The retailer hopes the range will compete with shoe specialists such as Office, Faith, Ravel and Dune, a report in Retail Week said, but will feature relatively low price points of between GBP30 (US$58.10) and GBP40.

Malcolm Collins, New Look buying director for accessories, was reported as saying:  "We are upping fashionability and using higher-grade materials. We have a commanding position in the footwear market and feel we can stretch it."

The company will source most of the collection from the Far East and a small portion from Italy.

New Look did not provide further information on the collection when contacted by just-style.

VF Corporation, which makes Lee and Wrangler jeans, wants its Nautica brand to have the same global feel (windswept yachtsmen) but different regional styles. This is a strategy that the company has been developing with its jeans and North Face and is now rolling out for other brands.

Karl Heinz Salzburger, VF’s president of European and Asian operations, told just-style: “We will customise the brand for Europe with about 80% of our designs unique to the market.

“We will use the same advertising and same values so the brand has the same feel but different colours and styles.”

VF will start its European women’s wear roll out for Nautica in France and Spain next autumn before attempting a relaunch in the UK and German markets.

“Nautica’s first attempt in Europe failed because they tried to sell what they were selling in the United States and that didn’t work because people wear different things,” Salzburger says. “We are trying to be more careful.”

Tailored to local styles
This use of global brand values while tailoring design to local styles is something that VF is keen to push with its other brands, like North Face and Vans.

North Face in particular feels identical to the brand that exists in the US but there are differences with style and particularly colouring.

However, VF is keen to ensure that there are no rigid barriers set up between its geographic divisions and cites the success of Nautica’s Salt Water range as an example of European styles working in the US.

Kipling is another European brand that VF is hoping will prove popular in America and it plans to use Nautica’s department store presence to push the brand into this new market.

VF is increasingly relying on its international division to supply profits growth as the US retail market has become tougher.

The international division increased its share of revenues from 19% to 25%, or $1.6bn, over the past five years.

Retailer consolidation in the United States has squeezed companies like VF in its domestic market. The company has also suffered because its core denim products are being passed over by consumers moving either to the high price, high fashion end of the market or the ultra low price end.

The combination of these factors has led to jeans sales largely stagnating in recent years.

Revitalise classic brands
VF is attempting to breathe fresh life into its classic brands, Lee and Wrangler, by taking them upmarket. This, the company hopes, will bring new consumers to the brands and give the whole line greater fashion appeal.

Salzburger explains: “The big, historical denim companies have struggled while other sectors, particularly the so-called lifestyle brands such as Diesel, have done well.

“We have entered that business, but with a different perspective because we don't want to be a clone. We have our own brand image and we are working that heritage and authenticity to give our styles a bit more of that lifestyle look.”

According to research in the United States, 41% of denim buyers are willing to spend a three-figure sum on jeans.

This has hit the mid-priced classics like VF’s rival Levi’s. That company has seen its worldwide sales fall from $6.8bn in 1997 to a low of $4bn in 2004. European sales have also fallen from $1.8bn to $1bn in the same period.

VF’s jeans division has seen sales hover at $2.696bn in 2003 and $2.697bn last year.

Salzburger says: “From a volume point of view, there will not be big change from going to a high price position, but it will improve our image and that will cascade down to the volume area.”

VF is also considering acquiring smaller lifestyle brands to sit alongside the classics, hoping that the “cool” factor will rub off on Lee and Wrangler.

These acquisitions will be made on a region by region basis but may become, like Nautica or North Face, global brands with differing geographic styles.

Retail stores
To help give consumers access to these new brands, VF is opening more of its own retail stores.

It plans to nearly double its current number of stores to 1000 by 2009. “It’s all about distribution,” Mr Salzburger says. “You’ve got to get that right.”

VF believes that it can better display its growing range of styles, as well as offering a flavour of its other brands like Vans, if it owns its own stores. It can also dictate the look of the store and its location, which reinforces the brands’ new upmarket look.

By developing the jeans business and promoting brands like Nautica, Salzburger believes he can build on the growth already achieved by the international division. His bosses at VF in the US evidently agree and have set him a target of 30% of group revenues in the next three to five years.

“We are doing pretty well and we believe our global brand values in the outdoor division will continue to push sales growth,” Salzburger said. “It is a bit more complicated in jeans but the changes we are making will help us achieve our targets.”

Even though Liz Claiborne Inc is one of the fashion industry’s largest and most successful fashion companies, posting record global sales of $4.8bn last year, it still has its work cut-out to enhance profitability and drive long-term revenues.

This week chief executive officer Paul Charron is visiting the UK with a view to expanding the company’s presence here, as well as well as eyeing new fashion labels to add to its line-up.

Speaking about the company’s plans for the future he says: “We're taking significant steps to…more closely align our business with rapidly changing customer and consumer needs.”

And he adds that one of the cornerstones for growth is to “capitalise on the many compelling opportunities among our more than 40 brands, including targeted brand extensions and global retail expansion for ‘power brands’ such as Juicy Couture, Lucky Brand, Sigrid Olsen and Mexx.”

Not surprisingly, changes are already underway at Mexx Europe Holding BV, the Netherlands-based fashion label that Liz Claiborne bought in 2001.

Mexx is two years into a four-year $10m product lifecycle management (PLM) pilot to help improve its competitiveness against European fast-fashion labels like Spain’s Zara and Sweden’s Hennes & Mauritz.

The software has been up-and-running since April 2006 across five or six Mexx divisions and will eventually be rolled out across Liz Claiborne’s entire brand portfolio by 2008.

Transparent process
Tom Reeve, ICT director for Mexx Europe International, is tasked with ensuring the investment brings transparency to the whole design and development process, ultimately delivering better products to the consumer and better sell-throughs to the bottom line.

“We want a product world we control ourselves,” he told just-style.

“We’re working in a very complex environment with multiple points of communication, limited process visibility, no centralisation, multiple versions, duplication of efforts and lack of control.”

Mexx sells men’s, women’s and children’s wear and accessories (and a range of licensed products like socks, homewear, footwear and furniture) in its own shops as well as department stores, independent outlets and the Internet across the world.

It has turned to PLM to enhance the visibility of information across a company and its supply chain which, as Reeve confirms, “will help the company to be faster, reduce costs, become more integrated, and will help the business to move away from wholesale and into retail and control the customer experience.”

Flexible collaboration
The driving force behind the company’s implementation of the web-based FlexPLM software from PTC, the Product Development Company, is to improve collaboration with vendors.

Mexx will continue to use PDM (product data management) software for line planning, product development etc, but will feed the forecasts from these ‘islands’ of information into FlexPLM. From here, ERP systems will handle financial transactions and inventory management.

The data will be accessible to all employees in all factories, and reduce duplicate work.

“We asked ourselves how we wanted to work with our factories and deliver product,” Reeve explains. “We decided to be more transparent and to place more trust in the factories. We’re looking at them as partners.”

A whole wave of process benefits should follow, including making Mexx’s merchandise development processes more flexible, reducing time to market, and enhancing the visibility of information across the supply chain.

All of which are, of course, critical when developing and delivering compelling, trend-right products in an increasingly competitive business environment.

It also ties in with Liz Claiborne Inc’s Vision 2010 plan, which according to Paul Charron, will reflect the “new technologies, increased sophistication and truly global partnerships” of the post-quota world.

Putting it into practice
It might sound easy on paper, but putting it into practice across a business with a portfolio of 43 brands from C&C California and Ellen Tracy, to DKNY Jeans and DKNY Active – and yet more acquisitions in the pipeline – is a different matter entirely.

Liz Claiborne Inc doesn’t own any manufacturing facilities, but instead has production centres and offices throughout Asia, Europe, India and the Caribbean. The right to manufacture and sell products bearing the company’s trademarks is licensed to third parties.

As a result, the group has an employee base of 14,000+ associates worldwide, “with a lot of people in different places,” as Reeve modestly puts it.

Since it joined the Liz Claiborne fold, Mexx has been instrumental in helping to change its parent’s mindset on how to approach product development.

Crucially, it has experience in delivering products quickly and has long since abandoned a traditional one-year lead time.

“We’ve become more vertical and faster at making products in 20 weeks and less,” Reeve explains. “We still have products on a 35-week cycle but 10-20% of the line is in an 8-10 week cycle time to catch on to fashion trends.”

But not only are designers, marketers and manufacturers all working to reduce production time in shrinking seasons; they must make sure that all information relating to a collection is up-to-date so that garments can be tracked across intricate supply chains, changing international trade policies, and consolidating suppliers.

“We used to design for the local market and have a team based nearby, but we’re now working across continents so there’s increasing complexity in handling communications,” Reeve elaborates.

Product development visibility
A key advantage of PLM is visibility across this product development process. Internal design teams and global suppliers collaborate on product designs simultaneously so it is necessary to manage, control and access product data and imagery – which is time consuming and potentially confusing.

For instance, when a designer creates a new garment pattern, the changes must be communicated to the rest of the team. PDM and PLM software enables this information to be communicated automatically to everyone involved – from trim suppliers to factories – and be analysed too.

A positive, but little-mentioned side-effect is increased job satisfaction for designers, who are often side-tracked by administrative tasks and have less time to carry out the creative conceptual work.
 
So far, users of the FlexPLM system are staff in Amsterdam, Hong Kong, Turkey, India working in Mexx Europe’s XX division (the juniors line, which represents around 12% of Mexx’s business).

Initial functionalities cover corporate libraries, security, image integration, raw materials, product specs, bill of materials, factory allocation, estimate costing and reporting. Workflow and the vendor portal will be added next.

As for the lessons learned so far, Reeve’s checklist includes the following:
- keep the scope of the implementation in check; don’t overwhelm users or the system;
- understand the differences between the US and European requirements;
- fast is not fast enough; everyone wants it and wants it quick;
- don’t underestimate resource requirements, the skill levels of key personnel, or the challenges of system integration;
- and, of course, the time-consuming public relations to communicate the changes to executives and product divisions. 

The final word goes to PTC’s director of marketing, consumer products, Matthew Austin. He makes the observation: “You can’t get any lower in terms of cost, so the only way to differentiate yourself is through marketing or design, and designers don’t want to be sidetracked by other functions. Stripping these out provides transparency of information.”

And that, surely, will be the new mantra governing tomorrow’s apparel supply chain.

Paul Charron is regarded by many as an industry legend, having run Liz Claiborne Inc for 12 years and more than doubled its sales to $4.8bn. The company has also bought numerous high-profile brands during his tenure including Lucky Brand Jeans, Juicy Couture and C&C California.

He announced his intention to retire at the start of this year and Wall Street expectation is that he will be replaced by Patrick Bousquet-Chavanne, a group president at Estée Lauder.

But tough trading conditions have hurt Liz Claiborne recently, with retail consolidation being blamed for its difficulties. The company’s sales fell 3.4% in the first quarter of this year to $1.17bn, and climbed a marginal 2.4% to $1.13bn in the second quarter.

Charron says: “Retail consolidation simply means that there are fewer people for us to supply. Retailers are also more focused on productivity now, so fewer goods are being ordered into stores and that affects our sales.”

Wholesalers have responded by consolidating themselves and companies like Liz Claiborne have led the way, buying numerous smaller brands and making it harder for retailers to demand discounts and concessions.

“Wholesaler consolidation means there are now a few players who have become larger and more powerful and that makes it tougher for retailers to wring money out of us,” Charron says.

