AAP Network Blog

The U.S. and the 'Region'

February 10, 2010

 I would like you to read the following comments regarding the US response to Haiti:

.....Prior to the devastating January 12th earthquake, apparel manufacturing was one of Haiti's most important industries, employing some 25,000 workers and accounting for more than three-quarters of the nation's export earnings, with 82 percent of the exports going to the United States.

....industries "play a responsible and proactive role in Haiti's overall recovery."... infrastructure problems, factory capacity levels, workforce training and sourcing patterns.

....the U.S. apparel industry has a long partnership with Haiti and is "ready to be a cornerstone of Haiti reconstruction." .... making sure growth is sustainable and continues into the future."

.... By renewing pro-Haitian provisions in U.S. trade law, streamlining Customs processes and opening up avenues for foreign investment, the U.S. can have a significant impact on this fragile economy and restore a much-needed sense of normalcy."

.... It is more important than ever that this two-way relationship be continued and expanded. The legislation will put Haitians back to work at a crucial time, and will help provide long-term markets for their products that will help build the foundation for economic prosperity and political stability.

This is all good. It is the right thing to do. But, why did it take an earthquake? This response of Haiti is what these very same people should have been having about the entire region all along – that it is strategically vital both ways, to provide stability, to ensure security, to create wealth, to sustain jobs, to recognize the tightly wound cultures of this hemisphere, to see this region as a ‘flat world’ when it really has always BEEN a flat world in our own time zone. Why did it take an earthquake?

How do you define ‘social responsibility’? If you define it as being responsible for societies, then this new focus on Haiti by US brands and retailers is the ultimate in social responsibility. But why wait for the next earthquake?

Everywhere you listen in our country, you will hear Spanish spoken. If in Florida, throw in some Creole. We are what we are. Our cultures, our supply chains, our commerce, our destiny in this hemisphere is very tightly wound together. To illustrate this took a devastating earthquake. But an even stronger force threatening it is ignorance of the importance of the responsibility we all have to proactively, “play a responsible and proactive role in (the region’s) overall recovery” and to build “long partnerships” and to exercise balanced “sourcing patterns” in this hemisphere and to “make sure growth is sustainable and continues into the future" and to “have a significant impact on (these) fragile economies” and to be sure “(these) two-way relationship be continued and expanded” and to “provide long-term markets for their products that will help build the foundation for economic prosperity and political stability”.

Haiti, The Dominican Republic, Mexico, Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, Colombia, Peru and above all else, the United States. This is a supply chain region, and within it AAPN members are its spinal cord, directly connecting brands and retailers to factories and their suppliers. It doesn’t take earthquakes. It just takes stakeholders. This kind of reaction to crises needs to be ongoing acceptance of responsibility before they occur. And we do that.

Join this effort. Commit to this commerce. As we see first hand, nothing stops poverty like a job. And with company jobs comes country and regional “economic prosperity and political stability”. It took an earthquake to highlight in Haiti. We hope this email highlights the actual and true big picture responsibility we all have for this entire region.

Mike

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AAPN Tactical Network responds to Haiti

January 13, 2010

At 10:30 AM this morning, I activated the AAPN Tactical Network in response to news from Haiti by sending a high priority broadcast to our over 600 people in AAPN. My question was simple – did anyone know how Jean-Paul Faubert, Alain Villard, Marie-Louise Baker, and Joe Stephenson, who we assumed were in Port au Prince yesterday when the 7.0 Earthquake hit, were doing.

By 2 PM today, we knew about each of these 4 people, in detail. They are fine and they are busting their butts exactly like leaders do when caught in the cross hairs of an emergency. In fact, Jean-Paul - jpfaubert@palmapparelgroup.com - wrote us saying, “Alain, myself and our families are ok. We are assessing the material damage and helping others that are not as fortunate! It is bad. I am not sure what you can do to help. Right now we need doctors, hospitals, medicine and the us army corps of engineers with lots of equipment to take out the few remaining survivors from under the rumble! JP”

The AAPN Tactical Network generated over 80 email responses back to us, each of them starting a thread from our member to their own respective web of relationships, eventually reaching these 4 people, and who knows how many hundreds of others too.

Being a retired Air Force telecommunications officer, I know how we used to respond to emergencies like this, with plane loads of air traffic control, voice and data systems and the skills to operate them. We were known as the “FILO Force” – first in, last out.

Today, that role has been perfected in our country, and I mean PERFECTED, by Walmart.

But, this is Haiti. There is no Walmart in Haiti. Have you ever been there? We have. When you went, did you stay at the luxurious and distinctive Hotel Montana? Its gone. Repair their infrastructure? They never had an infrastructure.

This will be a time that tests our souls on a personal level. I have gotten notes from people willing to leave work right now for Haiti and go wherever their church sends them.

On a professional level, the merits of strategically balanced sourcing will become REAL important to some brands I know quite well because there is going to be a disruption to production in Haiti and they will not be excused for being late by their customers.

Know this - Jean-Paul Faubert, Alain Villard, Marie-Louise Baker, and Joe Stephenson are four of the smartest, kindest, most successful and charismatic people I have ever met. They’re one-in-a-million. When they tell us what they need, you will be the first to know.

Thank God for this practical and proven network of you people, for your instant response to this emergency and for the chance to do the right thing.

Wow.

