Kingpins Quarterly Winter 2024

VOLUME TWO

WINTER 2024

DENIM'S LABOR CONUNDRUM How rising minimum wages are affecting sourcing— and the widening living wage gap is impacting workers

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V O L U M E T W O, W I N T E R 2 0 2 4

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founder's letter

21

Insufficient Funds Inflation is the latest factor pushing living

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Results & Resolutions Industry leaders reflect on their 2023 wins and their goals for the year ahead

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12

IYKYK: NYC

wages farther out of reach—how will the denim industry respond?

CALETHA CRAWFORD Editorial Director

23 Global Footprints

COLIN BEAUCHEMIN Creative Director

Mills are diversifying through owned

Forget the city guides. Denim insiders

operations overseas—which comes

share their favorite haunts in the Big Apple.

with both opportunities and challenges

On the Show Floor

26 2024 Retail Outlook

Your first look at the top news, notes and

How merchants are dealing with inflation,

highlights from Kingpins NYC 2024 exhibitors.

inventory and an influx of negative news heading into 2024

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The Decarbonization Divide Why the industry’s approach to reducing

28 Small Wonders

emissions could be pitting brands against

Despite smaller orders, the trims market

suppliers—and putting the planet in jeopardy

is under pressure to deliver on sustainability at increasingly competitive prices

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Calculating the Cost of Labor How minimum wages, which are up on paper, have tumbled in priority in practice

30 Optimizing Assortments After 2023 gave denim the blues, analysts advise how to get consumers to move jeans up their shopping lists in the new year

K I NG P I N SQ UA RT E RLY.CO M

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K I N G P I N S Q U A R T E R LY

ANDREW OLAH Founder

VIVIAN WANG Managing Director/ Global Sales Manager GORDON HEFFNER Director, Media & Retail FOR ADVERTISING INQUIRIES Contact Vivian Wang at vivian@kingpinsshow.com

WE SEE BEAUTY THROUGH CRAFT. WE INNOVATE FOR THE FUTURE.

WE HEAR THE WORLD BREATHING

www.ortaanadolu.com

FOUNDER'S LETTER Welcome to another Kingpins: One more time!

If it’s your first time at the show or your first time reading Kingpins Quarterly, thanks for your engagement. We like to think of ourselves—as you are—as another member of the global denim community.

With that in mind, here are some crazy things going on.

A friend of mine who is a denim master, having launched all sorts of great premium brands since the turn of the century, carefully examined a jean his wife purchased at Walmart. He found it to be impeccably made. The jean was premium quality, the fit perfect, pocket placement excellent and the wash outstanding. He concluded that the global supply chain (the jeans were likely made in Bangladesh or Pakistan) now is able to make super great quality regardless of the origin or the price. Being a supplier to Target for years, I already knew their jeans were really high quality, but I never expected to hear that Walmart was making high quality product as well. So, hello to another well made $29 jean.

Here is information other industry colleagues from the supply chain gave me that might raise your eyebrows, as in ‘WHAT?’ I’m not going to name names

costs $1,100 or, like the Big Mac, 730 percent more today than almost 50 years ago.

because that does not matter. What matters is the price. I’ll get into that in a moment but first the highlights, which are also lowlights.

In short, our industry is shoving prices down to create “demand” when we know consumers are quite willing to pay McDonald’s or LVHM 700 percent

A retailer in Spain: Indigo jeans shipped at $5.70

more than they used to pay.

An American brand: Indigo jeans shipped $6.50 A retailer in France: Indigo jeans shipped $6.00

We all need to give this a serious think because few of us in the supply chain are

A Danish brand: Indigo jeans shipped $6.00

able to make normal profits (if any) anymore. At Kingpins, we love and use the word sustainable when it comes to products but not really sure how that word

If we assume that denim fabric at cost is $2.50/yd (should be $3.20/yd) and total

applies to suppliers and their long-term viability, which of course means the

consumption for a women’s jean would be $3.35 (or so) with trims at 50 cents,

people who sew and wash garments in our industry have massive job risk.

that leaves only $2 for sewing and washing.

Somewhere, somehow prices need to include a normal profit for suppliers— The cost of denim in 1982 was $3.00/yard. At that time, cotton cost (year range)

not their cost or less than production—for the workers, if not for anyone else.

was 70 cents/lb while today it’s 80 cents for December delivery, a 14 percent increase in 51 years. Petroleum cost was $30/barrel, while today it’s $90/barrel,

Perhaps the legislators need to also think about the facts and get involved in

a 300 percent increase. And so, one wonders incredulously while life costs

unfair tactics in our industry compared to food or luxury products.

more, how on earth prices are so much lower today for denim fabric?

Enjoy the show, and please remember that in the early 1980’s a Wrangler jean I’ve included a McDonald’s drive-in menu from 1983 where a Big Mac sold for

cost $13.99 and today (right now) online it’s available at Walmart for $19.97.

85 cents. Today, four decades later, the Big Mac now costs $5.89 in California or almost 700 percent more than it cost when this menu was built.

Best, Andrew Olah

Bagaholic tells us a Louis Vuitton Speedy 25 bag cost $150 in 1979, and today it

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K I N G P I N S Q U A R T E R LY

Founder, Kingpins

RESULTS & RESOLUTIONS Industry leaders reflect on their 2023 wins and their aspirations for the year ahead BY CHELSEA DOBROSIELSKI

A

fter three years of turbulent change, 2023 offered the denim industry its own unique

mix of complications and challenges. Players across the supply chain, however, are investing

Matteo Urbini Managing director, Soko in Italy

Andrea Venier Managing director, Officina+39 in Italy

Best Decision of 2023:

Best Decision of 2023:

We created our

As in recent years, 2023

in the future, whether that’s embracing artificial

Researching Division for

was also complicated

intelligence or prioritizing sustainability.

external customers like

and full of challenges.

buyers, brands, garments

Officina39’s strength is not

manufacturers, etc., dedicated to

accepting the word “no” as an

Leaders from textile manufacturers Sapphire Mills

new targets and goals in garment washing

answer, always looking for new ways to

and Global Denim, chemistry experts Soko and

and finishing, like new processing techniques to solve existing

deal with difficult situations. We worked hard to implement

Officina+39, and Asahi Kasei Corp.’s ROICA fiber

limits. It’s an independent division from the chemical division,

products and processes following the perspective of

operating on a project basis with the receiving partners and

sustainability, with the aim of providing our clients with as

studied at 360°, including fabric, machineries and recipes.

many tools as possible to face the end consumer market.

2024 Goals:

2024 Goals:

It’s our aim for our Researching Division to collaborate with

To develop and research products and processes to satisfy

strategic partners and see where the new challenges will head

the interest of our customers while maintaining our company

to. Also, our Lab will be implemented with new equipment to

philosophy of combining chemical creativity and sustainability.

cover most of the technical aspects and get ready for a new

To allow brands to leverage these new technologies, both in

way of processing garments.

terms of cost and the needs of the end consumer.

Takehiro Kamiyama Senior executive manager, ROICA Division of Asahi Kasei Corp. in Japan

Anatt Finkler Creative director, Global Denim in Mexico

Digital Transformation Team. We have

Best Decision of 2023:

adopted DMIX, which revolutionizes the way suppliers and

The most impactful

Despite the market and

decision we’ve made is

brands interact. We also use CLO for virtual, true-to-life garment

world issues, we have

investing in sustainability

visualization. We also got FastReact to maximize efficiencies and

kept investing in sustainable

and transitioning our

remove bottlenecks. These tools allow us to better manage our

innovation. We published the

data to prepare us to effectively embrace artificial intelligence

company mindset toward

first annual “ROICA Sustainability Fact.”

as a revolutionary phenomenon in the future.

circularity. We’ve embraced ISO’s

That’s because, on top of key investments in highly innovative

principles, revolutionizing our internal systems, improving

and responsible products such as ROICA V550 degradable, 2024 Goals:

management practices, and operational efficiency. This shift

together with joint development with key partners such as

not only conserves resources but also serves as a catalyst for

In addition to filling our 65 million meters of woven fabric

Candiani, Prosperity and Artistic Milliners for denim, we want

per year capacity and increasing our apparel manufacturing

inspiring positive change.

to complete the transparency and value picture about our

capacity. We have targeted that Sapphire Mills is to be almost

company as well.

division shared with Kingpins Quarterly some of the best decisions they made in 2023—and their No. 1 goals for the new year.

Ismael Abdullah Director & owner, Sapphire Mills in Pakistan Best Decision of 2023: The best decision was to take the next step on our digitization journey, which began with implementing SAP S/4HANA. We formed a

100% powered by renewable energy - biomass and solar –

8

Best Decision of 2023:

2024 Goals: Our primary business objective is to sustain and expand our

by the year 2027, and we want to make a significant stride in

2024 Goals:

success in the U.S. market, fostering substantial growth in this

that direction in 2024. We have already initiated our solar and

We have set the target of reducing the GHG emissions of the

biomass projects and have made large investments in that

region. Simultaneously, we aim to venture into other international

ROICA business by 60 percent or more (compared to fiscal 2013)

markets, with focus on areas such as Latin America. Our strategy

direction. In addition, we are beginning our water recycling

by 2030. This year, we will contribute to our target and invest in

involves staying at the forefront of industry trends and tailoring

project in 2024.

launching new innovation.

our offerings to meet the specific needs of each market.

K I N G P I N S Q U A R T E R LY

IYKYK: NEW YORK CITY Denim Dudes’ Shannon Reddy shares where the locals shop, eat and hang in the city that never sleeps.

