How the industry has changed forever
This is the entry I mentioned in passing yesterday. Since I tend to ramble, it’ll have to go up in several parts.
I know most of you don’t make children’s products but like it or not, CPSIA has forced long term trickle down effects through out the industry so you should read this anyway. Even if we could hit the pause button or wave a magic wand and just make this whole thing go away, there are larger economic and retail trends bringing these as yet, unlabeled trends to bear.
Everyone is going to have to get a lot more professional. I took a lot of heat saying that before. Professional doesn’t mean bigger. It means better.
I was talking about this with a friend of mine and honestly, feeling a bit vindicated because I’ve long said people should focus on their core competency. This environment -with or without CPSIA- now forces it. We will see more retailers abandoning manufacturing and more manufacturers abandoning retail because few do both well. I’ve always felt that many manufacturers who retailed, did it because in a manner of speaking, they disrespected or minimized the intangible intelligence of what it takes to move product at retail. Likewise, retail must not have thought it was hard to manufacture and it wasn’t; not using facilitated private label programs, hiring out the heavy lifting as they are/were.
What no one seems to see, is that the issue at the forefront now is accountability. Whoever you are, you’re more accountable and responsible than you were before CPSIA whether you make kid’s products are not. Companies are looking for ways to reduce their risk and liability; they will resume their core activity abandoning the rest. Sure, some can eke out a space for themselves and hang on by their fingernails with disruptive technologies (consumer direct, internet sales) and hope for a return to those heady days of freewheeling consumer spending but who knows when that will be? In sum, I think there will be more gains in traditional retail/manufacturer relationships.
In my discussion with my friend (she’s a retailer who does some private label) we agreed there would be a return to traditionalism, like selling via reps to retail and wholesale. The market is going to shake out anyway, retail was already in trouble. In the case of CPSIA, if we are later permitted to use vendor certification of components, consolidation will still be inevitable. For starters, the market will be weeded to only the larger of the smaller players who have access to traditional sourcing venues. You can only get vendor certs if you’re buying from mill representatives -but not jobbers like so many are. As my friend said, if jobbers don’t even know the fiber content of the goods they sell, they won’t have the mechanisms to pass along certs if they’re buying overstocks from other mills or even excess inventory from other manufacturers. The affect of CPSIA will be that children’s wear designers will be forced back into the most traditional format of manufacturing probably before anyone else. I don’t expect anyone will like it; many got spoiled by the ease afforded by technology to reach the consumer. But now, those edges aren’t so fuzzy anymore, they aren’t so nebulous. We have hard rules now. And you’d better believe that retailers of any stripe have taken notice affecting everyone in this market.
But back to a return to traditionalism and professionalism (better, not bigger). Speaking of, how many of you don’t even have an RN number? You’re going to need one now. They’re free, may as well sign up now.
The big reason why you’ll need one is because retail will shake out itself with a lot of failures. The stores that survive -the ones you and everybody else wants to sell to- will be more professional (better, not bigger) themselves. As such, they have standards you’ll have to meet if you want to get in. Traditionally, manufacturers had little recourse in selling their products themselves, so they had to adhere to strict fulfillment criteria of (often larger) stores. Any manufacturers that failed to meet those standards were mostly eliminated at Market or even delivery. This was especially true of products subject to rules or bans like children’s wear. This system was not perfect but this holistic vetting system of professional retailers as gate keepers prevented unsafe or substandard product from entering the consumer stream. It may not seem that way now (you can only imagine product that doesn’t make the cut) but it had been and it will certainly be moving back in that direction. Retail must react because in this climate, consumers are demanding more value.
A lot of tiny operations out there resent me. I’m an easy big target. I say things you don’t want to hear. My point being, you’re going to start hearing a lot of the things I’ve been saying from other people, assuming they’ll talk to you at all. Mostly they just won’t. Even in this climate of hungry sewing contractors, they’re also getting pickier because they don’t have time to waste. Many are refusing children’s products altogether so if you do manage to get in anywhere, you’ll have to know your stuff. I spent yesterday talking to a contractor who ran a net loss last year. Too many people coming in the door with bad patterns that held up production. Everything flows in process.
And financing? Have you ever heard the expression, “Capital is a coward”? Colin Powell is most often credited with saying that but I learned the phrase in an Econ 101 textbook nearly 30 years ago (gosh, I don’t feel that old).
Attracting this money isn’t easy. Capital is a coward. It flees from corruption and bad policies, conflict and unpredictability. It shuns ignorance, disease and illiteracy. Capital goes where it is welcomed and where investors can be confident of a return on the resources they have put at risk.
Do you know what it all boils down to? It’s trust. Trust and confidence. More worrisome than a reduction in consumer confidence is diminished confidence among business partners. As Colin implies above, trust is based on credibility. In this tightening market, you may not have money but you must assume the responsibility of developing credibility no matter how unpopular it may make you (me). I’ll write more about that next.