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Day 1 4:55pm I thought we had hit some potholes that we might not have seen. But as we kept moving slowly with no potholes in front of us, the shaking of the SUV continued and worsened. The car in front was wobbling as well and at that point I knew something was amiss. Looking down the road and along the sides I began to see what looked like objects falling from the sky, blocks from building walls and wooden beams, with dust filling the air. We stopped in our tracks, trying to hold onto the doors and the seat to keep from being thrown from side to side or front to back, as well as up and down. The shaking of the car was as much as two feet from side to side and front to back, while at the same time bouncing up and down. I heard a thud. The concrete block wall lining part of the street to our side had fallen a foot from the passenger side of the car where I was sitting. I pushed myself to the center of the seats, extending my head as far back and away from any windows as possible, but trying to maintain sight of what was happening outside, hoping as well that nothing would fall on our roof. Didn’t know if it was best to stay in the car or get out, but we stayed in. It felt like a Disney World ride, but one that wasn’t engineered, and not knowing if and when there was an end. It wasn’t staged. No one was at the controls. People from one end of the street were running downhill while those downhill were running uphill, both groups thinking there was safety at the other end of the street. That is, those could walk or run during the tremble. Most people were first falling down only to try to get back up and falling once again. Some people stood mesmerized in a panic turning in circles. Others were crying over someone that had been injured or even killed, crushed by something falling. Women and men holding young injured children were running down the street, looking for a place that could somehow miraculously help heal them. It lasted about 15-20 seconds, but seemed like it would never end. The shaking slowed down and finally stopped. A man came running up to the side of my door, knelt down and threw aside three, still joined, concrete blocks and picked up a little girl about 4 years old from underneath to take her to shelter. She wasn’t visible from inside the car, lying inches from the bottom of my door. She was bloodied and I felt somewhat of a guilt not having spotted her sooner than he did, considering I was inches away. My escort was a policeman during this particular ride so I felt safe among all the turmoil now going on, as least as far as anyone deciding to rob the only foreigner on the street. I stepped out of the car to see if there was anyone else that was in possible need of help that was nearby, not that there was really any assistance we could provide except for comfort or to remove someone from under rubble. I felt for a short while that I couldn’t stand up myself without holding on to the car, still feeling a wobbly effect, whether imagined, something still in my body as an after affect, or if it was still trembling a little bit. A man half walking and half running with blood running down from his skull grabbed my hand. I pulled away as there was really nothing I could do for him. He turned away and just stood looking down the street. With people lining the streets it was impossible to move the car for the moment. People were screaming. Some were shouting prayers, others screaming in fear, while others screaming over a lost or injured loved one. We waited a few more minutes before turning around to head home. As we rode down the street we saw more people carrying children trying to crowd into the public transport pick-ups, in Haiti called “tap taps”. It happened a few minutes before 5pm so it was now beginning to get dark outside. We had been in route to the downtown area, which ran through one of the poorest sectors of town. Incredibly, most of the home made buildings by the natives were still standing, but as we got back on the main streets we saw that the commercial banks and other large buildings were collapsed. There was no cell service. I was unable to call anyone else to see if they were ok or not. I would just have to wait to get back, a long 20 minute ride. Once I got back I found that our group was safe, but without the phone service as well as internet, there was no way to inform our families that we had survived, and as I write there is still neither. I got back to the house at the same time the rest of my group was arriving, they having walked from the factory. We found the house intact with little damage. The pool was missing water, my boss (Joe Stephenson), who I had dropped off at the house before leaving for downtown said the waves in the pool were responsible for the foot of water missing. We checked our generator for electricity as city power was out and we expected it to be for some time. We were all anxious about this particular machine. It provided us with our water flow to the house, the ability to cook, as well as giving us the fans in the heat of the day. It will later serve us to communicate with our internet when that signal resumes. The first thing we saw when we checked it was the gas tank over on its side, off the stand it needed to be on, but still full. 5 of the guys managed to lift it back onto the stand. It didn’t look damaged. First good sign. We then checked around the generator to see if anything else appeared to have damage. Aside from the exhaust pipe leaning to the side it looked like it was in good shape. We decided to give it a try. Our prayers for the moment were answered as it started up and the house came to life with lights. Our water line was broken and we managed to fix that. It had been crushed by the wall at the back of the house falling over. I found my bedroom a mess with the armoire fallen and most of the items on my desk and dresser on the floor or close to being so. All the furniture was rearranged. We ate a quick dinner, most of us with very little appetite. We went to the hotel 3 blocks away that had remained intact as well, hoping to find someone with an international phone or possibly internet service, neither of which we found existed at the moment. But we found lounge chairs around the pool which would serve as our beds for the night, since they were outside and safer than indoors. The aftershocks were trembling about every half hour. The pool at the hotel was somehow leaking as we saw the water level diminishing and was already half empty. One person in our group was a guest at this hotel so we got the sheets out of his room to use as covers and protection from the mosquitoes that are common in Haiti, while others had brought some type of blanket to use. I covered myself from head to toe as did the others, and tried to sleep, while at the same time trying to stay alert to any tremors that could be another quake instead. Day 2 I managed to get a call out to the US this morning, finding a scarce signal that has yet to return, to inform that I was ok as well as the others in my group, but it was the only call that any of us were able to connect with. We rode to the factory to see the extent of damage. We were fortunate there as well having had some people with only minor injuries and no deaths. Rubble was on the ground. Pieces of the walls were gone. The stairwell to the upstairs was cracked with pieces of blocks from the walls on the stairway. The wall at the halfway turn of the stairwell to the outside of the building was gone, which was also used by some of our employees as they jumped out to safety, not wanting to wait to get out with those in front of them. People were scrambling to get out with only themselves in mind. The support pillars had cracks and shifts in them. Machines were moved. Rolls of fabric were on the floor. Cartons of finished work had fallen off the prepared pallets. Dust, powder, and debris were rampant. Lights hung suspended only by the electrical wires attached to them. Other factories were not as fortunate as one had a complete wall fall and killed 3 of the workers. What we can be thankful for from the factory is that the diesel tank is still standing and will provide us with diesel for the home generator for the next couple weeks until things take some kind of order and the fact that we just had a fresh supply of purified bottled water delivered to the plant that will provide us with what is normally taken for granted. Our pickup was low on gas. A few of the guys went to find some gas, afraid it was going to be impossible. Luckily they took two containers and found a gas station with gas. With too many people gathered around the station they were forced to fill the containers over and over and take them to the truck to put in the tank. But they managed to fill the tank as well as the two containers for a little extra later. We left to see if we could find a supermarket open to stock up on food. The usual grocery store we shop in no longer exists, while all the others were closed. On the way we passed close to the epicenter of the quake, about 2 miles from where I was at where it happened. One large building after another was either collapsed or partially so with the remaining portion tilted, or with large sections of walls fallen out. The two major hotels that house most of the business travelers further up the mountain no longer exist, both having collapsed in the same manner as the twin towers. Workers are digging out people. Parking garages are one solid mass of concrete now with no space between floors. Dead people lie covered in the streets, unfortunate victims, some abandoned while others with people around them crying and praying. Everyone is on the streets, afraid to go into a building for fear that the building would collapse on its own or an aftershock would arrive and cause it to collapse. We have had numerous aftershocks, but none that caused much more damage. Day 3 I finally got some much needed rest last night. The aftershocks appeared to stop around 7pm last night and around 10pm I slept inside, having moved from upstairs to downstairs with better access to the exits. Joe accepted a ride to Dominican Republic, the other half of the island, and promised he would write and call our families. There’s nothing more we can do for the moment except wait for the infrastructure to at least get the basics working again. The United Nations, already with a presence here on the island is out and working, both in rescue efforts and repairs. I heard rumors that the chief of the United Nations was in the country during the quake and was one of the victims at the major hotel that collapsed. The airport does not have departing flights. I visited the hotel nearby again an hour ago to check on phone service as well as internet. What I learned was that they have the internet tower that supplies the signal to the area, but that it is down. They are waiting for Hainet, the internet company, to come put it back up, but don’t know exactly when they will arrive. They have satellite TV, so there was a weak signal with CNN. I watched for a short while seeing the reporting on Haiti, learning aid was on the way, and knowing the world knew what had happened. What I didn’t see reported was the lack of phone or internet service, which would explain our lack of communication. I saw that Obama said that Haiti would not be forgotten, but that message would not reach the population here now as no one has cable service without the satellite. 4pm I’m shaking again, the same as I do each time after feeling an aftershock and running outside to be sure it’s not going to be major again. The sounds of helicopters overhead are increasing with time. 5pm We went to the free zone to the factory to pick up refills on diesel and water. The free zone, which is where all the sewing factories are located, is also the home base for the UN. Today we found the street lined with mobile trailers that had arrived from the Social Assistance Department of Dominican Republic. The trailers were portable kitchens and were being prepared to hit the streets to provide some food for all those in need. After making our stop at the factory we rode out a ways to see if we could find a signal for phone service, but no luck. On the way we saw the first two portable kitchens out with two lines of people a block long and more running to the back of the line as word spread that food was available. Each person was pegged to the next in order to prevent anyone from slipping into line while the UN force watched for the same and tried to maintain an organized and calm procedure. Haiti, which was starting to show a little progress in rebuilding the country with efforts to put people back to work in the sewing industry, with investors from other countries, with increases in the minimum wage, a HOPE program by the U.S., and clients in the sewing industry starting to see benefits of coming to Haiti, will be devastated again with all that at a standstill. Those two hotels that collapsed housed 90 percent of the business travelers. Factories are damaged and will take months to make the necessary repairs or to make moves to new facilities. What was once a bad infrastructure is now worse, and I feel for the people of Haiti. Our workers have been dropping by our house, some telling us their families are ok, while others tell us how many they have lost. Day 4 Friday 5am. I woke up hearing a ticking sound which was my table rattling, and felt my bed shaking. Grabbed my shoes and computer bag, my only future means of communication besides the phone, and ran outside again. Not the most pleasant way to wake up. We waited outside for a while to make sure all was ok again, while in the meantime I turned on my cell phone to again check for a signal, but to no avail. After 15 minutes I heard the sound from my phone indicating a change in signal. I immediately started dialing until finally got a connection with home. Spoke to my wife and assured her we were fine, at least with water, electricity, and food. I then dialed out for each of the others on my team so they could do the same, as my phone was the only one with some minutes available. I felt a sense of a relief knowing I was able to assure them we were alive and well. We’re still waiting for internet service. With each tremor we check the cracks in the walls on the house to be sure there are no new ones or that any have not changed for the worse. We can only wait until there are services so that we can find a way out and home. In the meantime I have by essentials for survival in my briefcase and a small bag, both of which I grab and run with from the house at the slightest tremor. I guess I’ll go shower, something I don’t relish since it’s cold water, while I also rush to be sure there’s no tremor while I am doing so. 9pm Got internet service and able to communicate with everyone, as well as see the US news reports. In some ways I didn’t realize just how bad it was out there since we have stayed close to home since it occurred. I wrote this account to keep me busy during the past few days and thought I would share it with you. Wayne Cooperman
 
Wayne Cooperman, QRM S.A. 12:04PM 01/16/10

The Top 10 MUST-DO Apparel Marketing Tips for 2010

December 22, 2009

 Well, its that time again, New Year’s Resolutions. This year, far too many companies did the exact opposite of marketing, they pulled the plug on all of it, thereby dropping off the radar, sending the market the signal they were in crisis. A crisis is a terrible thing to waste and many did. So, for 2010, we scoured the files and the feedback to produce this short list of things you can do to get seen, found, understood and reached because what you are trying to sell is exactly what someone is trying to buy.

1. Define Yourself, your Expertise – use all the words, the internet does: its all about you. Its a what-have-you-done-for-me-today world. Like Norm said on CHEERS, “it’s a dog eat dog world and I’m wearing Milkbone underwear”. Show what you know. Be the go-to person. Stand out from the crowd. Have you solved a customer or technical problem? Share your experience. Customers will love the extra information. Prospects will have reasons to choose you. Create content on one of the busiest websites in the industry, aapnetwork.net. What are the issues? What are you doing? Display your passion for all to see, and update it constantly.

2. Control Your Content, Counter the Bad Data – Blog, Video, Articles, Press Releases, Slide Shows: you would be amazed the amount, the volume and the detail available on you right now either free (and growing) on the internet or through expert services like Panjiva. Shipping data, with exact volumes; who your customers are, with exact volumes; annual sales; your credit score; officers; issues and much more. There is no-one to call to fix it. But you CAN counter it with content that is under your control, the ‘good news’ about your company and someone to call to help you – us at AAPN and aapnetwork.net online.

3. Catch the Wave, Which Right Now its Sustainability: sustainability is the new status symbol, except this one isn’t a fad, its a commitment, its taking responsibility, its the right thing to do. But what are its elements? We think there are three – the environment obviously, the water, air, land; the people, society, the community, a living wage, a higher standard of living; and finally the company, the country, the economy, making a profit to fund sustainability, creating wealth. At AAPN, we believe ‘nothing stops a bullet like a job’ so our focus is ‘people’ and the helping the ‘company’ make a profit. Jobs are the easiest measurement we can track over time, it tells you how a company is doing, countries too. Our annual meeting May 2-4, 2010 on Sustainability is your time to take ownership of jobs.

4. Question Trade Shows, Ads, Meetings, Travel and all ‘Claims’: hey, its the old 40/40/20 Rule of Marketing - 40% of Marketing is the List (the tighter the target, the better pre-qualified); 40% of Marketing is the Offer (always nice to solve a problem prospects agree they actually have); and 20% is what you spend all the Money on. This is the year to market smart and direct. The big supply chain that is our membership runs up and down this hemisphere and is the spinal cord of the industry connecting factories to brands and retailers. A good network saves money, reduces travel, speeds up information, makes introductions and puts you 1 or 2 phone calls away from anyone you want to meet.

5. Show Up; Be Seen; Get Known; Stay Safe: 80% of success in life comes from just showing up. Belonging to AAPN or any other organization asks you to give what you have the least of, your time. The one thing you can give and still keep is your word. Just as eventually all great ideas degenerate into real work, great relationships start from showing up, doing face-to-face networking. That’s why we always open our meetings by SLOWLY introducing everyone so networking starts by design up front instead of by accident, if at all. AAPN is about creating relationships that buffer the shock of change, before the change hits you and its too late. We have your back.

6. Sponsor Something, Be a Benefactor, a Stakeholder: 7 years ago, Sue Strickland had the radical idea to create a special Reception for Sourcing Managers at Material World the night before the show opened. It was going to cost $10,000. Suzy Ganz of Lion Brothers made it easy for us by donating half. Her investment in us will live forever. She showed the industry she cared enough about factories, suppliers, members and prospective ones to sponsor an event that quickly grew to 350 people at Versace’s on Miami and put AAPN on the map!

