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Plunkett Research, Ltd. www.plunkettresearch.com APPAREL & TEXTILES INDUSTRY TRENDS CONTENTS Click to go directly to a subject area. You can also use the bookmarks on the left of your screen. Table of Contents 1 Major Trends Affecting the Apparel & Textiles Industry 2 1) Introduction to the Apparel & Textiles Industry 2 2) Globalization: China Dominates Apparel & Textiles But Its Explosive Growth is Checked 3 3) Apparel Firms and Clothing Retailers Targeted for Mergers and Acquisitions 5 4) High-Tech and Smart Fabrics Proliferate 5 5) 3PL Supply Chain Management Evolves to Serve the Global Market 6 6) Synthetic Fiber Manufacturers Face Global Glut 9 7) U.S. Linens Sales Dominated by Big-Box Retailers and Discount Department Stores 9 8) The Vast Majority of Shoes Sold in the U.S. Are Now Made in China 9 9) Bricks, Clicks, Catalogs and Living Rooms 9 10) Alternative Sizing Is Big 10 11) Baby Boomers Dominate the Apparel Market 11 12) Discount Clothing Retailers See Promise in Designer Lines 11 13) Haute Couture Designers Experience Conflicts over Costs and Control 12 14) Luxury Goes Online 12 15) Mass Designers and Retailers Speed Up for Fast Fashion 13 16) Athletic Footwear Draws Big Names from Athletes to Designers 13 17) Specialty Retailers Look Forward, and to the Past, for New Ideas 14 18) Some Apparel Manufacturers Still Resist Outsourcing 14 Plunkett Research, Ltd. www.plunkettresearch.com Chapter 1 MAJOR TRENDS AFFECTING THE APPAREL & TEXTILES INDUSTRY Major Trends Affecting the Apparel & Textiles 16) Athletic Footwear Draws Big Names from Industry: Athletes to Designers 17) Specialty Retailers Look Forward, and to 1) Introduction to the Apparel & Textiles the Past, for New Ideas Industry 18) Some Apparel Manufacturers Still Resist 2) Globalization: China Dominates Apparel & Outsourcing Textiles But Its Explosive Growth is Checked 1) Introduction to the Apparel & Textiles 3) Apparel Firms and Clothing Retailers Industry Targeted for Mergers and Acquisitions While China is rapidly gaining a dominant 4) High-Tech and Smart Fabrics Proliferate position in shoes, apparel and linens manufacturing, 5) 3PL Supply Chain Management Evolves to U.S. makers of these items have suffered a long Serve the Global Market period of decline. For example, over 98% of the 6) Synthetic Fiber Manufacturers Face Global shoes sold in America each year are imports, and the Glut vast majority of these imports come from China. To 7) U.S. Linens Sales Dominated by Big-Box consumers, this growing reliance on China as a low- Retailers and Discount Department Stores cost producer has meant very low retail prices for 8) The Vast Majority of Shoes Sold in the U.S. goods of reasonable quality. In fact, some categories Are Now Made in China of clothing have actually gone down in retail price in 9) Bricks, Clicks, Catalogs and Living Rooms recent years. 10) Alternative Sizing Is Big Hundreds of thousands of U.S. manufacturing 11) Baby Boomers Dominate the Apparel jobs have been lost in this industry. Since 1997, 367 Market U.S. textile plants have closed. More than 440,000 12) Discount Clothing Retailers See Promise in U.S. jobs have been cut and most remaining mills Designer Lines operate at 50% capacity. Textile mill bankruptcies 13) Haute Couture Designers Experience have been commonplace. Conflicts over Costs and Control Meanwhile, the manufacture of basic synthetic 14) Luxury Goes Online textiles, such as polyester fabrics, is facing a global 15) Mass Designers and Retailers Speed Up for manufacturing glut, combined with rising prices of Fast Fashion basic materials due to the high cost of petroleum. Plunkett Research, Ltd. www.plunnkettresearch.com Synthetic textile manufacturing has been dominated have been trained to wait for clothing to go on sale by the largest global chemical firms, but many of before they make purchases. Nonetheless, them are exiting the business by spinning off or department stores remain major forces in apparel selling their holdings. retailing today. Trade agreements among the U.S. and its trading Another sweeping change in apparel retailing is partners attempt to foster employment in certain parts the rising success of e-commerce. National apparel of the world (such as poverty-stricken areas in the chains are employing bricks and clicks successfully. Caribbean) and allow U.S. consumers fair access to That is, they create synergies between very active reasonably priced goods while providing some sort of web sites and their retail stores. Other firms, such as relief to U.S. business interests. Because trade Bluefly.com, sell apparel through the Internet only, agreements will never satisfy all parties concerned, often at everyday discount prices. Catalog retailers they tend to lead to controversy and much critical continue to do reasonably well, particularly if they discussion. operate well-designed web sites to supplement their On the retail end, consumers are enjoying wide printed catalogs. Meanwhile, a growing number of selections and moderate prices in the U.S., Europe fashion companies are enjoying success selling and elsewhere in the world. American apparel, shoes women’s fashions in the home via independent and accessories combined are approximately a $450 reps—somewhat like the success of similar billion retail market. Apparel retailing has always companies that sell cosmetics. been a tough, highly competitive business, and many chains rise dramatically and then fail. Retail fashion 2) Globalization: China Dominates Apparel & merchandising is a vast challenge (witness the recent Textiles But Its Explosive Growth is ups and downs of The Gap). Just-in-time inventory Checked driven by highly computerized supply chain The apparel and textiles industry has long been management systems is now an immense assist to ruled by complex import and export agreements that major retailers. Nonetheless, price pressure from limit the amounts of particular garments (such as t- major discounters like Wal-Mart and Kohl’s can keep shirts, pants and sweaters) and textiles (such as yarns profit margins thin at stores that sell moderately and fabrics) that may be produced and exported to priced apparel. Some of the most successful retail specific markets around the world. In an effort to chains are those that focus on niche markets with safeguard domestic production, the United States, special tastes and needs, such as Chico’s FAS, which Canada and several additional countries now part of caters to 35- to 60-year-old women who want the European Union established the Multifiber flattering fashions that suit their figures. Speaking of Agreement (MFA) in 1973. Under the provisions of figures, the well-documented growing girth of the agreement, a quota system was put in place that Americans is placing new challenges upon fashion established the maximum numbers of products merchandisers as overweight people of all ages, produced in developing countries that could be tastes and income brackets require clothes in larger legally exported to MFA member countries. These sizes. Designers and merchandisers face the task of amounts differed from country to country and were developing and presenting larger clothes in a based on historic purchasing patterns. flattering light. By the mid 90s, many factors, including global Department stores have changed their business demand for cheaper goods and political pressures for models drastically. While they were originally free trade, brought about the World Trade sellers of virtually every type of product, set in well- Organization’s (WTO) Agreement on Textile and defined spaces within giant buildings (thus the use of Clothing. This agreement defined a 10-year phase- the