High-fashion lifestyle brands
Another strategy Charron helped pioneer was the acquisition of high-fashion, high-margin “lifestyle” brands to differentiate the company from low-price retailers.

Competition at the low-price end of the market has been brutal as Wal-Mart, Target and their equivalents have driven down prices.

Lifestyle brands are more resistant to this sort of price pressure as they command consumer loyalty and offer a unique proposition that people are willing to pay premium prices for.

“Many of us are concentrating on brands and the people most seriously affected by retail consolidation are those without brands that have a strong consumer following.

“We have a collection of lifestyle brands that only operate at the upper end. We have no opening-price point area because the people who deal there are effectively selling commodity goods. They are living on borrowed time.”

Charron is also keen to increase the number of Claiborne-owned stores, which offers the company more retail outlets to sell product through.

“Having our own stores and brands is an attempt by us to control our destiny. How much a store like Federated-May decides to buy depends on their strategy and they do their own pricing. They have control of these decisions and they are not always made in the best interest of our brands.”

Hybrid model
As a result, larger wholesalers like Claiborne are moving toward this hybrid model with a large retail side to the business as well as traditional retail supply.

Retailers, too, are becoming hybrids with many cutting out the middlemen and sourcing directly from factory gates for their own-label products.

“We want the retailer’s margin as well as our wholesaler margin. We are becoming a hybrid, as are the retailers,” Charron explains.

European acquisitions
Liz Claiborne is also planning an expansion of its European operations, which are centred on the Mexx brand. Charron flew London last week to work on a strategy for growth in the UK and Europe.

Claiborne plans to make a number of acquisitions of European brands in the $100m to $400m range and analysts believe the company could be tempted by Ted Baker, French Connection or Diesel.

At the boutique end, brands like Reiss and Mulberry might give the company the uniqueness it is seeking.

Charron said: “We are looking for acquisitions in Europe, particularly in the UK. There are a number of European brands on our radar. There is some really good fashion and design talent building some interesting brands there.”

Claiborne will also push more of its US brands into Europe and further develop Mexx in Britain. Lucky Brand Jeans had been expected to open its first stand-alone store in London this year but this plan has been scrapped. Lucky is still available in department stores but the company will now concentrate on developing Juicy Couture in the UK instead.

Charron said: “The opportunities in the UK are, at this moment, more robust for a brand like Juicy than Lucky. Juicy competes at a high price point and should do well in the UK.”

Despite the recent difficulties Claiborne and numerous others have faced in recent years Charron’s strategy for survival has been clearly laid out for his successor.

But the retirement of Paul Charron will be as significant a blow to Liz Claiborne as the 1989 departure of the designer herself.

CAREER HIGHLIGHTS: Paul R Charron
Mr Charron joined Liz Claiborne Inc as vice chairman and chief operating officer, and became a director, in 1994. In 1995, he became president (a position held until October 1996) and chief executive officer of the company. In 1996, Mr Charron became chairman of the board.

Prior to joining Liz Claiborne Inc, Mr Charron served in various executive capacities at apparel manufacturer VF Corporation, including group vice president and executive vice president, from 1988.

Mr Charron also serves as a director of Campbell Soup Company and on a number of not-for-profit boards, including the National Retail Federation, the American Apparel & Footwear Association, Vital Voices Global Partnership and the Partnership for New York.

By David Robertson.

Sri Lanka might be a small supplier to the global garment market (it accounts for less than 1% of total clothing imports into the US) – but when it comes to intimate apparel like sultry nightwear and sexy underwear, the conservative island has a hot reputation.

Jerry Stritzke, chief operating officer of Victoria’s Secret Megabrand which includes Victoria’s Secret Stores, Victoria’s Secret Direct and Victoria’s Secret Beauty, explains that the company’s sourcing relationship with Sri Lanka “started 19 years ago with Mast Industries," the sourcing arm of Limited Brands, which owns Victoria's Secret.

“Then Victoria’s Secret had 145 stores – and now we have 1,000 stores,” he adds.

Over the years Sri Lanka has become one of the biggest suppliers to the US brand. For instance 55m of the 70m Victoria’s Secret panties made every year come from Sri Lanka.

Sri Lankan factories also supply 15m bras, 10m sleepwear items and 2.5m swimsuits per year for Victoria’s Secret Stores, catalogues and online sales and for sub-brands like Victoria’s Secret Beauty, Pink, Intimissimi and Sexy Sport.

And Victoria’s Secret’s biggest bra manufacturing factory in the world is located on the Indian Ocean island. Called Bodyline, this 15-year-old joint venture with Sri Lanka’s MAS Group dishes out 10m bras bearing Victoria’s Secret labels every year.

In fact, total Sri Lankan production for the US speciality retailer is now around US$500m, up from US$300m just two years ago. Most of this growth is to do with Victoria’s Secret moving more business into the island over the last two years.

“Sri Lanka has been a great partner. You could say we have almost grown up together, really. We pioneered the lingerie business in Sri Lanka together,” says Sharen Jester Turney, president and CEO of Victoria’s Secret Megabrand.

Getting cosier
The near two decade partnership with Sri Lankan companies, says Victoria’s Secret, is still going strong and getting richer – quite literally.

The lingerie retailer is now looking to integrate more closely with the island’s already well developed intimate apparel business, and is asking other companies to relocate to Sri Lanka as well.

“We have asked some of our raw material providers to relocate to Sri Lanka,” says Stritzke.

These include suppliers of various components that go into making bras and panties, like lace and pads and also warp knit fabric.

The closer integration is expected to strengthen Sri Lanka’s position as a niche intimate clothing supplier and make it easier for intimate apparel brands to do business in Sri Lanka.

Richer rewards
More good news for Sri Lanka is the fact that brands like Victoria’s Secret are not as cost conscious as some mass market clothing labels. This allows for better margins for local producers.

“Victoria’s Secret is not always looking for the cheapest product. Cost would be a factor for brands like Wal-Mart. For us, what matters is that the island is vertically integrated. Many low cost countries do not have the fabric and other infrastructure that Sri Lanka does,” explains Stritzke.

Sri Lanka’s long term expertise in intimate apparel, and the investment in equipment and human resources for specialised segments like lingerie and swimwear, has also paid off. These segments are better backward integrated than other types of apparel and are better able to deal with post-quota pressures.

“Our partners here [in Sri Lanka] have got increasingly more sophisticated on how to tailor to what we need. So the level of the product we get here is competitive,” says Stritzke.

Sri Lankan intimate apparel suppliers too, are predictably targeting upmarket brands – to bypass mass-market competition from China, India and Vietnam and of course, for better profits.

“Most vendors here are not looking at making the cheapest product. They are looking at upscale brands,” says Stritzke.

Lingerie paradise
Stronger integration with brands like Victoria’s Secret is expected to generate richer rewards for the local industry.

As it is, Victoria’s Secret Direct – the company’s online and catalogue sales arm – is one of the largest direct marketers of women’s apparel and lingerie in the US, with sales over US$1.2bn in 2005.

Total Victoria’s Secret sales in 2005 were worth US$4.4bn – more than the total value of Sri Lankan garment exports last year (around US$3bn).

So stronger ties with high-end niche products like Victoria’s Secret is good news for the Sri Lankan apparel industry that is besieged by rising domestic costs and pressures to increase wages.

Meanwhile Victoria’s Secret says Sri Lanka’s winning strategy should be to continue investing in design and development.
 
“Sri Lanka is at the forefront in terms of quality, integration and innovation. Sri Lanka’s biggest strategic advantage is the emphasis on innovation,” says Turney.

J-S: Bluefly was established in 1998. Did it aim to fill a market niche? And how successful has it been in doing this?

MP: After a frustrating day of outlet shopping, rummaging through bins of disorganised, two-season-old designer clothing, Bluefly’s founders realised there had to be a better way. They recognised that traditional outlet stores selling off-price designer apparel were not offering the type of shopping experience consumers have come to expect. The solution was clearly the internet, a significant untapped source for retailing off-price merchandise apparel and home furnishings...and Bluefly was born. We’ve been extremely successful, with revenues growing significantly every year, as new customers discover the site.

J-S: How has online retailing progressed since Bluefly was established? Have you noticed a lot more competitors in the field?

MP: We haven’t noticed many true competitors. Essentially our competition is high-end retail sites, and very few of them are set up to offer in-season merchandise by top designers. More sites crop up every day, but principally the major players are the online iterations of the brick-and-mortar stores carrying designer merchandise, ie Neiman Marcus.

J-S: Is Bluefly concerned that as more mainstream apparel retailers go online, it might have to fight to retain its market share? 

MP: It’s always a fight for market share. But again, very few, if any, retailers offer the value proposition we’re able to offer. Our merchandise is in-season, on-trend and offered at a significant value. Our customers are extremely savvy and have done their homework – they know what sets us apart and seek us out accordingly. They’re also fiercely loyal because we prove ourselves to them over and over again...not to mention each day when we feature over 150 new arrivals posted on our site. 

J-S: Does Bluefly see a lot of further growth for online apparel retailing?

MP: Absolutely. We have seen the growth and potential and feel confident that online retail is the best source for shopping. The bottom line is it expands your options. You have at your fingertips an unlimited amount of choices so you can find your style at competitive prices.

J-S: Some critics say the scope for buying fashion online is limited since consumers cannot try things on and many people, women especially, enjoy shopping in stores. What would you say to this?

MP: We are fully aware that women love shopping. Our target market is categorically fashion obsessed. But retail stores are not really our main competition. One of the key benefits of Bluefly is that we carry the current styles in the current season. Store retail is usually a season ahead. For instance, the stores on Fifth Avenue are carrying spring merchandise now – in the dead of winter – which means that ultimately, we are even more relevant because we service our customer during their time of need: ie “It's cold, so give me winter!” Additionally, online retail, while a relatively modern option, has been embraced by our population in a huge way. Most of the early-day stigma associated with it, such as credit card fraud, privacy and, of course, fit issues have all but disappeared. Savvy shoppers know their sizes and know their designers – plus, making a mistake or a ‘wrong purchase’ has very low consequences given our liberal return policy of 90 days with a money back guarantee, no questions asked. We make it especially easy with a pre-paid and pre-addressed return label.

J-S: How might Bluefly develop in the future?

MP: There are many thoughts we’ve had in terms of our future. Primarily we’re planning to expand our existing offering to include additional categories and consumer segments. At the moment we carry clothing and accessories for women, men and the home. We believe our value proposition is so compelling that it could easily translate to a variety of new areas. Also, we plan on developing our brand internationally to attract a broader audience base. Beyond that...stay tuned!

“New Look currently has a total of 838 shops and our objective is to strengthen our international development over the next 5 years with 50 store openings annually,” the group’s international director, Michael Lemner, told just-style.

“The focus will of course be on growth in the countries where we are already present. However, we will open our first store in Saudi Arabia in September 2007 and plan to add one other country in Europe to our network by 2009-2010.”
 
In addition to its established presence in the UK, Ireland, France and Belgium, New Look opened in Dubai in September 2006 and last month added a sixth country to its network – Kuwait.
 
An expanding network of stores has contributed to average annual growth of 20% in New Look’s sales, and estimates put its turnover in the year to March 2007 at around EUR1.5bn (US$2.0bn).
 
French target
New Look crossed the Channel into Continental Europe 15 months ago, with France its principal target. The budget retailer opened its biggest store to date there earlier this month – a 1,700 square metre outlet in Grenoble, in the south east of the country – and is planning further growth in France this year and in 2008.
 
