Trade Show Season or, “Hi Ho, Hi Ho, It’s Off to Sell We Go!”
My list this year includes Agenda, The KNOWSHOW in Vancouver, and SIA in Denver. Part of me would like to go to others, especially Surf Expo, part of me wouldn’t and, like all of you, I figure it out based on schedule, resources, expected results and, frankly, my tolerance for travel.
I liked Agenda as usual. Also as usual, people think it’s a bit early but on the other hand it doesn’t conflict with another show and I expect they get a hell of a good price on the space given those dates which I hope they pass on to the exhibitors.
Here are a couple of things I noticed at the show:
Thinking About U.S. Manufacturing
I talked to four brands that are considering starting or increasing their manufacturing in the U.S. I’ll have more to say about this in an upcoming article, but I wanted to highlight it now as something maybe you should be thinking about too. Partly, it’s because Chinese wages have risen something like 17% a year for five years and are continuing to rise. And some of their factories have started to automate. But it’s also because U.S. wages, for better or worse, have fallen.
Once the labor cost differential isn’t so dramatic, then other costs become more important. Travel, freight, time to market (which impacts the amount of inventory you have to hold), communications issues, surprise delays, custom duties, control of intellectual property and quality control are among the costs that may be higher with foreign production. But most general ledgers aren’t set up to isolate those costs.
It’s an accounting hassle, and no fun. But if you take the time to figure out those costs, you may find there’s a certain logic to making some formerly foreign produced products in the U.S.
The Great Skate Divide
When I go to Denver for SIA, I’m pretty sure I won’t find the snowboard companies that make pipe boards in one part of the show, and the ones that make all mountain boards in another. But at Agenda, I find the street skating companies in The Berrics, and the longboards mostly in one aisle far away.
Perhaps it’s just because of how the Berrics was organized and set up with Agenda. You know- institutional inertia. But I wouldn’t be surprised if there was still some left over and nonproductive stuff (I’m struggling here for a good word. You know me, I always want to be careful what I say) going on. A bit of a hangover from longboarding growing so much and street skating continually hoping it would go away?
I would like to remind us all (including myself) that we will never be the arbiters of how a twelve year old decides to roll down the street and have fun. The “stuff” we’ve got going on doesn’t matter to them. Can anybody say “plastic skateboards” or “scooters?”
I know longboarding is different from street skating like snowboarding in the back country or on groomed runs is different from being in the half pipe. But the snowboard companies all think they are in the same industry. I’m not sure I know how to get there, but the skate industry needs to think the same. Most of our retailers already do.
IASC
And speaking of progress, it isn’t a new development but it was great to see Steve Lake from Sector 9 and Monica Campana from Transworld sitting up there with the IASC board of directors at the open board meeting at the show. The meeting was well attended, but then they had a keg so what would you expect. They introduced a great new insurance product for skaters from Aflac at the meeting which is probably worth the cost of membership all by itself. You can find a link to it at the bottom of this page.
Hoodiebuddie
Hoodiebuddie is a couple of years old, but I chatted with them at the show and discovered some interesting business things (Full disclosure- they gave me a hoodie which I passed on to my kid, so he thought I was cool for almost 20 minutes).
As you probably know, they make the hoodie with the ear buds built in and you can put it through the laundry without removing them. The technology that allows them to make buds that can withstand the wash and dry cycle is patented.
That’s cool, but what really caught my attention was their business strategy. First, they do all the design, product development and marketing themselves. But they have a business partner that handles production, accounting and most of the back office. And the partner is big enough to defend their technology around the world as people try to rip it off. I like that arrangement.
More importantly, the company isn’t really just about a hoodie with washable ear buds. That’s their entry product that establishes their market position and gets them recognized as a brand. But longer term, they are building a product line that expands out from the basic hoodie, but is based on it. Essentially, they are trying to make hoodies into a category with a fashion component to it. This isn’t all that different from Clive in back packs and Nixon with watches.
It might be that they could have a nice little company just selling hoodies with ear buds, but I doubt that would be of much interest to their partner. The lesson for all of us is that the focus needs to be on the market position the product gives you, not just the product.
Okay, that’s it. See you at the next show.
Hi Jeff — Good thoughts on revival stories for domestic manufacturing. You left out one huge factor, though — energy costs. With the explosion of domestic fossil energy exploration, bringing on abundant and cheap natural gas supplies, energy costs (and as well its impact on domestic transportation costs) are a big driver of such manufacturing location decisions. Am not lending any political/environmental opinion, just that the numbers are driving decisions. Again, good article! bh
Argh! You’re right Bob. I even went back over my list to think about what I’d missed and still didn’t include it. I’m going to write in more detail on this if I can get out from under SEC filings and trade show stuff. Thanks for pointing it out.
J.
Thanks Jeff.
Always good to hear that 3rd party point of view. We get caught up in our own little worlds sometimes.
I agree with your assessment of both the perceived skate divide and domestic production.
I think solving both will bring very positive results to our industry.
G
Hi Glenn,
What I’m afraid of is that it will be easier to bring production back to the U.S. than to get longboarding and street skating to cooperate.
Thanks,
J.
Jeff, thanks for coming out and i always love to see your take on the show.
Thanks!
Always? I must be losing my touch.
Thanks Aaron.
J.
Nice piece, Jeff. I loved all the new technology and retro brands (and board widths) making it back to skate and showing up at the show. I think that as the industry as a whole reflects on the “street” saturation, what was formerly “niche” skateboarding will again re-emerge as cutting edge, just like it did with surf. Who ever thought a 5’4″ quad fin Fish would be considered the “latest” in surf.
Hi Greg,
Yup, product cycles happen lacking a really fundamental change in technology. It’s true in apparel too.