word “department” to describe them), most out of the MFA quotas, finalizing on January 1, 2005, department stores of today are primarily apparel and after which all WTO member countries were to have accessories stores. When consumers shop at stores virtually unrestricted access to U.S., Canadian and like Nordstrom, Neiman Marcus or Dillard’s, they European markets. The abolition of these quotas had find floor after floor of shoes, clothing, accessories a marked effect, particularly in apparel and textiles and cosmetics. This change has created problems exported from China. According to the United States within the department store industry, as managers, International Trade Commission, China’s export of faced with intense competition, developed the habit bras jumped 232% since that quota’s end, and the of continuously discounting clothing in sale events, export of baby clothes soared 826%. Overall, U.S. consequently pressuring profitability. Consumers federal estimates place the rise in Chinese textile and Plunkett Research, Ltd. www.plunnkettresearch.com apparel imports from January 2005 through August Bangladesh, for example, were up 20% in 2005 over 2005 at 64%, totaling $15.4 billion. 2004. China, which joined the WTO in 2001, had the Another effect of the newly imposed growth caps most to gain from global free trade since it boasts a is that China is being forced to improve the quality of highly diversified apparel and textile industry, its goods to stay competitive. Since many Third operates in a low-cost environment, is active in all World nations are capable of providing low-cost, phases of production and has developed markets in low-quality apparel manufacturing, China needs to countries around the world. However, in response to move ahead in terms of quality in order to maintain the MFA phase out, the U.S. and the European Union significant competitive advantage and continued established “safeguard quotas” in June 2005 which revenue growth. Manufacturing trends in China are were essentially caps on growth. The WTO has an evolving somewhat like they did in post-war Japan. agreement with China, under which the international In the 1950s and 1960s, Japan was seen as a very low organization may impose a growth cap of 7.5% per cost producer of goods that were generally poor in year on specific categories of Chinese textile imports quality. However, as Japan’s post-war industrial to member countries, if those imports are proven to giants gained engineering prowess and a greater be disruptive to local markets. Items such as understanding of global consumer markets, Japanese sweaters, trousers and brassieres were all deemed to quality (and consumers’ awareness of that quality) be disruptive imports, especially in the EU. The began to rise steadily. In fact, in many respects Japan European countries also imposed their own caps, in is now a world leader in producing highest quality which growth in 10 categories of Chinese textiles goods that represent tremendous value to the were to be capped between 8% and 12.5% until 2008. consumer. Lexus and Toyota automobiles are an Unfortunately, the European caps backfired, excellent example. Watch for the Chinese creating multiple, unforeseen problems. By manufacture of all manner of goods (including September 2005, millions of Chinese-manufactured apparel and textiles) to evolve from the world’s sweaters, trousers and bras were stranded at cheapest to eventually become some of the world’s European ports because they exceeded the growth best. This is already happening in quotas for the year. Retailers were clamoring for telecommunications equipment and certain other inexpensive goods to offer their customers and ports electronic goods made in China. were stymied by limited storage areas and huge Meanwhile, India has not reaped the expected amounts of quarantined goods. Representatives from rewards of free markets in apparel and textiles. After the EU and China hammered out an accord to ease the expiration of the MFA agreement, analysts the caps and allow one-half of the backlog of goods projected that Indian apparel exports would reach $25 into Europe immediately. The other half were also billion by 2010. This looks doubtful, however, since allowed in, but counted as a deduction against 2006 India’s apparel exports for 2005 declined 4.9% from growth limits. the previous year, falling to $5.4 billion. The reason In the U.S., a landmark pact was signed in for the decline, and the more important failure to November 2005 and took effect in January 2006. capitalize on the lifting of global quotas, lies in the Under this agreement, Chinese textile import growth labor laws that govern Indian textile workers. They will be capped at between 10% and 15% in 2006; forbid contract labor and make it virtually impossible 12.5% and 16% in 2007; and 15% and 17% in 2008. for employers to terminate workers once hired. New The accord effectively replaces the safeguard quotas proposals under government consideration include put into place in mid-2005. allowing contract employment and extending work The result of these growth limits is impacting the hours from 48 hours per week to 60 with overtime Chinese textile industry in a big way. Ironically, benefits. some Chinese companies are laying off workers and In a World Bank estimate, China will control outsourcing labor-intensive tasks to countries such as close to 50% of the world’s clothing market by 2010, Bangladesh, Nigeria and Cambodia, the very significantly up from its 17% share in 2003. countries that world economists predicted would Historically, China has paid its apparel workers suffer when global quotas were lifted in early 2005. approximately $73 per month on average, while pay In addition, many of those countries have enjoyed was higher elsewhere: about $75 per month in significant growth in exports to the U.S. The Indonesia, $102 per month in the Dominican Department of Commerce says that imports from Republic and $300 in Honduras. However, in recent months, intense demand for workers has caused pay Plunkett Research, Ltd. www.plunnkettresearch.com rates in China to rise dramatically. Nonetheless, the While import restrictions and quotas may rich U.S., Canadian and European markets preserve domestic jobs in the short term, free trade guaranteed to these and other developing countries in proponents argue that they will drive prices up and the quota system will be dominated by the volume of therefore hurt consumers. Prices for apparel drop goods that China can and is providing and China’s 30% on average in each category when a particular ability to manufacture and ship in a timely manner. quota has been abolished. In fact, the apparel industry in The Philippines has already been hurt by the removal of the quota on 3) Apparel Firms and Clothing Retailers baby clothes. Its share of the U.S. market has Targeted for Mergers and Acquisitions declined, according to industry sources. Growth through mergers and acquisitions is a The impact of globalization on the apparel and time-tested business practice that has strengthened textiles industry in the U.S. has been devastating. many companies in business sectors across the board. Especially hard hit are the southern states of North In the apparel industry, the dominance of and South Carolina, Georgia, Virginia and Alabama, manufacturer VF Corporation is due largely to smart where apparel and textiles have long been a major acquisitions of niche companies such as North Face, economic mainstay. According to the Department of Gitano, Jansport, Nautica and Wrangler. Labor, 248,000 textile workers have been laid off More recently, Jones Apparel Group acquired since 1990 in the Carolinas alone. A total of 318,000 Barneys New