“The Grenoble store is located in the large, Grand Place shopping centre which serves the French Alps region and is offering New Look’s full range – women’s, men’s, kids wear and footwear,” Lemner explains.
 
After the first four openings in the Paris area last year, New Look opened a 500 square metre shop in the north-west suburbs of Paris at the end of March this year and next month will open for business in Lille with a 1,300 square metre store in the northern French city’s premier retail site, Euralille.

This will take New Look’s French locations to seven, a number Lemner is looking to double in 2008.
 
“We are planning our first opening in central Paris next spring. I can’t say much more other than to say it’s a very good location. Two other openings in the Paris area are planned which would give us a total of eight stores in and around the French capital,” he enthuses.
 
Next spring will also see New Look open a 1,300 square metre store in Strasbourg and the chain has pencilled in additional outlets of various sizes located in as yet unspecified French cities during the course of 2008.
 
“We have confirmed our concept and now have our place in the market despite no real concerted marketing campaign. Our turnover is going up and average buying per customer is higher than we expected.”
 
“We’re getting customers of all ages and social groups shopping in our stores and we’ve been successful in adding men’s and kids wear to our core women’s wear lines. Our footwear range is doing very well and is a point of difference with the competition,” Lemner adds. 
 
European inroads
Apart from its significant inroads into France, New Look has also been growing steadily in Belgium where it now has five stores, the latest opening in Liege at the end of March 2007.
 
Lemner, who was behind the launch of H&M in France around a decade ago, also highlights the very positive picture at New Look’s French sister company, clothing chain, Mim, which was acquired by the New Look Group in 2003.
 
“Having Mim has made the task of developing New Look in France significantly easier as we were able to draw on its market knowledge when it came to locating shops and developing local contacts, for example” Lemner underlines.
 
Mim opened 25 new outlets last year taking its network to around 240 stores. A further 40 openings are planned for 2007.
 
“New Look and Mim are very complementary. Mim has lower price levels, focuses more on basic, casual fashion and its stores are considerably smaller at between 200-250 square metres. There is no clash between the two and we can point to several cases where they share the same retail site in perfect harmony!”
 
Lemner reveals that he is keen to test out the Mim brand outside of France in 2008 and is eyeing Belgium as one possibility.
 
“We already have Mim stores in France along the Belgian border so the logistics side of things would be good.”

New Look, which earlier this month launched a celebrity fashion line designed by pop star Lily Allen, is likely to be sold within the next few weeks after attracting bids from three major private equity players: Texas Pacific Group, Warburg Pincus, and Landmark, the group's franchise partners in the Middle-East.

The fashion group was acquired three years ago by private equity firms, Apax Partners and Permira for EUR1bn and earlier this year the investors appointed Merrill Lynch to advise on an exit strategy.

But when buyers ask this of MAS Holdings, Sri Lanka’s largest clothing exporter, the company is well prepared: “We see ourselves winning business in the marketplace by bringing innovative products and new technology to our customers,” says Mr Mahesh Amalean, founder and chairman.

Although firmly established as South Asia’s largest supplier of intimate apparel – churning out 50m bras a year – and one of Sri Lanka’s fastest growing suppliers of casual and sportswear for brands such as Adidas, Reebok and Speedo, manufacturing is just a small part of the whole package offered by MAS.

It also seems to have an aversion to standing still. In the past year alone it has unveiled plans for the world’s first eco-friendly industrial zone dedicated to apparel and fabric production, a ‘green plant’ to make bras for UK retailer Marks & Spencer, a deal for a US$200m industrial zone in India, and has even stepped into retail for the first time with a new branded lingerie line.

“We’ve had to structure our organisation to be able to align ourselves with customers, bringing in the necessary competencies in order to respond to their needs and have the supply chain in place to support this,” Amalean explains.

As the single largest supplier to US lingerie chain Victoria’s Secret, a preferred supplier to Gap and Nike, and one of just two direct suppliers of intimate apparel to M&S, MAS has come a long way in the past 20 years.

From a standing start in 1987, as a contract manufacturer with just 60 employees, it now has 39 production facilities in eight countries with a combined workforce of 35,000. Turnover has grown at around 20% a year since its inception, with annual revenues in 2006 reaching US$700m.

Design to delivery solution
Today the company provides a complete design to delivery solution, from sourcing the raw material, through design and product development, to logistics and even a vendor managed inventory service if required.

Significantly, it is also in the midst of a new evolution in which it is adding innovative products and technologies to the mix as well.

“We realised the expectations of customers were changing, and that innovative products were winning in the marketplace,” Amalean explains.

He adds: “For a long time we thought innovation was another service added on to the existing services that we provided. We didn’t realise that the industry was actually evolving into a knowledge industry.

“We are now working with research institutions in other parts of the world, and small entrepreneurial companies, to develop new fabrics, technologies and processes.” Innovations include a fully bonded bra construction that is now being used in products for both Nike and Victoria’s Secret.

Post-quota opportunities
Surprisingly, perhaps, MAS also found new opportunities when quotas between World Trade Organization (WTO) members were abolished at the end of 2004.

“What happened as a result of quota constraints being lifted was that buyers could go to any region, country and supplier and there were no restrictions on the volumes of business they could do with those suppliers; probably the only restriction was the capacity of the supplier to be able to deliver on the expectations of the customer,” Amalean says.

So a lot of the better brands sought suppliers with whom they could establish strong relationships, had access to a good supply chain and could make good products.
 
“Do price, quality and service matter?” asks Amalean. “Yes they do. Those are a given. But increasing speed, response, flexibility and responsiveness is also critical since a lot of orders are coming much closer to the season. It’s a very different environment now.”

In the same way that customers started reducing their vendor bases as quota restrictions lifted, MAS also reduced its customer portfolio from 44 to 18. Within its intimate apparel division, MAS Intimates, three customers – Victoria’s Secret, M&S and Dim – account for almost 70% of business.
 
It has also done the same thing on the supply side. “We had 250 suppliers; we have brought that down to 150 and our objective is to reduce that to within 50-100 suppliers worldwide. There are 28-32 components that go into our [bra] products, so you need a minimum of that number of suppliers.”

With such a huge concentration of customers on one side, and a reduction in suppliers on the other, the relationship between the two has also changed significantly, becoming closer and more strategic.

For example, MAS is now invited to sit in vendor councils where a customer introduces its sourcing strategy, and in some instances the sourcing strategy evolves within that group through discussion.

Fabric focus
Meeting customer demands for speed and flexibility has also spurred heavy investment in textile and component manufacturing to ensure all the raw materials needed for production are close at hand.

“We’ve been successful in attracting knit fabric manufacturers to Sri Lanka,” explains Amalean, “and as a result have been able to increase our business in casualwear, leisurewear, active and sportswear, children’s wear, and intimate apparel.”

Through a number of joint ventures, MAS has formed partnerships in Sri Lanka that supply elastic (Stretchline), weft knit fabric and dyeing (Textured Jersey), lace (Noyon Dentelles), and shoulder straps, hook and eye tape, and underwires (Prym Intimates Lanka).

Most recently, last month it started production of warp knit fabric through a joint venture with DogiEFA, while Spanish company Textprint, an expert at printing on synthetic fabrics, is also setting up a new facility in the country.

Both are located at the MAS Fabric Park at Thulhiriya, a 2 hour drive from the capital Colombo, a 165-acre site which is being positioned as the world’s first eco-friendly zone dedicated to fabric and apparel manufacturing.

Green production
The Park will also house the first ‘green’ production plant making bras for M&S.

Due to formally open in May 2008, this factory is being designed to conserve energy and natural resources, using rain water to meet some of its water requirements, solar power to generate electricity, and natural light and low-energy cooling systems instead of air-conditioning.

“It will be the first step towards the factory of the future,” notes Amalean. “What we learn from this we would like to take to the rest of our business and through that to the rest of the industry.”

Further afield, MAS is also revving up its expansion plans in South Asia, with a 750-acre industrial zone under construction in Nellore in Andhra Pradesh, India. The company already has three production facilities in the country employing 4600 people, but projected employment at the new site is for a staggering 30,000.

The move is expected to benefit customers of MAS Holdings by enabling expansion in India while using Sri Lanka as a hub to facilitate product design, development and raw material sourcing.
 
“We want to be seen as a regional player and not as a national player,” says Amalean.

Another strategic investment for the company is its move into branded retail. Its first lingerie brand, Amante, was launched in India last month (October) with an initial investment of $10m.

The line has a strong South Asia focus that is expected to give it an edge over other international competitors, and 100 outlets are scheduled to be up and running by the end of 2008.

This initiatives might seem ambitious, but MAS has grand plans for the future. By 2010 it would like to be the preferred partner of the world’s leading brands of intimates, sports and leisurewear with a turnover of US$1bn.

The reasons for such deals are well-documented, and more often than not include one or a combination of the following: improving efficiency by consolidating overheads and reducing costs, moving into new international markets, becoming more competitive, and boosting financial performance.

But less well-known is what actually happens behind the scenes when such a huge and complicated transaction takes place.

For Harry Debes, who took over as CEO of Lawson Software Inc in June 2005, his first year in the job was dominated by the company’s merger with Sweden based Intentia International. The deal, which was completed in April 2006, marked the culmination of nearly 12 months of activity and “1000 things on our to-do list.”

Bringing together two mid-market enterprise resource planning (ERP) software vendors with a portfolio of products in 20 languages, more than 4,000 customers in 40 countries, and total combined revenues of around US$750m highlighted not only the size and complexity of the task in hand, but also the cultural challenge between the businesses.

“One was a US-based company and the other a Swedish based company,” Debes tells just-style, “so there were lots and lots of things to look after” including getting all the legal paperwork and filings in place while continuing to run the businesses.

“The biggest job in the first year was just getting the deal done as we had all these financial issues to resolve, specifically restating Intentia’s history into US GAAP (generally accepted accounting principles) standards.

But this meant a lot of the legwork had been done before the transaction was completed, “so on the day that the deal actually closed many good things were in place immediately, like all the communication systems, the networks, the new logo and branding, and the new go-to-market strategy.

Since last April, the focus has been on combining the businesses, which posted revenues of $191.2m in the third quarter to 28 February 2007, an increase of 118% year-on-year as sales from the former Intentia were factored in.

“The most challenging part of what we had to do is now behind us,” concedes Debes, who has considerable M&A experience garnered in previous roles at SPL Worldgroup, JD Edwards and Geac.

“We’re now in the strengthening and building mode and are very optimistic about where we are today and will be in the medium to long term.”

Key vertical in fashion
In particular, the company is leveraging its strength in the fashion sector, which has been singled out as one of the six or seven key verticals where it already had a strong track record and on which its resources and customer service will now be focused.

“Fashion is front and centre – and we’ve added some pretty cool new features,” said Debes.

First and foremost, the new M3 release Enterprise Management System 7.1 launched in May now separates the technology from the applications. Not only is this intended to make some of the technical aspects of an implementation easier, but it will also simplify the upgrade process as new versions of the software become available.

It also includes features to make it easier to use and richer in function. The brand new user interface, in particular, has a modern look and is more intuitive to use. Instead of going through five or six different screens to enter an order or receive a purchase order, for example, this has been simplified down to just one.

