While China is has gained a dominant position in shoes, apparel and household textiles manufacturing, makers of these items located in developed nations have suffered a long period of decline. For example, over 98% of the shoes sold in America each year are imports, and the vast majority of these imports come from China. To consumers in Europe and North America, this growing reliance on China as a low-cost producer has meant very low retail prices for goods of reasonable quality. However, recent increases in the value of the Chinese currency, combined with rapidly rising labor costs, put Chinese manufacturers in a much less competitive position by the beginning of 2008, and many plants in China are operating far below capacity. Competition, from very low cost nations in Africa as well as Vietnam and elsewhere, is intense.
Many Chinese firms are massive in size, with tightly integrated units providing rapid design, manufacturing and logistics. One of the most interesting organizations is the Esquel Group of Companies. Esquel is one of the world’s largest producers of cotton shirts, with an output of more than 60 million garments each year. The firm’s vertically integrated operation starts in China where it oversees nearly 4,700 acres of cotton farms, which supply spinning, dyeing and knitting facilities that produce 90 million yards of high-quality cotton fabric annually. Esquel manufactures clothing on behalf of brands that include Banana Republic, Tommy Hilfiger, Hugo Boss, Brooks Brothers, Abercrombie and Fitch, Nike, Nordstrom and Lands’ End, as well as private-label items for retailers such as Marks and Spencer. The Esquel companies transform its fabric into premium men’s and women’s wear at plants in China, Hong Kong, Malaysia, Mauritius, Sri Lanka and Vietnam. The company also sells its products through its proprietary brand, PYE, which markets high-end cotton apparel in China with a flagship luxury retail store in Beijing. Esquel maintains group sales offices in select locations around the world, including U.S. offices in New York City and regional locations convenient to key accounts. Unlike many textile companies, the firm has an expressed strategy of in-company resource development, seeking to ensure high standards of quality and consistency across all of its product lines.
Meanwhile, some manufacturers outside of Asia have become very efficient and quick to react to consumer trends. The most notable company in this category is Spain’s Inditex. The firm is famous for its lean inventory and fast-fashion strategy. It can get a new item of clothing from its 300-person design team, through its manufacturing plants, and into its more than 4,000 stores in as little as two weeks. The company operates several manufacturing facilities in Spain for its high-end clothing. Many of its outside suppliers are located in Spain and elsewhere in Europe. For 2009, the company plans to open about 400 new retail stores under the Zara, Pull & Bear, Massimo Dutti and Oyosho brands. Likewise, retailer/manufacturer American Apparel is noted for manufacturing in its U.S. plants. Moreover, the well known firm of Benetton manufactures its fashion apparel primarily in Italy, with additional plants in Eastern Europe, Tunisia and India.
Today’s environment of a global economic slowdown combined with rising prices has put a damper on the apparel, shoes and accessories sectors. The high-end luxury sector is suffering. For example, early 2009 sales figures for retailers such as Neiman Marcus and Saks were down considerably. Likewise, manufacturers that attempted to raise prices and position themselves for the upper-middle market with “affordable luxury” are now scrambling to restructure product lines to make them more affordable. Consumers in the U.S., the U.K. and elsewhere are drowning in debt and are cutting back on nonessential purchases.
Hundreds of thousands of U.S. manufacturing jobs have been lost in recent years in the textiles, apparel and shoe manufacturing sectors. Since 1997, more than 360 U.S. textile plants have closed, and hundreds of thousands of jobs were permanently lost. Textile mill bankruptcies were commonplace in the 1990s.
During 2008, the U.S. manufactured $38.5 billion in fabrics, down from $44.5 billion the previous year, according to Plunkett Research, Ltd. estimates. In addition, according to the U.S. Bureau of the Census, America manufactured $9.3 billion in apparel (down from $10.5 billion) and $12.4 billion in carpets and rugs (down from $14.2 billion). For 2008, America imported $96.1 billion in apparel and textiles (down from $96.4 billion in 2007), while it exported $16.1 billion (up from $15.9 billion).
U.S. employment in clothing, shoes and accessories stores totaled 1.45 million in 2008, compared to 1.5 million in 2007. Employment in manufacturing and wholesale trade of apparel, accessories, shoes and textiles totaled 679,500 in 2008, compared to 729,000 in 2007 and 782,000 in 2006.
In the European Union (EU), the textile and apparel sector is quite large, particularly in nations that enjoy lower operating costs, such as the Baltic States and Eastern European States. EU textile and apparel manufacturing employment totaled about 2.4 million people and generated revenues of about 211 billion Euros in 2007 (down from 2.7 million employees and 220 billion Euros in revenues the previous year). Nearby, the textile and apparel industry remains a major part of the economy of Turkey. South America, Central America and Africa also play minor roles in world apparel trade.