York by for $400 million in late 2004. jobs have been cut in the U.S. since January 2001. In 2005, the takeover of May Department Stores by Many of the largest textile mills have declared Federated Department Stores created a retail giant bankruptcy, including Burlington Industries, Malden with close to 1,000 department stores and 721 bridal Mills Industries and Guilford Mills. Some have been and formalwear stores. forced completely out of business, such as Pillowtex However, bigger is not always better, as may be Corporation, maker of Fieldcrest, Cannon and the case for Jones Apparel Group. Despite its Charisma bed linens and Royal Velvet towels. aggressive acquisition policy, the company is seeing falling profits, down to $274 million in 2005 from SPOTLIGHT: American Apparel, Inc. $301 million in 2004. In March 2006, Jones retained The most notable exception in the decline of U.S. Goldman, Sachs to look for possible buyers. Industry textile manufacturing plants is an up and coming firm analysts are looking to conglomerates such as VF called American Apparel, Inc. American Apparel is Corporation and Oxford Industries, which owns the the largest apparel manufacturer operating in Tommy Bahama line of casual apparel, as potential America—all of its goods are made at its U.S. plants, buyers. Private equity groups are another possibility which employ more than 2,000 workers. The firm’s in a Jones sale, as in as the purchase of luxury downtown Los Angeles factory has an output of over department store chain Neiman Marcus in 2005 by one million garments per week. In addition to its investment firms Warburg Pincus and Texas Pacific regular product lines, American Apparel offers Group. Sustainable Edition, a line of clothing made from certified organic cotton. The firm plans to integrate 4) High-Tech and Smart Fabrics Proliferate sustainable and organic cotton into nearly all its With the advent of rayon in the 1920s, high-tech products in coming years, and it recycles over a fabrics were born. DuPont’s “continuous filament million pounds of fabric scraps each year. In viscose fiber” was then and is now durable and silky- addition to its California factory, American Apparel soft and costs much less than organic fabrics made of maintains distribution warehouses in Montreal, silk. Today’s high-tech fabrics are either treated with Quebec and Frankfurt, Germany, as well as a chemicals, polymers or combinations thereof, or wholesale office in the U.K. The company operates specially engineered for durability, stain-proofing, its own chain of retail stores, and plans to add 35 wrinkle-resistance or weather protection. In addition stores in the coming year, including locations in to these wonders, scientists are producing smart Tokyo, Puerto Rico and Mexico City. Ambitious fabrics, which are engineered on a molecular level for expansion plans call for over 100 stores worldwide wearability advantages as well as an astounding array by the end of 2006, and nearly 1,000 by the end of of protective and clinical abilities. Through the use of 2008. special fabrics capable of conducting data flow, telecommunications and computing abilities are also possible in apparel. Plunkett Research, Ltd. www.plunnkettresearch.com The abilities of high-tech materials to keep The future for high-tech fabrics and smart fabrics athletes dry and comfortable have sparked a $9- in the near term sounds to many like something out billion market for high-performance outdoor apparel. of science fiction. Nonetheless, specialized fabrics An excellent example of the power of this industry will be sensitive to a wide variety of external niche is the wildly successful Gore-Tex fabric substances, including harmful toxins or chemical produced by W.L. Gore & Associates, Inc. The agents. The U.S. military has already incorporated fabric is a fluoropolymer, a manufactured fiber that patches worn on uniform cuffs that change color forms a barrier to wind and water but still allows air when harmful agents are detected in the surrounding to pass through it. Body heat and moisture can air. Scientists at MIT have created smart fabrics that evaporate through Gore-Tex even while it protects filter or shield wearers from radiation by combining from wind, rain, sleet or snow. It's used in everything synthetic fibers with an optical device called a from jackets to shoes to backpacks, and it generates dielectric mirror. impressive sales since apparel treated with Gore-Tex The possibilities are fascinating. Want to wear a often costs three times as much as non-treated pieces. favorite shirt in a different color? Smart fabrics made W.L. Gore’s 2005 annual revenues were upwards of of winged fibers that change how special dyes reflect $1.8 billion. light can do the job. What remains to be seen is how Another example of high-tech fabric is X-Static, consumers respond to these innovations and how manufactured by Noble Fiber Technologies, Inc. X- much they will be willing to pay for them. Static is reinforced with silver, which kills bacteria According to Venture Development Corp., a and odor while providing thermodynamic technology market research firm, revenue growth for temperature regulation. In cool weather, X-Static smart clothes should stay at 19% through 2008 to helps the body retain heat, and in warm weather it reach $720 million, up from $300 million in 2003. disperses heat. The silver is woven into the fabric, Yet another boon to the smart clothes industry is meaning that it cannot wash out or weaken over time. the potential for domestic employment gains in the First developed for the U.S. Army, it is now used in a U.S. Particularly in hard-hit areas in the southern variety of athletic apparel and was used in the states where traditional textile mills have all but uniforms worn by athletes from 61 countries in the disappeared, plants that provide high-tech and smart 2004 Summer Olympics. materials, as well as factories for producing goods Yet another high-tech sports apparel example is made from those materials, are employing workers. Textronics, Inc.’s (www.textronicsinc.com) use of In the eighteen-month period from January 2005 electro textiles. The fabric has circuitry, sensors and through May 2005, seven nonwoven textile functional component woven right in that renders the companies planned new facilities or expansion, material capable of powering electronic devices such investing $241 million in the Raleigh-Durham, North as cell phones of music players, provide heat for the Caroline area alone. wearer or sense external changes such as shifts in temperature and respond accordingly. Textronics 5) 3PL Supply Chain Management Evolves to makes a sports bra under the NuMetrex brand which Serve the Global Market senses the wearer’s heart rate and communicates that The challenges faced by supply chains are data to a wrist monitor. Retailing for about $115 multifaceted: coordinating the arrival of supplies in (including a combination wrist monitor/watch), the factories; bringing together all the necessary parts bras free female athletes from wearing separate heart and assembling them into consumer-ready products; rate monitor straps and sensors. and distributing them across oceans, highways and Manufacturers are hoping to take high-tech airways to arrive in the correct locations in the right fabrics indoors by applying new technology to fabrics quantities, colors and styles to satisfy consumer used in suits, sweaters, ties and more. They believe demand. All of this must be done at the lowest that consumers will buy into clothing that can't be possible cost. Compounded by delays and mistakes crushed when packed and is stain-proof as well as that can be made along the way due to bad weather, waterproof. Retailers such as Eddie Bauer are communication breakdowns, accidents, inspections already stocking casual cotton pants made of or simple human error, these challenges can quickly nanotextiles—materials constructed at the molecular become catastrophes. In order to prevent mishaps level of particles so tiny that moisture cannot and manage day-to-day supply issues, companies hire penetrate them. supply chain managers and utilize advanced data Plunkett Research, Ltd. www.plunnkettresearch.com systems. In some cases, supply chain services are SPOTLIGHT: CH Robinson Worldwide, Inc. outsourced altogether. Sector: 3PL Third-party logistics companies (known as 3PLs) 2005 Revenues: $5.69 bil., up 31% are quickly assuming a vital role in the supply chain. 