The applications themselves include features that are targeted specifically at the fashion industry where the focus is on managing the supply chain, visibility across the supply chain, and reducing lead times at the same time as improving delivery performance.

They also address the way in which companies are working much more collaboratively now than they did in the past, and embrace trends like brand owners sourcing more and increasingly moving into retail operations.

The Supply Chain Orders application is aimed at both manufacturers and brand owners and gives complete visibility across a network from the customer order right down the supply chain. It also allows users to make changes at any point in the chain and see the impact of those changes flow automatically up and down the supply chain.

For manufacturers, who typically operate more than one site or use subcontractors too, the Fashion Planning Workbench is a completely new product which links in with Supply Chain Orders. It enables a company to plan, to balance orders against capacity, and to decide where it’s most appropriate to make things – and to take those decisions at a style or style colour level. Again, changes are automatically implemented in the operational system.

Also available with M3 is Lawson Business Intelligence which enables users to drill down to get detailed information out of the system. It includes a smart alert feature for exceptions to a particular pattern, such as when a supplier moves the date back on a purchase order against a style.

ERP investments
Lawson’s customer list ranges from Acushnet, RM Williams, Pringle of Scotland, Quiksilver and Red Wing Shoes, to TAL, Koramsa, Delta Galil, Schiesser and Rossignol, many of whom are on their second, third or even fourth system and are closely involved as development partners on testing the software before its general release.

At the other end of the spectrum, however, many companies in Asia are buying their first enterprise system and still need educating about ERP and what it can mean to their business.

So why should they make this investment?

“The fashion industry has a complex supply chain and a complex supply chain network with a lot of steps in it and, coupled with the squeeze on margins and the cost of labour, being as efficient as you possibly can is absolutely essential,” explains Debes.

“An ERP system gives you the tools to run your business, to plan your demands, to source your labour and raw materials and to produce what customers need and when they need it, and get it to market in the most efficient way.

“I can’t imagine anyone trying to do that manually or with a spreadsheet. I think it is just prone to far too many errors and miscalculations.”

And of course despite the most meticulous planning for what should happen, it just takes a little break in the chain (like a supplier having a problem with one of the fabrics, or only being able to deliver certain colours) to have a fantastic impact across the supply chain.

Another new option for fashion companies who are resource constrained or implementing for the first time is QuickStep Fashion, a pre-configured ERP application package created specifically for the needs of fashion and apparel companies, launched early 2007.

Lawson expects it to “make a big difference to apparel customers” since it is a tailored offering including tools for education and training, with documentation of all the core processes.

It reduces the amount of time for an implementation and enables users to get their basic processes up and running quickly – which in turn gives the project a lot of impetus and recognition and sets the right mindset for additional value adding capabilities.

For Lawson, fashion is now “front and centre,” according to Debes. He adds: “Pretty much on the day the transaction was announced we’ve emphasised that positioning and all our marketing and company material continues to emphasise it.”

Underscoring that commitment, Debes points out that of Lawson’s 320 fashion customers worldwide, three of the top ten apparel brands, and three of the top ten luxury brands use its systems. “We won our first Lawson M3 fashion customer in 1992 and they are still with us.”

By Leonie Barrie.

Not even his wife liked them at first, but Ron Snyder tells just-style during a recent meeting in London that the UK has been a hospitable environment for Crocs.

Snyder, the company’s president and CEO, is suited and booted for the occasion, in a unique way. Towards the end of the interview, he demonstrates the value of yoga by stretching his right foot onto the table to show me his chosen footwear for the day – a pair of brown buck-topped Crocs Ventures. He pulls the look off well, proving that Crocs is bringing some style to the table these days, quite literally.

“When my wife originally saw them, she said ‘look I am never going to wear those’. Now of course she wears them all the time but says she takes them off after six. Now she’s excited to get the new You by Crocs [fashion shoes and boots] line because you can have comfortable shoes after six,” he tells just-style.

Having nearly tripled its net income to US$64.4m last year and quadrupled profits for the first quarter of 2007, Colorado-born shoe brand Crocs is well and truly in the limelight. The quirky footwear firm thinks it has the bright colours to stay there and Snyder is also setting his sights on a bigger, and more fashionable, stage.

Snyder speaks with the conviction and confidence of a high-profile corporate boss and dresses the part with a classy cream suit and gold watch. He has experience managing growth, as a former executive at electronics group Flextronics and CEO of home-theatre firm Vinci Corporation, and officially joined Crocs in June 2004, stepping forward from a consultant role.

Pivotal year
The company’s growth has been unparalleled in subsequent years and Snyder, who identifies 2005 as a pivotal year, knows that Crocs has something unique. “We had great products to start with, like with all of the products we have developed up to date, our material’s unique and our styling’s unique,” he says.

As a result of this uniqueness, replication has been an issue for Crocs, which has successfully sued a number of companies for infringements.

The company’s kryptonite, so to speak, is a patented material called Croslite, which has lightweight, slip-resistant and antibacterial properties and is used in every single one of its footwear, accessories and apparel products.

Croc boasts to operate two and a half times faster than most footwear and apparel outfits. Indeed, the company took just a month to launch the brand in Australia, two weeks in Singapore, and since the turn of 2007 has set up manufacturing and sales in Brazil, accelerated by the contacts of Snyder and other management from Flextronics.

“We see the world as flat and we can get there very quickly,” Snyder says.

Rapid expansion
The Crocs workforce has expanded from three to 3,200 since 2002, and 17,500 outlets in 80 countries worldwide stock the brand. The company has six production sites in the US, Canada, China, Italy, Mexico and Romania and has a Crocs Europe unit set up in the Netherlands. It also runs Crocs stores, with 65 globally, in eight countries.

Crocs has become synonymous with sailing, fishing, nursing, gardening and catering. In addition, the Crocs RX range has won accreditation from the American Podiatric Medical Association (APMA), and 1,000 doctors offices in the US subscribe. Exercise enthusiast Snyder, who runs, bikes and even hikes in his Cayman’s, is well aware of the footwear’s versatility.

“Our customer base is massive, it’s every demographic and it’s for so many different uses and so many different socio-economic groups. It’s a very broad demographic, probably the most broad of any footwear for many, many years – there is no question about that,” he says.

Having hit the ground running since a successful IPO last year, Crocs has snapped up brands aside from footwear, such as sports equipment label Fury and accessories outfit Jibbitz – character charms that can be pinned to Crocs shoes.

The company also has plans to release bags, hats, scarves, gloves, clothing, underwear and hosiery – all incorporating Croslite.

It has also entered into a licensing deal with Warner Brothers in February, adding to existing agreements with Disney and Nickelodeon – all representing sure-fire routes to the children’s wear market.

Broadening its appeal
The brand is also broadening its appeal with the You by Crocs line of fashion shoes and boots, which has been launched in New York. Although more expensive than the original Crocs, priced at between US$149 to $299, Snyder insists the brand is not moving into an upper market.

He tells just-style: “We use the highest quality materials in this new You by Crocs line, with shearling in some of the product and some high quality leathers. So we’ve come up with a very high-end line that might be twice the price as one of our high-end fashion shoe companies but are good value for a really high end product.

“There will be other products that are even more affordable than the initial Crocs, so we’re going both directions.”

“Ugly” is a word never far removed from conversations about Crocs, and yet they are designed in Italy – a country steeped in style and finesse. Crocs has played on such accusations, and even ran an advertising campaign in the US tagged ‘Ugly can be beautiful.’

“Some people don’t like Crocs and think they’re ugly, but everybody knows and has heard how comfortable they are and how many uses there are for the product. So now as we come up with more styles – some that fit a particular taste more than the original style – we are getting even more customers to jump on the Crocs bandwagon,” Snyder continues.

Stepping into fashion
It does raise the question of how a brand known for being practical, comfortable and even “ugly” can step forward with new fashionable ranges. Snyder acknowledges that stepping into fashion can be dangerous.

“If it’s dangerous it doesn’t mean you don’t do it. It just means you have to bring something different to justify the fashion element. With our new women’s shoe line the story is really comfort, they just happen to be fashionable too. With our new apparel line the story is that it’s going to be comfort apparel – and by the way it’s fashionable,” Snyder says.

So it seems that Crocs’ business strategy more closely resembles the jagged edges of its namesake crocodile than that of a one trick pony, and in Snyder they have an expert zookeeper to tame the beast.

“Keep in mind that under the business model we put together, we’re not going to go crazy by developing massive amounts of product that might not be accepted in the market. We are going to build products as consumers say ‘I really like that, I’d like to have more of that,’ – that’s part of our model,” Snyder adds.

Crocs’ management realises that the popularity of its bold early collections gives the brand a passport for better looking fashionable items. However, the transition of Crocs should be closer to a makeover than plastic surgery.

A number of events have been held to commemorate the first bale of Australian wool being sent to Britain for commercial sale back in 1807, with AWI seizing the opportunity to reposition its product. just-style caught up with Craig Welsh in London, to discuss some of the issues facing the wool firm, including its impending merger agreement with Australian Wool Services (AWS).

The long-awaited merger of AWI and AWS is nearing completion, and one of Welsh’s primary tasks is to oversee the integration. The contract outlining the purchase of AWS assets by AWI has been signed by both companies and is subject to AWS shareholder approval next week (28 August). The two companies should be fully integrated by September, meaning that AWI will own the Woolmark brand.
 
Speaking of the merger, Welsh says: "I think it will be good news for everyone, we see absolutely no downside. It will require a significant investment in rejuvenating the Woolmark brand, and a new strategic plan in terms of how we roll out a branding strategy for it next year.

"The first six months is really all about doing an audit so we can work out strategically what is the best way to manage the brand and develop the new business model. Then early to mid next year we would look to roll it out internationally."

Commercial pressure
Welsh only took to the helm on 22 January, but is no stranger to commercial pressure, as former general manager of the Colorado Group’s Dianna Ferrari, Jag and DKNY brands. He was most recently general manager of marketing for retailer Myer Stores in Australia, and also has high-level experience with Puma and Clarks.

However, his sole focus is now on AWI, a not-for-profit company that is owned by and works solely for the benefit of Australian woolgrowers. To put this into perspective, Australian Merino sheep graze a quarter of the Australian landscape and produce 1bn kilograms of fleece per year, bringing in AUD$2.8bn (US$2.25bn) for the nation's economy.

Welsh selects the superlatives 'very good', 'exciting', and 'productive' to describe his settling in period at AWI so far. Perhaps he was enthused by me being on time for the interview – with his luggage still yet to arrive in London after a certain British airline forwarded it to Milan by mistake following a long-haul flight from Australia.

Welsh is jovial about the incident, proving he is the type of chap who can take things in his stride. As a consequence, however, everything Welsh wore that day at Australia House was brand spanking new and just-style was glad to be wearing a tie.

Global recognition
The Woolmark brand that AWI will inherit has global recognition, so much so that AWS was renamed The Woolmark Company in 1997. In terms of marketing, AWI know it has a strong hand to work with here, but will take due care on deciding marketing strategy for the brand.

"It's a very complicated issue that needs a lot of work and strategic analysis done on it. What we're not going to do is rush something for the sake of rushing it. We've got one opportunity to get it right. The good thing is that everyone has an opinion so we will take it on board from partners and licensees around the world, and from shareholders," Welsh says.

Meanwhile, with top retailers like Marks & Spencer committing themselves to the sale of organic wool, AWI has had to move fast. Although less than 1% of wool made in Australia is certified organic, it takes three years to gain accreditation and many growers are trying to meet the premium.