7. Blame Nobody, Expect Nothing, Do Something: the industry does not change because “something needs to be done” but because individuals say “I need to do something”. The aggressive agenda for our annual meeting in May is riding on the backs of over a dozen of our members. It has to be a killer event. It has to be an event where people go back and do something that needs to be done. We hear it more and more, “we are doing this because it is the right thing to do”. Doing something that is right, and still business, is a double whammy.

8. Use it or lose it (not that it cost anything anyway): this year, more original work was published and posted on the internet than was written in all the books ever written in our entire history! The power of the internet, the channel accessed by the mobile device in your hand, the amount of information being organized in the ‘cloud’, the speed of innovation and that most of the tools being used for all of this are “freeware” means use it, because someone in Asia is!! The world is what it is. The most common language spoken worldwide is bad English. If you can speak it, you can talk to anyone. And now you can do this anytime, from anywhere, to anyone.

9. Leverage the Supply Chain: all companies compete as supply chains, period, statement of fact. Take sustainability. Consumers literally believe that their brands and retailers are taking care of all the risks and wrongs of the world on their behalf. So, whether you own the factory or know who made the zipper, in the end, in the court of public opinion, its your fault. That’s why we believe you must ‘sell as a team’ with your suppliers and why we work to help customers ‘buy as teams’. Eight of ‘us’ met with 12 of ‘them’ earlier this year and it worked. Now we’re working on how to keep score of all of this.

10. Meet your Customer’s Customers’ Customer: and you’ll learn something. Just because we have a network of world class suppliers as members does not mean we have a world class supply chain in AAPN, but we’re REAL close. A meeting where you’re at one end of the chain hearing someone from the other end read you the riot act about why Asia is so much better than you is uncomfortable, to put it mildly. That’s why meetings like ours, of a supply chain, where each person is outside the comfort of their own industry silo, is tough. Nobody gets away with playing anybody. And nothing beats watching a brand meet a factory, a mill, a trim maker and shipping company to put together a sourcing deal over a drink. We know. We bought the round.

So, there you have it. What are your ideas? Do you have tips you can share with us and about 600 others out there waiting?

And in the spirit of the season, another of my favorite Norm exchanges on CHEERS goes:
Bartender: "Hey Norm, Jack Frost nipping at your nose?"
Norm: "Yep, now let's get Joe Beer nipping at my liver, huh?"

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Retailers Scrambling for Inventory

November 06, 2009

Question? When a retailer ‘scrambles’ to chase fast selling apparel where does she scramble to? This is the greatest opportunity for ‘proximity’ apparel factories in recent decades. Its like they say, three things can happen when you pass a football and two of them are bad. Same in retail when you put inventory on the sales room floor. You can sell it at full profit; you can sell out of it and miss that revenue completely (stockout); or you can not give it away and you make nothing (markdown). Now, the problem is stockouts. Factory-direct replenishment fixes that.

If you are a serious, super-compliant, short run, fast turn apparel factory anywhere in the Western Hemisphere, how are ‘retailers’, whoever they are, going to find you? Make no mistake, this is the most serious issue the American apparel industry faces. It is just as hard to find a good factory as it has ever been (unless they are logging onto aapnetwork.net of course) because most factories don’t market, don’t join, don’t show up, don’t create content about themselves, don’t even know how to define their competitive edge or real value.

Well, we’re working on fixing this on a far more global scale. We’ve exchanged emails with our Board of Directors madly all week. We just hung up with Panjiva. And the best thing, we’re meeting in an invitation-only, retail/brand-only, Senior Sourcing-only roomful of executives November 17 in NY to learn from them what they need to know to get to work with you, our members. And then we start a countdown to our annual meeting May 2-4 in Miami which is going to have the most important and definitive agenda in the US apparel industry next year – defining, integrating, setting standards and centralizing information on balanced sourcing; risk assessment; social responsibility; factory selection; strategic sourcing; and best practices from the leading factories of the Western Hemisphere.

This isn’t a meeting for hand wringers and do gooders and students and start ups and lobbies and resisters to change. This isn’t about having good laws, its about making money. This is proactive, serious Top 100, Corporate strategic thinking because sourcing has reached its time and we can help.

Who else is doing this? Nobody. We do this because our motto here is “blame nobody, expect nothing, do something.” It segues perfectly to another saying a member sent me yesterday morning, “'I must do something' always solves more problems than 'Something must be done'.”

We must do something...........its about jobs up and down the chain, here in the US and in the hemisphere, that give us safety and security, creates wealth, raises the standard of living, and stops despots from selling their countries out to the ‘Left.’ We found a great saying that says it all, “nothing stops a bullet like a job.” Take your pick – bullets or jobs. THAT is social responsibility on steroids and brands/retailers are big enough to take responsibility for the choice, with a spectacular direct impact on the societies of every one of us. Its time to show the industry how to do this.

Its time for each of us to come together and do this, because its really something our future depends upon.........

Tags: retail , inventory

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Urban Expositions Cancels Material World Shows

November 03, 2009

Thanks to those of you sending us this just-announced news of the closing of Material World. Actually, we were trusted with this news several weeks ago. It was not a hasty decision by Tim von Gal and his amazing team at Urban Expositions.


In truth, thinking of Tim here, he owns a number of other non-apparel-industry trade shows – and (MY opinion only) none of them featured the political intrigue, challenged margins, reluctant attendance and inexplicable royalties of this particular show. All of his other skillfully managed shows are highly attended, fun, focused, profitable, stress-free and highlights of the year for their respective target markets.

Tim has been a trusted friend, a valued advisor and a rock of calm and insight since we were the first apparel industry organization to endorse Material World, attending our first show September 11, 2001. You can guess how THAT trip turned out – just like yours wherever you were.

We are delighted to announce we signed a contract today for a luxurious hotel at negotiated low rates for our AAPN Annual Meeting May 2-4, 2010.........in Miami Beach. That’s what we’re going to do – fill the Miami date so many of us have to come to expect with a new format and mission-critical content, such as the outcome of our ‘risk assessment’ sourcing executive roundtable in two weeks in New York.

Carlos Arias of Denimatrix put it best when he wrote us recently, “Actually, for me the attraction (of Material World) was the AAPN Reception.........let's go back to basics, to the roots of AAPN, an annual meeting of the core members of AAPN plus special guests. Those initial meetings of the AAPN created lasting friendships that continue to this day.”

That’s it then. Back to basics, back to business and back to Miami Beach.

Tags: trade show , material world , Miami , networking

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I totally agree with Carlos, I think fewer people would have attended Material World if it was not for the fact that they were going to the AAPN reception. AAPN offers a realistic service......Networking. The Annual Meeting has all the posibilities of another stella networking event, increase in attendance and hopefully increase in membership.
 
Peter J. Hegarty 10:51AM 11/03/09

The Industry Changes Overnight

October 30, 2009

In this month’s Harvard Business Review, on page 20, it says, “Managers may believe that industry structures are ordained by the Good Lord, but they can – and often do – change overnight”, Peter F. Drucker, “The Discipline of Innovation”, HBR, May-June, 1985.

1985, huh.

Where were you in the ‘apparel’ industry in 1985, a mere 24 years ago? How many department store chains existed regionally and nationally in the US? How many US apparel factories, owned by brands and independent contractors, did we have (and where were these producers located)? Can you remember all the textile mills, many of which were easy to spot from I-85? And, how easy was it for you to get a pair of Levi’s?

Well, it changed and its changing. As the bumper sticker says, “SHIFT HAPPENS”.

When I came into this industry with IBM in 1990, and did my research to learn the job, I began giving talks about the big 3 trends I found – Globalization (this was 4 years before NAFTA but they were already lobbying for it); Consolidation (we were seeing brands buy brands and retailers merge); and Computerization (VERY self-serving, because this was my job – and my hero back then and into today remains Alan Brooks of NGC, one of the industry’s earliest application software innovators).

Well, you can give this same talk today can’t you. It goes like this - the world is flat; there’s Walmart and not-Walmart; and the internet has set you free.

But the key takeaway for me is the phrase, “Managers may believe that industry structures.....”. Are there industry structures? Really? That would imply there are strategies, there is clarity, there is some stability and predictability. Is there? Or are we still chasing the low cost needle in what-have-you-done-for-me-today mode? For those few who go back to 1985, there is the conviction, as Mark Twain put it so well, “history does not repeat itself, but it does rhyme”. Here is how it rhymes for one.

An AAPN member wrote me a personal email saying, “Many merchants are only used to costs going down. The customer has been trained to this also - they now believe that each year they will be able to get more features and higher quality at a price lower than the year before. But the cold reality is that inflation is coming. And in this current economic environment with unemployment still increasing, it will be difficult for the customer to swallow a higher retail price. So the retailer will be challenged with margin pressure. We have not had to deal with an environment like this in decades - most retailers have never dealt with it due to their age. We are all naive if we think we will be able to continue to obtain lower costs. We are going to have to pay more, plain and simple.”

These comments segue nicely into those Marshal Cohen of NPD made recently at MAGIC, “Retailers don’t know enough to know where the problem is in the chain. They are just now figuring out they do not have the answers and many are getting in over their heads. The advantage is in sourcing and production. There needs to be a new measurement for senior management – not how cheap you got it but if it sold. Retailers are stunned when things get stuck in a part of the pipeline they don’t understand, and this crosses all departments like it crosses the whole chain. Sourcing knowledge – the lack of understanding of sourcing is the issue – this is where you reach out to the people who do know, the professionals.”

Well, these retailers are in luck. The professionals they seek are right here in AAPN, some 600 of them from 180 organizations across all 40 links in our chain. One email from us to them and within minutes, definitive answers back to you. Today, in the internet age, one proven form of an ‘industry structure’ is our instant network of skilled and experienced professionals that gets results. It is how we tie them together that sets us apart.

Since 1981, AAPN continues to find and receive, centralize, accumulate, consolidate, analyze, interpret, distribute then add to our unique library of exclusive industry insights from owners and executives on the ground floor, some of whom go all the way back to 1985. So, yes, the industry does change overnight.......but we catch it in the morning.

