Apparel in America

Last week I posted on making toys in the US; this week it’s apparel — specifically, T-shirts and sweatshirts. Let starts with sweatshirts and a firm called American Giant. The story starts back in December with an article in Slate describing the company’s business model and extolling the wonders of its product (This Is the Greatest Hoodie Ever Made, Dec 4, 2012). In effect, American Giant uses technology to cut its distribution cost and rolls a good chunk of the savings into offering a superior product.

In the 1970s, when the fashion industry morphed into a mass-market business dominated by mall stores, its marketing and distribution costs began to skyrocket. To keep retail prices down, companies began to shrink the price of producing clothes. Today, when you buy a hooded sweatshirt, most of your money is going to the retailer, the brand, and the various buyers that shuttle the garment between the two. The item itself costs very little to make—a $50 hoodie at the Gap likely costs about $6 or $7 to produce at an Asian manufacturing facility.

American Giant has found a loophole in the process. The loophole allows Winthrop to spend a lot more time and money producing his clothes than his competitors do. …

American Giant doesn’t maintain a storefront, and it doesn’t deal with middlemen. By selling garments directly from its factory via the Web, American Giant can avoid the distribution costs baked into most other clothes. …

But there is really no comparison between American Giant’s hoodie and the competition. It looks better and feels substantially more durable—Winthrop says it will last a lifetime. When you wear this hoodie, you’ll wonder why all other clothes aren’t made this well. And when you hear about how American Giant produced it, it’s hard not to conclude that one day, they all may be.

OK, so what do you think happens when such glowing press hits the web a few weeks before Christmas? Right, they sell out of everything. Here is a BBC report how they got hit by a tsunami of orders (American Giant: The problems of being an overnight success, Mar 10).

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The Unbearable Lightness of Lululemon Yoga Pants

So Lululemon has a problem with its yoga pants. It is of the I-see-England-I-see-France variety (Lululemon Yoga Pants Pulled From Stores for ‘Sheerness’, Wall Street Journal, March 19).

The yoga-apparel retailer’s shares tumbled late Monday after saying it has pulled some of its popular pants from stores, after a mistake by a supplier left the pants too see-through. …

“The ingredients, weight and longevity qualities of the pants remain the same but the coverage does not, resulting in a level of sheerness in some of our women’s black Luon bottoms that falls short of our very high standards,” Lululemon said in a release.

Lululemon said Monday it has used the same manufacturing supplier on key fabrics since 2004 and is working to understand what happened.

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Zara! Zara! Zara!

The New York Times Magazine has a long article on how Inditex and its main brand Zara have grown to be one of the world’s most influential fashion players (How Zara Grew Into the World’s Largest Fashion Retailer, Nov 11). They even have a spiffy video.

Not surprisingly, both play up the role of operations in the firm’s success.

A traditional ready-to-wear fashion company in the West sends the designs for its clothes to independent factories in countries like China and India, where the labor to make them is cheap. These clothes are then shipped back and stocked in stores in spring and fall, with smaller shipments throughout the year.

But a brand at Inditex will make a fall collection, for example, and then ship only three or four dresses or shirts or jackets in each style to a store. There’s very little leftover stock, few extra-smalls or mediums hiding in the back. But store managers can request more if there’s demand. They also monitor customers’ reactions, on the basis of what they buy and don’t buy, and what they say to a sales clerk: “I like this scooped collar” or “I hate zippers at the ankles.” Inditex says its sales staff is trained to draw out these sorts of comments from their customers. Every day, store managers report this information to headquarters, where it is then transmitted to a vast team of in-house designers, who quickly develop new designs and send them to factories to be turned into clothes.

More than half of Inditex’s manufacturing takes place either in the factories it owns or within proximity to company headquarters, which is to say in Europe or Northern Africa. Inditex owns factories in Spain and outsources production to factories in Portugal, Morocco and Turkey — considered costly labor markets, typically. The rest of its clothes are produced in China, Bangladesh, Vietnam and Brazil, among other countries. The trendiest items are made closest to home, however, so that the production process, from start to finish, takes only two to three weeks. Inditex’s higher labor costs are offset by greater flexibility — no extra inventory lying around — and on faster turnaround speed.

That means that if Inditex stores in London, Tokyo and São Paulo all have customers responding enthusiastically to, let’s say, sequined cranberry-colored hot pants, Inditex can deliver more of these, or a variation on hot pants, sequins or that cranberry color, to stores within three weeks. The company tries to keep the stock fresh; one promise its stores make is that you will always be buying something nearly unique. Merchandise moves incredibly quickly, even by fast-fashion standards. All those thousands of Inditex stores receive deliveries of new clothes twice a week.

So is there really much new here?