"We had a very good meeting with Stuart Rose last month and we've always had an outstanding relationship with Marks & Spencer. We see it strengthening further with their renewed commitment to organic fibres," says Welsh.

"We have recently done some research where we surveyed 25,000 people in ten key markets around the world, and the overwhelming response was that if people had a preference they would buy organic clothes and organic fibres.

"So what it shows is that of 14 mega trends we've identified, the trend towards organic-natural-eco is not only in the UK but its a global thing, and it gravitates towards Australian Merino Wool being perfect towards fulfilling that requirement."

Animal rights issues
On the production side, AWI has found itself dodging bullets from the People for the Ethical Treatment of Animals (PETA) over its practice of mulesing to remove wool from sheep, which PETA deems cruel. Last month it struck a deal to stop PETA threatening global retailers until 2010, with AWI agreeing to phase out surgical mulesing in return.

Welsh adds: "There's a number of alternatives we're working on at the moment. We're committed to the voluntary phasing out of mulesing by 2010 as an industry."

Furthermore, Australia's climate has experienced an extreme dry patch over the past year, meaning wool prices are sky high. "The drought has been the worst in a hundred years, the supply is down on what it's been obviously because of the conditions. But wool prices have hit a 20 year high recently and they continue to trade at all-time highs in recent weeks, so we don't see it changing much in the next 12 or 18 months or so."

Welsh explains: "What happens to the actual pricing is determined by the market itself. The price is a result of anticipated slight diminishing in supply along with an increase in global demand."

Confident future
At a time that AWI looks back at 200 years supplying wool, its boss is also looking to the future with confidence. "I think that there's no question that we will be supplying for the next 200 years. I think that the demand for wool and organic fibres in the UK will definitely increase over the next period of time and it's just a question of working with the partners here to work out how we maximise the sales and optimise the opportunities for everyone involved," Welsh says.

His optimism is well placed, because despite some production glitches, Merino is considered the softest and finest of the wool family, and has versatility owing to its high-performance and luxurious properties.

Moreover, AWI now has a trump card in Woolmark and a chief executive willing to travel as far as the wool. Indeed, since the turn of the year, Welsh has dropped into Shanghai, Tokyo, New York, LA, London and Milan. He needs to be market driven though because, after all, 97% of Australian wool sales are outside the country it originates.

By Joe Ayling.

What is the idea behind the J Shoes image and what do you have in mind when designing a new collection?

ND: “The ‘Do the Jaywalk’ concept has been the driving force behind the brand, the idea that life should be lived creatively and to the full, that individuals should do nothing but their own thing, and walk their own way. We see our brand as quirky, confident and creative. This ideology is behind everything we do; for the product we combine this with a strong sense of fashion, as well as a casual style and crafted feel.”

How do you plan to continue inspiring consumers and celebrities to wear your shoes?

ND: “We plan to continue developing and designing interesting and engaging products which reflect our brand concept as well as working on special projects, like our Lost & Found concept, which we will launch in SS08. This will give one of a kind footwear [every shoe produced in each individual size will be truly unique].”

How has J Shoes handled the difficult trading conditions brought about by the poor weather in the UK?

AF: “We have worked very closely with our retail network ensuring they have the right product mix for the season. The weather has been challenging, but by their nature independent retailers can adopt and react to seasonal changes.” 

How many different retail outlets do you use in the UK? Is the domestic market quite saturated and if so who are your main competitors?

AF: “We have a network of independent retailers up and down the country from St Ives to Orkney and work closely with them all. Our account managers have close relationships and regular communication with their accounts; not only do we offer in season stock replenishment, but also a comprehensive point-of-sale package and co-operative advertising. Yes we have competition, but as a brand we have always been a little quirky, never following the mainstream and always going our own way, so to a point we fly in the eye of our competition.”

How has the company performed in the past few years, in terms of like-for-like sales and profit?

AF: “Sales have grown nicely over the last few years. The development of a ladies' collection has added to our bottom line. We are trying to be more proactive and like many businesses have restructured certain departments, but now have a strong and well-focused team, who all have the same goal.”

As a percentage, do you sell more men's or women's shoes? What is the age and status of your target consumer?

ND: “We sell more men’s than woman’s internationally; however over the last couple of seasons we have seen a gain in our women’s business especially in the UK, where it now represents a significant portion of our turnover. Our target consumer age is between 25-35, they are individuals who are media savvy, they have an interest in fashion and design and represent the early majority consumer group.”

How do you see the company growing in the future? Have investors ever approached you and do you see consolidation in the footwear industry as a good thing?

AF: “We certainly don’t want to over distribute our brand, it’s a very fine balance. We will be looking for growth from within our existing account base and selected new business in the UK and across Europe. Financially we are in a very strong position with great backing from some very shrewd investors.”

How is your relationship with suppliers in Thailand; can you identify any sourcing issues? There have been reports that countries like China and Vietnam are now able to produce footwear more cheaply?

AF: “We always put quality first, the standard of footwear manufacture in Thailand has always been higher than other parts of Asia and we enjoy a good relationship with our supplier. We have our own technicians and design team based in Thailand, so any potential issues are addressed at a local level.”

Where is your fastest growing market and where else do you plan to distribute in the future?  

AF: “In a controlled manner our business is growing nicely; we presently distribute our brand across mainland Europe via a network of agents and distributors. In recent seasons we have had some great response from Eastern Europe and have build some great relationships and business in Croatia, Serbia and Romania. People everywhere appreciate a quality product.

“Where next? I would love to crack Russia and have a J Shoes store in Moscow.”

Have you encountered any counterfeiting, and if so what action did you take? Do you see this as a large-scale problem in the footwear industry?

ND: “No not really, we are a niche fashion brand, so counterfeiting is less of a problem for us. What we do see is similar product hitting the market that has obviously been directly influenced by us and is very close. I think counterfeiting is a big problem especially for the large players in the sports and luxury end of the business.”

What percentage of your earnings is spent on advertising and do you advertise outside the UK?

ND: “We do advertise on a small scale in both the UK and the US, and through our distributors in various other markets. In the past our marketing focus has been at point of sale, and through other activities such as supporting various PR initiatives.”

Have you ever considered releasing a J Clothes line, or are you focused on footwear?

ND: “We have considered clothing and its definitely something we see happening in the future. However right now we are concentrating on strengthening and developing our footwear business.”

Japan's largest casualwear retailer, Uniqlo, has undergone a major re-branding exercise following its decision to open large-scale flagship stores worldwide in its quest to “perfect our brand, and challenge the world.”

A whole raft of new marketing strategies were unveiled, and shops and corporate websites redesigned, as parent company Fast Retailing sought to reposition Uniqlo in the UK (where its London flagship opened in November) and launch it in the US (where it has a store in New York.)

Chairman and CEO Tadashi Yanaii hired a crack team of creatives to help to erase Uniqlo’s “C&A of the East” image for one of Japanese urban cool.
 
Markus Kirsten
Markus Kirsten, a German native who moved to New York in 2000, runs MP Creative, a studio that specialises in everything from advertising and shop design to web design.
 
Uniqlo asked him to art direct its flagship store in New York based on his “ability to sense the strength of a brand and express it visually in a stunningly beautiful way.” He also works closely with Uniqlo teams in New York, London and Tokyo on everything from the global ad campaign to in-store displays to the collection itself.
 
What was the nature of  your cooperation with the Japanese side of the team and where did you want to take the brand?
The brand is pretty open to suggestion, which has been great, and we also get to speak directly with Mr Yanaii, so we really get to volley back and forth on a very intimate level when it comes to presenting concepts and ideas.

There's also quite a bit of to-and-fro with Kashiwa Sato (who developed Uniqlo's new corporate image), Katayama/Wonderwall (who has designed Uniqlo's new flagship stores), and Yugo (the mastermind behind Uniqlo online).

I feel that we end up inspiring one another and feeding off of one another, as well. It's great because it means we all have a very similar and strong vision of the brand, but we all have unique vantage points as well, so there's always something to say.
 
What are you trying to do with the brand?
Outside of Japan, the name Uniqlo was either non-existent (as in the case of New York) or still nascent (in the UK).

The biggest problem we faced was that bringing a new brand to a city is a tough task because people are rightfully skeptical of anyone or anything that tries to infiltrate their neighbourhoods.

We knew this from the beginning, so the approach we took was to connect Uniqlo with real people in each city. Instead of using models or full-on celebrities, we looked for locals who are known and recognized by everyone in town.

In New York, we used people like Kelis and Terry Richardson and Kim Gordon. In London, we worked with great people like Dizzee Rascal and Katy England. These people are kind of like the ambassadors of their respective towns.

They don’t have hidden agendas, they stand for very specific ideals, and they all have personal style. These are characteristics shared by Uniqlo, and so we felt this direction would be a perfect fit.
 
Kashiwa Sato
Kashiwa Sato established his award-winning studio Samurai in 2000 in Tokyo and has made a name for himself as a designer, advertiser and art director of some distinction.
 
Uniqlo asked him to be overall art director for the brand and redesigned its logo to look more Japanese.
 
What kind of look were you trying to achieve for the brand?
 I wanted to reflect the ultra-contemporary cool aspect of Japan, its pop culture rather than something traditional and Japanesey. Like Japanese graphic design itself this is logical, clean, high-quality, speed, flat, graphical. I believe that aesthetic consciousness is going to be key to Japan going forward.
 
What were you trying to achieve with the relaunch of Uniqlo in the US and its huge ‘Super-Rational’ store?

With the Soho store, we are not looking to radically change the Uniqlo that we have come to know. Rather, we want to really get to the heart of Uniqlo, to build on that, and bring it into the spotlight. We want to make the most of Uniqlo's strengths and present them to the world.
 
Masamichi Katayama
Interior designer Masamichi Katayama is revered in Japan and overseas for his ability to balance a respect for tradition and style while adding a splash of the modern. Hiring Katayama for the NY store interior signalled the final break with the old style since critics had panned the blandness of previous Uniqlo overseas stores.

How did you approach your brief for Uniqlo?
I was looking for a beauty conscious, ultra rational style. Each element, from advertising to the new logo, to the shop floor is designed to reflecting this fusion and the clothes themselves.

I considered how this concept and the brand identity of Uniqlo could be expressed as a space. Since the store has an abundance of variety of merchandise, I resorted to creating an environment with their products with very little “designing” of the actual space. The interior design was based on how to enhance the merchandising.
 
How much collaboration is there with the rest of the Uniqlo creative team? What form did this take?
The flow of this project began with the Uniqlo Flagship store in New York and has led to the current London and soon the Paris project [the first French Uniqlo store opens in Paris today (14 December) and a flagship Uniqlo outlet is planned for central Paris during 2009].

Mr Kashiwa Sato conceived the overall concept, and each creator designed with that in mind. All of the elements, the interior design, the graphics, the website and so on have fallen into place in an organic way.
 
Is the look Japanese?
While Uniqlo is a Japanese company, Japan or Japaneseness were not considered, at least intentionally, in this project. And I think I can speak for the overall concept as well. However, since most of us involved in this project are Japanese, and while it may be unconscious, there may be some Japaneseness in the details that exists that others may notice.

Following a two-year political row with neighbour Venezuela, the industry has taken a devastating blow as exports to its number one market - where 65% of all textiles and 55% of all apparel were sold in 2008 - have plunged as diplomatic relations have embittered significantly, at times prompting reports of imminent war.

