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PHOTO BY THOMAS IANNACCONE; MODEL: NINA DE RAADT/FORD; HAIR BY JENNIFER BRENT FOR KERASTASE PARIS; MAKEUP BY MISUZU MIYAKE USING LAURA MERCIER COSMETICS; FASHION ASSISTANT: ALYSSA ALPER; STYLED BY KIM FRIDAY<br />

RETAIL:<br />

Malls eager<br />

to lure<br />

consumers<br />

with more<br />

than just<br />

shopping,<br />

page 12.<br />

▲<br />

Women’s Wear Daily • The Retailers’ Daily Newspaper • April 28, 2009 • $3.00<br />

WWDTUESDAY TUESDAY<br />

Ready-to-Wear/Textiles<br />

<strong>Hot</strong> <strong>Wheels</strong><br />

Gear up for this season’s hard-edged denim that<br />

nods to motorcycle culture. Here, Maise’s cotton<br />

and elastane jeans with G-Star NY Raw’s wool and<br />

polyamide coat and LNA’s cotton T-shirt. For more<br />

on the trend, see pages 6 and 7.<br />

Not Only the Recession:<br />

Industry Hit by Resizing,<br />

Trade Issues and More<br />

By Ross Tucker<br />

It’s a shrinking world — and one likely to<br />

get even smaller for manufacturers and<br />

retailers alike.<br />

“Everything we do and talk about with our<br />

customers today is smaller,” said Rick Darling,<br />

president of sourcing giant Li & Fung USA.<br />

“Smaller number of stores, smaller number of<br />

orders, smaller quantities per order, smaller<br />

prices, smaller everything.”<br />

The description of the new landscape was<br />

one of many observations Darling and other<br />

speakers made to the more than 130 sourcing<br />

executives gathered in New York on April<br />

15 for the WWD Sourcing & Supply Chain<br />

Leadership Forum. Speakers at the event<br />

focused on the key issues and trends likely<br />

to impact sourcing decisions over the next<br />

See A Flight, Page 8<br />

MEDIA:<br />

Condé<br />

Nast<br />

closes<br />

Portfolio,<br />

page 5.<br />

▲<br />

FASHION: Dior to mount Marc<br />

Bohan retrospective, page 3.<br />

EYE:<br />

Partying in<br />

L.A. for the<br />

environment<br />

with Leo,<br />

Cameron<br />

and Tom,<br />

page 4.<br />


8 WWD, tuesDay, april 28, 2009<br />

WWD Sourcing & Supply Chain Forum<br />

A Flight to Quality as World Contracts<br />

Continued from page one<br />

three to five years, including:<br />

• Deflation<br />

• An oversupply of the world’s<br />

apparel manufacturing capabilities,<br />

accentuated by falling consumer<br />

spending.<br />

• The need to find value in the<br />

supply chain beyond simply capturing<br />

the lowest prices.<br />

• The rising threat of protectionism<br />

at home and abroad.<br />

• Managing risk in sourcing<br />

hot spots like Pakistan and<br />

Bangladesh.<br />

• The necessity of brands and<br />

retailers to fully fund and incorporate<br />

corporate social responsibility<br />

programs.<br />

Overriding all of these, however,<br />

was the continued recession<br />

and the question of when it<br />

might be over.<br />

“I don’t think there’s an economist<br />

or a business person of<br />

significant stature that is right<br />

now thinking there’s any hope<br />

of a turnaround that we’re going<br />

to feel in 2009,” said Darling.<br />

“Generally, people feel this is<br />

going to be a tough economy.”<br />

Crumbling global economies<br />

have brought the oversupply of<br />

the world’s apparel manufacturing<br />

capabilities into focus,<br />

an imbalance that had existed<br />

prior to the downturn and is expected<br />

to persist. The purchasing<br />

power of the U.S. market<br />

in particular has been hard hit<br />

and shows no signs of making a<br />

quick recovery. According to the<br />

U.S. Department of Labor, the<br />

unemployment rate reached 8.5<br />

percent in March. About 5.1 million<br />

jobs have been lost since<br />

December 2007, and the number<br />

of unemployed Americans is upward<br />

of 13.2 million. More than<br />

half of the uptick occurred in the<br />

four months through March.<br />

Darling said Li & Fung expects<br />

the next 18 months to be<br />

defined by deflation rates of between<br />

three and six percent.<br />

As conditions have worsened,<br />

companies have returned their<br />

attentions to sourcing in Asia,<br />

according to Darling. Over the<br />

last several years, brands and<br />

retailers had been exploring alternative<br />

sourcing areas outside<br />

of Asia in an effort to maintain<br />

diversification and chase lower<br />

prices. In China, rising costs for<br />

energy and labor spurred a gradual<br />

shift away from the country.<br />

Not any longer.<br />

“We see that trend now reversing<br />

fast in a significant way,” said<br />

Darling. “Frankly, to a big degree,<br />

it’s based on price.”<br />

Darling said Asia’s prices<br />

have become more competitive<br />

over the last 18 months. He also<br />

contends that in some cases suppliers<br />

in the Western hemisphere<br />

missed their opportunity to seize<br />

a greater share of the market by<br />

failing to deliver on higher-quality<br />

items.<br />

“What’s happened is a major<br />

change in attitude toward what<br />

we’re calling a flight to quality,”<br />

said Darling. “It’s not just the<br />

quality of the product but the<br />

quality in terms of how goods are<br />

made and how quickly goods are<br />

photos by dan d’errico<br />

Munir Mashooqullah<br />

made. Factories and countries that may have been considered expensive are all being<br />

rethought and put in the mix in terms of what additional value they provide beyond<br />

price,” he said.<br />

There is a shift going on within China as well, as the government looks to push its<br />

apparel manufacturing capabilities further inland. The Pearl River Delta area, once<br />