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Odds & ends: Fashion week to heart attacks

It’s time to clear out a bunch of articles of that I have had kicking around. First up, we note that it has been Fashion Week in New York and that has led a couple of interesting articles:

• The New Yorker has a profile of Federico Marchetti and his company Yoox (The Geek of Chic, Sep 10). Yoox does a couple of things. It started by selling end of season luxury fashions. It won friends in the industry by just posting their own price with noting how much it was discounted off the list price. Luxury brands liked that this allowed them to unload unsold items without tying their brand to a 50% off sign. The interesting part is that Yoox was able to provide the brands with information they never had before (like what colors were selling where). Yoox has since expanded and now provides the backend and fulfillment for multiple designers’ web stores.
• At a different end of the market, Wired had an interview with Yasunobu Kyogoku, the COO of Uniqlo USA, which is ramping up a big US expansion (Upending Fashion, Steve Jobs-Style: 10 Questions With Uniqlo’s Yasunobu Kyogoku, Aug 31). Uniqlo has a very different approach from, say, Zara.

Wired: Is it true Uniqlo orders from its suppliers a full year in advance? What’s the thinking behind that?

Kyogoku: Let’s say you happen to own your own factory, and someone says, ‘In September, I’d like to order 40% of your capacity; in October, 70%; in the rest of the year, zero.’ You’d say, ‘But there’s a gentleman who just came to me and said, ‘I will book 80% of your capacity for a year and in fact, let’s do a long term partnership. Why don’t we add an extra line?’ The more you produce, the more you help me reduce the cost. We pass that to the customer. The customer buys more. We have a positive cycle where everyone wins.

Wired: With a 12-month cycle, aren’t you worried customers will go to faster-moving competitors with trendier clothes?

Kyogoku: We don’t chase trends. People mistakenly say that Uniqlo is a fast-fashion brand. We’re not. We are about clothing that’s made for everyone.

•  Adam Davidson continues to write great stuff. He has a New York Times Magazine article about making bespoke and made-to-measure suits (What’s a $4,000 Suit Worth?, Sep 9). As the article notes, you would think that loads of people in Manhattan willing to pony up for the perfect suit. And there are but does not mean that it’s an easy way to make money. The economics of bespoke suits aren’t like those of Uniqlo:

As Rowland explained to me, even with a century-old reputation and a profoundly loyal customer base, it’s nearly impossible to get ahead. “There’s no scalability,” she explained. “Whether we’re making 50 suits or 1 — each unit costs the same.”

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Monitoring quality via online reviews

Pretty much every e-commerce site now allows customers to express their opinion about products. Such reviews can certainly be helpful to other customers, but how do firms use the feedback? According to the Wall Street Journal, some firms are now using the reviews to monitor for quality problems (Firms Take Online Reviews to Heart, Jul 29).

L.L. Bean Inc. noticed earlier this year that one of its top-selling products, Supima Cotton Fitted Sheets, was being slammed in online customer reviews.

The company, which pulled the sheets from its website, found that a wrinkle-resistance treatment mistakenly added by a contractor was causing the cotton fabric to unravel. It offered new sheets to the 6,300 customers who had purchased the set and destroyed the rest of the faulty batch.

“Before, it would have taken us months and months to figure out if something was wrong with the product through returns, if we ever would have known at all,” said Steve Fuller, L.L. Bean’s chief marketing officer.

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A sustainability index for apparel

What makes for sustainable clothes? That is the focus of a Wall Street Journal article on an index developed by an industry coalition that aims to rank apparel based on a variety of factors (Which Outfit Is Greenest? A New Rating Tool, Jul 25).

The Higg Index (its name doesn’t refer to anyone but was chosen to clear copyright protections in 100-plus countries) looks at the entire life of a product from raw material to disposal. Brands can get points for asking consumers to wash items in cold, rather than hot, water, as Levi’s does, or for using recycled components like Nike’s polyester, made from used water bottles.

The graphic below shows how different fabrics stack up.

The index will initially be available to just industry insiders but the goal is to eventually have clothes in stores with tags that let consumers see the impact of their clothes.

Even in its early form, the Higg index is impacting how firms design and make clothes.

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Odds & ends: Planes to underwear

There have been a number of recent articles that touch on some recurring Operations Room themes.

• First up, big planes! We have had a number of articles on the travails of the Boeing company in launching the 787. Now the Wall Street Journal reports that they have reached an important milestone (Boeing Hits a Milestone, Jun 8).

Boeing Co. rolled out the first 787 Dreamliner from its main factory that won’t need major additional work before delivery, a long-delayed milestone that reflects streamlined manufacturing of the company’s flagship passenger jet but also points up the program’s enormous costs. …

Assembling the 787—the first jetliner made from mostly carbon-fiber composites—involves tens of thousands of steps, from installing galleys and complex electrical systems to fusing the wings to the body. Boeing, which started making 787s in 2007, had been sending them out of its main factory in Everett, Wash., with many of those steps—sometimes thousands—unfinished, due to parts shortages and design changes on the advanced new jet. Those planes went to a separate facility in Boeing’s giant campus to be completed.

