While China has gained a dominant position in shoes, apparel and household textiles manufacturing, makers of these items located in developed nations such as the U.S. and Canada 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, have put Chinese manufacturers in a much less competitive position. Competition, from very low cost nations in Africa as well as Vietnam, Malaysia, The Philippines and elsewhere, is intense. While China continues to have a robust apparel manufacturing industry, it is moving up the industrial chain by encouraging heavy manufacturing in InfoTech, automobiles, trains and telecommunications gear.
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 4,600 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 planned to open about 400 new retail stores under the Zara, Pull & Bear, Massimo Dutti and Oyosho brands.
Elsewhere, 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.
The global economic slowdown put a damper on the apparel, shoes and accessories sectors. The high-end luxury sector suffered in particular, especially in the U.S. and Europe. Retailers such as Neiman Marcus and Saks saw sales drop considerably. Consumers in the U.S., the U.K. and elsewhere are cutting back debt. However, there were good indications in early 2010 that consumers in America were increasing their shopping for apparel, furniture and other nonessential items. That doesn’t mean that retailers and apparel manufacturers will enjoy the big revenues of the boom that ended in 2007. Far from it. Today’s consumers want reasonable prices for high quality goods. Also, they are likely to pay cash or put their purchases on a debit card, while in the recent boom they were willing to run up revolving debts in order to buy more.
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 2009, the U.S. manufactured $30.8 billion in fabrics, down from $38.5 billion in 2008 and $44.5 billion in 2007, according to Plunkett Research, Ltd. estimates. In addition, according to the U.S. Bureau of the Census, America manufactured only $5.6 billion in apparel during 2009, compared to $9.3 billion during 2008 and $10.5 billion during 2007. In carpet and rugs, American firms manufactured $10.8 billion during 2009, down from $12.4 billion in 2008 and $14.2 billion during 2007.
During 2009, America exported about $13.6 billion in textiles and apparel, and imported about $81 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).
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.
Globally, the World Trade Organization (WTO) reports that global apparel exports were $362 billion during 2008, which represented 2.3% of the world’s merchandise trade. Textiles represented about $250 billion in exports and 1.6% of world trade in merchandise.
Over the past several years, 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.-based businesses. Because trade agreements will never satisfy all parties concerned, they tend to lead to controversy and much critical discussion. On the retail end, consumers of apparel have long enjoyed wide selections and moderate prices in North America, Asia, Europe and elsewhere.
During 2009, retail sales at clothing and accessories stores in the U.S. totaled $208.5 billion, according to the Bureau of the Census. In addition, Plunkett Research estimates that 80% ($150.5 billion) of sales at department stores, 60% ($52.32 billion) of sales at sporting goods stores and 40% of sales at discount department stores ($48.8 billion) were for clothing and accessories. This would put the retail apparel and accessories market in America at $460.1 billion, but this number may not include all sales made online.
Apparel 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.
Speaking 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).
Demographic changes will offer immense opportunities to U.S. fashion merchandisers. To begin with, the nation’s 76 million surviving 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 in America 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 apparel 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.
In many Asian nations including China, however, a department store of today typically looks more like one did in America 100 years ago. Department stores in China, for example, are known to sell everything from medicinal herbs to clothing to furniture and even automobiles. The world’s largest department stores by far are found in Asia.
Another sweeping change in apparel retailing is the rising success of e-commerce. Retail 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.