Same Old, Same Old? No Way
September 21, 2011,
Old Winnie obviously never was in the home textiles business.
It's human nature not to acknowledge change when you are caught up in the middle of it, and that is certainly the case for those in the soft home business. But as the industry gathers here in New York this week for its fall market week, any tendency not to understand exactly how much the industry has changed - in the right directions, as well as the wrong ones - is to ignore the fundamental reinvention of the American home textiles business.
And no, we're not talking about consolidation at the retail level or the shift in manufacturing production to Asia. These are significant changes in the very nature of the industry, but they have been ongoing for much of the past two decades. Anyone unaware of these broad redefinitions is clearly not in touch with textiles reality.
But there are other, just-as-critical, changes in the way the industry goes about its business, and if not as widely recognized, they still represent a vastly different business model.
Not the Same Old, Same Old in a Changing Industry
1. The American home textiles industry as recently as a decade ago was dominated by a handful of huge suppliers who at their peak did as much as two-thirds of the overall volume in the industry. The largest of the great American mills each did a billion dollars or more in sales and the fall-off to the next tier of suppliers was enormous.
That picture is radically changed. The top ten suppliers of core home textiles products represent a relatively small percentage of the overall business, and no company does over a billion dollars in annual volume. Instead there are a vast number of suppliers in the $50 million to $250 million range who have carved up the old mill market share in dozens of smaller slices. These suppliers are often foreign-owned, but a surprisingly large number of them remain American companies, often managed by mill refugees. They are not household names and in some cases, not even industry names, flying under the radar with a limited customer base and an even more limited market presence.
Even the last of the two great American mills - Springs and WestPoint - operate on a business model closer to this new reality than the old strategy. While most other industries in America - from cars to airplanes to banks to food - have consolidated, the home textiles industry has gone in the opposite direction ... a direction it has often found itself in over the years.
2. This used to be an industry with a relatively simple distribution model: Suppliers sold to retailers, who sold to consumers. With the exception of a smattering of outlet stores, vendors never came into contact with the ultimate users of their products.
That is no longer the case. Many vendors - it may even be a majority - now sell direct to consumers, either under their own names, or perhaps more commonly, under a third party name. Some of this is due to limited distribution options with fewer retail customers to sell to. And some of it, of course, is the ease of entry to direct selling afforded by the rise September 18, 2011 of the Internet.
But increasingly, it is suppliers looking to cut out the middlemen and control their own distribution, theoretically at least retaining a higher percentage of profits. We see this throughout the overall consumer products industry, but this is one case where textiles is as much in the vanguard of this movement as any product classification.
3. The thread-count war - the defining criteria for doing business in the sheet business over the past 20 years - is largely over. When counts broke into the four-digit range (real or not-so-real) a few years ago, it marked the pinnacle of thread lunacy. Consumers were as confused as they possibly could be. They had been taught that more was better, but this much more was somewhat hard to believe.
When cotton prices escalated over the past 18 months, it created more impetus for suppliers to downplay thread-count stories and focus on other attributes. The rise of non-cotton constructions added to the de-emphasis of counts.
After more than two decades of ever increasing attention on that magic number, thread counts have receded into just another piece of information on the package.
4. The origin and ownership of brands is a vastly different undertaking than it used to be just a few short years ago. Back then, companies owned their own brands and when they did choose to do a licensed label, it came from outside the industry, usually from fashion or the world of entertainment.
Those outlets still exist but now there is an entirely new entity in the world of brands and it is the brand management company. Best exemplified by Iconix, but also including players like Brand Matters, Otto International and Brand Sense, these are companies that don't manufacture or sell products. Instead, they own brands and license them out, often in exclusive retail arrangements, and collect licensing royalties for their brand management efforts.
It is certainly a new model and the whole concept of rent-a-brand is likely to get more common as retailers look for greater product differentiation and exclusivity.
5. They used to be called the third tier: close-out stores like T.J. Maxx, Marshalls, Ross and Tuesday Morning. They were customers of last resort, where you took the remnants and the rejects and, licking your wounds, got whatever you could. That was then.
This is now and these stores - still called third tier but second class citizens no more - are often the first choice for both suppliers looking to place programs and shoppers looking for bargains.
A whole subset of vendors has emerged who do nothing but sell only to this class of trade, and during the Recession-Without-End we cannot escape, these stores have fared better than just about any other channel of distribution on the retail landscape.
While these stores are as ruthless in their buying practices as any class in the trade, they are generally recognized by suppliers as being upfront in their demands without excess abuse later on - and they are fast payers, a key factor when credit is tough and cash flow an issue.
These stores, once the bottom feeders of the home furnishings industry, are now as desirable a customer as one can have. And they know it, too.
6. There are certainly many other ways in which the home textiles industry has changed, though in most cases, these have long-seated roots: The emergence of Bed Bath & Beyond as the only superstore game in town; the Internet as its own channel of distribution through e-commerce; proprietary product for individual retailers; expanded product development efforts by retailers leading to direct sourcing; and the ever-expanding quest for the next hot sourcing country.
Put it all together and it spells an industry where more has changed over the past five years than could possibly be imagined at the start of the 21st century.
Same old, same old? Not in your life.
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