The plane that rolled out this week—Boeing’s 66th Dreamliner—skipped that costly step. Workers had only around 300 mostly small assembly tasks left to complete, about 100 more than the company’s goal, but far fewer than the roughly 6,000 on the earliest Dreamliners, said a person familiar with the plane.

Boeing, in a statement, confirmed the plane “will be the first airplane to go straight into preflight operations” from the Everett plant. The minor tasks left for plane No. 66 can be handled outside of the factory before being prepared for delivery.

Note that this suggests that Boeing has now worked through (or at least isn’t adding to) the massive amount of inventory they had sitting around at the end of last summer.

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Making American Apparel in America

When you think of the retailer American Apparel, you may first think of racy advertising or a CEO prone to being served with sexual harassment suits. (My mind, of course, goes immediately to a classic Onion piece that combines both of these.) What you may not know is that American Apparel’s apparel is actually made in America. Just how they go about doing that is the subject of a recent LA Times piece (American Apparel fights the ‘made in America’ fight. For how long?, Jun 3).

The company’s seven-story factory, a former Southern Pacific Railway freight depot, is the biggest garment-making facility in the U.S., according to an industry trade group. Here, 4,500 workers staggered over two shifts cut, sew, fold, box and ship clothes to the company’s 253 stores and other clothiers worldwide. …

In addition to the two large buildings downtown, the company owns four smaller manufacturing operations in Southern California. Fabric for the company’s trademark cotton T-shirts, which come in 52 colors, is knit and dyed in those facilities before getting trucked downtown for sewing.

So what steps do they take to make manufacturing T-shirts in the US viable?

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On the ethics of fast fashion

Last week, I wrote about wedding gowns. Now it’s time to think of the other end of the fashion price spectrum: fast fashion. The Observer had an interesting piece on Swedish fast fashion retailer H&M and what they report in their annual sustainability report (Is H&M the new home of ethical fashion?, Apr 7). The report is notable because the Swedes have apparently set the goal for themselves of being “the ethical solution, the retailer that can make ethics and fast fashion synonymous.”  So how is that going?

“I don’t think guarantee is the right word,” says Helena Helmersson, head of sustainability, brightly. “A lot of people ask for guarantees: ‘Can you guarantee labour conditions? Can you guarantee zero chemicals?’ Of course we cannot when we’re such a huge company operating in very challenging conditions. What I can say is that we do the very best we can with a lot of resources and a clear direction of what we’re supposed to do. We’re working really hard.”

I believe her. Thursday’s report will show some impressive sustainable figures: for example nearly 2.5 million pairs of shoes were made last year using lower-impact water-based solvents; all building contractors have signed a code of conduct to ensure “good” working conditions; recycled polyester equivalent to 9.2 million plastic bottles has been used, and H&M uses more organic cotton in production than any other group. This year I am told, 7.6% of its cotton was organic (an industry insider estimates H&M’s overall cotton use to be around 200,000 tonnes a year). By 2020 100% will be sustainably sourced cotton. …

Does Helmersson still wake up worried they’ll be the subject of a sweated labour expose? “Yes, I worry about that sometimes. I lived in Dhaka for two years. You see how things happen down the chain in a country like Bangladesh. Remember that H&M does not own any factories itself. We are to some extent dependent on the suppliers — it is impossible to be in full control.”

And therein lies the rub. While H&M talks about responsibility, in the supply chain where retailers devolve power to factories it can be easy to distance yourself. Helmersson says H&M has invested in 100 people in CSR, 75 of whom are auditors (assessing social and now some environmental conditions in factories) and produced a series of groundbreaking short films, including one on fire safety that it claims more than 400,000 garment workers have seen.

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What determines the cost of wedding gowns?

Check out this fun video from Planet Money: Why Did My Wedding Dress Cost So Much? (Apr 3). (Sorry, I can’t get the video to display properly here.)

To some extent the title of this piece is wrong. The real question for her is not what her gown cost to make, but why it is priced so high. That may strike you as mere semantics, but there is a difference. As our young bride finds out in the video, the production cost of an item can differ widely from what it sells for. The real reason her wedding gown was priced so high is that people will buy at those prices. A store will charge $2,730 for the dress because there are brides out there who will pony the cash. Yes, information asymmetry and a bride’s desire to show her commitment to wedding play a part in that but all of that is largely independent of whether the dress cost $700 or $1,000 to make.

Which is not to say that how wedding dresses get made and distributed is uninteresting.

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