N

ew York is world renowned for its dining, elite shopping scene and incredible

architecture—not to mention it’s top notch for denim street style. However, some of the best spots won’t show up in your average “Things to do Around NYC” google search or city guides. But about the best mom and pop restaurants, one-off

Lila Habermann, VP of design and product development at Artistic Milliners

boutiques and lesser-known snack spots so you

Sincerely, Tommy

can be in the know too.

This BedStuy coffee shop

don’t worry. We got the scoop from denim heads

and ultra-curated boutique is a beacon of cool in an already cool neighborhood. One of my favorite places to grab a coffee and sit outside to people watch; the streetstyle up and down Tompkins Ave is unmatched.

The store carries up-and-coming designers, clothing, accessories and home goods. The curation always feels fresh, Maurice Mosseri, COO of Still Here

cool and approachable without trying too hard.

cool to see Self Edge keeping up with the culture. They started carrying the Rick Owens raw denim line a few years ago.

They’ve been there for me through all of my phases!

Loren Cronk, Denim Designer Five Leaves This is my “cheers’’ of Greenpoint… where everyone knows your name. For 2010-2020, my denim shop, Loren, was just across the street and 5L was my

Tangerine

go-to for entertaining friends and

Another perfectly curated Brooklyn boutique. Tangerine in East

guests. I made most of their denim aprons and from time to time

Williamsburg carries indie heavy-hitters and up-and-comers

I still see a few on the wait staff which is nice. The El Ray cocktail

alike. I love their simple curation that brings high and low

is my fav. I used to sit on the outside bar and watch my shop as I

together. You could leave with a trendy bottle of vinegar or a

was sipping on a cocktail, when I saw someone walk in, I’d run

$400 necklace, depending on the day.

over and act like I wasn’t sipping on a cocktail.

Founder Tyler Hays is an artist,

Kopitiam

Xi’an Famous Foods

clothing designer, furniture builder,

Probably my favorite place to grab a bite, Kopitiam on the Lower

Everything on this menu is great… but F4 is my one and only:

architect and engineer. Everything he creates is done by hand

East Side seems like the best place for any meal or occasion.

spicy lamb dumpling. My mouth is watering just thinking about it.

or using hand-made materials. His ceramics and homewares are

This Singaporean coffee house has insane desserts, to-die-for

Booking a delta flight now.

made from wild clay he digs himself. They brew their own beer

noodles, and always has new and rotating menus filled with

and make incredible denim too!

things I’ve never heard of and can’t wait to try. I love to meet

M. Crow & Company To me, M. Crow is the gold standard of an incredible lifestyle brand and I love shopping at their NYC store.

friends here on a Sunday afternoon to hang for hours or stop in on a weekday morning for a quick coffee and kaya toast.

Sonia Mosseri, Co-Founder & Creative Director of Still Here

Miko Underwood, Founder of Oak & Acorn One Stop Patty Shop They have the BEST

Micheal Smith, Pair of Kings Podcast Co-Host & data science analyst

vegetarian Jamaican

incredible, classic New

Self Edge

Patties are always fresh! And

York-style luncheonette,

When I was in high school,

the chef is the best!

one of the only ones still

I got into clothing through

around. It was most recently

raw denim and workwear,

bought by the owners of Court Street

and Self Edge on the Lower

Grocers. My Grandfather used to take my dad there growing

East Side was the first store I ever

up, and my dad has always taken me through the years. It has a

saw that carried all the big brands.

really special New York Charm.

My taste has changed through the years and it has been really

S&P This Flatiron staple is an

1 0 K I N G P I N S Q U A R T E R LY

patties. Their flavor palette is unmatched. The

Lee Lee’s Baked Goods Hands down the MOST OUTSTANDING rugelach in New York City. LEE LEE’s is a staple in Harlem. The scent of rugelach baking will draw you in from the streetside. The most irresistible pastry I’ve ever had.

A testament to timeless style and environmental responsibility.

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ARTISTIC MILLINERS' CUTTING EDGE INNOVATION THROUGH COLLABORATION Artistic Milliners, one of the world’s leading producers of denim, expands on its proven track record of sustainability initiatives in clean energy, organic cotton, and regenerative agriculture at the Kingpins show.

Archroma X Artistic Milliners: Sustainable Dyeing for the Future

to introduce a collection of denim fabrics made

our carbon footprint and contributing to a more

from Tencel’s newest fiber, 32MM. These fabrics

sustainable future for the denim industry.

Our partnership with Archroma, a global leader

are optimized to create ultra-soft fabrications with

in specialty chemicals promotes cutting-edge

the authentic look of a classic pair of jeans, without

Double Beam: Comfort and Durability

sustainable dyeing, including more eco-

compromising on comfort. Tencel 32MM offers

Artistic Milliners and The LYCRA Company have

advanced sulfur black dyeing for denim with the

exceptional softness, breathability, and moisture

teamed up to create the Double Beam collection,

groundbreaking DIRESUL® EVOLUTION BLACK

management, making it ideal for denim that feels as

which unlocks a new level of comfort in denim. This

dyestuff. This innovative dye delivers outstanding

good as it looks.

collection utilizes LYCRA® T400® EcoMade fiber,

resource savings, using less water, energy, and CO2

which is made from recycled content and provides

during production, and generates less wastewater

BioBlack TX: Carbon-Negative Black Pigment

exceptional stretch and recovery. The Double Beam

and unwanted effluents. Additionally, DIRESUL®

In collaboration with Nature Coatings, Artistic

collection offers superior comfort, durability, and

EVOLUTION BLACK offers unique shade and

Milliners presents the Nature Coatings X Artistic

hand-feel, making it ideal for denim that can keep up

washdown behavior for eye-catching aesthetics

Milliners capsule collection. This collection features

with your active lifestyle.

and is laser-friendly, making it a perfect choice for

the innovative use of BioBlack TX, a 100% bio-based,

sustainable and stylish denim.

carbon negative and non-toxic black pigment

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derived from wood waste. This sustainable Ultra-Soft Luxury with Tencel 32MM

alternative to petroleum-derived carbon black is

Artistic Milliners and Lenzing have joined forces

applied to 100% cotton denim, actively reducing

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1102 K I N G P I N S Q U A R T E R LY

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WE HEAR THE WORLD BREATHING In its landmark 70th year anniversary, ORTA’s newest collection is leading the way towards 100% regenerative eco-bold denim.

ORTA sees that to be truly regenerative, you need

next-gen solution for materials: Viscose made

output, along with water and textile waste for

to also address the behaviors of consumption.

with CIRCULOSE® and BioBlackTX. CIRCULOSE

more than 10 years. This year, ORTA restarted

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vintage, artisanal denim styles and a silent luxe,

technology that dissolves used cotton and other

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ORTA saw this as more than just a backlash to

natural fibers into a new, biodegradable raw

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SAPPHIRE MILLS - ELEVATING FASHION, REDEFINING SUSTAINABILITY (BOOTH #: WHITE 10) In the ever-evolving landscape of fashion, Sapphire Mills stands out as a true Fabric and Apparel Powerhouse.

As we eagerly anticipate the Kingpins Show 2024, Sapphire invites you to unravel a narrative that seamlessly weaves together style, sustainability, and innovation.

SAPPHIRE X LYCRA - ESSENTIABLE Collection:

HORIZONS, an enchanting tapestry of woven

responsibility, Sapphire Mills leads the way

A Symphony of Functionality and Style

fabric haute couture. This collection, boasting

with a narrative that transcends trends, leaving

E mbark on a transformative journey as we unveil

seven sub-collections like Linen Bliss, Signatures,

a permanent mark on the future of fashion.

ESSENTIABLE, Sapphire’s latest collection tailored

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soft linens and versatile Techno fabrics. Explore

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the Kingpins Show 2024 to experience these collections firsthand.

BLOOMING HORIZONS -

Discover the perfect blend of style, sustainability,

A Tapestry of Haute Couture

and innovation that defines Sapphire Mills. As

Step into a realm of possibilities with BLOOMING

we navigate the intersection of fashion and

Finishing Mills Limited

K I N G P I N S Q U A R T E R LY

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THE DECARBONIZATION DIVIDE Why Transformers Foundation says the industry’s misguided approach to reducing emissions is pitting brands against suppliers—and putting the planet in jeopardy

W

ith 2030 right around the corner, the industry

The report, which includes in-depth interviews with

KPQ: “Doomed” is a strong word. Why do you

has been focused on how to accelerate

denim suppliers and stakeholders from major garment-

think it’s an appropriate descriptor for the industry’s

change—but the better question might be, is fashion

producing nations, was written by Elizabeth L. Cline,

climate strategy?

racing toward a dead end?

lecturer of Fashion Policy and Consumerism at Columbia University; Brooke Roberts-Islam, an industry expert

KvdW: The primary findings of this report are that

A new report from the Transformers Foundation raises

and independent journalist; and Kim van der Weerd,

responsibility for climate action in fashion is not

concerns about the complexities of the fashion

Intelligence Director of Transformers Foundation.

shared, it is largely a supplier responsibility. This

industry’s climate commitments and the unfair burden

approach is not only inequitable, it’s impracticable.

they place on textile and apparel suppliers worldwide.