Amid this backrop, everyone is in a scramble to find new markets, so much so that the effort has become a national obsession, according to Paula Andrea Trujillo, director of competitiveness and internationalisation at the Institute for Export and Fashion Inexmoda.

"Everybody is obsessed with this, from business people to industrialists to politicians," she told just-style in an interview, adding that Colombians don't see a quick end to the Venezuelan row.

"We cannot have an optimistic view in the short or medium term as we don't see a breaking point in which relationships can stabilise.

"Colombia has to find new markets to compensate for the loss of this country and we are working very hard to make that happen."

Colombia's newly-elected president Juan Manuel Santos is also expected to mostly follow the free-market, pro-US agenda of the preceeding government which has angered Venezuela's leftist president and US nemesis Hugo Chavez.

The countries took a turn for the worse in March 2008 when Colombia sent troops to Ecuador to kill a number of rebels belonging to the Farc (Colombian) terrorist group.

The move triggered sovereign protests from Ecuador and close ally Venezuela, which expelled their Colombian ambassadors.

"We've hardly had a diplomatic presence in both countries since 2008," Trujillo continues. "Our ambassadors have returned but they were gone for a long time and this obviously created a lot of instability" for commerce.

As the stalemate continues, Venezuelan exports will continue to sag this year and for some time to come.

However, they have improved to Ecuador, Trujillo enthused, adding that they increased 36% between January and March 2010 after also collapsing last year.

Colombian-Ecuadorian relations have since improved and Ecuador has eliminated trade barriers for Colombian goods which at one point slapped as much as $12 per kilo of imported merchandise.

Doubling exports to Europe, North America
Colombia recently signed a free trade deal with the European Union that Trujillo is confident will be ratified next year.

This will open up a huge market for Colombian brands, particularly premium lingerie, weight-control and big-size apparel, which Inexmoda is rushing to promote in the Mediterranean basin, Western Europe, Scandinavia, Russia and the former Soviet Union.

A similar campaign is also underway to publicise these segments, as well as Colombian designers, in Canada, Mexico and Peru, Trujillo says, adding that Colombia is confident it can double exports to Europe and North America in the next five years.

Then, of course, there is the US, with which Colombia has struck a free trade deal that's pending ratification. Trujillo says US and Colombian political priorities will likely delay the accord's approval until 2011.

Once it's passed, Colombia will have to fight hard to recover some of the US producers that moved to cheaper production posts in the region operating under free-trade accords with the US.

In previous years most exports went to Colombia and the US but the distribution arrangement is no longer so cut and dry. In fact, it's likely to get even fuzzier in the short term as Colombia opens new markets in Europe, Canada, Mexico and Peru.

"It's not clear how our trade matrix will change in coming years," Trujillo explains.

It's cocktail hour at Prime Source Forum, but just-style is more excited to be interviewing one of the men leading Bangladesh's charge forward as a vibrant apparel exporter.

Fazlul Hoque has an intensity in his eyes, especially when discussing the needs of garment workers in Bangladesh.

Upon meeting we are ushered into the media room at the Hong Kong exhibition centre, where classical music blares out from the adjacent party.

As Mozart plays out in the background, Hoque pulls no punches when it comes to buyers. “We don't get any real support from the buyers, they are always trying to squeeze us,” he says.

He stresses that factory workers need money for “food and shelter” first and foremost, and that brands need to share this responsibility.

Hoque says: “I think the main goals should come from the buyers, they should say 'OK, I paid you $1 last year, this year I would like to pay you $1.10, and you have to make sure that extra 10 cents is being spent on the workers'.”

According to BKMEA figures, Bangladesh's knitwear exports have slowed by 3.35% over the eight months to March 2010, after growing around 15% in each of the past few years.

Although the downturn has slowed progress, knitwear still accounts for 77% of the country's exports.

Power struggle
Hoque says: “We have observed a small decline in growth rate, but not so much as to force closure of good garment factories. Other than the economic crisis we have another problem though, which is the struggle to get power - gas and electricity. Without power it is a redundant industry.”

He tells just-style that the Bangladeshi government is looking into alternative energy sources, together with plans to build a deep seaport to handle the country's booming exports.

Hoque is also keen to drum up business with emerging consumer markets in Asia, including China and India. Although Bangladesh has a number of multi-lateral trade agreements in place, Hoque wants to push for a bilateral deals with these two countries.

He says: “If we had bilateral agreements with India and China then we'd have more chance to explore, but the problem is we don't have sufficient agreement to move forward.

“We have so far been concentrating on the Western markets, but the game is not over yet, it is just starting.”

The BKMEA represents 1,700 factories in Bangladesh, mainly in and around the capital city of Dhaka. Hoque tells just-style the industry started out supplying basic garments, but is now moving into mid-tier products and functional textiles too.

Low cost labour
Retail buyers are generally lured to Bangladesh by virtue of its cheap prices, but are the country's labour practices up to scratch, just-style asks?

“Statistically we are doing well, otherwise the international buyers and the big names wouldn't be participating. There's Nike, Adidas, Marks & Spencer, Gap, Wal-Mart - everybody's there. I don't claim it is 100% perfect but where is?” Hoque says.

And it is the subject of living wage that Hoque seems most passionate about, insisting that buyers are often asking for the impossible.

“Unfortunately, the irony is that the buyers are pressurising us to increase the standard of labour, working conditions and the living wage while always trying to reduce the price,” he says.

Hoque believes that Western investments in the country, like Wal-Mart's new learning centre, would be better spent improving garment worker wages.

“Some buyers open schools and charities but this is indirect support,” he adds. “Ask them to pay extra and make sure that money is paid in cash to the workers.”

When it comes to knitwear production, Bangladesh is learning fast. The country was identified along with Vietnam and Indonesia as the supply chain destinations with most potential by delegates at this year's Prime Source Forum.

Furthermore, it seems with Hoque at the helm, the country will be no pushover for Western brands.

India, Indonesia and Malaysian exporters have been the big winners instead, he says.

Even the tiny island states of St Kitts & Nevis, in the Caribbean, and Tuvalu, in the Pacific – population of just 42,000 people and 12,000 respectively – and Mongolia have now emerged as significant South African textile suppliers.
 
“India and Indonesia were advantaged but so too was Malaysia,” Mr Brink told just-style in an interview.

“But other countries were also advantaged: Oman, Mongolia, the Cocos and Keeling Islands, the Cayman Islands, St Kitts and Tuvalu amongst others have all recently emerged as suppliers of clothing to South Africa.”

Fresh doubts over the restrictions
This failure to divert demand to the South African textile sector has also cast fresh doubts over whether these import restrictions are actually watertight.

Either Chinese firms are using a host of new business addresses to circumvent the South African restrictions or South Africa has unwittingly sparked clothing industries in some of the remotest corners of the planet, notes Mr Brink.

The growth of textile and clothing imports from India and Indonesia – while almost certainly legitimate – is also expected to continue.
 
“That the quotas would be so readily and easily circumvented was not foreseen.

“Safeguard measures [adding temporary protective duties to imports of items involved in an import boom] would have been a better option.

“The [South Africa government’s] Department of Trade and Industry (DTI) certainly must have believed that the quota measures they introduced would halt the surge in imports from China on items under quota,” he says.

And although “in this regard they were proved correct,” Brink adds, it was far from being the whole story. 

“The advantage of a targeted quota is that it is very specific and can be designed and tailored to arrest specific product import surges from a particular origin. The disadvantage is that if not adequately administered it is easily circumvented by both genuine and fraudulent source switching.”
 
More problems
And yet more problems may be looming for South African textile producers.

Under World Trade Organisation (WTO) rules, the existing Chinese quotas are expected to expire in December 2008, lifting the flawed protection offered by the quotas to South Africa textile producers, who have struggled to match the Chinese combination of low costs with reliable quality. 

Yet to some extent, Texfed has little to grumble about.

It supported the DTI’s decision to impose quotas on imported Chinese textiles and clothing in January 2007.

As the representative of all cotton, wool and worsted yarn and woven fabric textile manufacturers in South Africa and about 70% of the country’s fabric knitting mills, it acts as the voice and spokesman for its members on key industry issues. 

The need for import restrictions was highlighted by the parlous state of the South African textile sector.

Employment has collapsed from 70,500 in 2003 to below 50,500, whilst a number of textile mills have recently closed and have been forced to retrench staff. Imports are at an all time high.
 
Action plan
Meanwhile, the DTI has announced an action plan to recapitalise and upgrade the South African clothing and textiles industry.

The ministry intends to fund research and development and upgrading of skills and the state will step up efforts to curb illegal imports, which many manufacturers consider the biggest threat to the industry. But this initiative may be too little too late.
 
“Our position is that the breathing space that was afforded by the imposition of quotas should have been used to boost investment in upgrading and technological improvements of manufacturing plants.

“Investment incentives have only recently in July been introduced just prior to the termination of the quotas,” says Brink.
 
The problem is highlighted by difficulties encountered by cut, make and trim operations (CMTs) who previously used imported fabric and did switch to local suppliers because of the quotas.

Some local manufacturers, already struggling with rising costs, electricity cuts and a drop in consumer spending within South Africa, have complained to the South African media about local fabric supplies being often of an inferior quality, a higher price and suffering from problematic delivery schedules.

The result: some CMT contracts have been lost because of local supply problems.
 
Meanwhile, the DTI has initiated a plan to improve the South African clothing industry’s competitiveness by launching a review that may being new import duties on textiles, streamlining the existing complex system and maybe bringing positive benefits to a beleaguered sector.

By Steven Swindells.

Textile industry statistics - Click to enlarge

China quota summary - Click to enlarge

Dr John Cheh joined Esquel in 2003 and took up the post of CEO on 1 January this year.

Privately held Esquel is a vertical supplier that produces everything from cotton fibre to yarn, fabric and garments and sells close to 70m knit and woven shirts and T-shirts a year.

Its customers are in the US, Europe, Japan and the rest of Asia – including top brands like Hugo Boss, Polo Ralph Lauren, Nordstrom, Brooks Brothers, Next, Ted Baker, Abercrombie & Fitch – and also in China where the company has stepped into retail with its own PYE brand.

As well as men’s and women’s shirts, the business also sells about 15m yards woven fabric to brands and stores.

In Guangdong, the company has a knit fabric mill that produces about 15,000 tons a year, and two woven fabric mills producing over 80m yards a year. The woven fabric is all yarn-dyed – with plans to add a piece-dyed line for flexibility – and the knit mill makes both yarn-dyed and piece-dyed fabrics.

In Xinjiang, its cotton operations include cotton farming, ginning and yarn spinning. The company specialises in higher count yarn, all of which is used in its fabrics, but it also buys in the more regular yarn.

Garment manufacturing takes place in Guangdong and in the Shanghai area, but Esquel also has facilities in Mauritius (woven), Sri Lanka (knit), Malaysia (woven) and Vietnam (knit). Worldwide, the company employs 47,000 people, including 30,000 in China.

just-style: How does being vertical affect your offer?

Dr Cheh: Because we are a vertical supplier, we control the quality of the cotton, the yarn, the fabric and the final product. We also carry out product development on the fabric, yarn, blends, dyes and washes, depending on the requirements of the customer. Technology and innovation at the textile level give us an edge.

