IBM APPAREL INDUSTRY REVIEW

ApparelManufacturingIndustryBriefSeptember2002Anypotentialexternaluseofcustomerinformation,byname,containedinthisdocumentmustfirstbereviewedwiththeIBMaccountrepresentativelistedintheCountry(AP,EMEA,LA,US)CustomerReferencedatabaserecord.ItistheresponsibilityoftheIBMpersonoranyotherorganizationplanningtousethisreferencetomakesurethatthisisdone.TheIBMaccountrepresentativewill,asappropriate,contactthecustomerforreview.Youshouldnotcontactthecustomerdirectly.©2002IBMCorporationApparelIndustryBriefExecutiveSummaryOverviewTheApparelIndustryvaluechain,broadlydefined,includesmanufacturers,retailersandsecondarychannels.Behindthewell-knownnamesarealargenumberofproductionfacilitiesmakinguptheApparelManufacturingsub-sector.TheApparelManufacturingsub-sector(NAICS315)iscomprisedofestablishmentsthateithercutandsewgarmentsusingpurchasedfabric,orknitfabricandthencutandsewthefabricintogarments.Thediverserangeofestablishmentsmayperformoneoranumberofactivitiesandincludes:wmanufacturersoffulllinesofready-to-wearapparelwapparelcontractorsthatperformcuttingorsewingoperationsonmaterialsownedbyotherswjobbersperformingentrepreneurialfunctionsinvolvedinapparelmanufacture(cutonly,forexample)wtailors,manufacturingcustomgarmentsforindividuals©2002IBMCorporationApparelIndustryBrief•Manageproduction•Buildbrands•Sellproductstoretailersasnationalorprivatelabels•Determineproductmixanddesign•Developmarketingandmerchandisingstrategies•SellproductstoconsumersManufacturersDescriptionTypesandExamplesApparelIndustryValueChainApparelIndustryValueChain•Branded:–RalphLauren–CalvinKlein–TommyHilfiger–Benetton–Armani•PrivateLabel:–Retrospettiva•Traditional:–Macy’s–Karstadt–SaksFifthAvenue•VerticallyIntegrated:–Gap,Inc.–Zara–AnnTaylor–AbercrombieandFitch•Manufacturer/RetailerOutletStores•Off-PriceRetailers:–TJX–RossStores•Liquidators:–GordonBrothers–Schottenstein’s–AssetBasedLenders–OzerGroup•Selldistressed,outofseason,excess,andothertypesofmerchandisethatcannotbesoldatfullpriceRetailersSecondaryRetailChannelsLeadingbrandedmanufacturersmakeproductsundermultiplebrandnames.Theytypicallydistributeproductthroughdepartmentandoutletstores.Manyactualmanufacturersareverysmall,having50-150employeesinwhatisaverylaborintensivebusiness.Thetargetmarketconsistsofthoselargermanufacturerswhooftensubcontractheavilytosmalljobshops.Theexamplesofleadingbrandmanufacturersareprovidedasapartoftheoverallunderstandingoftheindustry.IndustryTrendsDiscount&DepartmentStoreChains:Chainsareincreasinglythedistributionchannelsforapparel.Only2ofthetop10US(andpossiblyglobal)apparelretailersarespecialtyapparelretailers,GapandLimitedBrands.UseofPrivateLabels:Theuseofprivate-labellinesbydepartmentstoresisincreasing.Retailersareextendingtheirreachintodesignandareexertingmoreinfluenceinthesupplychain.GlobalizationofRetail:RealestatepressuresandamatureretailmarketarepromptingEuropeanandAsianretailerstoexpandglobally.ApparelPricesDeclining:Retailersworldwidearefacedwithdecliningpricesandarelookingtosourcemerchandiseatthelowestpossiblecost.IncreasedGlobalSourcing:Achievingtherightmixofdomesticandoff-shoreapparelsourcingishighonretailer’sprioritylists.Thetrendhasbeentowardglobalsourcing,duetocostpressures.RegulatoryChanges-QuotaSystemsBeingPhasedOut:Since1993,NAFTA,theNorthAmericanFreeTradeAct,hasresultinasignificantshiftofemploymentinthelabor-intensiveapparelmanufacturingindustrytothosecountrieswithlowlaborcosts.PassageoftheTradeandDevelopmentActof2000(TDA),gaveNAFTA-likeprivilegestotheCaribbeanBasinInitiative(CBI)countries.In2005,whentheWorldTradeOrganization(WTO)implementsthefinalphaseoutofquotas,China,amongothers,isinapositiontoregainapparelmarketshare.©2002IBMCorporationApparelIndustryBriefLeadingBrandedManufacturersLeadingBrandedManufacturers1999Revenues($Millions)JonesApparelGroup,Inc.$3,151LizClaiborne,Inc.$2,807WarnacoGroup,Inc.$2,114V.F.Corporation$5,552BenettonGroup,S.P.A.$1,888ProductLines/BrandsChannelsJonesNewYork,Evan-Picone,RenaRowan,ToddOldham,NineWest,EnzoAngiolini,EasySpiritLicensedbrands:Ralph,Lauren,PoloJeansLizClaiborne,LizSport,LizWear,Liz&Co.,DanaBuchman,CrazyHorse,Elisabeth,EmmaJames,FirstIssue,Russ,Villager,BabyTogs,LaundrybyShelliSegal,NikiTaylorWarners,Olga,CalvinKlein,Lejaby,VanRaalte,FruitoftheLoom,Bodyslimmers,ChapsbyRalphLauren,CatalinaSpecialtyretailstores,departmentstores,urbanretailcenters,outletstores,Internet(ninewest.com)Company-ownedstores,departmentstores,massmerchandisersDepartmentstores,specialtystores,massmerchandisers,outletstoresLee,Wrangler,Rustler,Riders,Brittania,HealthTex,WolfCreek,JansportIntimateapparel:VanityFair,LilyofFrance,OscardeLaRenta,Vassarette,BestformSwimwear:Jantzen,NikeDepartmentstores,specialtystores,massmerchandisers,discountchainsUnitedColorsofBenetton,012Benetton,Sisley,Playlife,Nordica,Prince,Rollerblade,KillerLoopIndependentsalesrepresentatives,company-owned“Megastores”,sportspecialtystores,PlaylifedepartmentstoresSolutionsBreakthroughsinecommerceareopeningnewdoorsforretailersandsewnproductsmanufacturerstosharemoredataonabusinesst