Here, van der Weerd tells Kingpins Quarterly why

One of the main ways that responsibility has been

Titled “Towards A Collective Approach: Rethinking

one-size-fits-all makes about as much sense for

pushed down the supply chain is through the

Fashion’s Doomed Climate Strategy,” the report

sustainability as it does for a pair of jeans, what it will

industry’s pursuit of science-based targets (SBTs).

highlights what it calls a worrying disconnect between

take to change the current top-down framework and

Most companies (for example, brands and retailers)

the pursuit of science-based targets and feasibility,

why we don’t have any other choice than to equitably

setting SBTs are setting targets that cover their entire

equity and financing.

share the financial burden.

supply chain emissions (where most emissions are concentrated), but without input from their suppliers.

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K I N G P I N S Q U A R T E R LY

Suppliers also say they’re increasingly required

impact the current brand-supplier dynamic?

or expected to set their own SBTs, which require individual companies to reduce their greenhouse

KvdW: In this paper we look at three examples of

gas emissions by about half by 2030 and achieve

legislation striving to hold companies accountable

net zero by 2050. While seemingly egalitarian—by

for the climate impacts (CSDDD, CSRD, and the NY

asking all companies along the value chain to set the

Fashion Act). Though they all try to do this in slightly

same or similar targets to reduce emissions to the

different ways and make varied references to things

same extent—SBTs have institutionalized the logic

like the role of purchasing practices, overall we felt

that the work of decarbonizing fashion is the supply

that regulators are missing a chance to enable climate

chain’s responsibility. And yet, because SBTs are set

action in part by reinforcing targets as a solution and

without consideration of feasibility and context, many

an end in themselves—rather than, say, unlocking

suppliers—through no fault of their own—are limited in

collectively funding mechanisms or exploring

their ability to deliver those targets.

reporting systems that require brands and retailers to disclose the extent to which they are investing

What’s more, the industry is not engaging in a wider

financially in their supply chain’s decarbonization.

reckoning about funding. In practice, suppliers are not only expected to do most of the work to

KPQ: What are some suggestions on how the

decarbonize, but to pay for it (even when no financial

burden can be shared in the denim industry?

returns are possible). This not only goes against industry platitudes and established international frameworks,

KvdW: We define collective action as shared

including the Paris Agreement, about a need for

ownership and shared responsibility. This requires

equitable and just transition, but it also ensures climate

shifting responsibility for climate action from suppliers

mitigation will stall.

to one that’s shared across the apparel value chain.

Climate action must be our problem. This includes

KPQ: The dynamic in which brands dictate to

sharing financial resources, but also other types of

suppliers seems to have existed since offshoring

resources. No target, not even a differentiated target,

began, whether it’s been about price, quality or

is viable without collective action. I hope one of the

sustainability. How can the industry break out of it for

contributions of this paper will be to give people a

the sake of combating climate change?

vocabulary for articulating how and why the sector’s current approach is not collective.

KvdW: I’m tentatively (naively?) optimistic that if anything can break this dynamic it’s climate change. A

The first step towards collective action is decoupling

supplier once said to me: “when it comes to climate

the “who does how much” question from the “who

change, we either all win or we all lose.” I think this is

pays” question. In other words, just because a

true for many of the things that you list in your question,

company needs to deeply decarbonize to meet

but it’s more obvious how and why this kind of

our collective climate goals, that does not mean

statement is true for climate change. For example,

they’re automatically responsible for paying the tab.

if suppliers are forced to set targets that many of

These two pieces of the puzzle—where does the

them—through no fault of their own—cannot achieve,

work need to be done and who pays—need to be

then collectively, we will all fail. It doesn’t matter if

solved separately. Contributions should be linked to

one brand hits its targets if the rest of the sector is left

ability to pay and could factor in equity, margins, and

behind. As an aside: that’s also why this “who should

historical emissions, for example.

do how much” question—which is tackled in the paper—is so critical. If contextual factors mean that

An example of a program that is not collective would

not all suppliers are in a position to realize aggressive

be a brand lending to a supplier because in this case,

emissions reductions, then some companies

the supplier is still the entity that takes the project and

(whether suppliers or other value chain actors) have to

the credit risk, and also a loan has to be paid back.

do more. This is a conversation we need to be having, but aren’t...

Decoupling is the first and most important step towards a collective approach.

A Seat at the Table Suppliers weigh in on how SBTs, collaboration and legislation play a role in the industry’s push toward decarbonization.

On the need for a collaborative approach: Suppliers are increasingly under pressure to set sciencebased targets. For instance, major brands are now incorporating environmental considerations into their supply chain selection. The collaborative approach should be adopted rather than imposing requirements on the manufacturers…. They’re saying we’re business partners, but at the time of implementation, nobody is there to support us. That is the biggest challenge.

– Saqib Shahzad, head of sustainability for Sapphire, parent of Diamond Denim mill located in Pakistan On incentivizing change: The legislation needs to build a very well-defined competitive edge for sustainable transformation, a way to really measure it as well as incentivize it. Otherwise, it’s going to again be all open in the air. And I think the manufacturer perspective is not fully there within the legislation so that needs to be integrated more into how the frameworks are defined. If we’re involved with policies and legislations, we’re all ready to contribute.

– Ebru Debbag, executive director, global sales and marketing for Pakistan-based mill, Soorty On the price of sustainable innovation: For the last 12 to 15 years, the average cost of a basic five pocket is $6… A sustainable garment [that] consists of durability, that is manufactured with renewable energy and has recyclability that makes it environmentally friendly costs $9. [Brands] are saying ‘Okay, this is a good sustainability initiative, but we are willing to have a $6 garment at the moment and maybe in future we will consider it.’ The brand isn’t willing to pay an additional amount, and the same [for] the consumer. – Saqib Shahzad On how to move the conversation past prices: One example regarding a collective approach is recently [the International Apparel Federation] signed an agreement with the Inditex Group to try to define some rules and guidelines… I think we need this kind of approach with the Federation representing the producers. If we come together like IAF did, then we can have a seat at the table. Otherwise, if we do it, there’s so much [disconnect] between what the management is announcing with the science-based targets and the purchasing practices that are applied on a daily basis. – Romain Narcy, partner at the EreksBlue Matters mill in Turkey On how to bring all stakeholders into the conversation: [We need] a collaborative approach rather than a transaction-based approach in which brands and suppliers can sit down together to formulate three-year long plans on how they are going to [mediate] a collaborative decarbonization. And the other thing is… the more we can collaboratively make this information available as to where [consumers’] investments are going, what they are supporting, there’s the need for that in the market. – Ebru Debbag

KPQ: How will the new legislation in the EU and U.S. K I N G P I N S Q U A R T E R LY

15

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EMESSA DENIM ENTERS U.S. MARKET WITH STRONG ESG MANDATE

E

messa Denim may be a new name in the U.S.

Emessa employs Jeanologia laser

market but it is an established partner for

technology, nanotechnology and

better European brands and retailers. High quality

ozone to create on trend washes

standards plus a focus on ESG has made the Egypt-

and finishes that are less impactful

based trouser producer a trusted resource for

to the environment. Emessa’s value

household names in the EU like MaxMara, Brax,

chain is 90 percent based in Africa,

Marco Polo and Camel Active. And now, Emessa

with more than 80 percent of all

Denim is courting partners in the U.S. that have a

fabric, threads and zippers coming

shared vision and values.

from Egypt. The advantages are twofold: a short supply chain and a

“We are not only a producer. We are a partner

low carbon footprint.

for the brands. We understand their market. We understand their demand. We develop projects

Emessa believes environmental

together in terms of their collection achieving any

sustainability is not only table stakes

improvement, whether that’s efficiency, sustainability,

today, but that it should permeate

new products, new sourcing,” said founder Anis

all products and processes.

Trabulsi. This partnership relationship is an important

“Sustainability, in our opinion, not

distinction that separates Emessa from its competitors

only includes water treatment and

in the region. Another is the company’s willingness

chemical reduction, it’s also about

to be transparent, something Trabulsi said brands are

how many second choice do

often missing. “If there is a problem, we immediately

you do. If you do less second choice, you have less

communicate and we find a solution together.”

impact to the environment,” Trabulsi said.

Emessa, which focuses on the better to high-end

This ethos has led to Emessa being regarded as the

market, operates a 20,000 square meter facility

most sustainable factory in North Africa. It is RCS, GOTS

with capacity to produce 2.5 million denim

and OCS certified and ISO 9001:2015, ISO 14001:2105 and

and woven trousers per year. The company’s

ISO 45001:2018 compliant.

workers through middle management, Emessa offers

finishing, printing, embroidery and sewing.

The company continues to look for new ways to

and to reinforce the company culture. Emessa BSCI-

Emessa’s technical department is keenly focused

achieve greater sustainability. Emessa’s ultimate goal

certified, which is comparable to WRAP compliance

on strong measurement control to alleviate reverse

is to be a water- and chemical-free, low energy

in the U.S., which the company has also applied for.

logistics headaches for its partners’ online sales.

factory producing high fashion garments which are

And its location in Egypt affords it many advantages

comparable with conventionally produced garments

As Emessa launches into the U.S. market, the company

that sourcing executives in both the EU and U.S.

in terms of price and fashion level. To that end, it is

looks forward to forging new relationships with

can benefit from. The country’s stable political

constantly testing and sampling and evaluating the

brands that can embrace its environmental and social

environment, solid infrastructure, four international

latest materials and tech innovations to lessen its impact

improvement stance. “Our company culture and

ports, good energy supply and large workforce

and provide its brand partners with verifiable data they

partnerships with our clients is paramount. This is what

pool make it an ideal production destination. Further,

can use in their storytelling with the end consumer.

allows Emessa to create responsible, high fashion

capabilities span laundry, automatic cutting,

which Emessa fosters a supportive environment for its 1,700 person-plus workforce. “Our main focus is on creating a good social environment, giving our workers and their families a good outlook for their future,” Trabulsi said. “They feel loyal to our company and they see that we take care of all of them. There’s respect and everybody is valued.” From line continuous education to enable them to do their jobs

products that meet the exacting standards of our

under the Qualifying Industrial Zones (QIZ) initiative, goods from Egypt that contain inputs from Israel

Improvement also comes through the company’s

brands,” Trabulsi said. “We are looking for customers

enjoy duty-free status in the U.S.

rigorous training program, which is just one way in

who have the same idea and same vision.”

