just-style management briefing: Opportunities for the apparel industry in 2012
Opportunities the apparel industry can look forward to this year include speed to market, which favours sourcing in the western hemisphere; growth in the number and spending power of middle-lass consumers in emerging markets like China and India; and the use of technology and the internet to make sourcing a truly global activity.
Thomas Nelson, managing director, VP global product procurement, VF Asia
Better relationships and increased trust in the supply network are key for the future of our industry. The past "I win, you lose (both ways)" will not work. We must all work together to insure we deliver a great product to our end customers. The supply network that accomplishes this at the highest level will win.
Anthony Corsano, president and CEO, Anvil Knitwear
Speed to market will be a key driver of success in 2012. As such, the movement from Asia to Central and South America for product sourcing for the North American market will continue to be a significant opportunity for those suppliers in the region. Having the right product on the shelf at the right time will result in increased revenues while decreasing markdowns.
In today's market place, integrating a strong CSR programme into one's business is not just a good thing to do, but it's quickly becoming a nonnegotiable part of doing business. At Anvil, we view corporate social responsibility as an integral part of our business, a way of differentiating ourselves from the competition, and an enormous opportunity to be an industry leader.
Mike Todaro, managing director of AAPN (the American Apparel Producers' Network)
Sustainability. Every brand is going to have to do what they fear most: touch 'the social thing'. It's right there in their face - transparency, traceability, accountability. Every company competes as a supply chain, meaning there are hundreds of ways each is one tweet away from disaster. Central America is light years ahead of other regions and sourcing from there will increase.
Technology: invest in technology that gives the consumer permission to co-design apparel. It's possible. We have several case studies in AAPN right now of capturing point-of-fit data that will revolutionise factory-direct, high margin, online buying. We can all surround the consumer with multi-channel sales, distribution, and replenishment.
Organisation. Every "not-China" apparel region in the world can do better to organise industrially. We have worked on this for 10 years in Central America and see the exact same opportunity in South Asia. That must mean it is true everywhere. Unfortunately, we cannot be everywhere. Made in the USA is gaining ground, bringing investment in production and infrastructure back to this hemisphere.
Kanishka Wijayasiri, COO, Brandot International Limited
As the cost advantages of sourcing from China diminish, major US brands and retailers will shift more aggressively to sourcing apparel and textile products from the western hemisphere (NAFTA and CAFTA countries). Also, the recent depreciation of local currencies against the US dollar will make these regions more attractive. There are two key advantages the regions have to offer - 1: geographical proximity and 2: ease of doing business (same time zone and shorter travel time etc). We can expect 2012 to be a good year for manufacturers in the western hemisphere.
Specialty brands and retailers will also have to accept Bangladesh as an important destination for apparel sourcing. The industry in Bangladesh, which is built on supplying the mass market, will be challenged to find talent that would be able to service the requirements of these customers. Customers on their part will have to be patient and adopt with strategic vendor development initiatives to build potential factories in Bangladesh.
A word of caution: sourcing from Bangladesh will not be the same as from China! China was and is still supported by world-class talent and infrastructure of Hong Kong. There is no such comparable platform for Bangladesh.
If momentum for political change in Burma becomes real in 2012, this country will open up and could potentially become the next sourcing destination. The question is who would be able to take advantage of this change?
Kurt Cavano, CEO, Tradecard
The present day is a prime moment to establish a dynamic apparel production network outside of China that delivers quality products with speed and integrity, at lower costs. Some places like Central America and Bangladesh have the resources to become apparel production powerhouses. And while business in these regions is well established and additional development is ramping up quickly and new factories and facilities continue to be built, the landscape is still a fairly clean slate. The decisions and infrastructure installed in places like these during the next couple years will shape the future of the textile industry for years to come.
So this is an important intersection. If the right choices are made, Central America and Bangladesh and other emerging spots can become the next global success stories. This could lead to significant new opportunities for the apparel industry.
Hans Bühr, head of raw material purchasing Asia, Triumph International (Hong Kong)
I believe the greatest opportunities lie in the continuous growth of the middle income segment of many developing countries, most notably China and India, where more and more people are shifting from the purchase of cheap apparel to more upscale branded products. China has stipulated in its 12th five-year plan that they would like to see the income/wages of the working class to double, and whilst this is a big burden on wages/production cost, millions of workers joining the middle class of consumers may present a huge opportunity at the same time.
Generally branded merchandise is seen as of being better quality, but at the same time also allowing the consumer to illustrate their financially improved status as middle class. There are of course many domestic brands as well in China, and it will remain to be seen whether in the long term there will be more preference for international brands or, due to growing national sentiment, a tendency to turn to domestic brands. Nevertheless, branded apparel should continue to do better in the long run, compared to non-branded goods or retail brands. In any case, local production will be a key factor for commercial success in China.