“ Factories and countries that<br />

may have been considered<br />

expensive are all being rethought<br />

and put in the mix in terms<br />

of what additional value<br />

they provide<br />

beyond price.<br />

— Rick Darling, Li & Fung USA ”<br />

David Schwarz<br />

the heart of China’s southern apparel<br />

region, has seen thousands<br />

of textile and apparel factories<br />

shutter their doors since 2008,<br />

and more than 20 million jobs<br />

have disappeared. The Chinese<br />

government is in the process of<br />

transitioning the manufacturing<br />

base of the area to higher-level<br />

products like technology. Darling<br />

predicts Dongwan will eventually<br />

become China’s equivalent<br />

of Silicon Valley.<br />

Improved safety, sustainability<br />

and environmental practices<br />

will play a prominent role in how<br />

brands’ and retailers’ assess value.<br />

“I actually think [corporate<br />

social responsibility] is becoming<br />

very much an assumed trait,”<br />

said Darling. “The debates about<br />

whether it costs money or doesn’t<br />

cost money are no longer valid.”<br />

Li & Fung is in the process of<br />

determining the carbon footprint<br />

of its factory base, a tall task for a<br />

company sourcing products in 80<br />

countries with a network of 10,000<br />

suppliers.<br />

“I think sustainability will<br />

probably be, along with quality,<br />

the two main decision-making<br />

premises for most sourcing decisions<br />

that are going to be made<br />

over the next five to 10 years,”<br />

said Darling.<br />

The rise of protectionism in<br />

the face of economic decline<br />

is also something he believes<br />

the apparel industry will need<br />

to confront, and not solely in<br />

the U.S. Darling perceives the<br />

proliferation of bilateral trade<br />

agreements as a different form<br />

of protectionism that will further<br />

complicate the industry.<br />

“What [these bilateral agreements]<br />

are saying is that instead<br />

of participating in this global<br />

structure that was set out for the<br />

last 30 or 40 years…every country<br />

now is going to decide who<br />

it wants to trade with and what<br />

those rules are,” said Darling.<br />

“For those of us in the supply<br />

chain, that complicates our life<br />

more than quota did.”<br />

Simon Constantinides<br />

NEW REALITIES<br />

U.S. brands and retailers have<br />

failed to adjust their business<br />

models in the face of growing<br />

global economic turmoil, said<br />

Munir Mashooqullah, principal<br />

and founder of <strong>Synergies</strong><br />

<strong>Worldwide</strong>, a sourcing company<br />

with more than 50 clients. As a<br />

result, these companies have<br />

not only been unable to respond<br />

to the slowing environment, but<br />

have left the door open for fastfashion<br />

retailers to claim significant<br />

chunks of the market.<br />

“We cannot let Zara,<br />

Uniqlo and H&M take over,”<br />

Mashooqullah said, noting those<br />

retailers succeeded because they<br />

first and foremost figured out how<br />

to sell fashions that shoppers<br />

want. “We should be worried.”<br />

Despite the complex new<br />

realities in the marketplace,<br />

Mashooqullah pointed to some<br />

straightforward paths ahead.<br />

“China is no more the cheap<br />

source,” he said, echoing<br />

Darling’s comments. “If you want<br />

to work in China today, you’ve got<br />

to go deeper into China.”<br />

U.S. companies should also explore their outsourcing options while holding on to<br />

the creative aspects of the business they can do best, he said.<br />

Given the credit squeeze and troubled banking sector, Mashooqullah also said importers<br />

should consider hybrid methods of financing, such as giving a vendor a 10 or<br />

20 percent advance deposit and agreeing to pay the rest 60 days after receiving the