1106

K I N G P I N S Q U A R T E R LY

FE AT U RE

CALCULATING THE CO$T OF LABOR How minimum wages, which are up on paper, have tumbled in priority in practice

BY CALETHA CRAWFORD

K I N G P I N S Q U A R T E R LY

17

CALCULATING THE COST OF LABOR

T

here are no absolutes in sourcing. The

wage in Pakistan increased 28 percent year on year,

factors that prompt denim brands to opt

Mexico was up 20 percent and Egypt 11 percent

for production partners in one country

during the same period. While other countries like

Beyond currency devaluation, the sluggish market

today could lose significance in a

Vietnam and China were flat, Turkey was an outlier

for denim often also results in a greater disparity

decade, a year or even a season. We’re seeing it

with a minimum wage increase of 107 percent.

between product cost and price, as factories

now as the geopolitical climate becomes dicier

basically, they neutralized all this increase,” he said.

jockey for the few orders up for grabs. “We are

by the day. Suddenly stability is king, leapfrogging

The potential for this exact scenario has kept many a

talking about cost, but price is a totally different

over other long held priorities. Even nearshoring,

sourcing executive awake at night. But these days,

equation,” Schlossmann said. “In times of declining

which has spent nearly a decade on everyone’s

rising minimum wages isn’t sending the shockwave

consumption, in times of unutilized production

lips, is moving up the agenda. And as sourcing

through the denim ecosystem that it might have in

capacity, prices can be given which are far lower

considerations shuffle, the industry is working to

years past. Today, factors like tumbling currencies

than any cost you may calculate.”

determine where labor costs fit into the hierarchy.

abroad and waning demand at home are mitigating

“Minimum wages are a decision criteria. But maybe

at least a portion of the price increases brand

Using Bangladesh as an example, Schlossmann

partners would otherwise be paying for goods.

said the requested 187 percent minimum wage

not necessarily critical. I think we have more critical

increase would increase the FOB price on a pair of

factors to take into consideration like geopolitics,

jeans by 65 percent, assuming labor accounts for

which I think is currently a major criteria,” said Guido Schlossmann, president and Group CEO of virtual manufacturer Synergies Worldwide Sourcing, listing duty rates, efficiency and proximity as other key factors. “We have actually a variety of very critical decision-making factors, and it becomes more and more difficult to put them into a meaningful sequence or order.”

Henry Chow, founder and CEO of Hong Kongbased Precision Textiles, echoes that sentiment.

He said for his firm, which produces in Vietnam for the Australian market, proximity is a bigger concern than wages.

“When you look at the minimum wage and you

WE HAVE ACTUALLY A VARIETY OF VERY CRITICAL DECISIONMAKING FACTORS, AND IT BECOMES MORE AND MORE DIFFICULT TO PUT THEM INTO A MEANINGFUL SEQUENCE OR ORDER.

look at what that percentage is in the total retail

35 percent of the FOB price. This would obviously be substantial but for the last decade prices out of Bangladesh have actually been stagnant, he said, in part due to currency depreciation and one other factor. “People are desperate to fill their production capacity, especially factories which are highly bank leveraged… So, you see a substantial discrepancy between price and cost, which is very tough, because eventually it goes fully into the manufacturers’ margin.”

But for now, suppliers that can do so are taking whatever business they can get—at whatever price—and it ratchets up the competition between countries, Vonrufs said. Weak sales from the U.S., has resulted in fewer orders for Egypt because producers there can’t meet the prices

price, then it becomes—it doesn’t become

As of November 2023, the currencies for all of the

quoted elsewhere. “Since America reduced the

insignificant—but its significance really is very, very

countries Kingpins Quarterly tracked—with the

volume, suddenly [Bangladesh] produces at very,

small,” Chow said. “Speed to market, making the

exception of Mexico’s—weakened against the

very low prices,” he said. “We lost many orders

right decisions on product and being able to do

dollar. So, for example, the 28 percent increase in

where [brands and retailers] put us in competition

that with having the flexibility of having your supply

minimum wages in Pakistan was mitigated by a 17

with Bangladesh with a huge difference of price.

chain closer to you and being able to react faster to

percent drop in the value of the rupee. Take Egypt,

They gave us target prices, which are crazy; 20

market is a far bigger factor in the decision making.”

which has seen minimum wages increase five

percent less compared to last year, which cannot

times since 2020. On its own, that fact would scare

be achieved. We have a profitability of 6, 7, 8

any sourcing executive away, but Marco Vonrufs,

percent maximum.”

Wages are Up But What Does That Mean?

general manager of Intertex, which owns a vertical

The promise of cheap labor has been a siren song

retail partners are still winners. “It looks like a really

for apparel firms since production moved offshore.

dramatic situation. But in fact, if we consider that the

Why Wages Matter But Not That Much

But labor isn’t cheap anymore—even in many

Egyptian pound was E£ 7.8 for $1 in 2012 and today

Even when wage hikes result in larger invoices

so-called low-cost countries. Minimum wages are

it’s E£ 33 for $1, all the companies which work for the

for brands and retailers, sourcing managers must

increasing around the globe. In 2023, the minimum

export and cash their invoices in Euro or in dollars,

weigh these increases against other equally

1 8 K I N G P I N S Q U A R T E R LY

production facility in Egypt, said the country’s

AVERAGE MONTHLY APPAREL WORKER MINIMUM WAGES, 2020-2027E (USD$) 2027E 2026E 2025E 2 0 24 E

2023 2022 2021 2020

113 113 113 113

71 77

$

92 93

BANGLADESH

$

143 136 129 116

97 111 152 127

EGYPT

$

110 110 110 104

104 102

$

113 113 113 113

113 112

206 206 199 199

297 289 280 262

344 337 329 322

968 806 672 545

$

$237 $315 $472 191 188 176 314 347

116 118

117 109

194 191

137 116

328 314

370 347

TUNISIA

PA K IS TA N

VIETNAM

M EX ICO

CHINA

TURKEY

To determine the average monthly earnings, Kingpins Quarterly referenced a variety of sources; most notably the minimum wages each country publishes and is required to pay workers in the industry.

Note: Each country varies in the amount of taxes and deductions such as social insurance premiums and housing fund contributions. The average monthly apparel worker minimum wages shown reflects each country’s currency conversion rates to USD for 2020 through 2023. Estimated wages are presented against November 2023 conversion rates.

Sources: CEICdata.com, Global Living Wage Coalition, Independent country websites, International Labor Organization, International Monetary Fund, Tradingeconomics.com, WageIndicator.org

CURRENCY APPRECIATION YOY IN USD%, 2020 VS 2023 20 %

-5 %

The 2020 rate is YoY currency rate appreciation in USD$ as of September 30, 2020. The 2023 rate reflects the 2020 to 2023 currency rate appreciation in USD$ as of September 30 2023.

Source: U.S. Treasury Department.

-8 0 % 2020

CURRENCY R ATES AG AINST USD$

2023

% CHANGE

BANGLADESH TAK A

85

110

- 2 2.7 %

EGYPTIAN POUND

1 5.7

3 0.9

- 4 9.1 %

TUNISIA DINAR

2.8

3.2

-1 3.1 %

PA K IS TA N RU P E E

1 6 5.7

2 8 8.3

- 4 2.5 %

VIETNAM DONG

2 3,1 8 1

2 4,2 8 0

- 4.5 %

M EX IC A N PESO

2 0.1

1 7.5

CHINESE YUAN RENMINBI

6.8

7.3

1 4.9 % - 6.8 %

TURKEY LIR A

7.8

2 7.4

-7 1.7 %

CALCULATING THE COST OF LABOR

weigh these increases against other equally

he said. “And then you have to compare it against

Even without the efficiency drawbacks, Chow

important factors before considering moving

countries like Bangladesh, which work with less

said wages alone wouldn’t be enough to warrant

production.

technology efficiency, but the same efficiency

country hopping since he estimates that they only

when it comes to skills.”

constitute about 10 percent of the FOB price for

When you look at wages in the context of

jeans. “So, if you’re saving 20 percent on 10 percent,

productivity and efficiency, the conversation

Automation has allowed Intertex to slash its

gets very complicated, especially for the

workforce from 2,500 to 1,200 employees over

denim market. “When we talk about wages, it

the last six years. While the company used to

contributes on average, around 16 percent of

be hesitant about investing in technology, it was

the product’s cost. It’s somewhere between 10

spurred on by the idea of minimizing headcount,

to 16 percent, depending upon the complexity

thereby reducing labor-related headaches.

of the product and the material side,” said Zaki

“Nowadays when we make an investment, of

Saleemi, a 23-year veteran of sourcing in Asia and

course, we think about also the savings in terms

senior vice president of global sales for Material

of the number of employees—not that much for

Exchange. “Even if you go to a cheap place, like

the cost of the employees—but [because of] the

Ethiopia you’re gonna have very high rejection

difficulty to manage so many people in a factory,”

rates. And so that’s another thing people can

Vonrufs said.

overlook, which is the real efficiency level,” he

it’s only a couple of percent in the context of FOB pricing. The volumes [in the Australian market] don’t justify making such a huge move,” he said.