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Global sourcing in a world less flat

October 28, 2009

There is passage in an article in McKinsey which says, “Security, safety, and environmental regulations could become new forms of protectionism.” In other words, we will not source from your country because we do not think it is safe or healthy.

Does this mean the opposite could also be true, “that we WILL source from your country because we assign VALUE to the level of safety, security and compliance we see there”. In other words, we are delighted to pay more – higher value means lower risk!

What are the chances of that? Has the needle reached the lowest cost country left on this planet? Will inflation begin to increase the costs of sourcing and the costs of products and the price of garments at the same time high unemployment rocks the very definition of the ‘typical’ American consumer?

As an executive wrote us here earlier today, “Many (retailers) are only used to costs going down - look at the long history of retail prices going down year after year. The customer has been trained to this also - they now believe that each year the cost of a garment will be lower and they will be able to get more features and higher quality at a price lower than the year before. But the cold reality is that inflation is coming. And yet retailers and consumers still have the expectation that retail price tags will remain the same, not increase, and the cost of the garment will be less.”

Interesting challenge isn’t it. How to balance the ever-shifting risks of buying with the abstract chances of it actually selling.  

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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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just-style.com on AAPN and Web 3.0

August 17, 2009

US: Apparel network makes sourcing search easier
17 August 2009 | Source: just-style.com

The American Apparel Producers' Network (AAPN) is making it easier for retailers and importers to find apparel and fabric suppliers around the world via its new website, which uses the very latest in Web 3.0 technologies.

The new platform makes it easier to find and understand what AAPN members do, and how to reach them, faster and easier.

And with a membership that spans Europe, Asia and Central and South America, and ranges from fiber, yarn and fabric suppliers to garment makers, logistics and technology providers, this is no mean feat.

"As webmaster, I maintain over 500 pages of content", says AAPN executive director Sue C Strickland, "which is tens of thousands of words, each now active, each now sourceable under our new Web 3.0 technology".

www.aapnetwork.net is a series of mini-websites, more of a 'business media dashboard' incorporating products, people, services, skills, links, slides, press, bios, news, blogs, videos, Twitter and most importantly, search optimization.

"Business people now control what information they get and we work hard to master skills that make it easy for them to find our members first", says managing director Mike Todaro.

He continues: "In the past, marketing was outbound, ads, calls and mail to get people to trade shows. It was event driven, targeting mass markets, where you hoped to get a 1-3% hit rate.

"Now, that's all changed. Marketing is inbound, continuous. 98% of businesses use Google to find other businesses. They find you. The 'social media' for businesses hinges on continuously updated content. To be quiet is to be unimportant".

Having taken a first step onto this new platform, AAPN is also sponsoring a Web 3.0 workshop at the Material World show in Los Angeles on September 29, 2009.

With speakers including Kurt Cavano, CEO of TradeCard, and Bill Palmer of Activate Media Group, the workshop will cover social networking and emerging Web technologies and their application in the apparel and textile industries.

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Keep posting more cool articles like this. This is what makes me love this site.
 
korea fashion 3:47AM 09/18/09

Back-to-School Shopping Blues

August 11, 2009

Katherine Stein manages U.S. Softline Sales for SGS North America. She has 24 years of experience in the apparel and textile industry, and currently oversees compliance, quality management and reduced import risk for retailers, brands and importers.

Katherine Stein manages U.S. Softline Sales for SGS North America. She has 24 years of experience in the apparel and textile industry, and currently oversees compliance, quality management and reduced import risk for retailers, brands and importers.

Written for the South Florida Times newspaper by Katherine Stein

The school year is upon us again. For parents, that means a few days dedicated to sifting through clothing racks, backpacks, school supplies and other odds and ends.

Some children might be surprised to find this year’s selection of clothing and accessories is decidedly less flashy than in previous years. Likewise, some parents might be surprised to find that products with flashy snaps, ribbons, buttons, bows, zipper pulls, and other components made of metal or pliable plastic seem more expensive this year.

Parents, don’t fret. You might end up paying more, but it’s for good reason.

Following last year’s stream of recalls from children’s products manufacturers, the Consumer Product Safety Commission became the watchdog for the recently passed Consumer Product Safety Improvement Act (CPSIA). Effective Feb. 10, 2009, the new legislation provides stipulations that limit the amount of lead in products intended for use by children 12 years old and younger.

While rules limiting lead existed in the past, the legislation was limited to lead in paint and wasn’t extensively enforced. This new, more defined legislation mandates testing, compliance and certification for all components of a product before that product can go to market.

For manufacturers, the CPSIA means rising costs for lead-free screen-prints, buttons, rhinestones and zippers. Consequently, consumers might see increases in clothing and accessory costs coupled with decreases in the number of flashy clothing designs.

For instance, a manufacturer that used to produce ten-color screen-prints on a clothing line might move to three-color screen-prints because each of the colors must be tested independently from the others. Backpacks might have fewer toggles, locks and other metal objects. The latest girl’s trend might not include rhinestones as a component. Overall, we will most likely see well-engineered trends and lower levels of embellishment.

Adherence to the requirements of the legislation has been superb. There are concerns that bigger brands have the investment backing to survive the rising costs of materials and testing, while smaller designers and manufacturers might struggle with some of the new regulations.

Remember, these new regulations apply to both U.S and international manufacturers. Just because an article of clothing was made in China doesn’t mean it is exempt from the law or crafted from lower-quality materials. Chinese labs are working tirelessly to test products for CPSIA compliance. So, don’t be afraid of buying from China!

Even with the more stringent regulations, concerned parents should continue to check the CPSC website to view information on recalled products.

Editor’s Note: For more information on the U.S. Product Safety Commission, log onto http://www.cpsc.gov/.

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An AAPN Member Report from Outdoor Retailer Show

July 30, 2009

From Don Cilley, Carmel Creative Knits:

This was the first time in over a year that I have been at a show that was - ALIVE! Across the board, both brands and retailers have pulled themselves back into a shell – no inventory risks, no new product risks! Last week the word was that people are ready to get moving again – the market sees real optimism for the 2011 lines. Product development people are focused on new opportunities and getting the product right for a consumer they expect will be there.

Carmel Creative Knits has been promoting RECYCLED COTTON and ECO fibers for the past two years – last week one of those Billion Dollar Majors came up to me and said “I have had your fabric on my desk for the past year – we need to talk.” I had given up on them! I hadn’t tried to set up a meeting with them prior to the show. The interest in GREEN is still out there and coming back. RECYCLED is finally gaining interest over organic.

The “Storm Fleece” was also a major hit. Think of the hoodie sweatshirt you have in your closet – but this one is water resistant. It is an improvement on an basic item that everyone loves to wear, but now with functionality!

We are beginning to see the light at the end of a long dark tunnel. Between now and then – hold on and stay in the game!

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Kingpins - a different kind of face-to-face marketing venue

July 22, 2009

Sue and I attended our first Kingpins show last week. It is a small privately owned show, not a trade show, more of an encounter. It is held twice a year in NY, twice in LA and twice in HK.

We counted 25 exhibitors. Three of our members – FesslerUSA; Denimatrix/PCCA; and Union Textil from the DR – exhibited. They tell us they got their money’s worth.

It was strictly enforced invitation-only so you had next to no students, start ups, kids screaming in strollers and bag ladies filling pockets with freebies. Every store and brand of jeans you might imagine made an appearance. The format is gourmet food all day long, small footprint for the show, located in a loft on 36th and 10th, with a blockbuster rooftop party at 6:30 until whenever.

The theme is jeans and t-shirts. The exhibitors were full package with tons of samples. And they were solidly in the ‘fashion’ space of the industry. It was a two day show. The second day was really slow because of hang over’s from the party at the end of the first day. Two day shows CAN work.

Fortunately, Kingpin’s was one black away from Javits, where the TexWorld show was on and many went to both.  You could sure get in and out of Kingpin’s quickly.

Even though every customer was slowly walked around the show and told who was in each booth, no-one had nametags which actually forced quite a bit of interaction. I loved one moment when I saw someone Twit another booth that “Abercrombie & Fitch just walked into your booth”. Cool.

We spoke with the owner of Kingpin’s about an idea we have to promote the factories of the US, Mexico the Caribbean and CAFTA in this format and potentially at the same time as this event. There’s interest and we will let you know more.

It was an extremely pleasant experience, as focused and non-threatening as a show can get. Nothing beats a top designer with full responsibility coming in, sitting down and asking what is possible.

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Some REALLY Whacky new trade legislation

July 01, 2009

We don’t take sides on legislation but we can’t resist the weight of common sense. This is one the most far fetched, out-of-left-field proposals I’ve read coming out of DC in my life. Now, if you were to substitute ‘DR-CAFTA’ everywhere it says Philippines in the following creative writing exercise, THEN maybe you would be onto something.

Here’s my highlights:

McDermott noted, “that the United States and the Philippines have "mutually benefited from strong economic and cultural ties that date back many decades," until that pesky decade when they booted us out of Clark AFB and other mutual agreements.

This one cracks me up, “McDermott, a member of the House Ways and Means Trade Subcommittee, said the Philippines represents a "tremendous economic potential and enduring political and security significance to the United States."  Really?

I particularly slowed WAY down to make sure I understood each and every word of this staggering new insight, “....and for the first time, US textile manufacturers would have a program that utilizes sewing done in an Asian country.”

By the way, this is a hard kick in the butt of supply chains intertwined in this entire hemisphere including and especially factories in the US. I think some of you out there know the real story behind this. I do but I’m not in a position to broadcast it...........suffice it to say somebody paid somebody a LOT of money to come up with this, and I know some of the guys who collected on it.


Trade Bill Designed To Boost Textile Exports
James A. Morrissey, Washington Correspondent
Rep. Jim McDermott, D-Wash., has introduced legislation that would permit duty-free entry into the United States of apparel made in the Philippines, provided it contains yarn and fabric made in the Philippines or the United States. Its provisions are similar to the yarn-forward requirement in a number of US free trade agreements (FTAs).