goods. The risk, if it’s a good vendor, could be worth<br />

the reward, he said.<br />

Ultimately, the economic upheaval in the marketplace<br />

could help companies with strong underlying<br />

businesses and good practices rise to the top.<br />

“Reputation doesn’t matter,” he said. “[Disgraced<br />

investor Bernard] Madoff had a reputation.<br />

Reputation is what other people think of you.<br />

Character is what counts.”<br />

RISKS IN PAKISTAN, BANGLADESH<br />

Doing business in some of the world’s cheapest sourcing<br />

markets continues to carry with it greater risks.<br />

Pakistan and Bangladesh carry some of the lowest<br />

costs available, but each carries a distinct set of risks,<br />

noted David Schwarz, vice president of merchandise<br />

support and global sourcing for Redcats USA.<br />

Redcats has moved aggressively to more direct<br />

sourcing over the last fi ve years. The company has<br />

lowered its risk factor despite this. Still, Schwarz<br />

said in previous years Redcats used to have “one<br />

major critical issue a month.”<br />

“Now we have one a week,” said Schwarz. “We’re<br />

doing a better job, but because of direct sourcing,<br />

the nature of our supply chain and our processes…<br />

and because of the increased volume, the frequency<br />

of the issues is up. I consider it normal.”<br />

Bangladesh is Redcats’ third-largest supplier<br />

and, with labor rates as low as 22 cents an hour,<br />

represents one of the world’s cheapest sources for<br />

cotton-dominant products. The country also has a 40<br />

percent poverty rate and has been hit by cyclones at<br />

an average rate of one a year for the past 100 years.<br />

Recently, Schwarz said the country’s government<br />

began offering millions of garment workers a 25<br />

percent discount on rice, a subsidy that is expected<br />

to continue for several months.<br />

“This is telling us how unpredictable and how<br />

vulnerable the emerging countries have become,”<br />

said Schwarz.<br />

The situation is far more precarious in Pakistan,<br />

where the Taliban appears to be making increasing<br />

inroads. Schwarz said studies have ranked the country<br />

to be as risky as Iran, Nigeria and Venezuela.<br />

“There’s almost a suicide bomb blast a week<br />

in Pakistan,” said Schwarz. “It’s increasing.<br />

Unfortunately it has been increasing year after year,<br />

and I don’t see it improving.”<br />

Despite this, Schwarz acknowledged Pakistan is<br />

a top supplier for Redcats and that the “daily miracle”<br />

about the country is that product continues to<br />

be delivered on time and at a high quality.<br />

A VISIBLE SUPPLY CHAIN<br />

Even if owning the whole supply chain might be<br />

ancient history at many firms, brands still need to<br />

understand the influence their dollars have over<br />

suppliers, said Simon Constantinides, senior vice<br />

president and head of sales, trade and supply chain<br />

in the U.S. at HSBC Bank USA.<br />

Constantinides calls this being “vertically aware”<br />

and believes it is vital to know how all the fi nancial<br />

components of the supply chain work together. He<br />

advised companies to do their homework and be<br />

conservative in the down economy, but not greedy<br />

when it comes to negotiating with suppliers.<br />

In addition to increasing visibility, working with<br />

fewer producers and being more important to them<br />

could also help companies when it comes to fi nancing<br />

orders.<br />

“We’re more comfortable, I think, in looking at<br />

companies that have a smaller concentration of<br />

suppliers, where they have a meaningful impact on<br />

that relationship,” Constantinides said. “If you’re<br />

only two, three percent of a supplier’s business, you<br />

don’t have the impact to be aware of what’s going on<br />

with a supplier.”<br />

Kathryn Cullen, senior partner with consulting<br />

fi rm Kurt Salmon Associates, also encouraged<br />

brands and retailers to consider their businesses<br />