2005 Profits: $203 mil., up 48% The idea here is to provide, on an outsourced basis, a 2005 Employees: 5,700, up 18% seamless link between freight services, inventory management, warehousing and distribution. With nearly $6 billion in 2005 revenues, C.H. Logistics services are generally defined as services Robinson Worldwide, Inc. (CHRW) is one of North added onto regular transportation activities, including America’s largest third-party logistics (3PL) freight forwarding, which is the handling of freight providers and a global provider of multimodal from one form of transport to another (for example, transportation services. It operates through 176 the movement of containers from ship to truck or offices in 42 states across the U.S., as well as in railcar to truck). Transportation managers determine Canada, Mexico, Europe, South America and Asia. the most viable mode of transport (by train, truck, The company, which does not own any of its own boat, plane or a combination thereof). Value-added equipment, maintains the largest network of motor warehouses store the stock of other companies and carrier capacity on the continent through contracts ship the stock out as needed. Supply chain with approximately 35,000 carriers. CHRW serves management (SCM) software makers specialize in more than 18,000 customers and handles software that can track and/or allow communication approximately 3.8 million shipments annually. The between the different parts of a supply chain. group also contracts air carriers and specialty motor carriers that provide temperature-controlled and less- than-truckload services. Its subsidiary CHREX provides expedited services and is the largest capacity provider in the expedited market. In addition, the firm’s T-Chek unit offers fuel purchasing management services for motor carriers. In September 2005, CHRW acquired two freight forwarding companies, Hirdes Group Worldwide, an air and ocean international forwarding company based in Germany, and Bussini Transport S.r.l., an international freight forwarding, customs brokerage and domestic truck services firm based in Italy. The number of major logistics services companies worldwide has grown to more than 1,000, despite a rash of mergers between 1999 and 2001. Since the birth of the logistics services industry in the early ‘90s, it has grown by as much as 20% per year, and it will continue at a steady rate of expansion for the foreseeable future. In the U.S., by 2005, more than 80% of the 100 largest American companies were using 3PL services. The total market in the U.S. for outsourced logistics and warehouse services is now in the $100 billion per year range. Many freight and parcel shipping companies have jumped on the 3PL bandwagon to provide their customers with turn-key shipping services. Deutsche Post, UPS and FedEx have all made logistics acquisitions as they battle for market share. British- based Exel plc, one of the largest providers of logistics services in the world, has made several strategic acquisitions in order to offer domestic and Plunkett Research, Ltd. www.plunnkettresearch.com international supply chain management from SPOTLIGHT: Supply Chain Evolution in the beginning to end, with services including freight Global Apparel Industry forwarding, warehouse management, multi-modal Many industries have benefited greatly from the planning and powerful information technology. In leaps and bounds in supply chain intelligence that turn, Exel was acquired by DHL in late 2005. have come about in the recent past. However, one of However, the industry has not consolidated to the the last to see a return on investment was the apparel point where there is no longer room for small or start- and textiles industry. The failure of logistics to meet up companies. Many regional or specific service the demands of this industry stemmed from several specialists have found a great deal of success in their factors. For one thing, most data systems for own niche markets. purchasing and invoicing, such as EDI (electronic The rapid growth of 3PL is global phenomenon. data interchange), were too inflexible to account for In China, for example, UPS has announced plans to the incredible variety that is found in textile goods, open its first mainland China cargo hub, at Shanghai, such as weave, fiber, color, texture, quality, style and enabling it to offer 3PL services. In fact, as the size. Many efforts to implement data systems met world’s reliance on Chinese manufacturers continues with failure. Another factor that compounded the to grow, 3PL service operators in China have enjoyed problem was the mercilessly fickle demand found in booming business. UPS, FedEx and DHL are apparel consumers, who buy millions of a particular offering supply chain management services for shirt one week, for example, and then just as quickly foreign companies that purchase large quantities of abandon that fashion while manufacturers watch their Chinese goods. DHL has seen its business in China goods go out of style in a warehouse. Some garments surge by as much as 50% yearly. can be sold for only two weeks at full price, then at 30 to 40% discounts for another two, and after that the price can plummet to a mere 10% of full retail value (probably less than its cost). To top it off, new manufacturers and textile mills pop up daily in China, India and elsewhere, each offering its services at a lower price than the one before, slicing profit margins to a razor edge and leaving little room for error. Advances in information technology and entirely new models for manufacturing and supply have recently come to the fore (and to the rescue) in the apparel industry. Major improvements have included cutting time-to-market so as to turn over new fashions as quickly as possible and working more closely with retailers in order to monitor and react to demand with greater speed and efficiency. For example, take TAL Apparel, Ltd., a manufacturer based in Hong Kong. TAL entered into a close relationship with one of its primary retailers, J.C. Penney, taking over practically every aspect of its supply chain for store-branded dress shirts. Under the agreement, TAL receives selling information directly from point-of-service (POS) stations, including price, color and size. From this data, TAL not only fills out its own order forms to send J.C. Penney more shirts, but also, based on the trends that are found in each store, determines how many of each type of shirt to send and in what size and color. As a result, there is no delay between the sale of inventory and the shipment of new items, and no need for warehousing or overstocking. It is a streamlined and incredibly efficient system. Plunkett Research, Ltd. www.plunnkettresearch.com 6) Synthetic Fiber Manufacturers Face Global manufacturers, such as Allen-Edmonds (a high-end Glut maker of men’s shoes with about $100 million in The manufacture of basic synthetic fibers, such annual sales), are able to maintain factories in the as