Hot Wheels - Synergies Worldwide
Hot Wheels - Synergies Worldwide
Hot Wheels - Synergies Worldwide
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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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