in a vertical manner. The fi rm’s research has also<br />

found that companies that take a greater role in<br />

developing product are more likely to succeed.<br />

Companies should look to move away from a focus<br />

on price and promotion in favor of developing an<br />

image of having more innovative product and a<br />

unique customer experience.<br />

“That means they move from being merchants to<br />

also being product innovators,” said Cullen.<br />

She also encouraged forming stronger connections<br />

between designers, product developers and<br />

merchandisers.<br />

“One of the key things that our better retailers are<br />

doing is really looking at collaboration,” said Cullen.<br />

Doing so may mean bringing these departments<br />

closer together geographically, she said. If done<br />

properly, product should improve while cost and<br />

time is removed from the development process.<br />

— With contributions from E.C.<br />

By Evan Clark<br />

THE CAMPAIGN TALK OF PRESIDENT OBAMA MIGHT<br />

have morphed into a more politically pragmatic stance<br />

on trade policy, but in an area where small details can<br />

make expensive differences in supply chains, Wal-Mart<br />

Stores Inc. and other importers are still taking the measure<br />

of the White House.<br />

“We’re very much still reading the tea leaves for what<br />

the Obama administration is going to do on trade,” said<br />

Sarah Thorn, Wal-Mart’s director of international trade.<br />

Obama sounded notes that were interpreted as hostile<br />

to trade last year, such as the potential renegotiation of<br />

the North American Free Trade Agreement, but Thorn<br />

said she was “fairly pleased” with the administration’s<br />

policy agenda for the area, released last month.<br />

“It’s actually a fairly progressive approach to trade,<br />

that is open markets still matter, international trade still<br />

matters,” she said.<br />

But trade policy as it relates<br />

to apparel and textile<br />

concerns is still a work in<br />

progress for the administration,<br />

which has yet to appoint<br />

a special textile negotiator<br />

or a chair for the Committee<br />

for the Implementation of<br />

Textile Agreements. New<br />

U.S. Trade Representative<br />

Ron Kirk did say last week<br />

any tweaks to the NAFTA<br />

agreement would likely be<br />

done without a full renegotiation<br />

of the pact, which<br />

reshaped economic relationships<br />

in North America.<br />

Caroyl Miller, deputy textile<br />

negotiator in the USTR<br />

offi ce, said Obama was focused<br />

on “making trade<br />

work for working American<br />

families.”<br />

“Trade does not stand<br />

alone from our education policies,<br />

our polices related to the<br />

environment, our policies related to energy, our polices related<br />

to transportation,” Miller said. “This is all something<br />

that needs to be looked at as an integrated whole.”<br />

Much of the trade policy that concerns the fashion<br />

industry is tied in some way to China, an economic and<br />

global powerhouse that is locked into a broader strategic<br />

dance with the U.S., which often creates an overlap in<br />

political agendas.<br />

Thorn said Wal-Mart was closely watching the regulation<br />

of apparel imports from China, which after years of<br />

waiting began fl owing into the U.S. completely quota free<br />

in January.<br />

“The domestic textile industry is extremely nervous<br />

about this,” Thorn said. “They had spent a lot of time<br />

prior to the quotas coming off predicting that there were<br />

going to be surges in imports and slashed prices.”<br />

Last month, the National Council of Textile<br />

Organizations said January apparel imports from China<br />

surged in categories that had been covered by quotas,<br />

as prices dropped by as much as 20 percent. China pro-<br />

WWD, TUESDAY, APRIL 28, 2009<br />

WWD.COM<br />

Keeping Tabs on Trade Policy<br />

Caroyl Miller<br />

