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The Li & Fung Debate

The question mark in this year's HTT ranking of the Top 15 largest suppliers revolves around Li & Fung USA. Just what is it, how big is it and how does it fit in?

Li & Fung USA, the American marketing arm of a $6 billion Hong Kong-based sourcing company, claims $800 million in home fashions sales into the U.S. market last year. But others insist that number is inflated. Complicating the issue, Li & Fung USA sells to suppliers and retailers, providing some with private-label programs.

Further complicating things, now Li & Fung has its own compelling brands, and becomes, in effect, a brand management company as well, competing even more directly with U.S. major mills. Armed with a portfolio of brands, Li & Fung is now poised to start shipping product under the Royal Velvet and Cannon licenses.

In an increasingly complex global trade environment, non-traditional companies like Li & Fung are assuming an increasingly important, if not dominant role, as sourcers, shippers, supply chain experts, and now brand managers — offering a turn-key package to retailers, as well as fill-in services to manufacturers that can no longer afford to make some products here.

In a radically altered global playing field, the combined dollar sales of the Top 15 U.S. suppliers are only a fraction of the purchases now made directly by retailers, cutting U.S. suppliers. And a lot of that slack is being picked up by Li & Fung and other sourcing companies like it, which are increasingly in a position to challenge American suppliers for marketplace dominance.

So just how big is Li & Fung's U.S. home fashions business? Depends on who you talk to. The question's easy, but the answer is less straightforward.

Rick Darling, president of New York City-based Li & Fung USA, claims the company did an astonishing $800 million in sales of home fashions products into the United States last year, up from about $610 million in 2003. Accounting for virtually all of that 33 percent, or $190 million gain, he said, Li & Fung was the principal beneficiary of the death of Pillowtex Corp. Even before Pillowtex finally closed its doors, antsy retailers had already turned to Li & Fung to fill their shelves with replacement product, rather than diverting the business to the remaining U.S. major mills, Darling said. If that's the case, Li & Fung USA would easily rank as the third-largest home fashions supplier to the U.S. market, coming in just behind Springs and WestPoint Stevens.

“The industry is in the midst of a lot of change, and we're lucky to be a part of that,” said Darling. But others, including companies who have worked with Li & Fung in the past, scoff at that number. While Li & Fung certainly figures into any Top 15 ranking, its U.S. sales are nowhere near that high, the nay-sayers protest.

So where does Darling come up with that $800 million? “Our total company sales are about $6 billion. Our U.S. sales are about $1.8 to $2 billion. Strip out the apparel, the outdoor furniture and the dinnerware, and that's about $800 million in soft home.”

And that, said Darling, is just the start. “Royal Velvet doesn't figure into that. We started shipping that in December, and that takes us to a totally new level and allows us to leverage our core capabilities.”

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