Ultimately, it was the negative geopolitical undercurrent around China that prompted the company to begin to shift production to Vietnam.

And given the state of the world, many sourcing destinations are seeing their fates rise and fall as mitigating risk becomes task #1 for sourcing managers. Myanmar saw an influx of production thanks to cheap labor and investments from other Asian countries, but the apparel industry made an

said, adding if China is considered 100 percent

After 25 years of producing denim solely in China,

efficient, Pakistan is around 72 percent and

Precision Textiles, which launched in 1992, began

Bangladesh is at 56 percent.

moving production to Vietnam. While the company

Similarly, human rights violations and a civil war saw

found cheaper labor, costs didn’t really decrease.

Ethiopia, which was a promising low-cost option,

Schlossmann said sourcing executives need to

“Price wise, the competitive advantage from

stripped of its duty-free status under the U.S. African

be present on the ground to understand these

Vietnam to China isn’t that great when you take into

Growth Opportunity Act, making the African nation

nuances. “In denim, you have a lot of automization

account all the factors that go into making a pair

less appealing.

so the level of technical advancement gives

of jeans,” Chow said. “In Vietnam, we found that

you more efficiency. You’ll find it in China, you’ll

efficiencies were at least 30 percent lower at the

From a geopolitical standpoint, Egypt has been

find this in Mexico, you’ll find this in Turkey. You’ll

factory floor than what we could achieve in China,

both in and out of favor, according to Vonrufs.

find technology-driven efficiency, especially in

and so that offset the actual labor cost advantage

“When we started, we were one of the first really to

high wage countries. They have implemented it

where labor costs might have been a third of what

already in order to stay relevant and competitive,”

they were in China.”

be in Egypt; we were there since 1998. The people

about-face when workers’ rights issues hit the press.

say no Mubarak. This is not an issue anymore. On the contrary, I would say everybody is appreciating the political stability of Egypt, and I think this is a winning factor, especially in this moment,” he said.

“America was always there in the past because Egypt used to work mainly for the mass production in America, but also it’s becoming quite popular in Europe, which mostly never approached Egypt in the last 10 years.”

Vonrufs’ experience underscores Chow’s perspective on wages: basically, they’re important but less so than anything related to geopolitics and enabling retailers to make smaller bets going forward. “The main factor that’s going to [determine] where people are shifting their supply chains is agility, flexibility, speed to market,” he said, “so that people are having to hold less inventory and not having to look out into the crystal ball so far out.”

2 0 K I N G P I N S Q U A R T E R LY

INSUFFICIENT FUND$

been an updated living wage since 2021 due to the

at the moment,” Schlossmann said. “I’m foreseeing a

rising rates. Inflation is expected to continue through

lot of factory closure in the next couple of months if

2027, according to the International Monetary Fund

this trend continues globally, in Turkey and China in

prediction.

Myanmar, everywhere. And then the people, they might have increased wages on paper, but no job.”

Inflation is the latest factor pushing living

All eyes are on Bangladesh, the second largest

wages farther out of reach—how will the

exporter of garments in the world, which had the

The answer to moving toward living wages,

denim industry respond?

lowest monthly apparel worker wages from the

Schlossmann said, is higher prices at the register. “If

countries Kingpins Quarterly reviewed, with wages

today a pair of denim pants is purchased in Bangladesh

BY ERIN SCHMIDT AND CALETHA CRAWFORD

averaging $71 per month. There, inflation hit 9.7 percent

for 30 percent less than a coffee at Starbucks, there must

in 2023 with no increase to minimum wages through

be something wrong,” he said.

W

November. And even the 56 percent increase hile labor costs are increasing

proposed by the government, which as of press time

It’s a sentiment that many in the industry hold but how

in many corners of the globe,

was set to take effect on December 1, isn’t enough

to make the leap from today’s prices to prices that are

skyrocketing inflation is robbing

according to workers’ rights groups. The result has

commensurate with actual costs throughout the supply

workers of a higher percentage

been outrage and fatal clashes as workers fight for

chain is the question. It’s especially hard to answer

more money.

given the dominance of fast fashion, which has helped

of their earnings—thereby widening the gap between

convince consumers that clothes should be cheap.

minimum wages and living wages.

A living wage, as defined by the Global Living Wage Coalition (GLWC), is the remuneration for a standard workweek by a worker to afford a decent standard of living to cover essential needs, such as food, water, housing, education, healthcare, transport, clothing and provision for unexpected events.

Living wages are not the standard in the denim industry.

Minimum wages are the jumping off point, with salaries dependent on such factors as skills and availability and competition for workers. While some workers also receive benefits like child care and training, often these perks are offered at the factory owners’ discretion.

IF TODAY A PAIR OF DENIM PANTS IS PURCHASED IN BANGLADESH FOR 30 PERCENT LESS THAN A COFFEE AT STARBUCKS, THERE MUST BE SOMETHING WRONG.

And with cheap clothes, comes compromise. “If I was to produce a $5 or $6 pair of jeans, from anywhere, I would have to cut corners. The first thing I would cut corners on is the material. And then eventually, I would get to wages as well. It could end up being a factory where they don’t pay the overtime. It could be a factory where they have bonded labor. It could be a number of reasons because that’s how those corners are cut to get to $6,” said Zaki Saleemi, a 23-year veteran of sourcing in Asia and senior vice president of global sales for Material Exchange.

On the other end of the spectrum, Marco Vonrufs, general manager of Intertex, which owns a vertical production facility in Egypt, noted one retail partner in Germany increased prices by 10 euro and immediately

Though Mexico and China offer higher monthly minimum wages than the other countries Kingpins

Closing the Gap

saw sales drop. Rather than blame consumers, he said

Quarterly reviewed, both nations rank among the

The solution isn’t simple, especially in a down market

the industry must re-educate them. “We should teach

lowest for meeting monthly living wages. China

in which orders are anemic, and too few and far

people. The people should know when they buy

designates its minimum wages by province and

between.

something how much the workers are earning, how much this trouser is costing, how much their brands are

looking at the entire country, the lowest minimum wage is $194 per month or $1.95 per hour and the highest is

Guido Schlossmann, president and Group CEO of

earning because this is a problem,” Vonrufs said.

$370 per month or $3.70 per hour. Mexico has a daily

virtual manufacturer Synergies Worldwide Sourcing,

minimum wage of $11.87 per day or $1.24 per hour

said even if the government in Bangladesh were to

In the meantime, the cost of living continues to

because it is based upon a 48-hour work week, which

meet the demands for the requested 187 percent

increase—for both factory workers and the consumers

equates to approximately $237 monthly. Specifically, an

increase in minimum wages, it wouldn’t solve the

who buy the product.

average salary in Mexico meets 37 percent of a living

problem. In fact, things could get worse.

“I think we’re way far away from any discussion on

wage and in China an average salary meets 43 percent “The consequence will be ultimately the supplier

living wages at this stage. Living wages is a great

cannot ask for a price increase appropriate to the

aspiration but if we can just combat the current inflation

Turkey has raised its minimum wage five times since

costing increase because of market dynamics. So,

in Bangladesh, Pakistan, India, Vietnam, wherever,

2020, however, these rates are still not keeping pace

he will have no margin and eventually close down.

that’s the first step. Inflation can only be curtailed by

with the country’s explosive inflation. There has not

That is something which is very real and on the table

increasing the minimum wage,” Saleemi said.

of a living wage in 2023.

K I N G P I N S Q U A R T E R LY

21

CALCULATING THE COST OF LABOR

AVERAGE MONTHLY APPAREL WORKER MINIMUM WAGES COMPARED TO LIVING WAGES, 2023 (USD$) 59%

55%

$740 $639

39%

41%

32%

37%

$324 $238

$191

$97

$71

BANGLADESH

EGYPT

$104

TUNISIA

$191

$472

$315

$322 $204

43%

$237

AV E R AG E M I N I M U M M O N T H LY W A G E

$113

LIVING WAGE

N/A

*

PA K IS TA N

VIETNAM

M EX ICO

CHINA

MINIMUM WAGE AS A PERCENTAGE OF LIVING WAGE

TURKEY

Sources: CEICdata.com, Global Living Wage Coalition, Independent country websites, International Labor Organization, International Monetary Fund, Tradingeconomics.com, WageIndicator.org It is important to highlight that many living wages have not been updated to reflect the current economic conditions and that minimum wages were not covering basic needs prior to inflation. *Information for current living wage not available due to escalating inflation

MINIMUM WAGE (YOY%) AND INFLATION RATE (YOY%) MINIMUM WAGE

0%* 9.7%

11.1% 35.7%

0% 8.5%

28.0% 29.4%

0% 4.1%

20.0% 4.5%

0% 0.9%

107.3% 64.0%

2022

0% 7.6%

12.5% 13.2%

0% 10.1%

25.0% 21.3%

5.9% 4.6%

22.0% 7.8%

4.5% 1.8%

80.9% 64.3%

2021

0% 5.6%

20% 4.9%

0% 6.6%

14.3% 9.7%

0% 1.8%

15.0% 7.4%

4.8% 1.4%

21.6% 36.1%

BANGLADESH

EGYPT

TUNISIA

PA K IS TA N

VIETNAM

M EX ICO

CHINA

T U R K E Y‡

2023

Inflation rates reflect the YoY percent change of end of year consumer prices.

