In Praise of Dov Charney (sort of)

We recently paired with our manufacturer to create a vertically integrated apparel manufacturing company.  The plan includes moving the factory to a more visible area of Chicago and opening a small menswear boutique that will feature an in-house label along with our favorite brands.  As the business plan nears completion, I’ve been working to describe the benefits of an American-made vertically integrated clothing line and how we’re going to balance the relationship between the factory and boutique.  Based on my own experience in the apparel industry and other research I’ve done, this is what I’ve come up with.

Companies are beginning to realize that planning too far in advance means missing out on emerging fashion trends and consumer purchasing patterns.  It takes far too long for apparel brands and retailers to create their products (sourcing, design, development, production, delivery) while remaining nimble enough to abruptly change direction in order to stay ahead of the market.  The solution is adopting an integrated, continuous approach to manufacturing and retail.  

Vertical integration allows retailers to create a plan and continually revise and update the plan as needed through execution.  There are few existing shops that employ this business model: Reigning Champ in Vancouver, Schaeffer’s Garment Hotel in Hollywood, and The Stronghold in LA, to name a few.  While these shops have on-site manufacturing, it is done on a small scale.  Only recently have they begun to explore the wholesale market (i.e. The Stronghold for Orvis). 

Buying plans are created several months prior to allocation; as that date approaches, retailers learn more about consumer trends, tastes, and behaviors.  However, by locking in wholesale inventory so far in advance, retailers miss the opportunity to redirect their seasonal offerings.  When a company has control of their inventory, they are able to create more advanced allocation plans that ensure better distribution quantities and increase the likelihood of full-priced sales.

In the past, companies have forecasted and prepared their planning cycle by focusing on historical data.  However, with the state of the economy, the increased influence of e-commerce, mobile-commerce, and social commerce, a new style of consumer is emerging.  If companies employ historical data to plan for the future, their starting point is flawed.  Consumers now exercise a multi-channel buying strategy and retailers need to account for the differences in these buying channels and integrate a sales plan to satiate each one. 

Consumers don’t use each channel with the same intention or expectation.  They turn to online retailers for competitive prices, and they look to brick-and-mortar for more of a consumer experience.  It is vital for apparel companies to translate consumer’s digital footprints into strategic planning for store, catalog, online, and mobile sales.  Brick-and-mortar offerings need to be wide and shallow with an extensive range of product options, but in a limited number of sizes and stock. Online, the plan should be narrow and deep, carrying a limited number of SKUs with more size and color availability.

In order to execute this plan effectively, the chain of communication needs to be transparent.  Larger manufacturers and retailers are beginning to see the lines blur between the various departments whose input contributes to developing plans.  A vertically integrated company has the luxury of keeping these processes under one roof; financial, merchandising, marketing, product development and supply planning become a collaborative effort, ensuring the big picture plan is created in unison with maximum transparency within the company that should trickle down to the consumer in the form of lower prices and brand integrity.

My observations and opinions only scratch the surface of the current state of the apparel market. As the world continues to shrink with the globalization and the increasing efficiency of online outlets, the demand for innovative manufacturing-to-retail strategies is mounting.  There is no simple solution; rather, it is a constantly evolving approach that caters to the unpredictability of customers. The company that is nimble enough to adhere to consumer demand with timeliness and transparency will come out on top.