a number of products I can make in this country for marginally more money than out of Asia,” McLaughlin said. “Production costs have gone up in Asia, usually driven by the duty rate on the particular fabric. Nylon is an example of that. It is somewhat expensive on the duty rate. If we can get the response time down, it often pays” to have the products made in the U.S.
McLaughlin is uncertain of how solid a selling point a U.S. origin represents, saying, “That is a debatable point. People say they prefer ‘Made in the USA,’ but do they still say it if a $75 item goes to $125? In my view, price drives the deal, usually.”
Among other specialty retailers, the embrace of the U.S. market has been less tight, although there have been instances of moves to use production in the Los Angeles market, such as J. Crew Group Inc.’s premium Point Sur assortment of upscale jeans, which calls out not only country of origin but, in some jeans, the Japanese selvage denim used and, in others, the U.S. pedigree of the fabric from Cone Mills’ White Oak unit.
But specialty chains remain constrained by price concerns, even as some have brought production closer to home, such as to the Caribbean Basin, to better compete with fast-fashion retailers on speed to market.
“For a long time, it was about pricing,” said Janet Kloppenburg, analyst and president of JJK Research. “Teen retailers are already doing more in the L.A. market, and, as prices in Asia move up, you’re hearing about more interest in tops in this hemisphere as they become more competitive. It’s still about pricing, but speed is becoming a bigger factor.”