widely known polyester, is generally controlled by U.S., domestic manufacturing is all but dead. major chemical and petrochemical companies Another exception is New Balance. This maker worldwide. Many of these fibers are based on of high-end running and athletic shoes operates six petroleum, much the same as in the plastics business. factories in the U.S. While New Balance gets much These manufacturers are deep in a glut of capacity, of its inventory from overseas factories, New Balance which is driving down prices and profits. has taken an interesting position with its The business has been so tough that DuPont, manufacturing philosophy. It is the only large maker inventor of many synthetic textiles that are household of athletic shoes that still has plants in the U.S., while names, such as Lycra, Stainmaster and Polarguard, its major competitors, such as Nike and Reebok, get exited the business after being an industry leader for most or all of their shoes from Asia. decades. It sold its textiles business to subsidiaries of Koch Industries, Inc., a massive, privately held 9) Bricks, Clicks, Catalogs and Living Rooms petrochemicals company based in the U.S. DuPont The most successful apparel retailers take full had renamed its fibers business INVISTA, which has advantage of the stability of traditional, store-based operations in 50 nations. Its business units are retailing in combination with the growing popularity organized along the sectors of apparel, performance of catalog and Internet-based retailing. Such a fibers, interiors, intermediates, polymers and resins strategy entails: and textile fibers. Likewise, the global Bayer Group of chemicals companies spun off its polymers, fibers, • Seamless integration of store, catalog and additives and rubber units into a new company Internet-based offerings to consumers, providing named Lanxess in 2005. choices of 1) place and method of purchase, 2) method of pickup or shipment and 3) place or method 7) U.S. Linens Sales Dominated by Big-Box of returns, repairs and additional services as needed. Retailers and Discount Department Stores • Communication of a seamless brand identity and The superstore concept has played a major role in level of service throughout catalogs, retail stores and the way that American consumers purchase linens for web sites. household use. “Big-box” retailers have captured significant market share at retail. These retail chains Few companies have reached this level of include Linens ‘n Things and Bed Bath & Beyond. integration of traditional and non-traditional retailing. At the same time, discount supermarkets, including However, for good examples of companies that are Wal-Mart, Target and Costco, have major market evolving toward such seamless strategies, study Wal- share in this merchandise. Bed Bath & Beyond is a Mart, J.C. Penney, The Gap and Victoria’s Secret. particularly interesting retail chain. With 660 stores At lingerie giant Victoria’s Secret, customers in 44 U.S. states, the firm’s long-term goal is to grow find enhanced flexibility and customer service thanks to 1,050 stores. It enjoys terrific profit margins. to the opportunity to shop via the web, the Victoria’s Local store managers have significant influence over Secret catalog or Victoria’s Secret stores. In addition the merchandise they carry, so that each store has the to the millions of catalogs that are mailed every ability to cater to local tastes and economic week, stores hand out copies of the catalogs—which conditions. In 2005, the firm racked up a healthy feature the web address of VictoriasSecret.com, as $5.15 billion in sales, compared to Linens ‘n Things' well as phone and fax ordering options. The point is $2.69 billion. to create loyalty-inducing convenience for customers, giving them options for purchasing when, where and 8) The Vast Majority of Shoes Sold in the U.S. how they please. Online apparel sales are soaring. Are Now Made in China Another retailing option that is particular to According to the American Apparel & Footwear apparel (as well as cosmetics) is selling from the Association (www.apparelandfootwear.org), home. Companies such as Doncaster, Carlisle and Americans purchased 2.16 billion pairs of shoes Worth enable women who are independent during 2004. The organization states that 98.4% of representatives to show and sell clothes and those shoes were imported, and 83.5% were accessories from their homes or company show manufactured in China. While a handful of rooms at trunk shows, usually held four times per Plunkett Research, Ltd. www.plunnkettresearch.com year. It’s a model similar to Tupperware parties. At billion. However, those in the apparel industry who Doncaster, for example, “associates” are trained by have tried to capture this market have seen mixed district sales leaders to learn the ropes of fashion results. For manufacturers, challenges exist both in display, merchandising and marketing, as well as the terms of labor and material costs. The costs of nuts and bolts of processing orders and collecting additional fabric and thread can be passed on to the payments. Each quarter, associates send out advance customer fairly easily. However, passing on the costs marketing materials and invitations (professionally associated with changing equipment, creating new produced by Doncaster) to friends and acquaintances. patterns and training employees on new designs may Appointments are made by customers to see and try be more difficult. on pieces from the current line. Orders are placed, For retailers, part of the challenge lies in finding and then the apparel is delivered to the customers the best way to effectively target these consumers. within several weeks. Factors that retailers must consider are product Prices range from $60 for accessories up to placement in stores and store layout. Having clearly $1,000 or more for suits and outerwear. Annual sales marked sections devoted exclusively to plus-sized for these private companies run between $30 million garments, rather than combining these garments on and $130 million. Average annual income for racks with non-plus-sizes, seems to help, as do larger associates is $40,000, with top sellers earning more fitting rooms with pleasant lighting and fixtures. than $100,000. There are also design issues. Many plus-size consumers, especially women, do not want to 10) Alternative Sizing Is Big sacrifice style for proper fit, and they enjoy wearing The results of a recent study of American body youthful, chic clothing instead of the tent-like tops shapes and sizes reveal trends that will impact a and pants that have been their traditional choices. number of industries, including apparel. While a However, not all designs and fabrics fit all bodies in well-known 1994 study by the Centers for Disease the same way, and designers must give careful Control and Prevention (CDC) has already shown consideration to creating clothes that are both that Americans are getting bigger, a more recent flattering and comfortable for plus-size consumers. study, which was sponsored by the U.S. military as Over the years, as more and more Americans well as clothing companies such as Lands’ End, J.C. have approached the “overweight” category (women Penney, Target and Dillard’s, shows how factors such are generally moving from size 12 to 16, and men as age, income and occupation affect the size and from size 40 to 46), manufacturers have adjusted shape of the human body. For example, those who their sizes to stroke consumer egos and generate earn up to $25,000 per year weigh 152 pounds on more sales. The trend is called “vanity sizing.” average, while those in the $50,000-to-$75,000 What used to be labeled a women’s size 10 is now a category average 