Last not least, smart product innovations and improvements with true added value and consumer benefits will always be destined for success. A good example of this in the intimate apparel business is the continuous success of the fashionable shape wear segment, such as Triumph's Shape Sensation concept.
Roger Lee, COO, TAL Apparel
In terms of opportunities, I don't think 2012 is going to be a very bright year; we should be happy having a flat year (with 2011).
That said, a lot of US based retailers are also looking to diversify their risk, because all their eggs are in one basket in the US. A lot of them are coming out to Asia, especially China, to try and figure out if there is a way for them to work with a local partner to open stores, to have more revenue growth outside the US.
Josh Green, founder and CEO of Panjiva
The increasing willingness of consumers to buy apparel online clearly represents a tremendous opportunity, both for new businesses, as well as for established businesses. Of course, this trend represents a challenge for those who can't - or won't - move quickly to seize the moment.
On the supply side of the business, companies have more information at their disposal than ever before, making it easier than ever before to make sourcing a truly global activity. This may well be the key to keeping costs under control in the years ahead.
Ashroff Omar, CEO, Brandix Lanka Limited
Emerging markets hold the key for growth as already indicated by major retailers who are expanding their footprint on the ground or their reach online. The growing middle-class with a thirst for what is trendy with a disposable income to back it up and whom, by and large, still have the habit of buying at full price is a refreshing new consumer base.
Technology and the internet have provided ways and means of capturing an abundance of information on consumer behaviour, retail and supply chain data. Harnessing this information and using it intelligently to identify trends and needs could help get the right product in store at lower price points to avoid mass marketing discounts that consumers in major markets have become accustomed to. Transparency in information along the supply chain will help suppliers react much faster and better to customers' needs.
In comparison to many other industries, such as the automobile, mobile phone and even footwear industry, our industry has a long way to go in delivering true value to the consumer. Using the advancements in technology, there is an opportunity for the apparel industry to deliver this value.
Magdalena Kondej, head of apparel research at Euromonitor International
India: very strong growth is expected in apparel retail as a result of the move to 100% FDI for single-brand retailing.
Brands such as Gap and H&M, which have no presence in India, and sports goods retailers like Nike and Reebok, which do, will either be looking to enter the market or build on their already growing presence. Gap is an interesting player in the market as it enjoys strong demand for its products through its international online store, but does not have a bricks-and-mortar presence. It is committed to reducing its reliance on the US market and is likely to view India, alongside China, as a market that can help it achieve this strategic move.
Luxury brands are expected to be winners as well, as they are insulated from the recession more than standard brands. The very high incomes enjoyed by the customer base of these super premium retailers may have seen some impact from the global recession, but luxury products remained easily affordable. To quote Milton Pedraza, chief executive of the Luxury Institute: "[US$10m in liquid assets] is a level of wealth where people feel protected from the hazards of the world."
Nikhil Hirdaramani, director, Hirdaramani Group of Companies
I believe there are new markets that need to be explored. In the past the major markets have been the US and Europe, but now we have large middle classes in India and China. Russia and Brazil are also looking to source more from Asia.
With many smaller companies in the apparel trade going out of the business there is opportunity to grow and build stronger relationships with customers.
Mike Flanagan, CEO, Clothesource
The grown-up market. The travel and recorded music industries have learned that their paying customers are getting older: most money spent on recorded music now comes from over-50s, for example. That's because the number of under-30s is falling both in the rich world, and in practically every developing market with any real commercial potential. Growth is in the over-50 market - which most of the apparel industry simply pretends doesn't exist. Businesses that concentrate on growing markets are those most likely to prosper. The over-50s market is booming - and right on major retailers' and brands' doorsteps.
Lynn Evison, senior manager, Kurt Salmon
Space Management. Many apparel retailers use standard financial KPIs related to sales, markdown, stock turn and profit to measure their success. Successful retailers consider both micro space (the amount of space by product) and macro space (the size of the total store and categories within the store). Apparel retailers should look to the grocery sector to see how the supermarkets are driving the maximum return on space from their high street and on-line channels. At the micro level, effective space management supported with in-depth and well planned assortments can drive significant benefits to sales and profit, particularly when considering customer loyalty data, trading environment, and sales by volume. How many facings should each item really have? How do you drive depth and width in store and offer choice without driving a significant increase in inventory holding costs?
Maintaining customer loyalty through a customer centric digital environment. Particularly for retailers with a young customer target group, the use of social media, mobile apps etc can help build a direct relationship with the customer.
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