In introducing the legislation, McDermott, a member of the House Ways and Means Trade Subcommittee, said the Philippines represents a "tremendous economic potential and enduring political and security significance to the United States."

The bill says the United States and the Philippines share the same concerns and challenges stemming from the removal of textile and apparel quotas worldwide and the import safeguards guards covering US/Chinese trade. It also notes that the US apparel industry is heavily dependent on sewing operations outside of the United States, and for the first time, US textile manufacturers would have a program that utilizes sewing done in an Asian country. The United States has negotiated an FTA with South Korea, but it is bogged down in Congress in view of strong opposition from US automobile and textile manufacturers and others in this country as well as from agricultural interests in Korea.

The law would grant duty-free treatment to apparel products wholly assembled in the Philippines, provided they are made from US or Filipino yarn and fabric. It specifies a wide range of products including men's and boys' shirts, shorts, underwear and trousers; and women's and girls' skirts, shorts, blouses, slacks, brassieres and swimwear.

Noting that the United States and the Philippines have "mutually benefited from strong economic and cultural ties that date back many decades," McDermott pointed to a sharp decline in trade in recent years. He said  apparel imports from the Philippines have fallen by almost $1 billion since 2000, and US textile exports to the Philippines amounted to only about $20 million last year.

Kevin M. Burke, president and CEO of the American Apparel and Footwear Association, strongly endorsed the McDermott bill, saying, "Our efforts to tear down barriers to trade will strengthen the relationship we share with our 30th-largest trading partner while working to benefit our textile and apparel industries."

Peter B. Favila, secretary of the Philippine Department of Trade and Industry, also endorsed the legislation and urged Congress to approve it "as soon as possible."

June 30, 2009
 

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CAFTA and US Yarns/Fabrics

June 24, 2009

Original Article followed by exchanges between AAPN members:

Textile Executives Claim CAFTA Fraud
by Kristi Ellis <http://www.wwd.com/wwd-masthead/kristi-ellis-1871669>  
Posted Friday June 19, 2009

WASHINGTON — U.S. textile executives who at one time supported the controversial Central American Free Trade Agreement told a House panel Thursday that four years of massive amounts of fraud and inadequate Customs enforcement in the region are crippling their businesses.

A subcommittee of the House Small Business Committee, chaired by Rep. Heath Shuler (D., N.C.), heard the first panel of witnesses but later canceled the second panel with the textile executives due to time constraints. The panel said it would review written testimony and communicate via e-mail.

Textile executives are calling on Congress and the Obama administration to overhaul the textile enforcement division of U.S. Customs & Border Protection and crack down on what they claim are soaring levels of fraud in Central America and other trade preference areas.

The alleged fraud in Central America has left a bitter taste with the half of the textile industry that supported CAFTA after receiving assurances from the Bush administration in 2005 that there would be strong Customs enforcement.

Dan Nation, president of Parkdale Mills Inc., the largest yarn spinner in the U.S., and D. Harding Stowe, chief executive officer of R.L. Stowe Mills, which shuttered in January, said foreign companies are circumventing the strict rules of origin under CAFTA and the North American Free Trade Agreement. They said companies are producing yarn in countries like China or Pakistan, shipping it to the U.S. and falsifying affidavits of certification as “Made in the U.S.” to gain duty free benefits on apparel made in Central America or Mexico with the yarn that is then imported to the U.S.

Stowe, whose third generation textile company hosted President George W. Bush at his factory in 2005 during a pro-CAFTA tour to reassure workers the trade agreement would not hurt their jobs, said in his written testimony that “the lack of Customs enforcement was an important factor in our decision to close the business.”

“CAFTA is good for the U.S. textile industry,” said Nation, who estimates 1,200 jobs were eliminated due to fraud and inadequate enforcement, which undercut Parkdale’s business. “It is an important part of it, but it has to be [enforced] the way it was designed. What has happened now are companies like Harding’s and mine are playing by the rules and the cheaters are winning.”

Nation also pointed to government data in 2008 that showed twice as much combed cotton yarn was being exported from the U.S. as was actually being produced.

In written testimony, Loren Yager, director of international affairs and trade at the General Accountability Office, said Customs has made some improvements in textile trade enforcement but “trade enforcement issues continue to present long-term challenges with significant revenue implications for the U.S. government.”

Dan Baldwin, assistant commissioner of Customs, who testified before the hearing was cut short, acknowledged several types of textiles fraud currently exist and defended his agency’s focus on enforcement.

“We recognize the vital importance of the textile industry to this country,” said Baldwin. “We will continue to focus a substantial amount of our trade enforcement resources in this priority area to help protect our domestic industry and its vital role as an employer in our economy.”

He said 68,000 importers shipped $105 billion of textiles and apparel and textiles to the U.S. and paid over $11 billion in duties (42 percent of the overall total collected) in 2008. Of that $105 billion, Baldwin said about 19 percent claimed trade preferences and of that 19 percent, Customs found over 35 percent were ineligible for the claimed preference.

Baldwin, seeking to counter industry allegations, said the agency hired an additional 72 textile import specialists mandated by Congress and currently employs 329 textile import specialists, up from 264 in 2006.

John Peden of Patmos Distributors, Inc. writes: Mike - We have been operating in Guatemala for fifteen years.  Without CAFTA we would have closed several years ago.  Several times a year we receive inquiries from the Dept. of Homeland Security/US Customs and Border Protection requesting information about our sources of yarn and textiles to verify we are operating within the Agreement.   Since we only use Central American spinning mills, we can easily provide the answers to our Customs Entries.   Usually, its just a paperwork question. My point is that they do check, and attempt to keep everyone in line with the CAFTA agreement.   Without CAFTA our Company and employees in the US would cease to exist.   Just play by the rules......

A textile CEO writes:  Mike, the system is broken with regard to enforcement of trade rules and regulations.  Our trade agreements are a joke.  Not unlike enforcement of immigration law.  Those that profit by the lack of enforcement of our duly make laws, rules, and regulations are enriching themselves on the backs of the American Taxpayers.  Frankly, “I am mad as Hell.”

Trade Attorney Jon Fee of Alston & Bird writes: Dear Mike:
Since this is related to my area of law practice, I hope my comments might be of some value to you.
1.    We have a number of clients who receive information requests from CBP and undergo CAFTA-related detentions in the most active CAFTA ports, challenging their CAFTA claims.  This activity is usually consistent with proper CAFTA enforcement.  For example, an information request will ask the importer to provide his fabric and yarn affidavits, proof of movement of inputs, and proof of manufacturing operations in the region.  Affidavits themselves are scrutinized by CBP personnel for authenticity.  We are aware, for example, that CBP sometimes calls our clients' suppliers of yarn and fabrics to confirm that affidavits are genuine.  
2.    But unsupported claims are probably still being made.  Harding Stowe said in his testimony that CBP does not appear to have adequately staffed the ports with trained enforcement personnel.  The biggest problem, which would be hard to solve, is that only the importers are challenged and punished, so that cheating yarn or fabric suppliers don't get caught because they are not responsible as importers.  Consider an importer who receives a false yarn affidavit.  He may have been genuinely duped by a bad supplier.  His goods get stopped, he has to pay the non-CAFTA duty, and he could even be penalized.  But the bad guy who gave him the phony affidavit remains untouched because he is not the importer.  Even the importer has little recourse against him, because the importer probably paid for the yarn long before his import got questioned.  The bad guy probably knows that, for every one of his customers that gets caught, there are many more whose imports are not challenged, so he can keep selling bad yarn and making money without any realistic consequences.  CBP could possibly be more creative in its enforcement efforts by going after the non-importer bad guys and their agents.  The CBP penalty statute can be stretched to cover any person, not just the importer, who participates in the illegal importation of noncompliant goods.  It would be a hard case to build, since most of CBP's enforcement tools are focused on importers; but one or two well publicized cases could have a greater deterrent effect than presently exists.   
3.    Many of the yarn spinners have (I think) documented particular instances of phony yarn affidavits and, as Harding indicated in his testimony, have identified phony yarn and fabric companies.  I assume without knowing that they have presented their evidence to CBP; but I do not know what CBP has or has not done with the evidence.
4.    With all this said, we can be assured that there are many conscientious CBP personnel, particularly in Janet Labuda's office, who are actively and creatively involved in challenging and demanding support for CAFTA claims.  I don't think it is wise to he hypercritical of CBP personnel without giving proper credit to the personnel who genuinely do a good job.
5.    We in the customs bar spend most of our time representing reputable importers in their compliance efforts and helping them lawfully exploit CAFTA's proper opportunities.  Sometimes we find ourselves defending them against unreasonable CBP claims, which can happen even under the best of government intentions.  But we don't run across many bad guys -- bad guys don't consult lawyers until they get caught, and not many bad guys have been caught.  
6.    Unfortunately, we will never be able to measure the extent of wrongdoing.  Like Frenchmen who cheat on their tax returns, illegal importers aren't going to respond to surveys, and their unreported wrongdoing is masked as legitimate activity in census and other trade statistics.
    Maybe I'm stating the obvious; but I felt obliged to my friends at AAPN to comment nevertheless.

Gerald L. Cauthen, VP, Contempora Fabrics, Inc. writes: It says it all in the article. There is no doubt we have lost ground to improprieties in the region and the world.  The gate was opened and the horses called "no scruples" have been running  toward the only food supply, and when the day comes that the food supply is gone, all horses will die.  I think original intent was good but as those of us who foresaw this now know, our worst nightmares were realized through modifications of the agreements, inclusion of everybody (sort of like the TARP fiasco) and lack of enforcement which was known from the beginning.  Help starts at home.  When we can, we help our neighbors.  Then the rest of the world might follow.  But to kill the golden goose who consumes everything not made in the US only hastens the demise of our economy.  Job gains will not be realized with the looseness of today's rules and enforcement.  It even lures US companies to the brink of cheating which is sad.  Ask Harding how it hurt to lose all of his employees.  It hurts every time to see the moves that are so transparent.  We just have to open our eyes.  The world only cares for us when our pocketbooks are open.  Mine is almost empty.  And apparently we are not the only ones.