160 pounds. Those earning above size six. Some manufacturers are even making their $75,000 weighed nearly the same as those in the sizes slightly looser—a pair of men’s slacks with a lowest income category. Regardless of income, the 32-inch waist may actually measure 33 inches. average adult American woman is 5’4” tall, weights Others, such as The Gap, are designing clothes in 155 pounds and wears a size 14. varying styles to conform to different body shapes. While the study, known as SizeUSA, affirms the The Gap’s men’s khaki pants, for example, are CDC’s findings, it also shows that as the American offered in easy, relaxed and classic fits. population has grown more ethnically diverse, its However, the sponsors of the SizeUSA study average body size has changed. What was hope that their findings will bring more accuracy to considered “average” 40 years ago is no longer manufacturers’ sizing conventions, as well as help average today. These developments may mean them to target certain age and income markets more important changes in the way that apparel designers, effectively. These changes should pay off for retailers and manufacturers anticipate consumers’ consumers, who will then be able to find properly needs and desires. fitting clothes more quickly. Several clothing The plus-size market usually refers to women’s companies have adjusted the fit of their garments sizes 14 and up. However, there is also a larger set of based on the study’s findings. Jockey, for example, sizes which range from 14W to 24W (the W stands updated the fit of its line of bras while Liz Claiborne, for “woman”), and an extended range that goes from Inc. altered the sizing of all 42 of its brands. 24W to 34W. The plus-size market is clearly Victoria’s Secret and The Gap offer pants in three growing, with U.S. sales rising 4% in 2005 to $17.4 different fits. Victoria’s Secret offers the Christie, Plunkett Research, Ltd. www.plunnkettresearch.com Marisa and Bridget fits for different body types while often have more money to spend on clothing than the Gap is selling Curvy, Original and Straight fits. young women do, and older women also tend to be Although Wal-Mart and Target have struggled in more loyal to particular brands. this market, some retailers and manufacturers are clearly profiting from these sizing trends. Torrid, a 12) Discount Clothing Retailers See Promise in retailer that specializes in plus-size clothing for Designer Lines young women, has 123 stores nationwide and seems Discount apparel is booming as major discount to have found the proper balance between style and stores focus on fashion as well as low prices. Among fit. the key players in this business are Wal-Mart, followed by T.J. Maxx/Marshall’s, Target, Old Navy 11) Baby Boomers Dominate the Apparel and Kmart. In terms of apparel, discount stores such Market as Target, Wal-Mart and Kmart have typically been Americans aged 55 years or older are the fastest- the places where consumers shop for inexpensive growing segment of the population. 2006 marks the clothing basics such as socks, hosiery, underwear and year that the first Baby Boomers turn 60. The term sweatpants. But all of these retailers are now trying “Baby Boomer” generally refers to people born from to gain a firmer hold on casual and careerwear as 1946 to 1964. It evolved to include the children of well, by offering trendier, more upscale lines of soldiers and war industry workers who were involved clothing. in World War II. When those veterans and workers One such retailer is Wal-Mart. In 1999, it returned to civilian life, they started or added to acquired Asda, a U.K-based retailer specializing in families in large numbers. As a result, the Baby “cheap chic.” Asda operates several stand-alone Boom generation is one of the largest demographic stores called “George,” which sell its upscale but segments in the U.S. According to MetLife, Baby inexpensive apparel goods under a label bearing the Boomers make up about 27% of the U.S. population. same name. Designed in the U.K., the clothes feature These people number an astonishing 77 million. By sumptuous fabrics such as leather and cashmere at 2011, millions will begin turning traditional competitive prices. In the U.S., slightly more retirement age (65), resulting in extremely rapid conservative versions of these clothes are available growth in the senior portion of the population. for men, women and children at Wal-Mart stores. The apparel industry is quickly evolving to meet Wal-Mart’s entrée into the trendy clothing the needs and tastes of the people in this rapidly market comes on the heels of other discount retailers, growing population segment. The Gap, Inc. took a such as Target, which have paved the way in offering big step in this market in 2005 when it introduced its designer-name products. In recent years, Target has new Forth & Towne chain of stores. With four entered agreements with a number of hip designers, locations in the Chicago area and one in West Nyack, such as Michael Graves (for housewares) and Isaac New York, Forth & Towne offers four labels, each Mizrahi and Mossimo (for apparel and accessories) to with its own style. Allegory offers tailored separates develop products for its stores. Both chains are and coats; Vocabulary is a line of easy-fit knit wear; spending millions to advertise their fashion-forward Gap Edition offers casual sportswear and jeans; and apparel in upscale media including Vogue. Prize is the trendiest with more avant garde styles. Beginning in the luxe magazine’s September 2005 Unlike the clothes at The Gap stores, which are issue (it’s biggest issue of the year with page counts designed on a fit model in a size eight and then of 800 or more due to advertising), Wal-Mart bought altered or “graded” from there to fit the larger and an eight-page advertising spread. The landmark smaller sizes ranging from 0 to 16, Forth & Towne appearance is part of 116 full pages of ads for the uses a size 10 fit model and stocks sizes from 2 to 20. discount giant that will run through 2007. This is a 90% of the clothes offered are priced at under $100. major investment; Vogue’s average advertising rate The Gap, Inc. plans to open 10 new For the & Towne for a full page is $104,000. stores in late 2006. While these developments point to the increasing Another retailer, Chico’s FAS, Inc., which competition among discount retailers, they also operates 780 stores across the U.S., targets older reflect the general public’s greater ease in shopping women looking for casual clothing that’s for discount apparel. Wal-Mart claims that 93% of comfortable, stylish and vibrant. If Chico’s success all U.S. households include at least one shopper who is any indication (2005 annual sales reached $1.06 buys at its stores. billion), this market is a profitable one. Older women Plunkett Research, Ltd. www.plunnkettresearch.com 13) Haute Couture Designers Experience in China and 18% of Armani Collezioni, the ready- Conflicts over Costs and Control to-wear line of Giorgio Armani SpA, is produced in Fashion design houses are particularly Eastern Europe. susceptible to changes in the economy, and since the Some design houses are experiencing painful stock market crash of 2000 and the 9/11 terrorist adjustments after being acquired by larger attacks in 2001, many are still struggling to regain corporations. The main bone of contention? their standings. Although the outlook for this Creative control. Superstar designerTom Ford left industry is improving, many of the large, high-profile Gucci, owned by retailing giant Pinault Printemps houses, such as Gianni Versace S.p.A. and Gucci, are Redoute, apparently over design issues. Designer Jil undergoing restructuring to reduce costs