We also have our own design team to interpret fashion trends and offer different yarn counts, densities and hand feels.

j-s: Are you totally focused on cotton? Do you produce organic cotton?

Dr Cheh: Our strength is in cotton, and we also have an organic offer. We have international certification by US organisation OCIA (Organic Crop Improvement Association) of our cotton farming, ginning and spinning mill.

Right now, organic cotton is still a niche part in our production, but if demand grows we are able to supply and provide the certification. The main thing about organic cotton is verification and authentication. The cost is 50% higher than for regular cotton.

Our main customers in organic cotton are big players – Marks & Spencer, Nike and Nordstrom. They do not do everything with organic cotton, but in blends of 5%.

Among the 20,000 metric tons of cotton – including 10,000 metric tons of extra long staple cotton – that we use each year, we use about 300 tons of organic cotton. We don’t produce all our organic cotton, and also buy some from Turkey.

j-s: The production of cotton is a very polluting process, so what do you do in terms of environmental protection?

Dr Cheh: By having control of the whole supply chain we are able to offer customers social responsibility. That encompasses how we treat our workers, the conditions that they work in, and how we treat the environment, including energy saving technologies, pollution control, and waste treatment.

Dying and finishing are the most polluting part of the process. It is easy for garment manufacturers to say they are green if they do not know how the fabrics they are buying have been made.

But for us, being vertical means we know what we do and we can see what we do. We have our own power plant, which is extremely friendly to the environment. In dyeing, we have innovations to use less water and we have our own waste water treatment. It means investment, but also offers savings in energy, water and waste water treatment costs.

j-s: Does your concern for sustainable development make you more expensive?

Dr Cheh: No, we provide better value. Our customers recognise that, and they choose to do more business with us.

There are many cost pressures on us. The Chinese RMB is rising, labour costs and wages are going up, energy costs worldwide are going up, labour laws are getting tougher, and export tax policies are changing.

We have to be competitive of course, but we are investing to lower the labour costs and improve productivity and efficiency.

j-s: Quotas between China and Europe came to an end on 31 December 2007, but trade will still be monitored for a surge in Chinese imports. How do you see the situation now and in coming years?

Dr Cheh: The situation now is far better than the chaos in 2005 [when the EU reimposed quotas on imports of some Chinese textiles and apparel]. After two years of transition, we shall wait for three months to see the numbers in the first quarter of 2008 and gauge the impact of the total suppression of quotas with the EU.

But from Esquel’s point of view, trade with Europe was steady after 2005. Suppliers cannot continue to play the cut-price game or they will lose money. It seems that some stability has now been restored, but we shall see.

For China, trade with the US is still under safeguard quotas for one more year. But Esquel has the highest quota for men’s woven shirts and also the highest quota for men’s and women’s knit shirts because the government accepted that in order to encourage upmarket companies, allocation should be based on export performance, global performance and upgrading. We earned the quotas.

And of course we still have our other facilities in Mauritius, Sri Lanka, Malaysia and Vietnam. The reason we have a global presence is that we are diversified. If there is any trade action, like in 2005 when Europe was basically under embargo, we switch orders to Sri Lanka and Vietnam.

j-s: The last few months have been quite difficult for high-end brands because of turmoil in the financial markets. Has this had an impact on Esquel?

Dr Cheh: The financial turmoil in the sub-prime markets in the US and then Europe has had a negative impact on holiday retail sales, with many US and European retailers and stores seeing sluggish performances. The market is slowing down and is uncertain.

Obviously we are concerned and have to respond very carefully. But the interesting thing is, in a weak market there is consolidation. When business declines customers tend to buy from fewer suppliers, reducing from, say, 30 suppliers down to 15.

And at the end of quotas, because there are more suppliers, customers want to pick strategic ones who can also be partners. So as a result, our business with our top customers has been growing strongly.

Last year our sales grew by more than 20% to more than US$660m, and this year, in a slowing market, we are counting on a double digit growth. Because of our value proposition, our business is still very strong and our order book for the first half is overflowing, both for the knit and woven businesses.

j-s: Are you planning a European launch for your own men’s and ladies’ shirt brand, PYE?

Dr Cheh: Not in Europe, but in China we plan to expand it selectively – the retail price is close to EUR100 per shirt. We have one shop in the Oriental Plaza mall in Beijing and are planning to expand the brand in the main Chinese cities to show our customers our design ability and earn some retail experience.

But it is a challenge, because we have to build a brand. We used to have more than 100 stores 12 years ago, but that was our first entry and it was too early.

j-s: Europe plays a small part in your total sales; do you have ambitions in this market?

Dr Cheh: We would definitely like to grow our business in Europe. We have notable European customers – Marks & Spencer, Tesco, Hugo Boss, Cortefiel – but the European market is huge. Less than 15% of our sales are to Europe, compared with 60% to the US.

Except for Zara and H&M, it seems the rest of the European market is very fragmented. Last year, our business in euros grew by 60%, because we have an office in London, and we have added a presence in continental Europe. But it is still too slow relative to the US.

By Marie-Hélène Corbin.

“There’s an overall sense of slight unease because everything’s gone so quiet,” explains Emma Ormond, international trade consultant at PricewaterhouseCoopers.

She adds: “I can’t believe the industry is just sitting back and waiting to see what will happen.”

Behind the scenes, the EC and China are monitoring shipments of eight product categories (T-shirts, pullovers, men's trousers, blouses, dresses, bras, bed linen and flax yarn) to the European Union (EU) until the end of 2008.

The monitoring measure was agreed to ensure a smooth transition to quota-free trade – but any sudden surges in shipments from China are likely to trigger some form of protectionist measure again.

Ormond believes it’s inevitable that there will be a surge of imports in early 2008 “because a lot of merchandise was held over for shipment in January so it wasn’t covered by last year’s quota,” but adds the shipments should start to settle down by March.

She also thinks the most likely protectionist measure is an anti-dumping complaint rather than textile specific safeguard measures – since memories of the ‘bra wars’ fiasco in 2005, when millions of Chinese-made clothes were stranded in ports and at sea after new textile quotas were rapidly exceeded, still run deep within the Commission.

Launching the process
Instigating an anti-dumping complaint requires evidence of both dumping (goods sold on the export market at prices lower than on the domestic market) and damage to the EU industry before the Commission will launch an investigation.

“The advantage of anti-dumping duty from the Commission’s point of view is that it doesn’t just target China and is more a stance against proven unfair trade.

“So it would have to look at all other countries potentially dumping and causing damage, which means it could also be extended beyond China.”

Dumping is not that difficult to demonstrate. But because China is a state trading economy and not a market trading economy, instead of using its domestic prices to determine dumping, an analogue or reference country would be chosen instead.

China’s export pricing would then be compared with that country rather than with China’s domestic prices.

“So that’s the first thing that can have an adverse impact on China because very often the analogue countries they select are not particularly appropriate – and ultimately mean they’ll always be able to demonstrate dumping.”

In the anti-dumping case brought by the EU against leather footwear from China and Vietnam in 2006, for example, Brazil was used as the reference country.

The next issue is to demonstrate injury to the EU industry and assess the level of that damage by looking at things like import penetration, and export prices versus EU domestic prices. “They can nearly always prove damage,” Ormond explains.

“We’ve seen quite significant price deflation over the last few years and it was beginning to turn round, but as we’re starting to go into recession, there’ll be a lot of pressure back on pricing.

“That said, China’s not as cheap as it was, and it’s getting more expensive as labour rates are going up, and raw material and shipping costs are soaring.”

Import issues
The implications for retailers and importers are enormous. Not only do they need to be aware of what product categories from China are vulnerable – but also what is potentially vulnerable from other countries.

“And I don’t think people have really thought about that.”

Recent research carried out by Ormond and her colleagues in the customs and international trade team at PwC, studying trade volumes and values from China into the EU since the beginning of 2005, has demonstrated both dumping and damage in the six clothing categories still subject to surveillance.

And this is one reason why Ormond says she is “convinced” anti-dumping measures will come into play.

However, she adds: “I suspect the industry is probably biding its time and waiting for at least four months’ worth of trade data, so it’s unlikely we would see a complaint much before the end of the first half of this year.”

It’s hard to predict which product category or categories a complaint might be lodged against because “the six clothing categories which were subject to quota and are now subject to surveillance licensing have very similar profiles.”

Take dresses, for instance, whose imports look huge because they have been so on-trend, but also because a lot of tunic tops were actually imported as dresses.

Order implications
“For retailers and importers, my view is that their orders for 2008 are safe, and that spring/summer 2009 is possibly vulnerable,” Ormond says. She adds that provisional anti-dumping measures are most likely to hit garment orders for autumn/winter 2009, if they kick in at all.
 
In terms of the timescales, from the date the notice of initiation of an anti-dumping investigation is published in the Official Journal of the European Union, the Commission has 15 months to conclude its investigation.

In theory it could be significantly quicker, particularly in politically sensitive cases, and provisional measures could come into play within nine months.

“So if we saw an investigation at the end of June this year, then the chances are we wouldn’t see provisional duty until March next year,” Ormond explains. “And by that time, spring/summer merchandise is in.

“But there is still the prospect of disruption because of the possibility they could bring it [the provisional duty] in after nine months; and if provisional duty’s imposed that would generally be for six months – which takes you to the end of the 15-month period and then the definitive duty kicks in.”

Duty rates?
What are the duty rates likely to be? Ormond says they’re virtually impossible to predict. “Definitive duty is very often not at the same rate as the provisional duty, and so suddenly you have this huge uncertainty that just hangs over all your sourcing decisions.”

There are various mechanisms to calculate the rates, she says, “but if it’s fairly straightforward anti-dumping duty then it’s usually based on the lower of the dumping margin and the injury margin.

“So the dumping margin is the difference between the export price and the domestic price, and the injury margin is effectively what the EU industry feels it’s being damaged by in difference in prices, volumes etc.”

But often – as happened in the footwear case – the final duties don’t actually bear any relationship to either the dumping margin or the injury margin.

“And there’s no doubt at all that any clothing case would be hugely political again.”

Be prepared
Feedback from retailers and importers suggest most are concerned by the uncertainty. And for a lot of people who are monitoring the situation the view seems to be that “it’s a question of when, not if.”

Advice for companies is to be prepared.

Importers and retailers should look at where they can shift production, or whether they can mitigate the effect of anti-dumping duty out of China and anywhere else by using different raw materials, for example.

And individual companies must be willing to submit data about their own businesses which would be used by the Commission in its damage calculations.

But they only have 45 days from an anti-dumping complaint being filed to completing the relevant questionnaire. And a lot of the required information isn’t data an importer or retailer would readily have to hand.

“Which is why we keep telling companies they must be in a position to complete this documentation as and when anything happens,” Ormond notes. “The more they’re prepared to get involved, the better.”

Global sports brand Adidas has had a busy year in China. It launched its largest advertising campaign ever to support the Olympic Games sponsorship, launched its first brand centre in Beijing, opened hundreds more stores around the country, and last but not least, kitted out hundreds of thousands of athletes, officials and volunteers during the Olympic and Paralympic Games this summer.
 
The huge investments – the firm is rumoured to have spent EUR200m (US$251m) on the sponsorship and ad campaign – were worth every cent, believes Wolfgang Bentheimer, managing director of Adidas Greater China.

He quickly deflects criticism that the firm was subject to ambush marketing by other companies during the Olympics and points to a key achievement won – market leadership in China.  

