The San Andremart Fault

October 15, 2009

Two tectonic plates are colliding in the apparel industry, one sliding beneath the other, that is causing all sorts of trembling and destruction around the world, in nations, and in factories.

One plate is all of the costs of the apparel-producing nations and regions themselves and the owners of the production within them.

The other plate is unrelenting pricing pressure from apparel brands and retail.

The nation plate is the heavier of the two, consisting of massive public sector investments in what only the country can do – infrastructure, roads, finance, energy, logistics, et al – and what the private sector must do – investments, compliance, sustainability, modernization. Back ‘in the day’, all apparel factories did was sew and margins were enormous. Now all they do is invest and the margins are slim to none.

The customer plate is characterized by this quote from the article In Recession, China Solidifies Its Lead in Global Trade, October 13, 2009, NYTimes, “The buyers are getting more and more tough in bargaining for lower prices, especially American buyers....They offer $2.85 per pair of jeans for a package of a dozen, when the reasonable price is $7.”

$2.85 for a pair of jeans. Is this possible? All that denim? The special thread? The zippers? The tags? The pocketing? Cutting? Sewing? Finishing and finishing and finishing some more? The cafeteria? The benefits? The wages? Water treatment? The energy costs? $2.85?

I call this the San Andremart Fault, not that it is the fault of any one mart. But there is fault. And the plates are most definitely colliding. And Asia has every plan to be the big one left standing.

Do you read the China Daily News? We do ever since traveling there several years ago. One sample article is http://www.chinadaily.com.cn/cndy/2009-10/15/content_8795284.htm

Another article is titled "Integrated travel network crucial to masterplan" which lays out how China is linking together its various production regions. They have spent $20 billion on roads each of the last 5 years with no end in sight. You have to see them to believe them, and we have. The fact they have a masterplan and are so successful in implementing it should be a huge cause of concern to those regions in the ‘land of not-China’.

Yet another article is "Future 'city clusters' envisioned for vast economic heartland". These are the supply chain cities they are already famous for building such as ‘tire city’, and ‘golf club city’ and on.

And finally we saw where China, Japan and South Korea are now actively in talks to establish an "East Asia Community". There go those pesky Asian Five Year Plans again – plan your work, work your plan. Can you imagine a US/Canada/Mexico/Caribbean/Central American/Andean ‘Community’ that would work as the Asians intend to create theirs? What a chase mode, fast fashion, full package, screamingly fast replenishment production machine that could become.

So, given all of this, I ask you, is the problem in this hemisphere the plates or is the problem the faults? And of whom?
 

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