A journalist writes: The enforcement issue of trade agreements always raises big questions. Lack of enforcement leads to skepticism of new agreements, like FTA's with individual countries. Once a duty free relationship is established, those who have been burned in the past simply question whether a new pipeline for misrepresented goods has been opened.
   Dan Nation's testimony is pretty straight forward - companies are cheating. Blanket affidavits don't work. Customs for some reason has challenges with some of the most blatant cases. The math of US production vs. reported consumption for CAFTA imports doesn't work in some cases.
   In the end, lack of enforcement and cheating cheapens CAFTA and puts a false face on the true effectiveness of the agreement. It is the same with any regulatory body. If FDA does not enforce its regulations properly, the safety and effectiveness of food and drugs are compromised. If law is not enforced, bad guys win while good guys comply.
   Mike, as you raised the question of getting rid of  "yarn forward", maybe lack of enforcement is the best solution -- make the agreement, get the compromises based on the rules of the treaty, then just walk away.....
   Thing thing that got me was that the testimony wasn't anti-CAFTA, it was more about getting CAFTA to live up to the promise that drew the support in the first place.

Bryan Ashby, Carolina Cotton Works writes: As a US manufacturer of textile fabrics, it is our duty to comply with whatever legislation our lawmakers decide on.  When it comes to CAFTA, the rules are simple.  US (or regional) yarn forward.  It appears that this legislation, in its present form, allows our peers from outside the US, who sell to our market here in the US, to comply with rules of origin using the "honor system."  It is unfortunate, however, that there are those who are not subject to our laws, who choose to ignore the regulations for rules of origin for CAFTA.  Unfortunately, as noted in the recent testimony is Washington, that system is obviously flawed because these companies are obviously not subject to the same level of penalties as those of us producing in the US are.  Apparently, there are some who feel that low cost labor is not enough to compete in a global economy.  It is disappointing that there is no justice for those who do business this way.  One must wonder what a US buyer would do if they knew that their supplier was breaking the rules and using CAFTA for duty free trade into the US.  

Scott Vaughn of Recedes in Nicaragua writes:  I have spoken to representatives from the region and all are asking for the same thing – name names !! who is doing this ? tell us who they are and we will tell you where they live !!
    Once again the USA textile industry has forgotten who their only customers are !! or maybe they plan to sell into China, Vietnam, India, Cambodia….. where everyone is in strict compliance with the laws ?
    I know USA customs are in Nicaragua for two weeks right now doing audits in virtually every free zone factory. If they tell us who is cheating we can save customs a second trip down !!
 
Chandri Navarro-Bowman of Hogan & Hartson LLP writes: Mike-
Because the hearing got cut short due to members needing to go vote, none of the NCTO members were able to speak, and Erik Autor of the National Retail Federation didn't get to speak either.  Customs does audits based on risk.  So, generally, when Customs chooses entries to review, it is doing so based on risk factors.  It is not surprising therefore that the non-compliance rate is as high as Customs indicates.  This would indicate that Customs' risk targeting works.  Of the entries that are not in compliance, of course there are some that are intentionally non-compliant or fraudulent, but there are certainly numbers of entries which were inadvertently ineligible or for which the importer simply could not provide the paperwork necessary to provide eligibility.
    It is a real shame that textile executives are trying to claim that CAFTA fraud is what is putting them out of business and that CAFTA is bad for the US economy.  We all know that if importers cannot use preferential programs such as CAFTA, they simply will go source in China or Vietnam and then there will be no regional content in any of the apparel being imported.  The question is, how much textile related production and jobs has remained in the US and in the region because of CAFTA, CBTPA , ATPDEA, Peru FTA and HOPE?
    The lesson here is, apparel imports generate a huge percentage of the duties collected by the US Treasury.  The US Government is in current need of serious cash to pay for bank and auto company bailouts, among other expenses in this economic recession, and going after apparel imports that could potentially provide duties and penalties seems like their plan.  Therefore, apparel importers should cross their T-s and dot their i's and make sure they have verified compliance with the rules of origin of the FTAs or preference programs they are using, and that they have the documentation in their possession to prove eligibility.  We have already started to see an upsurge in Customs' Requests for Information (CF28's) for entries claiming FTA preferences.  This is not CAFTA specific, it cuts across all FTAs and preference programs.  Customs' risk based approach targets certain countries, certain importers, certain types of goods.  So importer beware.

Retail Executive writes: I believe there are probably some elements of fraud related to yarn certification. Both Mr. Nation and Mr. Stowe have the right to call this out. Perhaps this will lead to establishing new standards for authenticating the country of origin for yarn and other inputs that impact CAFTA.  This would not be bad. Perhaps there will be a suspension of the CAFTA program until a full investigation can be conducted.  This would be a disaster and cripple the already fragile sector that relies on CAFTA. Never say never. Is it worth the risk?

    

Tags: CAFTA , yarn , yarn forward , textiles , Central America , trade , laws

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Mr. Nation pointed to goverment data that showed more Yarn was being Exported from the US that what is produced in the US. So shouldn't US Customs be looking for the fraud within the US where is taking place?
 
Sal Llort 1:33PM 06/26/09
Those of us who embrace the US government's programs sometimes wonder if the additional exposure it brings is worth it. A recent C-TPAT site visit was so dreaded and yet conversely proved to be such a positive experience that it restored faith in at least some of the people and processes. They do what they can with what they've got. On the other hand, Congress' arbitrary allocation of TPL's etc. is the ultimate absurdity.
 
Mark Gitomer 10:08AM 06/25/09

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The Elevator Test

May 26, 2009

You know, in 2001, the AAPN really underwent a mission shift from being US factory-centric to becoming a regional supply chain network. What was still missing, however, were the retailers. That changed 4 or 5 years ago when Teresa Nersesyan, then of PacSun, joined and gave us the retail perspective, delivered at a directness none of us will soon forget. Similar messages, kinder and gentler, have settled here from Nordstrom’s, Kohl’s, Target and many others.

Today, if you aren’t talking to your customer, and keeping it simple, you’re missing the boat. But the more senior the customer, the more barriers and filters they have to B.S.

We’ve broken through because we have an honest and true message, and thanks to 55 of you who met in Savannah two months ago at our annual meeting, its simple. In fact, we have it down to an elevator speech. It goes like this:

THE ELEVATOR TEST
For Apparel Retailers
Who want to reduce inventory
The AAPN
is a network of Western Hemisphere factories
Who are full package producers
Unlike agents
We deliver direct factory sourcing
 

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Fashion's Shifting Paradigm

April 21, 2009

This is an amazing article. The wise among you will find the key bullets and suck them into your own list of ‘accentuating the positive’ aspects of your business plan. A key phrase is, “I think that buying something will no longer just be for yourself. It’s buying something with a conscience, how it affects the seamstresses, the fabric people, the manufacturers, the world at-large. I think we were in an economy where it was all about ‘what I want,’ but with every purchase, there is a business and how you can make a difference in somebody else’s life. If that shift happens, it will all of a sudden awaken the consumer to why they’re actually buying something.”

 

by WWD Staff
Posted MONDAY APRIL 13, 2009
Shoppers and store have to adjust to a new reality.

The old financial tricks and merchandising sleights of hand aren’t going to work anymore.

Fashion companies were quick enough to cut expenditures, pare store openings and lean on suppliers to survive the first year of the recession and the start of the credit crisis. But shifting consumer values and brutal economic realities are forcing both the weak and strong to reconsider their reason for being and how they do business.

The paradigm in fashion is shifting. Well-established consumer segments are all changing independently and the industry is scrambling to keep up. The proof is everywhere, from First Lady Michelle Obama’s penchant for J. Crew to Jil Sander’s transformation into fast-fashion maven and luxury’s nosedive.

The global playing field is also in flux with financial pressures bearing down on economies of all shapes and sizes.

“What’s going on is unprecedented, at least in my experience,” said Allen Questrom, former chief executive officer of J.C. Penney Co. Inc., Federated, Barneys New York and Neiman Marcus Inc. “This is the deepest consumer retrenchment I have ever witnessed. It’s like someone turned out the lights and the world changed.”

The advice from retail’s Mr. Fixit?

“Get rid of nonproductive stores. Cut back expectations — cut back the business empire from 10 to 20 percent depending on type of product — the whole business,” Questrom suggested. “It’s about cutting operating expenses, the number of physical facilities, sales, profits, the whole world. It could be four years, five years, or it could be we are in for a 10-year decline.”

Smaller is just a part of the new world order experts and industry veterans see coming.

The next couple of decades will see the coexistence of several “contradictory” distribution strategies, according to Gildas Minvielle, an economist at the French Fashion Institute. Slow and fast-fashion concepts will operate side-by-side and smaller retail formats will return to repopulate town centers.

“[Consumers are] coming back to basics and are less willing to be swayed by marketing campaigns,” Minvielle said. “But nothing’s sure. We could find at the end of 2010 a period of strong growth, and things could completely change.”

Shoppers who for years have subsidized mediocre collections and chains via credit-fueled purchases are reasserting themselves and forcing brands to produce goods that meet the demands of their lifestyles. Simply selling the same old, same old for 20 percent less will not be enough.

The whole economy is coming off of a period of excess, a gilded age of cash flow that covered Wall Street’s sins and filled holes in questionable business plans. Many see the quick growth and flameout of collegiate retailer Steve and Barry’s as just one example of the overabundance allowed to take root in the marketplace.

“What we now have will be a fundamental economic reset,” said Steve Ballmer, ceo of Microsoft Corp., at a House Democratic caucus retreat earlier this year. “The economy is going to have to re-establish itself at a lower level of spending that reflects the real value of underlying assets before we can all start growing again at a healthy rate.”

That’s trouble for high-end fashion.

“The pie is smaller and fewer people have access to it,” said Concetta Lanciaux, principle of Switzerland-based Strategy Luxury Advisors.

Lanciaux said designer labels are unlikely to grow as consumers trade down to brands that offer good design and quality for the price.

That Obama has embraced more “entry-level” brands like J. Crew, and “simple” versus flashy designers is emblematic of the direction. “The consumer can now really discern value for money,” she said. “People perceive what’s fake. Now we want the truth.”

