As hot and exciting as fashion wants to be on the runway and on the screen — back of house, brands want nothing more than a boring, predictable supply chain.
When it comes to making and shipping a pair of jeans or a button-down shirt, boring lets executives know just how much it’s going to cost and just how long it’s going to take. The rest of the business can be planned from there.
President-elect Donald Trump has promised to return to the trade wars he reveled in during his first term. Trump ran on proposals to impose a universal 10 percent to 20 percent duty on all imports and an additional 60 percent to 100 percent tariff on goods from China.
Once he hits the Oval Office, anything could happen. Exactly what comes next is often a question mark with Trump.
But fashion has gotten used to a little chaos after Trump reset the trade agenda in 2016, after COVID-19, wars in Ukraine and the Middle East, shipping disruptions in the Red Sea and more. A strike at East Coast ports could be taken back up in January, right before the inauguration.
“In today’s world, successful companies need an agile, diversified, resilient supply chain,” said Patrice Louvet, president and chief executive officer of Ralph Lauren Corp., in an interview last week.
“We have dramatically diversified our supply chain from where it stood seven, eight years ago, where it was quite dependent on just a few markets,” Louvet said. “Today, we have a supply chain that combines near-shoring, multisite sourcing on given products.”
Ralph Lauren sourced 15 percent of its goods from China in fiscal 2024, down from about 33 percent five years earlier.
The company has developed “a new agility,” Louvet said.
“We saw the benefit of all that during COVID[-19] where you had to be agile and you had to be resilient,” he said. “We demonstrated that our supply chain was a competitive advantage during that time. We are well positioned to continue to navigate what’s going to be a volatile environment.”
Joanne Crevoiserat, CEO of Tapestry Inc., had a similar take.
“If we’ve learned anything over the last four or five years, we have to be agile,” Crevoiserat told WWD. “The environment is always changing. We feel very well positioned. I would say regardless of who’s leading the federal government, our focus remains on meeting the consumer where they are and delivering the magic of our brands to consumers in the U.S. and around the world.”
Not everyone is feeling quite so well prepared. About 50 percent of Steve Madden’s business is subject to tariffs on Chinese-made goods and CEO Edward Rosenfeld said the company just set a plan in motion that will cut that in half over the next year.
It’s a complicated move and Rosenfeld told analysts that “it’s a little too early to speculate about what the impact” will be on gross margins.
Plenty of fashion brands will be scrambling too, especially as China — the main target of Trump’s trade ire — accounts for 36 percent of apparel imports to the U.S.
All this change could be helping to nudge the American fashion world at large to another new business model.
Eric Beder, a veteran analyst of fashion stocks and CEO of Small Cap Consumer Research, said the industry’s take has been that apparel is a deflationary product with ever lower prices and that suppliers needed to be squeezed to make the business work.
“What COVID-19 basically showed was, with that model, there’s not much more squeezing to be done,” Beder said. “If you want the flexibility you have to raise pricing or accept the fact that it’s going to cost more to ship.”
Apparel prices have risen about 9 percent over the past 20 years, a fraction of the 65 percent increase seen across all goods and services, according to the Labor Department.
“There is room to raise pricing,” Beder said. “People are making that judgment that, ‘Hey, do I ship it by air and raise the price? Do I decide to go to the U.S. or Mexico as a supplier?’”
The trade-off could be worth it, particularly with value-oriented companies like Primark and H&M expanding aggressively in the U.S., Beder said, pointing to specialty retailer Express, which went bankrupt in April.
“The logic of Express — ‘We’re going to have fashion product and an affordable price’ — it’s dead,” he said. “That logic doesn’t work anymore because Primark can kill that logic and say, ‘We’re going to be cheaper.’”
That’s one example, and it speaks to a broader trend.
“If you look at Europe, there’s no middle anymore, that’s disappeared,” Beder said. “What we’re seeing is that COVID-19 and the expansion of other players in the lower end, like a Primark, have started to do that here in the U.S.
“The middle tier has been teetering for a while, but every time we have a shock to the system, people look at this middle tier and say, ‘Hey, this model doesn’t work. I don’t want to have this much inventory. I’d rather have less and have people pay more for it.’ Everyone’s trying to do that.”
Ralph Lauren, for one, has been steadily looking to elevate its brand positioning and is on something of a run now. The brand has raised the average unit retail prices in its direct-to-consumer business for 30-straight quarters.
That’s pushed the company further away from the middle and helped support the agility Louvet speaks about.
It seems everybody needs to be more flexible now.
As an entrepreneur, Trump once made a small impact on the vast middle of the American fashion business, selling matching shirts and ties at Macy’s.
As president, again, he could be nudging along much bigger changes.
The Bottom Line is a business analysis column written by Evan Clark, deputy managing editor, who has covered the fashion industry since 2000. It appears every other Thursday.