duces 34.5 percent of the apparel sent to the U.S. in volume<br />

terms.<br />

Thorn’s reading of the import fi gures zeroed in on an<br />

overall drop in apparel shipments and a price increase,<br />

but she said there is validity to looking at the fl ow of<br />

trade on a category-by-category basis.<br />

Should the domestic industry be successful in getting<br />

the administration to bring an antidumping, countervailing<br />

duty or other trade case against Chinese apparel<br />

imports, it is specifi c types of goods that would be<br />

impacted.<br />

“As sourcing agents, watch your numbers coming from<br />

China,” Thorn said. “Make sure that you’re watching your<br />

categories and make sure you’re preparing. If you’re seeing<br />

monthly trends of prices declining and imports going<br />

up…you have to assume that you have a higher risk of<br />

some sort of government action.”<br />

China’s currency policies, which critics say give<br />

producers in the country an unfair advantage by depressing<br />

the value of<br />

the yuan, continue to<br />

draw the ire of many,<br />

but the fi nancial crisis<br />

“ We’re very much still<br />

reading the tea leaves<br />

for what the Obama<br />

administration is going to<br />

do on trade.<br />

— Sarah Thorn, Wal-Mart ”<br />

could delay any retaliation.<br />

This month, the<br />

Treasury Department<br />

again decided to not<br />

label China a currency<br />

manipulator.<br />

“The rhetoric and<br />

the tone on China’s<br />

currency has certainly<br />

changed in Washington,<br />

largely because they do<br />

hold $700 billion of our<br />

debt and they remind<br />

of us that frequently,”<br />

Thorn said.<br />

In 2005 and 2006,<br />

Sens. Charles Schumer<br />

(D., N.Y.) and Lindsey<br />

Graham (R., S.C.)<br />

pushed legislation to<br />

impose a 27.5 percent<br />

tariff on Chinese imports<br />

if the country did<br />

not revalue the yuan.<br />

If the temperature<br />

has come down on<br />

China’s currency, it’s only<br />

been turned up on safety<br />

issues, which also have a<br />

Chinese connection after the<br />

discovery of contaminated<br />

imports ranging from toothpaste<br />

to pet food.<br />

Last year’s Consumer<br />

Product Safety Improvement<br />

Act has had unexpected consequences<br />

for the fashion<br />

industry. The legislation<br />

requires reductions in lead<br />

levels in all children’s apparel,<br />

footwear and toys, and<br />

defi nes children as 12 years<br />

old or younger.<br />

“It’s had an enormous<br />

impact on our suppliers,”<br />

Thorn said, noting the company<br />

had pushed Congress<br />

for more time to implement<br />

the changes. “The attitude<br />

from the staff and certainly<br />

from the lawmakers was,<br />

‘I don’t care, these are haz-<br />

ardous substances and they need to be out of the supply<br />

chain.’”<br />

Already the legislation has complicated life for brands<br />

that have to certify their products are safe, said Mark<br />

Burstein, vice president of product life cycle management<br />

solutions at New Generation Computing Inc.<br />

“The punishment for breaking this law could be millions<br />

of dollars in fi nes and prison,” said Burstein.<br />

Many brands are managing their certifi cates of compliance<br />

manually, sending hosts of e-mails back and forth<br />

to various suppliers to keep track of laboratory results<br />

for details as small as painted buttons.<br />

Burstein said the safety certifi cates should be managed<br />

along with other shipping information and advocated<br />

his company’s Web-based platform that helps keep<br />

all parties — from the factory to the brands — on the<br />

same page.<br />

“This has to become part of a comprehensive sourcing<br />

strategy,” he said. “It can’t be stand-alone. It can’t be one person<br />

in your company who’s running it on their own laptop.”<br />

9


10 WWD, tuesDay, april 28, 2009<br />

WWD Sourcing & Supply Chain Forum<br />

