Large Retailers and Design Steering U.S. Textile Industry
April 8, 2004
NEW YORK - The U.S. textile companies that survive the ever-tightening industry will become distributors - not manufacturers of their products - by outsourcing their manufacturing process offshore, said James Richman, president of Richloom Fabrics Group. The 46-year-old home furnishings fabric company was one of the first leading American textile firms to send manufacturing processes overseas five years ago to exploit cheap labor there.
''It looks like every American manufacturer left in this business will become a distributor; about 80 percent of the companies [will be] left.'' Richman said. ''There will be some manufacturing left at the top end of the market and the rest will occur overseas.'' Andrew Reisel, vice president of Richloom, said offshore outsourcing has shrunk the pool of American textile companies and molded the business into a design-driven industry controlled by large retailers.
''Today, the retailer is dictating design,'' Reisel said. ''Yet, there are only a handful of important retailers out there. We can't service the small retailer. There are shorter product lifecycles, [which] adds up to lengthening product lead times. You still have to pay for and nurture the design. The only differentiating point from one line to another is the design. We all can make it the same way in China so the pressure must always be on producing the best possible design,'' he said.
Richloom Fabrics makes fabrics for upholstery, retail, jobber, manufacturing, recreational vehicle, contract and outdoor furniture markets. The New York City-based firm boasts factories, mills, and warehouses located throughout the U.S. but began producing most of its ready-mades overseas about five years ago.
''Richloom has produced ready-mades for 30 years; it went from a small percentage of our business to the majority of our business,'' Reisel said. ''This is why our country is at a difficult point: North and South Carolina have been replaced by China. Though the business is as big as ever, it is getting tougher to make money in this business.''
Richman and Reisel run Richloom's global sourcing operation, a fast-growing enterprise they say is getting increasingly tougher to manage.
''We look at how to do business in China every day,'' Richman said. ''We make more and more trips to China, which means more closeouts, greater exposure to losses and a greater downside.'' PAKISTAN, INDIA, TURKEY
''The cost of labor, freight and duty as it relates to China will be cheaper than anything we can do in the States,'' Richman said. ''The raw material cost is dubious at best because the Chinese could be bartering for currency and not paying much attention to profit. That means the precedent that we use to run our business in America doesn't apply to the Chinese.''
Despite the shift, Richloom is still developing its American base. The company boasts a new 300,000-square-foot manufacturing plant and distribution center in Clinton, South Carolina, where employees add finishing touches to goods produced offshore. Richloom also produces jacquard chenille upholstery at a mill in Lancaster, South Carolina to service the outdoor furniture business, RV trade and contract market.
In 2000, Richloom Fabrics Group - which comprises Richloom Fabrics and Berkshire Weaving - grossed about $200 million in revenues. In 2001, Richloom acquired the John Wolf converting business from Cone Mills. Last year, Liz Claiborne licensed Richloom to create decorative fabrics and upholstery for a new line of furniture to be designed and marketed by Lexington Home Brands.
Richman predicted that despite the U.S. textile market's heavy reliance on design, traditionally high-impact designers will have difficulty maintaining their business. ''Those who got a premium for their design before now find this margin is shrinking rapidly,'' Richman said. ''Lead times are longer when you deal offshore. Your money is tied up now in finished inventory, not just fabrics. That means you have more money tied up than ever before - four months as opposed to one month. Not everyone is going to make it in this business as a result.''
''It looks like every American manufacturer left in this business will become a distributor; about 80 percent of the companies [will be] left.'' Richman said. ''There will be some manufacturing left at the top end of the market and the rest will occur overseas.'' Andrew Reisel, vice president of Richloom, said offshore outsourcing has shrunk the pool of American textile companies and molded the business into a design-driven industry controlled by large retailers.
''Today, the retailer is dictating design,'' Reisel said. ''Yet, there are only a handful of important retailers out there. We can't service the small retailer. There are shorter product lifecycles, [which] adds up to lengthening product lead times. You still have to pay for and nurture the design. The only differentiating point from one line to another is the design. We all can make it the same way in China so the pressure must always be on producing the best possible design,'' he said.
Richloom Fabrics makes fabrics for upholstery, retail, jobber, manufacturing, recreational vehicle, contract and outdoor furniture markets. The New York City-based firm boasts factories, mills, and warehouses located throughout the U.S. but began producing most of its ready-mades overseas about five years ago.
''Richloom has produced ready-mades for 30 years; it went from a small percentage of our business to the majority of our business,'' Reisel said. ''This is why our country is at a difficult point: North and South Carolina have been replaced by China. Though the business is as big as ever, it is getting tougher to make money in this business.''
Richman and Reisel run Richloom's global sourcing operation, a fast-growing enterprise they say is getting increasingly tougher to manage.
''We look at how to do business in China every day,'' Richman said. ''We make more and more trips to China, which means more closeouts, greater exposure to losses and a greater downside.'' PAKISTAN, INDIA, TURKEY
''The cost of labor, freight and duty as it relates to China will be cheaper than anything we can do in the States,'' Richman said. ''The raw material cost is dubious at best because the Chinese could be bartering for currency and not paying much attention to profit. That means the precedent that we use to run our business in America doesn't apply to the Chinese.''
Despite the shift, Richloom is still developing its American base. The company boasts a new 300,000-square-foot manufacturing plant and distribution center in Clinton, South Carolina, where employees add finishing touches to goods produced offshore. Richloom also produces jacquard chenille upholstery at a mill in Lancaster, South Carolina to service the outdoor furniture business, RV trade and contract market.
In 2000, Richloom Fabrics Group - which comprises Richloom Fabrics and Berkshire Weaving - grossed about $200 million in revenues. In 2001, Richloom acquired the John Wolf converting business from Cone Mills. Last year, Liz Claiborne licensed Richloom to create decorative fabrics and upholstery for a new line of furniture to be designed and marketed by Lexington Home Brands.
Richman predicted that despite the U.S. textile market's heavy reliance on design, traditionally high-impact designers will have difficulty maintaining their business. ''Those who got a premium for their design before now find this margin is shrinking rapidly,'' Richman said. ''Lead times are longer when you deal offshore. Your money is tied up now in finished inventory, not just fabrics. That means you have more money tied up than ever before - four months as opposed to one month. Not everyone is going to make it in this business as a result.''