Li & Fung gauging demand for RV towel

Brent Felgner, Staff Staff, April 19, 2004

New York — Royal Velvet bath and kitchen licensee Li & Fung of Hong Kong expects to firm up both its sourcing and retailer destinations for the debut of its RV towel by the end of May, the president of the sourcing company's U.S. arm said last week.

"Until we solidify demand, we can't really fine-tune the capacity we'd like," said Rick Darling, president of Li & Fung USA. "We have plenty of capacity. That's the myth that's out there right now — that there are no towels to be bought. There are plenty to be bought; we have no concerns whatsoever about capacity. But the issue is we want to be able to realistically define that once we get a better indication from retailers what their needs will be."

Darling said the RV sample towel shown during market was supplied by a Turkish source. The initial runs will launch from manufacturers in Turkey and India, he said. But the final sourcing picture is still developing.

The spring '05 launch will be in the United States and Canada before it's "globalized" by the following fall, with initial product shipping then to Europe and, perhaps, Australia, Darling said.

Although the brand previously won only a modest 3 to 4 percent share of the market in Europe, "We think this brand has tremendous legs in terms of both its geographic and product extensions, if we do it properly," he added.

Like brand manager Group 3, Darling said he is convinced Royal Velvet will win back lost retail placements, telling a story of adequate margins despite significant royalties and marketing fees, along with a powerful brand marketing vision. He said vast efficiencies would be realized through Li & Fung's ability to source efficiently in countries such as Thailand and China, in addition to India and Turkey.

"Simply put, they were making it in the wrong place," Darling said of the towel's former life under the defunct Pillowtex Corp.

Still, the issues confronting the relaunch are admittedly formidable. RV's former shelf space has already been replaced — much of it with private or proprietary label goods — but Darling said he believes those placements are not yet permanent.

Li & Fung is also counting on its ability to leverage some of its existing retail relationships in home textiles with merchant clients such as Kohl's and Bed Bath & Beyond.

Though the company is obviously not seeking to trade space with its existing lines to the stores, the possibility of some cannibalized lines is real, Darling acknowledged. At the same time, he positioned the struggle as largely brand versus brand.

The company initially planned a relaunch this fall with a limited assortment of towels. It abandoned that idea after discussions with key retailers.

"In order to do a limited launch, it would have been limited by color, and it would have been limited by distribution — too limited by distribution," Darling explained. The towel line will debut with a 40-color palette, although probably 32 will be the valid core, he said. At the same time, bath accessories, shower curtains and liners, window treatments, rugs, robes and slippers will be in the early rollout.

"We think it's important to do it right up front, get it out there and make it part of the brand immediately," Darling said, "so we're not stuck with a towel brand that we're trying to extend."

A full bedding collection with other categories from other licensees not yet signed will follow by fall. Later, the balance of Li & Fung's licensed items for the kitchen will follow.

What about other soft home brands?

Despite an expanding branding strategy, it seems unlikely, at least for now. Darling indicated that any such effort would need to be carefully positioned so as not to compete

"Royal Velvet was the next natural step for us because we were already providing most of the infrastructure and service that it takes to do that product. We just didn't have a brand name. We didn't control that piece of it." he said. "Controlling that piece of it not only gives us the ability to control the entire chain, but also gives us (a larger portion of the margins)."

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