Lower spending means a new world order for the business of fashion, and so far the central theme appears to be a back-to-basics emphasis on the consumer. The problem is nobody’s sure just what the consumer wants now or what they’ll be looking for in the next decade.

“This thing comes at the Bermuda Triangle of the culture,” said futurist Faith Popcorn, founder of Faith Popcorn’s BrainReserve. “Ethics, the environment and the economy are all failing at the same time.”

People want to live the good life — and that life doesn’t necessarily mean shopping, especially for expensive clothes, she said.

And for companies looking for a way forward, the end of easy money only increases the risks. Businesses still find it hard to renegotiate bank loans and tap capital markets, just as consumers can no longer draw on second mortgages or burgeoning stock portfolios for purchases.

“You can really get scorched in a world where the consumer has a lot less money to spend,” said William McComb, ceo of Liz Claiborne Inc. “Ultimately, to become profitable again as an industry and to have sustainable margins, you’ve got to have some real level of scarcity.”

Fashion got caught up in extraordinary consumer growth, expanding store bases and supply chains to meet shoppers’ ever-increasing demand for more and more, risking a loss of market share if they didn’t hit the accelerator.

“We’re going to have fewer outlets over the next year, and it’s going to happen much more quickly than if the business cycle hadn’t screeched to a halt so fast,” said Nancy Koehn, a retail historian and professor at the Harvard Business School.

As painful as that sounds, there could be a payoff at the end for consumers.

“The drama of this moment will force savvy retailers to figure out how to be more distinctive and more targeted,” Koehn said. “We’re going to end up with a more distinctive, and in some sense, more compelling shopping landscape.”

She pointed to the fast-fashion model used so effectively by Hennes & Mauritz and Zara and said it could be re-engineered to suit a higher-end customer.

“This moment is a kind of great trumpet blowing for taking that idea, that rough concept and trying to add some [social] responsibility, some durability or lastingness to it,” Koehn said. “People are looking for purchases that are going to last. It needs to be a few zippy things that people can actually think about acquiring.”

Higher-end fast fashion based on a few key pieces? Just one possibility for fashion’s future. Certainly others have heard the rallying call to quick-turn styles, including the designer Jil Sander, who, after sitting on fashion’s sidelines for several years, recently inked a deal to oversee men’s and women’s apparel for Japanese retailer Uniqlo, owned by Fast Retailing Co. Ltd.

Fast fashion has caught on, in part, because of its clear usability for consumers. It’s a business model that offers shoppers an accessible way to stay current. If consumers once again reign as kings and queens, this is the type of focused business model expected to take root.

From fewer stores to a renewed focus on what consumers are demanding, it is a scary and exciting time in fashion. Even if the industry’s woes don’t rise to the doomsday scenarios facing the financial sector and U.S. automakers, by most accounts, fashion is headed for a significant reinvention as consumers find their footing and the business adapts to structural changes.

The New, Pushier Consumer

Every aspect of retailing, from the number of stores to the looks they carry and the marketing they use to draw customers, could be permanently reordered as shoppers throw their weight around.

“Consumers are getting out of the habit of buying,” said Popcorn, the futurist. “We’re calling the consumers ‘citizens’ and a citizen wants to play deeply in the purchase cycle. They want to say, ‘I want it this way or I want it that way. I want to put my logo on it. I want an Adidas logo on top of a Nike logo.’”

People are angry with their leaders, losing faith in big companies and scared about the economy, said Popcorn, noting that value brands are “no longer a sacrifice, just smart.”

Last month, Stefano Sassi, Valentino’s ceo, said consumers were beginning to take a “punitive” or “moral” approach to buying, meaning that price had to be relative to quality more than ever.

This is a challenge to the predominant mode of thinking that so often equates growth with success.

“If you’re going to truly focus on your core customer, you are going to have to relook at your business and how big your business can be,” said Andrew Sacks, president of marketing and intelligence firm Agencysacks. “The focus should be on being profitable and building a more consistent brand.”

Sacks said the first step is acknowledging the business is changing and might be smaller and focused on a different range of products.

“If anyone’s thinking about it already, then they’re already ahead of the game,” he said. “It’s also about taking a view. If you’re in the middle of the road, you know what happens. You’re going to get run over.”

Thinking smaller would be a clean break with much of the industry’s recent past.

Brands will have to do more than edge out the competition — they will have to satisfy important needs of shoppers, said Paul Charron, former ceo and chairman of Liz Claiborne Inc., who is set to become chairman of Campbell Soup Co. in August.

“When I look at some of the things I did as a ceo, I think I did them for largely competitive reasons and they probably served me well,” Charron said. “But I’m not sure that that’s going to be sufficient going forward. The things that need to be done are going to have to work from a consumer point of view and they’re going to have to enhance your stature with the consumer on a metric other than convenience, which is more accessibility, which is more stores.”

Charron said each consumer segment would react in its own way to the economic tides.

“You’ve got about seven or eight consumer revolutions under way, and no trend observer or researcher or consumer behaviorist has a clue as to what the world will be like on the other side,” he said.

The type of goods that go into stores and how they are presented to shoppers are also changing, and concepts such as “aspirational” are proving to be a moving target.

“The aspirational consumer is going to continue and maybe consumers will become even more aspirational,” said Mackey McDonald, former chairman and ceo of VF Corp., who is no longer affiliated with the company. “What they will buy will be the things that will be important to their image and the statement they want to make about who they are.”

Reaching the consumer will require more targeted marketing.

“I don’t think it’s a time when you can stop communicating,” said McDonald. “I just think you need to be communicating with a high-powered rifle rather than a shotgun.”

Already changes are happening throughout the industry.

A sign of the times: For his fall 2009 runway show, designer Graeme Black switched up his front-row lineup. He invited personal shoppers from stores such as Browns in London so they could see the collection firsthand. “The only way we’re going to move forward is to connect directly with the customer,” said Jonathan Reed, Black’s business partner.

The Price-Value Game

Price is a function of how much shoppers are willing to pay for something, while value is a gauge of something’s intrinsic worth.

It’s a distinction that sometimes gets forgotten.

For example, Gap Inc.’s Old Navy unit faltered after focusing on relatively inexpensive basics without much fashion, said Christine Chen, principal, equity research specialty retail, apparel analyst.

And the stakes are higher than ever.

“In this environment, we are going to continue to see a bigger separation between those who are doing well and those who are not doing well,” Chen said. “But everyone is going to suffer.”

This puts designer and discounter in the same boat.

“As money becomes a critical issue, clients will become more cynical with regard to how they spend it,” said Inacio Ribeiro, co-designer of ready-to-wear label Clements Ribeiro.

“The consumer is so well-informed today, they don’t want to be told how to buy and they feel conned and manipulated by big flagship stores, and by the disproportionate margins the brands are making,” Ribeiro said. “However, the consumer will welcome suggestions, and that is the way forward.”

Fashion’s reliance on ever-lower prices failed last fall, as sale signs shouting 60, 70 and 80 percent off attested. Value is making a comeback across the price spectrum.

“In all of our businesses at every single level, we have been focusing on value,” said Tom Murry, president and ceo of Calvin Klein Inc. “The consumer is responding to great product, but it has to represent good intrinsic value. Even at our designer level, we have men’s suits now at $1,095, and it used to open at around $1,600. Those suits are selling well at full price.”

Last fall’s price drops were so severe that suppliers from every corner of the industry are hoping retailers can hold their prices, even if they start at a lower level.

But that doesn’t mean brands are trimming their price tags simply for the benefit of retail bottom lines.

Stores tried to extract sharper pricing from designers after the fall runway shows in Paris and Milan, but major houses such as Chanel, Prada and Versace were holding the line.

Prices could be heading down for some time.

“Deflation is here to stay,” said William Fung, global managing director of Li & Fung Ltd. The sourcing giant is budgeting for a flat 2009 as its customers are predicting 10 to 20 percent decreases in sales. However appealing the notion of deflation might be for consumers, it’s bad for business. Profit margins are squeezed between fewer dollars flowing into the till on one hand, and the cost to make and market goods on the other hand.

Offering more value seems to be a way through.

“We have to get back to creating innovative product, concepts and merchandising ideas to stimulate and energize the customer,” said Andrew Rosen, president and co-founder of Theory. “You just can’t get away with making clothes and expecting them to sell. You have to be good at what you do. Clothing is not just a status symbol anymore. There has to be a sense of relevancy to it.”

The New Society

Kenneth Cole, who has long linked his brand to awareness of social issues, might find his marketing niche filled with more voices.

The fashion crowd, already in tune with myriad social concerns from women’s issues to advocacy for AIDS research, might become even active as the culture pays more attention to causes.

Donna Karan, for example, is trying to convey a sense of social consciousness through her Urban Zen concept.

“What does it mean to buy something?” Karan said. “I think that buying something will no longer just be for yourself. It’s buying something with a conscience, how it affects the seamstresses, the fabric people, the manufacturers, the world at-large. I think we were in an economy where it was all about ‘what I want,’ but with every purchase, there is a business and how you can make a difference in somebody else’s life. If that shift happens, it will all of a sudden awaken the consumer to why they’re actually buying something.”

Luxury titan Bernard Arnault, chairman and ceo of LVMH Moët Hennessy Louis Vuitton, might also be getting into the eco game.

LVMH is said to have its eye on Edun, the eco-luxury label founded in 2005 by U2 rocker Bono and his wife Ali Hewson. The brand is an attempt to drive sustainable employment in developing economies through the production of organic fashions.

Last month, Arnault demurred when asked about his company’s interest in Eden. “It’s top secret,” he said.

Fifty-five percent of consumers buy organic products, up from 49 percent a year ago, according to survey by WSL Strategic Retail. An increasing number of venues are offing consumers their organic fix. Among the latest: Target’s new Loomstate brand is made from certified organic cotton, and Anthropologie celebrated Earth Day this year with organic chefs and gardening events.

The Global Order

The financial crisis that began with risky mortgages in the U.S. has whipped around the world, making it even harder for retailers and brands to navigate international waters, where consumers and businesses have a rhythm of their own.