Social Responsibility Aids Survival Strategies<br />

By Ross Tucker<br />

ProPerly integrated and fully<br />

funded corporate social responsibility<br />

programs are becoming a requirement<br />

of doing business and, even in tough<br />

times, can be utilized to gain competitive<br />

advantages.<br />

a panel of CSr executives from<br />

Phillips-Van Heusen Corp., avon<br />

Products inc. and l.l. Bean inc. acknowledged<br />

that investing in programs<br />

designed to improve labor and environmental<br />

standards presents a challenge<br />

in an environment where orders are<br />

being slashed and cost cutting is a priority.<br />

However, consumers increasingly<br />

expect companies to be actively engaged<br />

in these issues, while revealing<br />

more about the processes involved in<br />

bringing their goods to store shelves.<br />

“Corporate responsibility should not<br />

be an island off the coast of your business,”<br />

said Susan arnot Heaney, director of corporate responsibility, public relations<br />

and communications at avon. “it is how you do your business, and people in the area<br />

of supply chain and sourcing are really on the front lines.”<br />

it’s a tall task. avon’s operations, for instance, span 16,000 suppliers in 50 countries,<br />

said Heaney. She warned that focusing on one or two issues, like human rights<br />

and working conditions, rather than the entire scope of issues under the social responsibility<br />

umbrella leaves companies vulnerable.<br />

“Consumers, advocates, activists, ngos [nongovernment organizations], the media,<br />

legislators — they are all really paying attention to this,” said Heaney. “it’s no longer<br />

just nice to do.”<br />

Companies are likely to face mounting pressure to disclose more of the where,<br />

when and how of their manufacturing process.<br />

“ ‘transparency’ has become a buzzword,” said laura Commike gitman, director<br />

of advisory services with Business for Social responsibility. “there’s a lot of people<br />

talking about the need for more transparency, but they’re not really sure what they’re<br />

actually asking you to be transparent about. i think we’re going to see a lot of further<br />

explanation and clarification of that.”<br />

July 14 - 16, 2009<br />

Javits Convention Center<br />

New York City<br />

Looking...<br />

for the right fabric<br />

at the right price?<br />

TexworldUSA.com/WWD<br />

Laura Commike Gitman, Susan Arnot Heaney,<br />

Mike Sheehy and Marcela Manubens.<br />

Withering economic conditions<br />

have slowed the implementation of<br />

some programs, but has also exposed<br />

companies that had approached CSr<br />

as a marketing tool rather than a true<br />

business initiative.<br />

Mike Sheehy, senior manager of<br />

global monitoring at l.l. Bean, believes<br />

smaller CSr programs have<br />

been jeopardized by economic conditions,<br />

and trying to get factory owners<br />

to embrace new programs when<br />

they’re losing business is difficult.<br />

“it’s a really tough environment to<br />

come talk to them after they’ve just<br />

been through a price negotiation with<br />

our sourcing people or told by our inventory<br />

management folks that they’re<br />

only going to get 30 percent of the order<br />

they thought they were going to get,”<br />

said Sheehy.<br />

Collaboration among brands has<br />

also slowed as companies train their<br />

focus on their own operations, according to Sheehy, who added a number of joint CSr<br />

programs are losing budgets and participation. gitman believes this is the opposite of<br />

what should be happening in a difficult environment.<br />

“there’s no way that you’re going to be able to solve some of these huge societal<br />

issues on your own as an individual company,” said gitman.<br />

She also touched on the negative perceptions the public associates with corporate culture<br />

of almost any kind at the moment, due to the Wall Street and banking meltdowns.<br />

