Off the Cuff: How the Decorated Apparel Industry Has Weathered the Recession

INDUSTRY OUTLOOK

Off the Cuff: How the Decorated Apparel Industry Has Weathered the Recession

November 23, 2009
By Mark L. Venit, MBA, Contributing Writer

In a two-part article published in Impressions last year at the onset of the recession (“Tackling a Tough Economy: Crisis vs. Opportunity”, July 2008), I commented on the similarities regarding the context and nuances of the Chinese words for “crisis” and “opportunity.” [Click here to read the article.]

In that article, I also set forth seven specific recommendations for decorated apparel professionals to effectively deal with the recession and the impact industry firms were beginning to experience in the accelerating downturn forecast at the time.

They were:

1. Ignore the bad buzz that goes around in uncertain economies.
2. Eliminate excess labor sooner rather than later.
3. Tighten your belt, where possible, sooner rather than later.
4. Consider purchasing labor-saving and more efficient equipment.
5. Upgrade your staff’s skills and cross-train wherever possible.
6. Farm out big orders.
7. Increase your advertising and marketing endeavors and improve your customer service functions.

As you undoubtedly know, during the past year and a half our economy has been wracked and exacerbated by declines in automobile manufacturing and home values, the related mortgage and credit clusterfuss, and a precipitous contraction in the housing and construction markets, as well as retailing. Though various sectors and regions appear to be slowly clawing back to normalcy, if you own a screen printing, embroidery or promotional products business, you’ve felt firsthand the challenges to your sales endeavors and your enterprise’s profitability. And if your client base currently or formerly included a substantial number of financial institutions, automotive and automotive aftermarket market buyers, and realtors and developers — among other key clients — you’ve felt firsthand the stings of budget cutbacks, unemployment, political turmoil and continued economic uncertainty.

The bulk of our industry’s apparel decorators and their vendors have learned to make do with less to keep afloat. However, some have done remarkably well, gaining market share against weakened, shrinking competitors and developing new product lines, buying technology and utterly sneering at the dangers of enabling a self-fulfilling prophecy.

Where the Industry Is Today
1. As prior recessions have taught us, the industry once again has proven it doesn’t collapse and die. What we saw in the recessions of the late 1970s, into the early 1980s — when the prime interest rate in the United States eclipsed 20% — toward the end of the 1980s, and following 9/11, teaches this industry that life goes on and businesses can and do adjust, albeit painfully at times, to the realities of the day. While the case that our industry is recession-proof is a non-starter, we’ve certainly demonstrated once again that sales of decorated apparel are, indeed, recession-resilient.

2. Teamwear sales remain at or near pre-recession levels. People are still playing their favorite sports, leagues continue to operate and children keep outgrowing their uniforms.

3. Casual workwear is still being sold, albeit with an understandable decline in units, which reflects the rising unemployment rate. Fortunately, 90% of the pre-recession workforce still has jobs.

4. Sales of garments geared for promotional use have experienced rough going, as businesses have cut back on non-essential purchases or have limited quantities to the bone. Garments sold to retailers for resale or in conjunction with events also have taken a big hit, as consumers continue to curtail discretionary purchases for obvious reasons.

5. Productivity is up — and if you own an apparel decorating company, that’s one big plus about the recession.

When the late-'70s-to-early-'80s recession struck, businesses — especially large national companies — cut their biggest expense, payroll, by eliminating dead-weight white-collar executives and staff, refocusing on their core products, and axing smaller and marginal locations. Companies got “lean and mean,” and subsequently, by the mid-'80s, were well poised for the recovery. Wall Street’s major indices rose in anticipation of the good times ahead.

The same realities are currently at work in our industry. Companies have eliminated or reduced excess staff where feasible. From observations in the field and speaking with management of dozens of apparel decorating companies across the country, I’d estimate that employment in our industry is down by 6% to 8% from two years ago. Many of those positions won’t come back, as about half the losses have been overcome by increased automation in screen printing and embroidery shops — from production, to art, to the front office — and more cogent thinking on managing workflow. I’ve always noted the increasing number of companies that provide screen printing, embroidery or other printing technologies that are cross-training their employees to be able to keep their jobs longer and for more hours per week.

In the second quarter of this year, the U.S. Department of Labor reported overall non-farm workplace productivity (defined as output per hour per employee) has risen significantly, while hours worked per employee fell at an annualized rate of 7.6%. Yes, overall economic output was down 1.7%, as the economy has contracted, but considering that there are fewer workers today working fewer hours, output per employee is actually up by a healthy 6.4%. I’ll venture to observe that our industry probably reflects this increase in performance, or is even higher. Apparel decorating companies are, in fact, doing more with fewer employees.

Technology Driving More Productivity
In our industry, there’s more technology today for handling art processes, including software that enables customers to design their imprints and embroidery online and bringing it to decorators for execution. There’s better basic business management and industry-specific software, improved management resources that are now trimming the number of office workers in our trade and lengthening the time between visits from your accountant. There’s a boom in CAD-cutting purchases to handle a variety of applications, especially cutting for appliqué, team numbers and names, and the evolution of a new generation of heat transfers. Digital printing is emerging in a growing percentage of apparel decorating businesses, accommodating their customers’ needs for banners and signage, among other product lines.

Among other major capital purchases showing strong signs of life is automated screen imaging equipment (I-Jet, Kiwo, et al), whose use has accelerated more than ever in high-volume shops, many of which are benefiting through significant reductions in labor and film costs, and dramatically shortening their pre-press turnaround time.

Given the rise in productivity and the addition of new technology in the apparel graphics workplace, the rebound from the recession, when it finally comes in earnest — most economists talk in terms of one to three years, barring unforeseen major world events — will help the strongest and smartest industry survivors fuel increased sales volume and profitability faster, while their lesser competitors will still be groggily awakening to the new paradigms of running apparel graphics companies.

Unlike some who believe the primary purpose of business is to create jobs, business owners and managers in our industry believe the goal is to make money. We’re largely unconcerned about how many jobs we jettison or how many we create. We care most about successfully running our businesses and finding ways to maximize profitability. When the recession is behind us, the leading firms in our industry will maintain workforces that are as small and trim as possible, but likely will be paying their employees higher wages because of their increased skills, value to management and productivity.

Running your business better doesn’t have to wait for the economy to turn around. The businesses that learn this lesson sooner are the ones that will see the biggest returns on investment when the recession ends — and even before!

Happy November!

Mark L. Venit, MBA, is president of Apparel Graphics Institute Ltd., Ocean Pines, Md., which provides management and marketing consulting and proprietary research to apparel graphics companies throughout the Americas and Europe. He also is the chairman of ShopWorks Software LLC, a provider of industry-specific business software. Venit teaches pricing, strategic marketing, salesmanship and other business management topics at the Imprinted Sportswear Shows. You can contact him at markvenit@cs.com.

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