Source: the International Monetary Fund.

Minimum wage data sources: CEICdata.com, Global Living Wage Coalition, Independent country websites, International Labor Organization, International Monetary Fund, Tradingeconomics.com, US Treasury Department, WageIndicator.org *Bangladesh raised its minimum wage in November 2023 by 56% which will go into effect December 1, 2023. ‡ The latest reported minimum wages were above inflation, however the extraordinarily high inflationary environment in Turkey is creating economic challenges for consumers.

INFL ATION R ATE MINIMUM WAGE A S C O M PA R E D TO INFL ATION R ATE

FE AT U RE

GLOBAL FOOTPRINTS Mills are diversifying through owned operations overseas— which comes with both opportunities and challenges

D

enim production diversification has gained momentum as a way to solve for increased costs

of doing business, address sustainability mandates and achieve agility along the value chain. The industry’s need for a multi-country approach to risk mitigation gives suppliers with international operations—and their resulting resilience and redundancy—an advantage. But the challenges inherent with expanding across borders means only a few mills have done so through owned operations. Investing

BY DOROTHY CROUCH

in international facilities requires them to adapt their business models to address differences in everything from climate and culture to prices and productivity.

K I N G P I N S Q U A R T E R LY

23 17

GLOBAL FOOTPRINTS

It’s a big undertaking—one that only makes sense

headquarters is the need or desire to offer options

Establishing operations in Turkey puts Sharabati in the

when demand supports it.

that promote greater customer service. Bringing

heart of the denim supply chain. “In Turkey, you have

operations closer to the end consumer is a top

a textile history,” Moretti Ciacci said. “The supply

“Apparel companies have traditionally not been

consideration for mills that diversify. This was the

chain in Turkey is complete. You can have anything

very willing to make long-term commitments

motivation for Sharabati Denim’s 2017 expansion

you want in textiles. Egypt is more difficult. Everyone

about volumes,” said Patricio Ibáñez, partner at

into Kadirli, Turkey, from its headquarters in Sadat

thinks of Egypt because of the cotton but for denim

management consulting firm McKinsey & Company.

City, Egypt, where founder Mohamad Sabbagh

and garmenting it doesn’t have a long history.”

“Therefore, you’re not going to make an investment

Sharabati moved from Aleppo, Syria, in 1978.

of hundreds of millions of dollars if you don’t have

Moving into new territory is difficult but certain

the commitment that apparel companies are going

“[The location in Turkey] is close to Syria, the place

mills have found that establishing relationships

to buy from you.”

where they were already doing business,”

with international partners first, and eventually

explained Alessandro Moretti Ciacci, sales and

acquiring these businesses, is a more secure

According to the McKinsey Apparel CPO Survey

marketing director for Sharabati Denim. “It’s an

diversification method.

2021, “Revamping fashion sourcing: Speed and

industrial area where a lot of textiles are produced.

“We had partners who were established people in China and Mexico to leverage their knowledge of how the government works with approval processes, banking and things of that nature,” explained Steve Maggard, president of Cone Denim.

“We bought out our partners and took full ownership. We built the second plant in Mexico ourselves, but that was several years after we had already been established in the country and had a little bit more experience.”

Cone, a subsidiary of Elevate Textiles, has been engaged in the U.S. denim business since 1891 with headquarters in Greensboro, N.C., but expanded into Latin America and China in the latter half of the early 2000s. Its vertical operations through two factories in Mexico and one in China yield a combined installed capacity of about 84 million linear yards globally. As the company eyes potential expansion to regions in Bangladesh, Indonesia

flexibility to the fore,” 45 percent of the executives

It is the area where a lot of our competitors

and Africa, Maggard noted that it will rely on its

surveyed expressed plans to increase the number

produce.”

sibling brands—Burlington performance textiles,

of their suppliers with multi-country footprints by

A&E thread, and Safety Components safety and

up to 25 percent by 2025. Further, the report, which

Building on the success of its Egypt facility, which

reflected findings from 38 chief procurement

boasts a production plant for 100 million meters

officers across international apparel and sportswear

per year and commercial offices, the factory in

Artistic Milliners also expanded by assuming

brands and retailers, found 24 percent planned to

Turkey took a year and a half to complete, and now

ownership of established operations. The nearly

increase reshoring.

has annual capacity for 45 million meters. Sharabati

75-year-old, vertically integrated company

also added a commercial office in Istanbul. The

extended its reach from its headquarters in Karachi,

fully vertical company counts among its clients

Pakistan, to Los Angeles in 2021 with the purchase

Expanding Strategically

Bestseller Group, Diesel, Everybody, Incotex

of an existing laundry in Commerce, Calif., dubbed

At the core of expanding beyond a mill’s

Group, Mainstream, Prada, PVH Group and Replay.

Star Fades International.

24 K I N G P I N S Q U A R T E R LY

technical fabrics—for guidance.

Murtaza Ahmed, director at Artistic Milliners and

on this,” McKinsey’s Ibáñez said, noting there’s

making both agility and nearshoring priorities.

co-founder of SFI in Los Angeles explained there

often a trade off when comparing one region to

“Speed has a certain value because when you buy

are numerous considerations before the company

another. “Another problem is the cost of the product.

quicker, you don’t have to discount the goods. When

commits. “We make sure there is enough labor in the

We have done studies about the cost of making

you buy six months in advance and fashion changes,

region and it is cost efficient, and we have to look at the

products in Asia versus doing it in Central America,

you discount the goods,” said Ahmed, adding that

macroeconomics of that location or country and see

which is at a slight disadvantage. It improves when

nearshoring also has ESG benefits. “It’s more sustainable

where it’s headed with labor costs, utility costs and, of

you look at landed cost because you have lower

to truck in goods from Mexico into the U.S. rather than

course, the most important is the speed to market—

shipping costs to the U.S.”

ship them from Asia.”

what kind of agility can that region bring?” he said.

Beyond labor, cost advantages are tricky to count AM/SFI’s annual production capacity stands at 88

on because they can evaporate very quickly from

million pounds of yarn, 108 million meters of fabric and

one year to the next. Rising costs of resources have

30 million garments with clients such as Balenciaga,

shaken economies around the globe since the onset

EB Denim, Gap, Target, Tom Ford and Spanx through

of the Russia-Ukraine conflict in February 2022. Mills that

multicategory offerings. Since the launch of SFI, the

diversified in hopes of offering greater savings for their

company has seen its stateside location grow into a

customers are feeling the negative impacts of these

design development, financing and nearshoring hub

changes, such as the recent 20 percent price hike of

for the Western hemisphere. It now has partners in

natural gas by Turkey’s energy importer BOTAS.

Mexico and expanded into Guatemala in September 2023 through a partnership with Denimville, which is

“These days, gas, electricity—all the things you need

owned by Denimatrix, LLC.

to produce denim in Turkey are much more expensive

SPEED HAS A CERTAIN VALUE BECAUSE WHEN YOU BUY QUICKER, YOU DON’T HAVE TO DISCOUNT THE GOODS.

than in Egypt. And labor costs are now higher,” said By pursuing acquisitions and partnerships around the

Moretti Ciacci, who noticed a change within the last

Whether near or far, diversifying production allows

globe, Artistic Milliners takes the burden off of their

year and was forced to create separate pricing for

mills to shift quickly when unexpected challenges

retail partners. “Retailers don’t want to go on their own

goods made in Turkey. “You have a factor of plus or

arise—and these days, unforeseens are a given.

because they need a partner like us to establish the

minus .20 or .25 per meter, depending on the situation.

groundwork or else they’ll have to have a massive

You are talking about two countries that are sensitive to

“If there is a hurricane or a typhoon coming through

overhead,” noted Ahmed.

interest rates, and devaluation—unstable—that makes

and it’s causing delays out of China then we can

the difference.”

offer production out of Mexico,” said Maggard, who explained diversification also enables mills to

Learning the Ropes

Despite the advantages that come with their new

accommodate a spike in demand. “If our facilities are

Managing production across multiple countries

locations, mills have to work to maintain the quality

full and business is very strong, having three facilities

promises immense benefits but many challenges

and composition that customers have grown to

enables us to move production around and help our

arise when expanding into new regions. It’s not as

expect across facilities. Cone Denim’s Maggard

customers by keeping real aggressive lead times.”

simple as replicating the logistics from one place in

said even the difference in terrain and climate can

another. Issues can stem from resource management

negatively impact products.

Mills are looking beyond the production possibilities in their new locations to determine how they can

and infrastructure, geopolitical instability, trade guidelines, workforce challenges, rising costs and

“Due to small differences in water properties—such

create a variety of other offerings through their regional

changes in the availability of raw materials.

as hardness—you have to tweak your dye formula

locations. Moretti Ciacci has developed a vision

slightly, just to take into account the different properties

beyond Sharabati’s production offerings to examine

Workforce management is one main consideration.

of the water and elevation,” Maggard said. “It requires

additional opportunities for the company across

The availability, cost and productivity of labor can

small tweaks in manufacturing processes that are

different countries.

vary greatly from one country to another. While

unique to each location.”

advancements in technology and a commitment to

“In Tunisia, we have our own office and warehouse.

training can help bridge the gap, China remains the

That is a service you can offer to cut short the

Exploring New Frontiers

timing,” Moretti Ciacci said. “That could be another

The uncertainty of Covid was only the beginning of a

possibility. Doing something like that in Pakistan or

“You see factories in Asia that have productivity 3x

new era of business that demands agile supply chains.