“We have been working for the last 12-18 months on this. We closed the gap, we have finally got it,” says Bentheimer, revealing the competitive nature of the industry.

The battle for share of Chinese turf is probably the most intense in the world, driven by the pace of growth of the relatively young sportswear market.

Last year sportswear grew by some 40% for many players and that figure was expected to be even faster this year, thanks to Games-related marketing.

Market share
Though Adidas has been in China since 1997, it has always trailed arch-rival Nike in market share. Now the German brand holds 22-23% of the premium sportswear category, with Nike following 1-2% behind, claims Bentheimer. 

The lead came in early 2008, some months after the firm rolled out its Olympics advertising campaign.

In sharp contrast to Nike’s ad for the Beijing Games, the Adidas commercial played on the huge feelings of national pride in China in the build-up to the Games.

Opening with a Chinese basketball player running across the outstretched hands of a sea of fans, the ad gives almost as much prominence to the fan-base as the athletes. Later a diver leaps from a platform of human bodies and into the fans below.

“It has been the biggest campaign we have ever done globally, even compared with the 2006 World Cup in Germany,” says Bentheimer.

It seems to have worked, though other factors also contributed to the 60% growth in sales at Adidas China in the first half of 2008.

“It’s very difficult to isolate the factors [involved in growth],” says Bentheimer. “We had ambitious targets for our Olympics licensed range and we over achieved.”

But he concedes: “We were at the beginning of a much bigger development. The Olympics have helped raise awareness of sport.”

Much of the brand’s growth also came from expanding distribution into China’s smaller cities, often referred to in tiers.

Consumers in tier 1 cities, like Beijing and Shanghai, spend more but the lower tier cities are seeing faster growing demand and are considered key to developing brand loyalty.

“Our distributor network is bigger than our competitor’s, with 4,500 stores in 650 cities.”

The group currently makes 60% of its sales in tier 1-3 cities and 40 per cent in lower tier, or smaller, cities. 

Brand awareness
Adidas has made headway in brand awareness this year too. As official sportswear partner of both the Beijing Olympic and Paralympic Games, its brand was “everywhere”, says Bentheimer. “More than 100,000 volunteers and officials were wearing our brand.”

Though some critics have argued that Nike did a better job at actually clothing the athletes, Bentheimer says consumer recognition and brand awareness has surpassed that of its main rival.

“When we asked consumers what is your preferred brand in a key sport like basketball we were always behind Nike. But it has shifted in the last 12 months. We were able to get a lead here,” he explains.

That comes as a surprise to market researchers, as well as the competition, he admits. “Our competition is a little surprised in recent times.”

Another strategic move for Adidas in China came with the opening of the group’s first ‘brand center’ in Beijing in July. The four-floor store covers more than 3,000 square metres, dominating a new shopping complex. 

Beijing was “an obvious choice” for the brand centre, says Bentheimer, with China to become the group’s second largest market after the US by the end of the year. 

The new store, the group’s biggest worldwide, works both as a retail space and showcase for the brand’s technology and style.

Consumers can test their reflexes and speed on interactive games and also browse its designer range from collaborations with Stella McCartney and Yohji Yamamoto. 

Though Beijing is not typically associated with cutting-edge style, and purchasing power is still below other international markets, Bentheimer says companies need to nevertheless demonstrate innovation in China.

“You have to be ahead of developments if you want to be at the top. It’s not different from other markets. We try to offer the best, innovative products here.”

Adidas has a design and development centre for apparel in Shanghai to “make sure we don’t miss any trends here,” though it claims to offer the same range of products in China as elsewhere.

China, by merit of its rapid growth and size, has in fact become somewhat of a launch market for Adidas.

Aside from the brand centre, the firm has also started opening new stores that offer only the casual, lifestyle range sold as Adidas Style Essentials. This concept will be rolled out to other markets in the future.

In the meantime, it has strong potential in the Chinese market. The ‘sports performance’ range generates most of Adidas’ sales here, up to 87%, compared with just 75% in other markets. 

“There is lots of upside potential in sports style. You see other fashion brands capturing this [demand for casual, lifestyle clothing],” says Bentheimer.

He adds: “As a sports brand we’re broad enough to target this segment without losing credibility in sports. The consumer is very receptive to this here.”

Retail slowdown
Consumer retail spend is still growing in China but recent figures show that the economy has started to see a real slowdown. That could hurt consumer demand though Bentheimer says Adidas has not seen any impact so far.

“We have to watch this. But we think that the Chinese government will shift towards promoting domestic consumption and put policies in place to make it easier for the Chinese to spend more. Overall retail sales were still up 23% in China in September and haven’t slowed down.”

One threat that seems impossible to tackle is the ongoing counterfeiting of Adidas goods. In 2007, 7m fake Adidas products were seized worldwide, with much of that originating in China.

“That’s the curse you have to live with as a successful consumer brand. It’s an ongoing battle,” says Bentheimer. “It’s something you will never win but as long as we can keep it somehow under control...we have dedicated departments within the group who work with investigators to minimise the impact.” 

Bentheimer says Adidas China is on track to generate EUR1bn in sales by 2010.

He believes the firm can retain its lead in the market, despite stiff competition from other international brands like Nike and Kappa, which is building a premium image in China’s smaller cities. 

“We take all our competition seriously but we’re not afraid of them.” 

Cortefiel Group, taken private by buyout holding MEP in July 2005, encompasses the Cortefiel eponymous chain, unisex casual chain Springfield, lingerie label Women’s Secret, upmarket label Pedro Del Hierro and suits chain Milano.

It operates 1,570 stores in 45 countries, mostly under the Springfield, Women's Secret and Cortefiel nameplates, of which 460 are franchised.

Cara says the group is on track to install 440 franchised stores around the world by 2013, many of them in Asia-Pacific and Latin America where the chain sees “untapped” potential in markets such as China, Argentina and Brazil.

In that vein, the group hopes to enter China, Kazakhstan, Algeria, Tunisia, Indonesia and Slovakia respectively within the next 12 months in efforts to open 100 franchises this year, Cara reveals.  It will also muscle into Ecuador, Venezuela Mexico, Russia and the Middle East.

“We are moving full throttle with our expansion,” Cara notes from Madrid, adding that Cortefiel Group will run 800 franchised outlets – from roughly 360 now – by the end of 2012.

“We are still negotiating with potential partners but hope to be in these markets by the end of our fiscal year” of February 2010.

Expansion drive
Cortefiel's flagship Springfield and Women’s Secret labels will continue to drive the expansion.

Stores will be rolled out in the five continents but with a special focus on Asia-Pacific, South America and the Middle East.

Springfield was recently converted from a men’s only to a mixed label operating separate men and women chains as well as mixed-gendered stores under the “Springfield” banner.

According to Cara, the future outlets will be opened as a mixture of standalone stores and department-store corners depending on the country’s retail market, consumer profile and franchise partner.

“Every market is different,” he adds. “Indonesia has an established department-store network so we are more likely to open corners there but in Kazakhstan, Tunisia and Azerbaijan we will probably open standalones.”

Under the chain’s franchise model, partners buy Cortefiel’s product and own the stores.

“We get an entry fee and margin on the sales, but our partners make a higher mark-up than with our competition,” Cara says.

Focus on Asia/South America
In Asia-Pacific, the focus will be China, Vietnam and Thailand, Cara said, adding that Cortefiel hopes to open 200 Chinese stores in five years. The chain will also muscle in India through with Springfield leading the way.

Next will be South America where Cara said Spain-Latam cultural/language links provide an ideal backdrop for expansion. Apart from Ecuador and Venezuela, Cortefiel group hopes to enter Brazil and Argentina in three years.

“South America is very interesting for us,” Cara noted. “We have been operating there very successfully, particularly in Mexico, and there is a lot of leverage to be had from being a Spanish company.”

Regarding the Middle East, Cortefiel will grow heavily in Qatar and Saudi Arabia, while in Europe the onus will be on Russia where “there’s still huge room for growth beyond our 50 franchised stores” when the recession abates, Cara said.

Cortefiel has a much more cautious strategy for its self-owned outlets.

Cara said non-franchised business will be stepped up post recession, particularly in Europe where the firm owns most stores including 800 in Spain and some 200 in key Western European markets including Portugal, Germany and France and Belgium.

“We will move to secure continued growth [post recession] where we lead but for now franchising will be the driving force. It’s a good business with limited risk and investment from our side.”

Tackling Zara, Mango 
As Cara spoke to just-style, ubiquitous archrivals such as Inditex and Mango are moving ahead with their own aggressive expansions.

Inditex, which owns Europe’s largest fashion retailer Zara and other top labels such as Paul & Bear and Bershka, opened 560 stores last year to run 4,278 and is targeting up to 450 new stores during 2009.

Barcelona-based women’s chain Mango is targeting 150 stores this year to boost its global count to 1,379.

With such formidable competitors biting at its feet, how does Cortefiel plan to compete?

Cara says product differentiation and quality are key to the retailer’s competitive strategy, which he says has earned it the trust of investors and franchise partners.

“One thing that has been echoed throughout is that we offer something different than our rivals as well a better quality/price ratio,” Cara points out.

“We are also happy to work with large franchise partners that deal with our competition. By offering mall developers a greater variety of anchor tenants, partners can negotiation better rent deals so we see this as a healthy thing.” 

He says Cortefiel’s brands avoid cannibalisation by targeting a very specific consumer profile.

Asked about how Women’s Secret competes with closest Inditex rival Oysho, Cara says its chain targets slightly older women (25 plus versus 16-18 for Oysho) and has a broader collection of “higher quality” lingerie, swimwear and children’s underwear. 

“We are leaders in Spain with the biggest market share in lingerie,” Cara boasts.

Speaking about Springfield Women versus Mango, Cara says the former targets younger women and offers a broader range of casual wear with a “fashion twist” whereas Mango is more focused on evening, party and formal.

With Springfield Men, the chain’s target is 18-plus compared to 14-plus for Inditex’s Paul & Bear, says Cara. Springfield also has a larger casual range and stronger accessories business than Zara Men.

“Our accessories business is very broad and we have a very strong denim brand,” Cara says, adding that Springfield recently launched a new and slightly more premium “urban and contemporary” casual label called Urban Project modelled by singer Justin Timberlake.

That strategy has been piggy backed by a new store format for Springfield which Cara says is performing very well and will serve as a blue print for future outlets.

Not fast-fashion
And Cara is first to stress that Cortefiel is not a “fast-fashion” retailer like Zara or H&M.

“We are about offering quality fashion at affordable prices,” he says, at least when it comes to Springfield and Women’s Secret. “We could work with factories with better margins and rates but we don’t want to sacrifice quality.” 

The quality spectrum rises with the Cortefiel chain, the group’s first and a staple of Spanish high streets, which sells more classic and upmarket clothes. Pedro Del Hierro is the group’s more luxurious brand while Milano mostly focuses on affordable suits.

Cara says Cortefiel has increased investment in tools and processes to streamline its distribution operations to accommodate its swelling franchise network.

It recently opened a new logistics centre in Aranjuez, Spain and a sourcing office in New Delhi to manage Indian suppliers more closely. The firm uses third-party manufacturers around the world and only has one self-owned factory in Morocco.

“We have invested a lot in people and resources to improve our logistics and operations because at the end of the day, if we can’t move product in the right time and quantities we won’t have a business.”

By Ivan Castano-Freeman.