September 26, 2016
A day of honest dialogue about the U.S. apparel industry and the global supply chain
CGPR had the opportunity to attend this year’s Sourcing Journal Summit in New York City. It featured a range of experts sharing insights on the future of today’s supply chain, their fears about what is challenging them the most, best practices and examples of who is doing a great job. The event was sold out, indicating that supply chains are top of mind for U.S. apparel manufacturers and, in some cases, can be the difference between a bright future and bankruptcy.
Speakers included leaders from Alvanon, Applied DNA Sciences, Chainge Capital, Cotton Incorporated, Esquel Group, Kohl’s, Under Armour, and the U.S. Trade Representative. It most certainly is a year of uncertainty and what became an overall theme from the day was clearly this: adapt or die.
What follows are themes from the day’s sessions:
- Outdated Sourcing Holds Brands Back: The way we source has started to change. Management is resistant to change, too worried about maintaining stock prices and the bottom line. Now is the time to have this conversation.
- Tracking DNA Will Help Poor Sourcing: Poor sourcing cannot be tracked (although now DNA tracking has made good inroads); a good question to ask is how much money is being thrown away by a mismanaged supply chain.
- Over-Sized Organizations with Lots of Layers Impede Progress: Big organizations slow have a harder time adapting to a quicker supply chain.
- American Companies Are Afraid of Change: American companies are too afraid of change and risk a “slow and painful death”.
- Factory Jumping Won’t Lead to Success: Jumping from factory to factory simply over price will never breed success; more emphasis should be placed on good product and how to get into the stores quickly.
- Global Unrest Contributing to Uncertainty: Many factors are contributing to the sense of uncertainty: a new U.S. president, increases in raw material, a supply chain that cannot afford any more rising prices, requests for price reductions at both the factory and retail level, customers demanding price reductions, factory consolidation, inflations in manufacturing countries, global political instability, ISIS/Brexit, and the pending bankruptcy of Hanjin.
- Slow Adoption of Technology: There is slow adoption of technology, especially on the factory side, which makes it impossible to keep up with consumers’ changing behavior.
- Consolidation Will Continue: Fashion apparel is here to say but there will be a consolidation of brands.
- Shifts Creating Chaos: The cultural shift between customization and brand cache will create chaos.
- Consumer’s Demand for Fresh Styles More Often is Challenging All of Us: New consumer preferences challenge product life cycles and sourcing calendars.
- Investment into R&D is Critical: There must be investment in creativity, R&D, and sustainability.
- Increasing Wages Beg for Collaboration: Wages are going up around the world and we are not going to see a slowdown in this trend. There must be collaboration between brands, retailers and suppliers.
- Millennials and Gen Z Driving Change: The informed consumer, especially millennials and Gen Z, are driving the technology changes.
- Transparency is Critical: Collaboration and transparency is critical in today’s supply chain. There must be a high level of trust with factories.
- Near Sourcing Should be an Option: Near sourcing is a trending topic; while it might be easy to go to Asia, it may not be the right thing to do.
- Fashion Streaming is Key: Today is about fashion streaming, live shows and wear now buy now, not only fast fashion.
- We Can’t Continue the Race to the Bottom: Everyone talks about how margins are being squeezed from every direction, but we can’t continue to discount discount and discount, otherwise, it just becomes a race to the bottom.
- Zara, Zara, Zara! Zara is excellent at training their consumer to buy at full price and is the best student of the industry. They have world class logistics, and the highest full price sell through in the industry. The average loyal customer physically visits their store 4 to 5, at Zara, it is 17 times a year. Zara designers make quick decisions and they have 26 seasons.
- Retailers Need to be Clever: Retailers are becoming clever in the ways they reach out to their customers, e.g. Bloomingdales that uses text messaging, or Kmart that has freebies for kids that go into their stores. It is a promotional battlefield.
- Amazon Getting into Apparel Presents Challenges/Opportunities: Amazon getting into private apparel will turn this industry upside down; for consumers it will be amazing. The price will be very interesting. However, it will be a challenge to see how they market and promote their own brands.
- Sustainability Ranks Low: How much do customers care about sustainability? According to recent numbers, it is 88%, however, when it comes to actually making the purchase, fashion is first, then fit, then sustainability.
- Consumers Are Controlling Price Points: Today, the consumer is really in control of the price point
- The Are Just Too Many Stores: We have too many stores and they are too large.
- Beauty Retailers Are Doing Well: Beauty and home retailers are nailing it.
- Wall Street Is Not Doing This Industry Any Favors: Private equity and Wall Street is not really doing the apparel industry any favors – do we really need billion dollar brands – do we really need them?
And a few choice quotes
- “Disruptive innovation is when new technologies cause great firms to fail.”
- “This industry is terrible at learning from outside the industry.”
- “What is the challenge? Culture, and culture eats strategy for breakfast.”
- “Innovation is end to end. What is different today is the whole supply chain has an opportunity to benefit. We/you need to take responsibility.”
- “Style and speed must be related to ‘What we Stand for’; we can’t continue to chase the lowest costs.”
- “Speed to market – is not the issue. It is consumer engagement.”
- “We are over-malled and over stored.”
- “Our factories are coughing and wheezing.”
- “More efficiency and more automation in an old supply chain is not a strategy.”
- “Best success? H&M and Target and the mini designer collections that appear on a regular basis, e.g. Target and Lily Pulitzer and H&M/Balmain.”
- “Successful brands are successful because they use the right side of the brain
- and have the engineering prowess working together.”
- “Engineering industries are drooling at the in-efficiencies of this business.”
- “Most companies are structured around two major seasons. What would the world look like if we had 12 collections a year?”
- “A lot of people dropped the ball.”
- “Culture has to work with financial realities.”
- “2016 is year of uncertainty, but 2017 will be the year of more bankruptcies, if people don’t get on the bandwagon fast. The train is leaving the station and it will not wait for anyone.”
- “Now is the most exciting time because we have the opportunity to recreate who we are – we need to. We have no choice.”