Thanks for the comment. Hope to run into you at some show or another.
J.
Jeff,
I am on the front line of production coming back from Asia and it is primarily because of production time. LA, Mexico and Central America can deliver CMT product in 6-8 weeks.
Retailers, big and small, want to buy closer to need so their purchases are more accurate, mark downs are less and they are able to respond to success (replenish). Brands and retailers are willing to take little less in starting margin because they are realizing their maintained margin is higher.
The quicker product life-cycle also moves fashion ahead faster.
This only applies to the less labor intensive products. Board shorts, jackets, etc will continue to be made wher labor is significantly cheaper. Thanks
Hi Tim,
Well, I don’t have much of a response because what you said doesn’t surprise me and I agree with you. But one thing I have been writing about is how operations are tying into marketing, and how higher margins may be more financially efficient than higher sales (and put more to the bottom line). It sounds like you and your customers agree with that. Can you tell us anything about what products you’re bringing back and what the thought process was to make the decision in a bit more detail?
Thanks for the comment.
J.
Jeff,
The majority of the products are knits because that is the fabric that is most readily available here. All tiers of distribution want to shorten the lead time to get better reads and thus more accurate buys. Then if successful, they can replenish quickly….great for reorders.
Leggings are strong now so I have been making printed leggings. The stores are chasing what is selling so it could be an animal print, tribal print, camo, lace…who knows what the junior customer wants week to week. We are delivering in 6 weeks. The same is happening with maxi skirts, knit tops, beach shorts, etc
Some of the men’s designers are doing great things locally that start with fabric; large loop French terry, triblends, poly/cottons, etc and incorporate simple construction, wash/dye or embellishment details. Lite weight hooies, custom tanks and pocket T’s have been good for mens.
The most successful and cost effect approach seems to be unique fabrications with simple construction.
The designers are just beginning to stretch in this category and I think we are going to see some amazing things. Thanks
Hi Tim,
So I guess what I hear you saying is that the stuff you’re making here is stuff with good margins you are certain you can move quickly and reliably. Thanks for the followup.
J.
Hi Jeff and Tim
It sounds more as a forecasting issue to me. I’m curious to hear how is this currently being done.
Thank you
Sebastien,
I’m intrigued. I’m not sure I know what you mean by it being a forecasting issue. More info please?
J.
Hi Jeff
Tim wrote “…distribution want to shorten the lead time to get better reads and thus more accurate buys”.
That sounded like a forecasting issue.
What if brands were capable to have a better read on future demand, would they still consider domestic manufacturing?
(sorry the subject is a bit off “Agenda” but I’m very curious to see what Operations & Production departments are currently doing to mitigate their inventory risk and reduce their margin pressure to stay competitive).
S.
Hi Sebastien,
I can tell you that retailers, as I’ve been writing about, are trying to micro manage inventory to get exactly what their customers want in the right stores at the right time. This is leading to some pressure on brands because to really do what the retailers want, they need to adjust their ordering and assortment held in inventory more often. That is, they have to take more inventory risk and it increases their costs.
I don’t see much likelihood that anybody will get better at predicting the future. In fact, because they can’t predict it, they try to create some artificial scarcity and excitement through fast fashion; a product that arrives often but isn’t around long. Remember that no retailer, as far as I know, is 100% fast fashion product. That’s just not possible.
I’ve been arguing for years now that some scarcity, higher margins, and better sell through was a better way to boost your bottom line then fighting for higher sales in a sales challenged environment. I still believe that’s correct.
Thanks for the comment,
J.
Glad you enjoyed the meeting (beer), thanks for the coverage! See you in Denver,
jf
Josh, surely you know that beer meetings are my favorite!
J.
Hi Jeff,
Since I won’t be at SIA this year I look forward to having our dinner here in Vancouver during the Know Show. Make sure I am in your diary!
Micky
Micky,
You are. See you Wednesday evening.
J.
Sebastien,
Forecasting is a big incentive of quicker delivery because the closer you are to the target the easier it is to hit. You can buy inventory based on more sales rather than a projection. Also, you have the opportunity to “chase” good products and get additional turns by replenishing in 6-8 weeks. Both contribute to higher maintained margins.
Many of the large retailers are now demanding that vendors shorten lead times so they can order closer to need…and reorder. Product development teams are challenged to design product that can be made in the western hemisphere and many are doing a good job of it.
Tim
I wonder what happens when/if (I think when) fash fashion starts to fade as a trend.
J.
I think that it is a mistake to think of this as just “fast fashion”.
It is really a change in the speed of the supply chain and it’s effect on the design/production process.
Zara seems to set the pace globally.
This trend does not include labor intensive apparel products with a lot of detail like board shorts, walk shorts, outerwear, etc.
Tim,
Ignoring fast fashion for a moment, I certainly agree with you that shorter lead times, leading to better customer responsiveness and less working capital investment through lower inventory, is a good thing. It’s always been a good idea, but when sales were growing faster and customers weren’t quite in the position of strength they are now, it was easier to avoid managing that way.
Improved supply chain speed certainly facilitates fast fashion. But if there was no “fast fashion” I still think we’d see companies working to improve their supply cycle.
Thanks for the good discussion!
J.
Jeff,
I agree with what you say and I would add that a faster, more responsive, supply cycle is becoming the norm. It enables the life cycle of fashion to move faster which makes for more exciting product which should result in more sales and less mark downs.
Thanks
Tim
Tim,
My understanding of the real fast fashion product is that the quality isn’t that good. I’m wondering if customers won’t get tired of it after a while. Not all, I know, but a lot. Regardless of fast fashion, I agree that a more responsive supply cycle is becoming the norm.
J.