The headlong rush to open in developing countries has slowed along with the prospects for growth, said Antony Karabus, ceo of Karabus Management. “The growth rates are nowhere near available as they were a year or two ago,” he said. “It’s not to say there are no opportunities. But it’s not as obvious and it’s not as slam dunk as it used to be.”

Karabus said it has also become harder to tap into the necessary capital to expand and that retailers would become more selective, going after a smaller number of big opportunities. “The execution is much harder in tough times,” he said.

Michael Jeffries, chairman and ceo of Abercrombie & Fitch Co., told Wall Street analysts the retailer would continue its overseas expansion.

Abercrombie will cut the ribbon on flagships in Milan and Tokyo, this year. Copenhagen will have to wait until next year. The firm also sees opportunity to add more Hollister mall stores in the U.K. “We will continue to approach our international expansion with the discipline that the current environment requires and will proceed at a pace with which we feel comfortable,” Jeffries said.

Tiffany & Co. cut its store openings to 13 this year, down from 22 in 2008. But the expansion still has an international flavor. The luxe jeweler has stores planned in Canada and Mexico, as well as seven in the Asia-Pacific area and one in Europe.

An A.T. Kearney study last year singled out the 10 most attractive emerging markets for investment. Brazil, China and India topped the list, which also included the United Arab Emirates as the 10th most attractive market. The global downturn might well force changes to that list, as fortunes rise and fall. Witness Dubai and Russia, which both seemed unstoppable just a few months ago but have since faltered dramatically.

Russia’s gross domestic product is expected contract by 4.5 percent this year, down from growth of 5.6 percent last year, according to the World Bank. The UAE has also been hit hard, with its GDP is slated to grow by just 2 percent this year, down from about 7.8 percent in 2008, according to the Dubai Chamber of Commerce and Industry.

The future of fashion might still lie with global players, but international expansion could be just a dream for some.

The New Austerity

Doing more with less is becoming a way of life in the often high-flying fashion industry.

The austerity can be seen far beyond the end, at least temporarily, of Marc Jacobs’ post-runway party, a twice-annual highlight on the social calendar of many fashionistas. Designers are looking at the economy and dramatically changing how they operate.

“The situation is very serious all over the world,” said Domenico Dolce, ceo of Dolce & Gabbana. “You either waste time commenting on the negatives, or you do the positive thing and do something constructive.” The company’s sales were down in their stores and showrooms and clients delayed their pre-fall buying from November to January and asked to postdate payments.

“Instead of making a certain number of models, you make less,” explained Stefano Gabbana, chairman of the design house. “But this has nothing to do with creativity….You have to do a bit of editing before instead of after. Instead of 1,000 items, you produce 500. Anyway, you send out 50 for the runway….The crisis is there, but we continue to make the collections as we did before — actually better [than before] to sustain all this.”

Empty fashion hype is another casualty of the financial crisis, said Jean-Jacques Picart, a Paris-based industry consultant. “The big trend of ‘fashion for fashion’ is dead,” he said. “Consumers are looking for honesty, respect and value.”

In the past, creativity was channeled in service of the image and desirability of fashion brands, whereas in the future, “creativity will serve the product,” he explained. “Passion and reason will be the two important elements for fashion in the future.”

The nips and tucks are happening everywhere.

“As a company, we’ll be more attentive to our investments, which will need to have a faster turnaround,” said Guido Damiani, chairman and ceo of Damiani SpA, the Italian jeweler. “If in the past we would invest in a new store knowing that we would lose money in the first three years and start making a profit after five, now the break-even target has to be shorter otherwise we’ll hold back.”

Damiani said consumers would eventually get used to the situation and start buying again, but the rebound would be uneven.

“It will take the more mature markets a longer time — maybe even 10 years — to forget the slap of this crisis while the emerging ones will turn out new richness faster,” he said.

The Nuts and Bolts

Making all this happen will require fashion companies to be as flexible and innovative as they’ve claimed to be all along, or more so.

For years, the industry’s been filled with chatter about market research, making products with both creative and commercial appeal and tweaking supply chains so design decisions could be made later, but the tangible results were often never seen.

“It’s the execution of these things, not just the wishful thinking of them,” said John Karonis, newly minted president of Kurt Salmon Associates’ retail and consumer products group. “Our economic environment has really instilled a sense of urgency in many people.”

A study by Kurt Salmon described this new, more efficient way of operating as “acting vertical,” and said firms such as Target Corp., Coach Inc. and Aéropostale Inc. were already doing it.

Coach is one company that, while heralded as a success and an accessible fashion darling, is also adjusting its approach, offering more bags at lower price points.

“Growth, if it’s not profitable, isn’t growth at all — it’s just expanding a problem,” Karonis said. “Wall Street has valued growth and put that up as kind of the key measure of a viable, vibrant company in the past. I just don’t think they’re going to place nearly as much value on that in the future. You have to earn the right to grow.”

That goes for brands across the price spectrum.

“While Bulgari’s objective regarding retail used to be maximizing the prestige, the image, the visibility — and therefore we were opening a lot of new large stores — now it has changed and become efficiency in the distribution network,” said Francesco Trapani, ceo of Italian jeweler Bulgari SpA. Bulgari will apply this new standard to new stores and existing doors, some of which will be closed.

All the action could change the geography of fashion. “Fashion markets in advanced countries will not see much business expansion because the society is aging, but developing countries will see an increase,” said Kana Sasaki, an analyst at Tokyo-based Mitsubishi UFJ Securities. “To survive for another couple of decades, big luxury brands like Chanel should protect the equity of brands while expanding merchandise variation.”

An emphasis on smaller chains and quick-turn fashions might also prompt some sourcing patterns to change, even bringing overseas production back to the U.S. market.

“As the dollar inevitably falls, the cost of manufacturing is going to become too great,” said Peter Schiff, president of Euro Pacific Capital. “A lot of the U.S. fashion industry manufactures in China and Mexico. That whole process is becoming increasingly more expensive due to shipping costs and the anticipated dwindling foreign currency exchange rates. We can’t just be a giant distribution center where we sell everyone else’s goods by credit.”

The Future

None of this means companies will outright abandon the strategies and methods that helped them get started in the first place. The future of fashion, however different, seems likely to be based mostly on its present.

Massimo Ferretti, executive chairman at Aeffe SpA, said his firm was sticking with its growth strategy focused on complementary brands and would try to make the most of the downturn. “Mindful that a crisis does not have to be seen as a negative, we are looking to be particularly flexible and to revise our guidelines based on the contingencies of the market,” Ferretti said. “We are seeking to focus on the core business, streamline costs and improve overall efficiency.”

Aeffe’s efforts include a rationalization of manufacturing processes and working closer with major retailers. The company is also holding on to its sense of what it means to create, sell and own a luxury good. “We do not forget that, even in a period of economic crisis, luxury products cannot afford to leave out ingredients like dreams, desires and aesthetic gratification, which end up representing one’s very essence,” Ferretti said. “Creativity remains the key to recovery.”

Amid the crisis, there might be opportunity for the nascent fashion industry in China, the world’s largest apparel producer.

Though the country is losing millions of manufacturing jobs with the downturn, Shen Liuxin, a Shanghai-based professor of international fashion and art, said declines elsewhere could help China’s creative industry.

“We should seize this time when the European fashion industry is entering a recession to promote our own brands to an international level,” said Shen. “We should develop our own brands, combining our traditional culture and style.”

The pieces in the global fashion game are moving, and there’s no telling at this point what the final picture will look like.

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Retailer, Factories and Suppliers

April 20, 2009

We got a strong response to our broadcast of the article “U.S. apparel makers to ask retailers for concessions”. They range from one executive literally writing, “it’s about f.....g time” to several much more detailed replies, which follow:

SUPPLIER: I am wondering if an analysis has ever been done by retailers and how their decisions to move or cancel programs affects their supplier. We recently had a cancellation by a major retailer of a major brand supplied program. This represented significant volumes for our (product). It may have an effect on the health of our company. This is linked to the fact that we also supply the (product) for the another major brand program for the same product, which was in fact not cancelled but increased in projections. Did anyone in this major retailer think that by cancelling one program, it may imperil another existing program?

Another example is this: A major brand recently decided to move a good portion of one of their business divisions away from this hemisphere. We were the main supplier for the majority of the (product) going into these programs. With the volume drop, this affects our ability to supply (product) to another division of this brand due to lowered efficiencies on our side. In fact, there are projected sourcing increases in this other division, but we are less competitive due to the loss of business from the withdrawal of the first division.

The bottom line is this: By cancelling or moving programs, it seems that no thought is given as to how this will disrupt the supply chain. Already in China, we are seeing massive closures. It’s also become incredibly difficult to source any apparel related goods out of the United States now. By searching for the new lower cost, sourcing professionals are weakening the supply chain and making their own jobs more challenging.

FACTORY: Most apparel manufacturers and producers have “agreements” – many of these are unwritten – that the producer will “guarantee” a gross margin for the retailer, payable each quarter – but definitely before the close of the retail year at the end of January.

The problem, of course, is that it presumes normal business with somewhat predictable markdown cadences. Once the retailer starts adding coupons and additional discounts, we can only watch helplessly. These “agreements” have falsely lead buyers to assume that there is a sum of cash held in reserve for this by the manufacturer, so that even when business is good and margins are achieved without assistance, they expect cash “assistance” at the end of the season (because they think it is rightfully THEIR money). It is a dirty secret in the apparel business with which I think 60 minutes would have a field day.

A final note – some retailers just take the markdown money they think they deserve without discussion by deducting directly it from invoices with no discussion or forewarning. This allows them to show an acceptable margin to the bank and forces manufacturers to fight tooth and nail to get payment for goods for which they have long since paid for the fabric, trim, labor, hangers, tags, cartons and shipping expense - this can take months during which the retailer will refuse to write any new orders or confirm any existing ones.

So, any comments from you out there?

Mike

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I agree and think the factories should see opportunities too
 
Steve Williams 4:32PM 04/20/09

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