Retailers/Suppliers to Strengthen Bonds
March 21, 2005,
Miami Beach, Fla. — In the evolution of post-quota direct importing, suppliers and retailers will tighten relationships and forge partnerships to create and co-ship goods from overseas factories to store shelves — skipping altogether suppliers' U.S. distribution facilities.
Means was one of six panelists that included some of the top executives at Nine West, Perry Ellis International and Phillips-Van Heusen Corp. who discussed this and other post-quota issues — such as the implementing of safeguards, supply chain initiatives, logistical hurdles, and intellectual property rights — during the executive sourcing summit at the American Apparel & Footwear Association's annual Material World event here.
Direct importing activity was a major point of discussion, as all the companies represented on the panel participate in it.
Phillips-Van Heusen currently limits its direct importing business to full container-loads of shirts. But that will soon change, said John Wells, vice president of importing.
“We'll definitely increase that going forward with small orders and retail stores,” Wells said.
Perry Ellis International does “a little” direct importing with Sam's Club and “with large orders where we can set up our distribution early — when it's late, it's impossible to do (direct importing),” explained Marvin Leto, vice president, logistics. He admitted that by importing product directly to retailers, his company subjects itself to certain limitations, such as on quality control.
“But still, it's working out,” Leto said. “And it makes sense. We've looked at doing quality control at origin. It's not as good as our own, but it is satisfactory.”
His colleague, Jorge Pita, Perry Ellis International's chief financial officer, noted a need for wholesale partnerships to replenish products.
“Direct imports in bulk shipments are happening, but the bigger trend is the whole replenishment program to the store,” Pita said.
Since January, when quota was lifted on apparel and some textiles from China, no safeguards have been implemented, which has U.S. suppliers wondering — and worried in some cases.
Means said he was “a little surprised” there still are no safeguards in place but expects that to change sometime in the next nine months.
“I think safeguards will show up in one form or another this year — I don't think they won't show up at all,” he added.
Wells is optimistic safeguards will come sooner rather than later, but doesn't think they'll be regulated in same way as quota. “(The safeguards) will be controlled more from the U.S. side,” he said.
On the other hand, Leto said he doesn't think the United States will create safeguards any time soon, but that China may, which leads to another post-quota rippling effect: “The currency issue will eventually play in the price of their goods,” he said.
Pita noted that as the United States continues to increase its debt to China, the dollar will be affected.
“It will be interesting to see how currency issues evolve as China evolves, and I think the effect will be short-term,” he said.
Issues regarding intellectual property rights and currency, Means said, “will become more important to us as China develops a middle class. That is when we'll probably start to see more intellectual property rights being put in place (in China), but it won't happen any time soon,” he explained.
Ted Sattler, group executive vice president, supply chain operations, Phillips-Van Heusen, said his company has spent “a lot of time and money” working with lawyers, hit teams and the Chinese government to prevent counterfeiting of its brands, which include Calvin Klein and Izod.
“We're making progress, but we still have a long way to go,” he admitted.
As a result, U.S. suppliers are exploring ways to sell their goods in China as its middle class emerges.
“There is definitely a huge opportunity in China, and we've started to penetrate it through licensing,” said Alan Luchette, senior vice president, sourcing, Nine West. “We're seeing a real hunger and demand for U.S. brands in China, and we're seeing the same product retailing higher there than in the U.S. — which is interesting, considering the product is made there.”
But Pita said the trend will be slow-moving because of the many complexities involved, such as sizing differences for Chinese customers versus Americans.
“I see it as a long-term opportunity and an evolution that can occur,” he said. “But you can't look at the Chinese market and see it as an immediate huge opportunity. To be successful at it, you need a lot of partners and help.”
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