, the World Trade Organization reports that international trade in apparel totaled $345.3 billion in 2007, up from $311.4 billion during 2006 (the latest data available). Apparel represents about 2.4% of total global merchandise exports of all types. World trade in textiles totaled about $238.1 billion in 2007.
Meanwhile, manufacturers of basic synthetic textiles, such as polyester fabrics, have been dealing with a global manufacturing glut. Synthetic textile manufacturing has been dominated by the largest global chemical firms, but many of them have exited the business by spinning off or selling their holdings.
Trade agreements among the U.S. and its trading partners attempt to foster employment in certain parts of the world (such as low income areas in the Caribbean) and allow U.S. consumers fair access to reasonably priced goods while providing some sort of relief to U.S. business interests. Because trade agreements will never satisfy all parties concerned, they tend to lead to controversy and much critical discussion. On the retail end, consumers have long enjoyed wide selections and moderate prices in North America, Asia, Europe and elsewhere.
apparel, shoes, sporting goods and accessories combined are approximately a $591.1 billion retail market—an amount equal to about 60% of the food and grocery store sector’s sales at retail. (This is based on $422.5 billion in total 2008 sales at retail clothing and accessories stores, per U.S. Census Bureau figures, plus an estimated $168.6 billion in apparel and shoe sales at department stores, sporting goods stores and discount stores.)
retailing has always been a tough, highly competitive business, and many chains rise dramatically and then fail. Retail fashion merchandising is a vast challenge (witness the recent ups and downs of The Gap). Just-in-time inventory driven by highly computerized supply chain management systems is now an immense asset to major retailers. Nonetheless, price pressure from major discounters like Wal-Mart, Target and Kohl’s can keep profit margins thin at stores that sell moderately priced apparel. Some of the most successful retail chains are those that focus on niche markets with special tastes and needs, such as Chico’s FAS, which caters to 35- to 60-year-old women who want flattering fashions that suit their figures.
of figures, the well-documented expanding girth of consumers in many nations is placing new challenges upon fashion merchandisers as overweight people of all ages, tastes and income brackets require clothes in larger sizes. Designers and merchandisers face the task of developing and presenting larger clothes in a flattering light.
While Americans (as well as residents of many other countries from Mexico to China) have been putting on weight, they have also developed a keen interest in sports apparel and workout gear to wear at the gym and in other leisure activities. This is one of the fastest-growing product categories in the apparel and shoe sector. Over 40 million Americans have some sort of gym membership, and they need appropriate clothing to wear while they workout. Plunkett Research estimates the active sports apparel segment of the U.S. retail clothing market at approximately $50 billion for 2008. The Sporting Goods Manufacturers Association (SGMA), in a 2008 report, identified fitness products as an area with potential for significant growth. The SGMA found that 34% of Americans exercise on a frequent basis (100 days or more per year) while 10% exercise on a regular basis (50 to 99 days yearly).
changes will offer immense opportunities to U.S. fashion merchandisers. To begin with, the nation’s 78 million Baby Boomers (post World War II babies born from 1946 through 1964) are beginning to enter the 60+ age category. As more and more of these people become seniors, their tastes and needs will bring great revenues to savvy apparel sellers who learn how to cater to this market. Meanwhile, the rapid growth of ethnic consumer groups in America, Hispanics in particular, will offer superb marketing and product development opportunities.
Department stores have changed their business models drastically. While they were historically sellers of virtually every type of product, arranged by category in well-defined spaces within giant buildings (thus the use of the word “department” to describe them), most department stores of today are primarily apparel and accessories stores. When consumers shop at stores like Nordstrom, Neiman Marcus or Dillard’s, they find floor after floor of shoes, clothing, accessories and cosmetics. This change has created problems within the department store industry, as managers, faced with intense competition, developed the habit of continuously discounting merchandise in sale events, consequently pressuring profitability. Consumers have been trained to wait for items to go on sale before they make purchases, thus lowering profit margins at stores. Nonetheless, department stores remain major forces in apparel retailing today.
Another sweeping change in apparel retailing is the rising success of e-commerce. National apparel chains are employing bricks and clicks together successfully. That is, they create synergies between very active web sites and their retail stores. Other firms, such as Bluefly.com, sell apparel through the Internet only, often at everyday discount prices. Catalog retailers continue to do reasonably well, particularly if they operate well-designed web sites to supplement their printed catalogs. Meanwhile, a growing number of fashion companies, such as Worth and The Carlisle Collection, are enjoying success selling women’s fashions in the home via independent reps—somewhat like the success of similar companies that sell cosmetics.