Crowded beach may alter towel game
Cecile Corral -- Home Textiles Today, May 31, 2004
Looking ahead to the scheduled elimination of quotas at the end of 2004, many U.S. suppliers of beach towels are bracing for a tidal wave of challenges waiting to greet them in the new year.
As the doors open to more product sources overseas, suppliers expect the crowding landscape to result in price pressure increases and a surge in the number of retailers exploring direct sourcing in the beach towel category.
"As is the case for all home textiles categories, we're all looking for something new, something different (for beach towels) in a world that has a ton of capacity but only so much demand," said John Cafaro, chief marketing officer of New York-based Karsten America.
Added Dan Harris, vice president of marketing and product development at Niles, Ill.-based Revere Mills, "The pie doesn't get any bigger."
Somerset, Ky.-based Cecil Saydah President Harold Schierholt believes there looms the possibility of price reduction — his estimate being 10 to 15 percent — as a result of quota lifting. But he believes it "will be rolled back into the product."
"We are all facing extreme upward pricing pressure for items using basic commodities (cotton), and what we may see is an offset — a price reduction — due to quota lifting, with a corresponding increase due to commodities and stress on overall supply overseas," he explained. "Our strategy is to improve the value while helping our customers protect their bottom lines. As quota comes off this category, it creates a further opportunity to enhance the value of the product for the same price."
Schierholt said most of Cecil Saydah's beach towel customers for premium goods "are not interested in the continuing price reduction game, as they are encountering little or no price elasticity (increased overall revenue with a price reduction) and they are encountering further stress on sales per line or foot, same store sales etc. Rather, they need differentiation, better product and better value."
To offset any damages, many U.S. suppliers are exploring prospects overseas with new manufacturing partners, diversified marketing strategies and innovative merchandising plans to better present and sell the final product to shoppers at the store.
Both Karsten America and Michele Sinai Inc., also based in New York, this year ventured beyond their bases in Brazil to expand product offerings with items they could not get from traditional sources.
"We want to offer our customers more of a well-rounded assortment — offer product that Karsten (the company's Brazil-based parent) doesn't make," Cafaro said. "We also want to be more cost-conscious, so we're utilizing vendors elsewhere who can offer us different product that can be more cost competitive."
Such new products include some novelty items, such as beach towels that can be folded into beach bags and towels with added features like storage pockets, as well as assorted jacquard constructions — all from Pakistan, India and China, Cafaro said.
Karsten America already gave its retail customers a taste of such goods in March during the New York Home Textiles Market and found, "They received them very well," Cafaro said. "We have great designs, U.S. distribution and sales and (our product from Brazil) is as competitive as anyone. But for some types of jacquards and lower-end goods, Karsten is not geared for that. So that opens the door for us to explore other avenues. You have to be able to tap into various resources to stay competitive."
Similarly, Michele Sinai, president and CEO of her namesake company, has made strides overseas, having recently forged a partnership with India-based terry towel manufacturer Trident Group. Sinai is designing collections of beach towels for Trident to distribute.
"It's another way to apply our collections to another production capacity because, I think, it is becoming clear there will be a few very powerful (beach towel) manufacturers in the world — in Brazil, China, India and Egypt — and so we need to have alliances already in place with these major production capacities to be able to have our beach (towels) sourced in these different countries," Sinai said.
Continuing on that effort, Sinai said she in currently exploring sourcing opportunities in China for beach and bath towels to complement her core lines, which are made in Brazil by Coteminas.
"We want to soon develop a main relationship with China," she added. "With the elimination of quota, we know we have to position ourselves to gain market share. We're seeing new opportunities, innovation and new concepts we want to tap. When major shifts like this happen, it is really a time to come in and make a differential value."
One company that has long been working to establish itself with overseas factories is Revere Mills. It has spent the past 20 years sourcing its beach and bath towels from India, China and Pakistan, Harris said.
The company just added 40-by-70 embroidered velour beach towels from Pakistan to its assortment.
Not all suppliers want to explore alternative sources overseas. New York-based Cobra/Espalma has no plans of diverting from its Brazilian base, said Rae Ellen Blum, vice president, sales and marketing.
"Our feet are deeply rooted in Brazil," she said. "Once you start to diversify, your quality suffers. I would rather be meaningful to the people I work with, and I'd rather work with my Brazilian people to the maximum than go somewhere else."
Döhler, which is based in Brazil and operates a sales office in New York, said it also will not waiver from its Brazilian product offerings.
"We are in Brazil, we'll stay in Brazil, and we'll continue to work hard to protect our market share here with our product," said Eric Vergucht, U.S.-based sales agent for Döhler. "We will continue to sell and specialize in what we make in our factories in Brazil."
Döhler's beach towel product line includes fiber-reactive, yarn-dyed, heat-transfer and sculpted varieties in 30-by-60 through 60-by-70 sizes, as well as coordinating beach bags.
Taking another approach at differentiating itself, Miami-based J.R. United is thinking in terms of merchandising.
"There are two types of beach towel customers — the seasonal guys who try to create some excitement, and the commodity guys, and they are the ones bound to end up direct importing and picking out whatever pattern, because they don't care about the product," said Salo Grosfeld, president of J.R. United. "We've walked away from that business. We used to do a lot of it, but in the past two years we've gradually walked away. We don't want it to be all about price. They make it so boring for the customer, but then they complain ... when the towels don't sell."
To help change that attitude at retail, the company is in the process of developing its "Beach Shop" concept, which it hopes to unveil by January 2006. It entails forging partnerships with manufacturers and suppliers of all types of beach seasonal goods — including swimwear, beach chairs, barbeque supplies, umbrellas, blankets and beach bags — and working together to encourage retailers to merchandise the products under a theme.
"It's a tough sell, I know, because retailers may not think they have the space," Grosfeld said. "But we've got to give this a try because if not, all the retailers will eventually go direct (importing overseas) and the category will shrink to nothing."
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