and Sander, who sold her fashion house to Prada in 2000 strengthen profit margins. and made a news-generating comeback in 2003, once Versace is cutting spending on flashy publicity, again left the company in late 2004. while looking for ways to attract new customers, such Ultimately, fashion is a fickle business and the as ordinary department store shoppers, rather than relationship between public companies and the focusing exclusively on the well-heeled clientele that design houses they acquire can be a trying one—for attend its runway shows. At Gucci, six brands such a the designers, the shareholders and even the Balenciaga, Stella McCartney and Alexander consumers. Some fashion houses, such as Armani, McQueen lost $30.9 million on $160 million in sales Missoni and Chanel, S.A. have thus far resisted the in the first half of 2005. The top brass at Gucci has benefits that public ownership can bestow—namely, warned the ailing lines that they will be sold if they cash for expansion and debt reduction. For these don’t show a profit by 2007. companies, maintaining design control is key. Karl Balenciaga chief designer Nicolas Ghesquiere is Lagerfeld, the chief designer for Chanel, has been taking the warning seriously, cutting costs wherever given free reign, something that appears to suit both possible. In 2005, he introduced Capsule Collections him and the company. Indeed, some private fashion of his most popular designs which lack pricey haute houses have even bought back licenses, one way to couture embellishments. Priced between $345 and reclaim control. In industries such as fashion, where $575, Capsule Collections pieces are far cheaper than free-flowing creativity is an important component of most Balenciaga ready-to-wear which costs upwards a company’s success, public ownership can of $2,000 per piece. The simpler clothes are sometimes be stifling. For haute couture designers, produced more quickly, spurring customers to visit the question of public versus private ownership is stores more often to try on and buy new merchandise. fairly simple—do you want to make money, or The efforts are reaping early rewards, with a 115% beautiful clothes? sales increase during the first six months of 2005. Other designers are taking preventive measures Fashion Defined: to ensure healthy profits by introducing lines of Haute Couture: Hand-sewn to order clothes using clothing directed at new markets, selling new designs fine materials. Couture designation is awarded by the before they hit the runway or diversifying their French government to those fashion houses that operations. To insulate itself from market caprices employ at least 20 people, create at least 25 designs and potential fashion show busts, Dolce & Gabbana for twice yearly shows in Paris and have had S.p.A. sells approximately 75% of its clothes well collections for at least two years. before they hit the runway in what are known as To Order: Handmade clothes made by designers who “pre-collection sales.” These clothes are tamer in do not have the haute couture designation. style and design than their runway counterparts, Semi-Couture: Machine made clothes made with which tend to be more conceptual and far more fine materials in limited quantities. expensive. Some designers are also buying back Ready-to-Wear: Designer clothes that are mass license agreements in order to regain control of produced and sold off the rack in retail stores. design, manufacture and marketing quality control. High fashion houses are also outsourcing some 14) Luxury Goes Online production to countries like Egypt, Hungary and After a few false starts, luxury apparel makers are China, an unheard of practice for luxury goods until selling big on the Internet. Not only are design recently. Valentino suits are being sewn in Egypt, houses maintaining their own sites, high-fashion sites Celine (a unit of LVMH Moet Hennessy Louis featuring many different brands of apparel and Vuitton SA) is manufacturing some of its handbags accessories are also flourishing. Plunkett Research, Ltd. www.plunnkettresearch.com One example is YOOX SpA (www.yoox.com). time of just two weeks. This is due in large part to The Italian site offers more than 250,000 items from the close proximity of its manufacturing facilities designers such as Chloe, Dolce & Gabbana, Gucci (located in Spain) to its stores. and Prada. 2005 revenues are expected to reach $60 H&M is the largest player in the fast fashion million, up 28% from 2004. market, both in terms of sales and stores. It operates Advance Publications, Inc., a private magazine more than 1,100 stores in the U.S. and Europe and publishing company that owns Conde Nast recorded sales of $9.4 billion in 2005. From design publications among others, operates ShopVogue.com. table to store rack, its lead time is three weeks. In The site’s content is comprised of ads and some keeping with the fast fashion model, H&M typically editorial content in Vogue magazine. Pages from the does not restock items—once they’re gone, magazine’s current issue appear on the site, where customers won’t see them again. This “now or users can click on a page to see information on items never” policy helps to promote H&M’s image as a shown in ads, including price and where to buy. In purveyor of up-to-the-second style. Mango uses a some instances, users can click on links to buy online slightly different strategy to cultivate a sense of immediately. fashion immediacy—it displays only one item per Overall online apparel sales in the U.S. were size in its stores. Though others may be in the expected to reach $12.5 billion in 2005, a 23% rise stockroom, the customer is left wondering if that from 2004’s $10.2 billion. Watch for luxury apparel size-10 shirt will be around tomorrow. companies to continue to pursue this rapidly growing Although The Gap has yet to meaningfully market. compete in the world of fast fashion (though it was reported recently that it had begun to decrease its lead 15) Mass Designers and Retailers Speed Up for time on some apparel pieces to just a few weeks), it is Fast Fashion making some changes in order to keep its styles Several European mass retailers are current. Meanwhile, in recognition of this market, its experimenting with a new business model known as Old Navy stores already offer three different t-shirt “fast fashion.” The key players in this business are size types, some of which are geared to teenagers, Sweden’s Hennes & Mauritz, also known as H&M, who like a snugger fit and bare midriffs. Twenty- as well as Zara and Mango, two Spanish retailers, and somethings and baby boomers generally prefer a the U.K. chain New Look. For these retailers, looser, more comfortable fit. success comes from designing trendy, inexpensive While The Gap sees lots of potential overseas, it clothes that mimic high-end fashion and that are is still trying to find the right business model for non- delivered to consumers at lightning speed—two to U.S. stores. It is learning that German and Japanese four weeks after conception. This turnaround time is tastes are far different from Americans’, both in a far cry from the four to nine months that U.S. mass terms of style and fit. Rather than try to aggressively retailers typically require. compete in the European market, however, The Gap Fast fashion wasn’t always part of New Look’s closed its stores in Germany, a country where H&M business strategy. As the phenomenon began to heat dominates. up, New Look changed its business model to get a piece of the action. Originally a discount retailer, 16) Athletic Footwear Draws Big Names from New Look's 511 stores now stock new items every Athletes to Designers week in order to catch the attention of fashion- Athletic shoes