Bangladesh, those countries are not easy from a

the productivity of Central America. It is dramatic. In

The need to shorten timelines and reduce carbon

financial and legislation import-export point of view

Latin America and Central America, they are lagging

footprints top sourcing executives’ to-do lists today,

but it’s feasible.”

gold standard when it comes to productivity.

K I N G P I N S Q U A R T E R LY 25

FE AT U RE

2024 RETAIL OUTLOOK How merchants are dealing with inflation, inventory and an influx of negative news heading into 2024 BY CALETHA CRAWFORD

A

new year brings new opportunities but the question is, how many of the old challenges will make the leap from one year to the next. Looking

forward, the good news is retail is by and large in a positive position, which is projected to strengthen toward midyear—particularly so if consumers keep up their spending, the geopolitical environment quiets down and interest rates level off. In the meantime, the relationship between buyers and suppliers continues to evolve as they grapple with inventory management, financing and prices. Here, insiders who finance partners along the supply chain explain what the industry has learned, how strategies are changing and what the next chapter in apparel retail will look like.

“As I look to this holiday season and then into 2024, I think it will look very positive for the wholesale and retail community from a working capital perspective,” said Eric Fisch, national sector head of retail & apparel, corporate banking for HSBC, which works with both large retailers as well as manufacturers, importers and suppliers. “We’re getting hopefully to a point where inventory is returning to historical norms, which is great. Hopefully that leads to less markdowns, more full price sales [and] probably a little bit of scarcity, which is good for the consumer

While retail is doing well heading into the new year, it’s not without its

to realize that they should buy now because it may be gone.”

challenges.

In addition to less of an inventory burden, Fisch said retail is in “a more resilient”

“Financially and credit worthy-wise, it’s been pretty steady, pretty stable from a

place thanks to leaner overhead. “I generally view the industry as being in

lender’s perspective,” said Brian Dowd, senior vice president of sales for trade

a relatively reasonable credit profile,” he said citing optimized store counts,

finance firm Tradewind, adding that companies are being cautious—as are

shipping costs at 10 percent of their peak and some raw materials like organics

lenders. Despite “solid” credit in the market, Dowd said it’s become harder to

on a downward trend. Added to that, more competitive prices from factories

access capital from banks, especially for small to midsize companies, over the

all jockeying for orders. That downward pressure on prices equals relief to

last couple of quarters—and of course the cost of capital is higher.

retailers and consumers alike. “We have some wholesalers selling into mass merchant chains that have actually been able to significantly reduce the price

As a result, suppliers are increasingly less willing to extend credit terms. This

they’re charging,” he said. “So, consumers walking into a mass retailer will

puts retailers with liquidity in the driver’s seat. “For buyers, cash is king,” Dowd

actually see the price come down from a year ago.”

said. “High interest rates are empowering the stronger buyers right now

2 6 K I N G P I N S Q U A R T E R LY

who have the cash to pay [suppliers] upfront.” Some

their lesson. Nobody wants to be over-inventoried,”

as his barometer for shoppers’ willingness to spend.

are using their ability to pay to secure production

Wassner said. “People did not anticipate this drop in

“If it continues as such, then I think we’ll have a strong

capacity while others are negotiating discounts on

sales. Even though everybody attempted to right-

year across the industry next year with less excess

their invoices for immediate payments.

size the inventory, they didn’t do it as well as they had

product,” he said.

hoped. There’s still some inventory at retail that’s too While cash-rich retailers are winning, other merchants

high and brands have quite a bit of inventory to have

Dowd shares that positive outlook, especially if Q4

are struggling.

to work through since Covid.”

of 2023 closes out well. “This holiday season will be a pretty big test to see if the recent consumer spending

“Payments are erratic. Some stores are paying

This seesaw between having too much and having

is sustainable, given all the current economic

exceedingly well, others are reportedly paying very

too little inventory is nothing new, but Fisch said stores

conditions. If it is, which I think we’re optimistic it will

slow. It’s tougher than it’s been in a long time to get

are in a much better position than they have been—

continue to be good, 2024 will be more optimistic

stores to remain current, to make sure we can maintain

and they intend to stay that way. Not only are they

than pessimistic,” he said. “The biggest thing will be

the credit lines that we have in place for them,” said

ordering less overall, they’re willing to place bets on

how global interest rates shake out.”

Gary Wassner, chief executive at fashion factoring firm

a percentage of the goods, hoping to be able to get

Hilldun Corporation, specifically referring to the luxury,

back into product if the sales materialize. Fisch said

Interest rates, which are spiking in many corners of

designer and contemporary space. “People are not

it’s too soon to know whether their gamble will pay

the globe, are on everyone’s radar. While no one

getting as much credit here as they were in the past,

off. It’s predicated on factories being able to adapt

expects immediate relief, the hope is that things could

which further exacerbates the problem and creates

to producing rush reorders. “The best way to correct

move in a positive direction by midyear. “Regardless

more stress on cash flow.”

a change in business like that is for the product not to

of what income bracket you’re in, you’re dealing

show up. And so, I think if there’s too much demand,

with an interest rate that we haven’t seen in years,”

Inventory Impact

retailers will learn that there’s a reason they ordered

Wassner said, adding that this is having an impact on

Inventory levels are a major metric that illustrates the

so far in advance. If there isn’t, then that practice will

discretionary spending. “Hopefully, [the Fed] will

industry’s health and dictates merchants’ buying.

continue,” he said.

either not increase them again or perhaps decrease them by a quarter point. That would be a nice boost. It

After coming into the year with too much stock on the books, retailers have been conservative to miserly

The just-in-time mindset also means suppliers are

with orders, prompting everyone along the value

expected to hold goods until retailers need it—

chain to make adjustments.

something few can afford to do anymore. So, with

But interest rates are just one in a long list of issues

retailers unwilling to take a risk and suppliers unable

weighing on shoppers’ today, Wassner noted. The

to float the inventory, the industry is leaning more on

wars in Ukraine and Gaza and the recent spike in

importers to bridge the gap, according to Dowd.

tensions between the U.S. and China over Taiwan are

“Retailers don’t want to buy. They want to have an

all in the headlines and top of consumers’ minds. “All

importer handle the purchases from the suppliers and

of these components are so negative, and they’ve

own the inventory, and then the retailer’s buying in a

impacted everyone, both emotionally and financially,”

lending arrangements.

just-in-time model,” he said. “That middleman makes just

he said. “As they ease, I think second quarter next

maybe 2 to 5 percent, maybe 5 to 10 percent margin,

year we’ll start to see a resurgence again in consumer

“We saw orders cut by anywhere from 5 to 20

and the retailer is the winner at the end of the day.”

confidence. We’ll see our retailers getting their

While retailers have been focused on selling through the merchandise on hand, the onus has been on suppliers to accept smaller orders, hold stock or cancel goods. Fisch said it’s been a “challenging” time that’s required banks to be more flexible in their

percent for clients. Since Covid, everybody’s learned

FOR BUYERS, CASH IS KING. HIGH INTEREST RATES ARE EMPOWERING STRONGER BUYERS WHO HAVE THE CASH TO PAY [SUPPLIERS] UPFRONT.

would create optimism in the consumer,” he said.

footing back, figuring out who they are and who the

Consumers Confidence

consumer is. It’s a new consumer than we’ve seen

Looking ahead to consumer spending in the new

since Covid.”

year, Fisch is optimistic, saying order sizes are not an indication of a pullback at retail. “Maybe your factory

The one thing retailers know is being safe isn’t

that you’re calling me about had its orders cut in half

going to cut it going forward. “When we have an

year over year,” he said. “That doesn’t mean that the

economy like this, retailers tend to be conservative.

consumer in the U.S. is buying half as much as the

They tend to buy what they know works, which

prior year. It’s just people here in the U.S. are working

means they experiment less with new product, and

down product, and hopefully over the next 12

we’ve seen that in many of the higher end retailers,”

months ordering from overseas will return to a more

Wassner said, calling it a “knee-jerk reaction” that

stable equilibrium.”

hasn’t helped. “Every retailer I speak to says ‘Yeah, we really need to energize our assortment. We

Fisch looks to employment numbers, which are strong,

need to add newness.’”

K I N G P I N S Q U A R T E R LY

27

FE AT U RE

SMALL WONDERS Despite shrinking orders, the trims market is under pressure to deliver verifiably sustainable product that wows—at increasingly competitive prices BY DOROTHY CROUCH

D

enim garment details in the trims and hardware category, including buttons, rivets, zippers and patches, are small, yet important components

of creating garments with appeal—and they play a key role in helping the industry advance its sustainability and circularity agendas. As the denim industry moves into 2024, trim makers are steadfastly fighting headwinds to create ecologically sound processes, adhere to sustainability certifications and reduce costs. It’s a challenge, for sure, but one they’re meeting head on.

“For 2024, the trend is to try to match the request of price decrease by a little bit but keep improving the sustainability part,” said Thibault Greuzat, CEO at Meaux, France-based Dorlet, which his great grandfather started more than 90 years ago. “If you want to improve the sustainability, you need to improve the

Dorlet’s Diabolo screw button and rivet

investments and change some rules and ways of making the product. This is in opposition with the request of the brand to lower the price.”

While sustainability and cost cutting top the agenda, there is also the trend toward wanting to know the story behind the product. Trim companies are answering the call for transparency by sharing the origin and inspiration surrounding trim and hardware goods with customers.