“there’s been a general loss of trust in the corporate sector — regardless of what<br />

industry you’re in,” she said. “the only way to gain back that trust is to be more transparent<br />

around what you’re doing.”<br />

taking it a step further, avon’s Heaney said, “there is no trust in corporations.<br />

any organization with ‘inc.’ at the end of it loses trust with the consumer by the very<br />

nature of its name.”<br />

Heaney believes companies must find ways to associate themselves with something<br />

more positive, holding up Ben & Jerry’s ice cream as a brand that generates that kind<br />

of “instant-emotion reaction” from consumers.<br />

Marcela Manubens, senior vice president of global human rights and social responsibility<br />

for PVH and the panel’s moderator, acknowledged the lack<br />

of a universal compliance program among brands and retailers has<br />

overloaded factories.<br />

“there has been a very inflexible, independent view of these<br />

compliance programs,” said Manubens. “Many companies believed<br />

they were doing the right thing and there was a lack of trust in the<br />

programs that someone else was doing.”<br />

Manubens encouraged focusing on providing factories with the<br />

tools to achieve compliance and to sustain proper practices.<br />

“We need to prove the business case to them,” she said, which will<br />

require shifting the focus from auditing to coaching and facilitating.<br />

“it’s not an easy process.”<br />

gitman said companies that haven’t made earnest efforts to incorporate<br />

CSr practices into their operations will fail to realize benefits<br />

that could ensure the survival of their companies in down times.<br />

“regardless of where you sit in the supply chain, when we come<br />

out on the other side of this, you’re going to see organizations that<br />

are able to achieve a more competitive advantage based on their<br />

investments [in CSr],” said gitman.<br />

The Fiber Price SheeT<br />

The last Tuesday of every month, WWD publishes the current,<br />

month-ago and year-ago fiber prices. Prices listed reflect the cost of<br />

one pound of fiber or, in the case of crude oil, one barrel.<br />

Fiber Price on Price on Price on<br />

4/27/09* 3/30/09 4/28/08<br />

cotton 40.20 cents 38.60 cents 64.65 cents<br />

Wool $2.49 $2.35 $3.95<br />

Polyester staple 79 cents 79 cents 88 cents<br />

Polyester filament 68 cents 68 cents 81 cents<br />

March Synthetic PPi 108.7 112.9 113.8<br />

crude oil $51.55 $52.38 $118.52<br />

*The Wool Price is baseD on The average Price for The Week enDeD aPril 24 of 11 DifferenT<br />

Thicknesses of fiber, ranging from 18 microns To 30 microns, accorDing To The Woolmark co.<br />

informaTion on coTTon anD PolyesTer Pricing is ProviDeD by The consulTing firm DeWiTT & co.<br />

The synTheTic-fiber ProDucer inDex, or PPi, is comPileD by The bureau of labor sTaTisTics anD<br />

reflecTs The overall change in all synTheTic-fiber Prices. iT is noT a Price in Dollars buT a<br />

measuremenT of hoW Prices have changeD since 1982, Which haD a PPi of 100. oil Prices reflecT<br />

lasT Week’s closing Price on The neW york mercanTile exchange of fuTure conTracTs for lighT,<br />

sWeeT cruDe oil To be DelivereD nexT monTh.


