The World of Fashion Evolves

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Designs Aren't the Only Thing That's Changing in the Apparel Industry

According to a story in the July 16 Wall Street Journal (link), the apparel industry is facing a number of challenges that are affecting the entire supply chain.  After three years of excess inventories and idle labor, companies throughout the industry are taking steps to reduce the risk of similar exposure in the future.  Instead of reinventing themselves, though, it appears that the companies are dealing with the changes by attempting to push the risk to their customers and/or suppliers.

When industries face a changing environment, companies throughout the supply chain need to work together to respond to the change in a positive manner.  The immediate reaction to drive risks to customers or suppliers has effects that, although not immediately visible, have longer-term effects that are destructive to everyone involved.  It does not help a company to improve its own profitability at the expense of its suppliers or customers.

The New World of Fashion

Among the issues faced by the apparel industry include:

• Smaller orders placed by retailers to test demand before committing to larger runs;
   
• Increased material, freight, and labor costs;
   
• Delays in ramping up production capacity because of a lack of confidence in long-term demand.

If smaller runs and increased costs sound familiar, it's because these are issues that have been faced by many industries over the last 30 years.  Change happens in every industry, and those companies that are flexible and able to adapt to (or drive) the changes quickly will be the most successful in the years ahead.

The Focus Still Needs to be the Customer

One of the problems I noticed from the information in the article is that the impetus for change within the industry is profitability rather than the consumer.  As has been proven over and over again in business, changes made without regard to the end customer can have devastating effects.  While a focus on value can increase profits for the company, a focus on profitability will not lead to increased value for the customer.

Two key areas that companies in the apparel industry need to investigate in order to survive and grow in the years ahead include:

1. Lean Manufacturing  Smaller production runs require improvements in quality, setups, and changeovers.  Lean (when done correctly) gets everyone focused on eliminating the waste that forces longer leadtimes and larger lot sizes.  Lean will also address the issue of increased labor costs;
    
2. Closer Factories  Increased freight costs and leadtimes will force retailers to have production capabilities closer to the point of sale.  Although oil prices have leveled out since the initial drop at the start of the recession, it is only a matter of time before they start rising again.  As a result, the benefits of having factories in areas with low labor costs will be offset by increased freight costs.

In an industry that thrives on change at the consumer level, one would think that the fashion retailers and producers would have no problem adapting to changes themselves.  Unfortunately, this does not appear to be the case.  The environment has changed and, as has been the case in so many industries over the years, it's time for a new business model.  The sooner the apparel companies realize this and make the necessary changes to adapt, the sooner they can once again turn their designs into financial success.

The Future of Television

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Earlier this month, a number of viewers in the northeast missed the first 15 minutes of the Academy Awards broadcast because of a dispute between Disney and Cablevision Systems.  The contract between the two had expired and, as the negotiation process got ugly, Disney pulled its signal from the system.  After issuing statements characterizing the other party as greedy and not caring about its customers, both sides finally came to an agreement that allowed the signal to be returned just after the Oscars began.

This was the second high profile dispute between a television broadcaster and a cable provider.  Fox and Time Warner had a similar battle late last year regarding the price of News Corp channels included in Time Warner subscriptions.  From all indications, this is just the beginning as broadcasters watch revenue from advertisers shrink and look for ways to make up for the loss.

Is the Business Model Obsolete?

As tensions between the broadcasters and subscription providers grows, I can't help but think that the current model for the industry is quickly becoming obsolete.  Broadcasters want more money for programming - subscription providers want more money for delivery of the programming - consumers want access to entertainment without paying more for their subscriptions.  Something has got to give . . .

I'm definitely not a media visionary, but I'm guessing that, now that internet bandwidths are increasing, it won't be long before we start downloading our television programs from the internet and sending them to our televisions wirelessly.  Although it's possible that we'll continue to pay companies like Comcast for subscription packages, it's also possible that we could end up paying the broadcasters directly through a monthly subscription or individually by the download.

The next five years will be very interesting to watch as another industry's business model becomes profoundly altered by the internet and the innovative and flexible companies take advantage of the opportunity to grow while those that don't significantly shrink or completely disappear.