have long been sporting the names conscious shoppers. and endorsements of big name professional athletes, Mango, which operates more than 800 stores and particularly basketball legend Michael Jordan. entered the U.S. market in 2005, has developed a Nike’s line of Air Jordan shoes has been the top clever distribution system that keeps its products and selling shoe brand of all time. Other athletes in the its inventory current. Clothes are categorized Nike stable are Kobe Bryant, Dwayne Wade, LeBron according to basic style traits, such as dressy or James and Carmelo Anthony. Adidas-Salomon AG casual, and then shipped to stores that are most offers shoes from Tracy McGrady and Kevin Garnett. successful at selling specific categories of Reebok International Ltd. pushes shoes under the merchandise. This system has given it a competitive Allen Iverson name. The trend to sell a shoe under edge in the world of fast fashion and its products can an athlete’s name is called marquee footwear. hit the stores in just four weeks. Inditex’s Zara, A new twist to marquee footwear is that which which has 646 stores, boasts the quickest turnaround sports a famous designer’s name instead of an Plunkett Research, Ltd. www.plunnkettresearch.com athlete’s. Stella McCartney, a high-fashion designer in clothes they bought in the mid- to late 1990s and and daughter of former Beatle Paul McCartney, asking the retailer to replace the modern-looking began collaborating with Adidas in 2005 for hip labels it used at that time with the older, scripted athletic shoes and clothing. Another designer/athletic labels to which it has since returned. Eddie Bauer, J. shoe partnership is that between traditional shoe Crew and Paul Stuart are also looking at old styles in maker Cole Haan which was acquired by Nike. The new ways. Many retailers attribute the consumer combination resulted in a line of comfortable street demand for retro looks to recent events, such as the shoes called Cole Haan Nike Air. September 11 terrorist attacks of 2001 and the All is not golden in the land of big name shoes, sobering-up period that occurred after the dot-com however, since sales of basketball sneakers for men crash. were down 4% in 2005 from the previous year, Looking to the past also means looking at more according to NPD Group. Quality remains high, but formal styling. As workplaces return to their former, consumers are balking at high prices. Men’s athletic more formal days, careerwear is following suit. shoes in 2006 are priced about 5% higher than in Careerwear is expected to be one of the fastest- 2005, and women’s shoes jumped by 10%. Most growing apparel segments. This is good news for marquee athletic shoes run in the $125 to $150 range, companies like Ann Taylor and Talbot’s, which have although a notable exception is the Converse Wade been suffering from customer defections. Many Ann which is made by Nike and priced at $90. Taylor customers thought the brand had become too There are cheaper, more fashionable alternative stiff in recent years, while at Talbot’s, customers fled on the market which is attracting teen consumers when it started to shorten its hemlines to present a especially. One big leader in the trend toward chic more modern look. Ironically, while department athletic footwear is Germany-based Puma. Puma, stores are looking for ways to convince consumers to which experienced dismal sales in the 1980s while pay full price, Talbot’s has dealt with consumers Nike leaped to the top of the market, is enjoying a drifting away from its traditional full-price model. renaissance. 2004 topped $2 billion, up from almost To keep them streaming through its bright red doors, $1.6 billion in 2003. What helped to turn the Talbot’s is banking on service and perks such as company around was a focus on fashion, aided by refreshments and on-the-spot discounts at open house designers such as Germany’s Jil Sander and events. Such discounts, however, are not advertised, American supermodel-turned-yoga guru Christy and as such are positioned as rewards for faithful Turlington. Although Puma’s sales figures are still customers. dwarfed by heavy hitters like Nike and Reebok, it is But retailers are looking forward, too. Rather growing at a significant rate. than waiting to copy runway styles, many retailers Nike, which earned more than $13.7 billion in and their suppliers are thinking more like haute sales in fiscal 2005 (13% more than in 2004), couture houses, trying to anticipate what consumers overhauled its computerized supply systems to want before they want it. Big retailers like The Gap increase efficiency and focused on international are looking for inspiration in unlikely places, such as markets for soccer and fashion shoes and apparel. Parisian flea markets and vintage clothing stores. (Nike gets more than one-half of its revenues from Many suppliers are working fast to develop new markets outside the U.S.) Nike’s marketing budget is fabrics, as much as one year in advance, hoping that legendary. Basketball great LeBron James signed a consumers’ tastes will catch up by the time the $90 million Nike endorsement contract in 2003, products hit the stores. while still a high school senior. 18) Some Apparel Manufacturers Still Resist 17) Specialty Retailers Look Forward, and to Outsourcing the Past, for New Ideas Many American and European clothing Like department store retailers, many American manufacturers, unable to resist the less expensive specialty retailers are looking for ways to lure new labor costs available in Latin America and Asia, have customers and regain others who have drifted away. given in to outsourcing. H&M, a European mega- Some, such as Brooks Brothers, see promise in the retailer known for its aggressive pricing, past. Digging through their attics and archives, the manufactures most of its clothing in China and brand’s designers are retrieving old classics for use in Southeast Asia, as does The Gap. Some, however, new pieces. Even labeling has become important. prefer to manufacture in their home countries, even if Brooks Brothers claims that customers are bringing it costs far more. This is often the case with haute Plunkett Research, Ltd. www.plunnkettresearch.com couture houses, such as Chanel, where quality, both in fabric and workmanship, is of critical importance. All of Chanel’s haute couture designs are made in France, one of the most costly countries in the world in terms of labor. However, this is also the case for Allen- Edmonds, a men’s shoe manufacturer based in Wisconsin. Its shoes, which are aimed at traditional, affluent men, have been worn by both President Bushes. How it has been able to sustain a successful American shoe manufacturing company is a lesson in Business 101: train your employees well, reward them with good pay and benefits and make a top- quality product. With products priced at $200 and up and available in a highly diverse array of sizes and widths, Allen-Edmonds is an unusual player in this business. In a market where 98.4% of U.S. shoes are manufactured abroad by laborers earning between $0.60 and $0.80 per hour, Allen-Edmonds’ average employee earns $15 per hour. Meanwhile, the firm’s high prices mean far fewer customers than a company like Nike. However, its annual sales run an estimated $100 million, a very impressive amount. Allen-Edmonds’ employees are also loyal, which has actually begun to pose a problem. Some of its most highly skilled employees are nearing retirement, and the company must now find and train new, younger employees to fill their shoes. While Allen- Edmonds has thus far resisted the temptation to outsource, it may be forced to look overseas for labor.
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