Long-term survivaL might depend on brands and retaiLers re-<br />

thinking the fundamentals of their relationships with consumers.<br />

manufacturing veteran, consultant and author david birnbaum believes there are<br />

two distinct philosophies companies apply when<br />

they consider consumers. the recession is amplify-<br />

ing the failures of one of those approaches — the<br />

one that is unfortunately being followed by the majority<br />

of the industry, he said.<br />

according to birnbaum, two explanations are<br />

offered when products aren’t selling. the first is<br />

that the consumer isn’t buying what a brand or retailer<br />

is selling. the second is that brands and retailers<br />

aren’t selling what the consumer is buying.<br />

birnbaum contends that 95 percent of the industry<br />

falls into the “they’re not buying what we’re selling”<br />

category — and the results aren’t promising.<br />

the mind-set, said birnbaum, leads to a predictable pattern. Companies, believing<br />

customers simply aren’t buying what they sell, look to outlast the recession and count<br />

on recouping sales when business picks up. managing through the downturn means<br />

reducing orders, followed by further reductions, followed by markdowns. as that is<br />

going on, management seeks to<br />

improve margins by negotiating<br />

harder with suppliers and reducing<br />

other overhead.<br />

the overall assumption being<br />

made in this circumstance is that<br />

the brand or retailer controls the<br />

market, that it knows what customers<br />

want. getting consumers<br />

to pay more for less quality or<br />

value is inherent in this stance,<br />

according to birnbaum.<br />

“the underlying assumption<br />

is that the consumer’s a moron,”<br />

said birnbaum. “i have to tell<br />

you that the average american<br />

may not be the smartest person<br />

to walk the face of the earth,<br />

but when it comes to buying —<br />

bunch of nobel prize winners.”<br />

birnbaum believes evidence<br />

of the failure of this approach<br />

is prevalent within the industry<br />

and in other areas. Car companies<br />

like general motors and<br />

Chrysler took this approach<br />

and are struggling to stay alive.<br />

birnbaum pointed to gap inc.<br />

and Liz Claiborne inc. as examples<br />

from within the industry.<br />

birnbaum noted that gap’s<br />

same-store sales have declined<br />

48 out of the last 50 months.<br />

“underlying gap’s strategy is<br />

the belief that they want to sell<br />

everybody in the world a gap<br />

garment,” he said. “there is an<br />

alternate strategy, which is…<br />

rather than selling everybody in<br />

the world a gap garment or the<br />

gap look, find out who the gap<br />

customer is and give them what<br />

they want, which is how Zara<br />

works or an h&m works.”<br />

birnbaum emphasized that in<br />

the case of gap and Claiborne,<br />

declines were occurring before<br />

the recession hit. the reason,<br />

birnbaum believes, is that con-<br />

WWD, tuesDay, april 28, 2009 11<br />

WWD.COM<br />

Tracking the Failings of the All-Purpose Approach<br />

David Birnbaum<br />

photos by dan d’errico<br />

“ The average American may not be the<br />

smartest person to walk the face of the<br />

earth, but when it comes to buying —<br />

bunch of Nobel Prize winners.<br />

— ” David Birnbaum<br />

sumers have been spending less on apparel for a number of years. birnbaum said<br />

the rate of u.s. garment imports started slowing around 1997 and that a decline in<br />

import figures was likely to have occurred by the end of 2008 regardless of the global<br />

economic turmoil.<br />

“We are fighting a reduced market with more<br />

suppliers,” he said.<br />

Companies like Zara, h&m, topshop and<br />

american apparel are gaining ground in the current<br />

environment because they are focused on providing<br />

what their particular customer wants. the retailers<br />

are proving that offering greater value doesn’t mean<br />

having to present a higher quality or more expensive<br />

product. a Zara garment may fall apart in three<br />

months, but birnbaum contends customers don’t purchase<br />

items there expecting them to last that long.<br />

“What makes Zara great is design integrity,” he said.<br />

“the garment in the store actually looks like the sample and the sample actually looked<br />

like the sketch. so you really have something that looks like fashion, not some hodgepodge,<br />

lowest common denominator design. For the consumer at Zara, that’s quality.”<br />

— R.T.<br />

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wholly owned subsidiary of X-Rite, Incorporated. © Pantone, Inc., 2009. All rights reserved.


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