“The main focus now is giving a clear picture of what is the product and behind the scenes as well,” according to Matteo Vivolo, chief sales officer at Vivolo in Bologna, Italy, who noted the importance of this approach in the luxury market, which he expects to reach 1.3 euro trillion—approximately $1.5 trillion—in just

for Sustainable Products Regulation (ESPR) and the legislation’s Digital Product Passports (DPPs), which aim to yield a more transparent supply chain, are expected to go into force within the next few years. And trims manufacturers are determined to be prepared, with many well on their way due to their adoption of their own ecological and ethics guidelines.

At YKK Türkiye, Suat Odabasi, sustainability coordinator for the Tokyoheadquartered fastening products manufacturer, noted the company is ready for upcoming regulations, pointing to certifications such as ISO, Oeko-Tex, RCS and GOTS for the materials used in its organic cotton zippers as an example.

over a year. “Offering a journey through the product and giving more than just

Additionally, Odabasi revealed YKK goes above and beyond the certification

product and price is the focus for sure.”

requirements.

“We follow our headquarters’ guidance such as [reducing our] CO2 footprint,

Spearheading Sustainability

and other environmental impact calculations but we also follow local issues

New sustainability regulations, including the European Union’s Eco-Design

such as using the electricity and water from the proper renewable energy

2 8 K I N G P I N S Q U A R T E R LY

sources and also because we have [our company’s]

To avoid greenwashing and inauthenticity, Odabasi

regulations for our raw materials supply, we are able to

said YKK holds its suppliers to an equally high standard.

supply materials locally,” Odabasi noted.

The company digs deep into its raw materials suppliers, such as the Sri Lanka-based companies

Similarly leather products manufacturer Vivolo works

that provide the goods that will be recycled to

to lessen its impact throughout the production

manufacture the zipper-maker’s Natulon Plus products.

process, which starts with adhering to CQY, GRS, FSC and Oeko-Tex certifications. The company’s headquarters relies on many sustainable features that support renewable energy and water independence, which allows Vivolo to be less reliant on municipal sources.

“Every single raw material supplier has to be tested and also certified in terms of sustainable products.

We don’t use any uncertified sustainable raw materials for our sustainable products,” said Odabasi.

“Sometimes it’s a minus because it’s not that easy to find really certified raw materials suppliers. So, no

“It is a 10,000-square-meter building and we have all of our energy from solar panels,” said Vivolo,

matter what is their claim, we always have to double check at the end.”

a smaller quantity.”

whose parents launched the company that bears the family name in 1977. “We have our water source, all the finishes are sustainable in terms of water based and color of the materials. This is just one of the sustainability aspects.”

Managing Smaller Quantities While trims manufacturers are committed to leveling up their environmental governance, doing so requires investment, which is challenging in a time when demand is low. These companies are having to

WHERE BRANDS WOULD ASK US FOR 10,000 PIECES, 20,000, OR 30,000 PIECES, NOW 5,000 IS THE NORM.

become increasingly resourceful as order quantities shrink and expectations from their customers increase, according to Nishi Vora, director of sales and business development with Mumbai, India-headquartered Fashion Accessories India (RCBC).

“Because they’re trying to bring down fabric and garment-washing cost, all of that money is going into making garments look appealing via trims,” Vora said, adding brands want fewer pieces of the colorful designs her business is known for. “Where brands would ask us for 10,000 pieces, 20,000, or 30,000 pieces, now 5,000 is the norm.”

Not only are shrinking order sizes eating into profits, they’re also having a negative impact on the planet as well. At first glance, smaller quantities seem to

credit: Fashion Accessories India (here and top)

drums. You can’t make them smaller to accommodate

Advancing Circularity One approach to balancing ecological interests and offering lower costs is through the development of trims, accessories and hardware that promote a circular economy. By creating trims, accessories and hardware that can be removed intact—and allow most of the original garment to be upcycled— manufacturers can remain active players in a business that is transforming.

When considering his company’s role in creating a circular denim ecosystem, Greuzat happily discusses Dorlet’s Diabolo, an easily removable, interchangeable button intended for reuse in the denim business.

“It is the same as a cufflink on a shirt. You can use one Diabolo for one, two, three, or ten pairs of jeans,” Greuzat said.

To remain relevant Greuzat encourages his peers to

speak to the “reduce” mandate inherent in climate

invest in the research and development of making

action but in this case it’s having the opposite effect,

fewer items but approaching the process with an

according to Vora.

open mind. His perspective is remaining open to possibilities and working together with clients to

“We’re constantly having to shut down machines and

build innovative products are the keys to longevity.

change molds. Something that would be sustainable or would bring environmental impact down is when

“Let’s sit together and make the product even if it

you have larger quantities running on your machines.

was not made before,” Greuzat explained. “Even if it’s

[Reducing the number of pieces] creates a lot of

completely new. Even if three, four or five suppliers

loss of energy and electricity,” explained Vora. “For

already told you it’s impossible—let’s do it. This is one of

instance, with electroplating, you have these large

the characteristics of our DNA. We are innovative.”

K I N G P I N S Q U A R T E R LY 29

OPTIMIZING ASSORTMENTS After 2023 gave denim the blues, analysts advise how to get consumers to move jeans up their shopping lists in the new year BY CALETHA CRAWFORD AND JASMINE GLASHEEN

T

he denim category has been anxiously awaiting

And this is coming at a time when denim has more

tighten their spending, they are still seeking out

the opportunity to turn the page on 2023, which

competition in the market than ever and consumers’

products that make them feel good and give them

proved to be challenging, to say the least. Men’s

lifestyles are harder to pin down. There is no

confidence. This means that there needs to be that

sales sagged the most with an 8 percent drop

one-style-suits-all equation. For instance, there’s a

balance of newness, innovation, and joy to drum up

compared to 2022, while women’s was down

bifurcation between those who continue to seek

excitement,” she said.

4 percent YOY. The only relative bright spot was

comfort above all else, and those who are living

children’s, which saw a 1 percent uptick. But industry

“la vie en rose” now that the world has reopened,

The good news is, denim shoppers respond to fresh

watchers say there’s hope, as shoppers look to

Kohan said. But she said brands have to be aware

silhouettes. “Stretch, wider fits, high-rise and now

refresh their wardrobes this year—and look to inject

of “the continued demand for athleisure wear, the

even low-rise, etc. were all ways in which we saw

it with some newness. As the industry looks ahead to

shift of preferences of younger generations moving

the category gain in the past, proving products must

2024, the winners will be those that are laser focused

away from jeans, and the increase in remote workers.”

continue to evolve,” Rugolo said. Ultimately, she said,

on the tiers, silhouettes and product attributes consumers are responding to most.

opportunities lie in innovation and versatility.

Diane Pollack, founder of the personal styling service Stylempower.com and former consultant at trend

Lorna Hall, director of fashion intelligence at trend

“Retail stores that specialize in apparel, accessories,

forecaster Fashion Snoops, agrees that denim lost

forecasting agency WGSN, said beyond wide

and shoes have remained soft in 2023,” said Shelley

ground as the WFH crowd, as well as the casual

legs, which are dominant, freshness in women’s

E. Kohan, associate professor at FIT and senior

office workers alike, prioritized comfort but she said

is coming from bootcut flares and, for younger

contributor at Forbes.com. Although the Consumer

it’s also losing share on the other end of the spectrum

consumers, lower rises. Hall is particularly bullish

Price Index showed signs that inflation is cooling

as well. “Then there are those who welcome

on barrel leg jeans, which she said is a refresh for

down, and prices were becoming more stable

dressing up and perhaps getting out of their jeans.”

looser fits. “What we like about this shape is it can

leading into 2024, Kohan noted, “consumers are

bring denim into that smarter dressing remit, which

being more selective and surgical about how they

For those still reaching for jeans, they want the name

is where it lost some sales to over the past year,” Hall

are spending, a trend we have seen all year and

brands they know and love, just at a lower price. This

said, adding it works with heels and a blazer or a

anticipate going into 2024.”

spells opportunity for certain retailers, according to

corset. “This gives it appeal beyond youth to a more

Maria Rugolo, apparel industry analyst at consumer

trend reactive older consumer who favors a more

behavior firm Circana. “Currently, the off-price channel

dressed up groomed look.”

EVEN AS CONSUMERS TIGHTEN THEIR SPENDING, THERE NEEDS TO BE THAT BALANCE OF NEWNESS, INNOVATION, AND JOY TO DRUM UP EXCITEMENT. 30 K I N G P I N S Q U A R T E R LY

as well as warehouse clubs, are two channels where we see jeans growing in terms of dollar sales,” she

While the straight leg reigns for men, Hall said loose

said. “The state of the economy and what happens

and baggy have likely peaked. “Where we are

with future inventory will be big factors in how these

seeing newness in men’s is via the bootcut flare, the

channels continue to perform into the new year.”

caveat here of course is it is in very small increments and only to the youth segment, here it is very much

Ultimately, she said part of why denim sales are

about testing the style if you have the customer,”

flagging is boredom as retail responded to the

she said.

state of the economy with traditional (read: safe) product. And it’s not just denim. Apparel in general

As she looks ahead, Rugolo is optimistic about

is lackluster right now. “The number of new items

the new year—but that’s partly predicated on

in the marketplace dropped by double-digits

the industry being willing to shake things up. “We

compared to just one year ago,” Rugolo said. A

anticipate sales to pick up again in 2024, thanks to

fact that’s counterintuitive for robust sales given

replenishment cycles coming full circle again, as

that innovation fuels growth. “Even as consumers

long as the category remains innovative.”

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