A New Look For Apparel Makers -- Fashion Forward -- Manufacturers Seek Strategies To Survive During Retail Recession

Since the 1970s, the coterie of Seattle clothing companies including Generra, UnionBay and Shah Safari have been rolling out new lines of young men's casual pants, shirts, tops and jeans at a glitzy marketing event called Preline.

Three times a year, department store buyers and executives flew into Seattle while about a dozen Northwest companies paraded their offerings, far from the madding crowds at major marketing shows where most companies were forced to make their pitch.

Preline was for selling and socializing, a chance to direct a buyer's attention to the latest lines while grazing on hors d'oeuvres, listening to a steel band at the parking-lot party for 200 or cruising Lake Washington on a chartered yacht.

But Preline is no more. The last Preline - minus a key sponsor that was soon to file for bankruptcy protection - faded into fashion merchandising history in the spring.

Most saw it as a timely, though unfortunate, death. These days, with consumers hanging onto their cash and discounters snagging market share from department stores, most retail buyers are less interested in steel bands than in getting a real steal on an order of pants.

And instead of traipsing off to Seattle, they're more likely to have manufacturers come to them.

"Everyone seems to be figuring out a new way to bring fashion to the consumer at the lowest possible cost," says Steve Ritchey, UnionBay's senior vice president for merchandising and design. "We have to do things differently."

So does everyone else. A sluggish national economy and consumers' changing buying habits have led to major upheaval in the retail industry. The number of retailers filing for bankruptcy protection or going out of business soared 35 percent in 1991, according to a study by Management Horizons, the retail consulting arm of Price Waterhouse.

It predicts the trend will continue, taking out half of today's retailers by 2000.

That leaves apparel importers and manufacturers with fewer customers. Those remaining, often squeezed by slow sales, are in turn squeezing suppliers - demanding better delivery terms, canceling orders, returning a higher percentage of clothes and pressuring suppliers to cover a larger share of expenses such as advertising or shipping costs.

"The bottom line is, they get money out of the suppliers one way or another," says Chuck Ingene, a professor of retailing at the University of Washington.

If all that weren't enough, clothing companies have to worry about getting paid, period. Bankruptcy filings by prominent retailers such as Macy's, the Federated and Allied stores (Allied is the parent of The Bon Marche) and Frederick & Nelson have left many manufacturers holding the bag.

With more retailing failures expected, manufacturers sometimes feel as if they're rolling the dice when they ship orders.

The upshot? "I think their life is going to become much more difficult," says Carl Steidtmann, Management Horizon's chief economist. "The competition is going to become much tougher, retailers are going to be much more demanding, and it's, generally speaking, not going to be a real good business to be in."

The men's retailing and apparel business has been much more depressed than the women's area, industry experts say. That may be because men are more likely than women to postpone clothing purchases when times are tough.

And, with more young men deserting department stores in favor of The Gap, which does its own manufacturing, and its clones, companies such as Generra and UnionBay found themselves trying to peddle clothing considered too dressy or expensive by consumers who were snapping up colored T-shirts and jeans instead.

Department stores responded. But in some cases, their response was to disband their young men's departments, where top brands such as Generra once were featured prominently in store-within-a-store displays, and group all men's clothing together under a men's buyer.

"That can't help but hurt the young men's industry," one industry executive says.

The move followed the stores' assumption that young men's clothing was becoming an extension of men's clothing. But critics say such moves reflect the industry's confusion over what the consumer will buy.

At any rate, the lack of focus in the retail industry has made it especially hard for manufacturers to figure out what to make. Should they venture into hip-hop, rap or other street styles? Something fashion forward but dressier? Collections of clothing in the same color palette or individual items to be mixed and matched?

That uncertainty has caused some manufacturers to focus more attention on clothing for young women and girls, even though segments of that market can be volatile. UnionBay says its junior's division, now about 25 percent of sales, eventually could account for half of sales. And M'otto, whose successful Red Eraser label for juniors already accounts for nearly half of sales, is looking at getting into the girls' market.

As for the young men's market, some things are becoming clear. As dress standards for the workplace are becoming more relaxed, upscale young men's sportswear that is dressy enough to be worn to work - such as UnionBay's upscale ReUnion label, its only collections label now - seems to be finding more favor.

DNR, a menswear trade publication, recently quoted a ReUnion executive who said orders were up 23 percent for spring.

Some have seen opportunity in the confusion. Last week, Tony Margolis, a Generra founder who left the company in the spring, announced he was starting a new company aimed at the young men's and men's markets. Viewpoint International was created to take advantage of the lack of direction in the male apparel market by targeting "individual lifestyle groups."

Still, the fraternity of sportswear companies headquartered in Seattle has seen its share of trouble lately.

Generra, the most prominent of the companies, filed for Chapter 11 bankruptcy protection in early July, just a month after Preline's last hurrah.

Meanwhile, Shah Safari - which owns a majority interest in another leading Northwest apparel company, International News - is under criminal investigation by U.S. Customs and the Internal Revenue Service. They allege company officials took $8 million in illegal deductions on federal income tax returns.

Shah Safari denies any wrongdoing and predicts it will be exonerated. Nonetheless, the investigation may make some buyers wary of doing business with either company.

The Northwest companies, which directly employ about 1,000 people in their Seattle headquarters offices and whose aggregate annual sales are in the $600 million range, tend to be apparel designers and importers who manufacture their clothes elsewhere, usually in Asia. Although this usually gives them a price advantage over domestic manufacturers, the average lead time of six to eight months can put them at a delivery disadvantage. In the best cases, domestic manufacturers can take an order Sunday night, make it and deliver it by Thursday.

Retailers are using such quick-response inventory programs to avoid the expense of having too much inventory on hand. To get around this problem, some Northwest apparel companies that formerly manufactured exclusively in Asia are now switching to the Caribbean and Mexico, and even to the United States.

Others gamble on what they expect retailers to order, make it and keep a steady stream of merchandise flowing to their warehouses. This puts the financial burden of carrying the inventory on their shoulders, but it allows them to give retailers what they want, when they want it.

Nearly a quarter of UnionBay's production now takes place in the U.S., up from 5 or 10 percent only three years ago. The garments are cut in North Carolina, Georgia or Texas, shipped to Mexico for assembly, then returned to the U.S. for washing.

"We're constantly cutting the lead time out of the production cycle to try and give the stores as much production as possible," Ritchey says, noting that the company has halved the average time between order and delivery from about six months to three.

Doing whatever you have to do to please the customer is key in the current brutal retailing climate. After all, some retailers have chosen to cut costs by reducing the number of their suppliers, says William Flatley, a retail consultant with Kurt Salmon Associates.

"They say, `Why should we carry six labels when three is all we need?' " Flatley says. Then, once the stores gain more leverage with the remaining labels, "they can lean on them for more allowances and lower prices."

To succeed, suppliers must be technologically up-to-date. Some chains prefer to deal with suppliers whose computer systems can reorder stock automatically.

Stores increasingly have been paring their buying staffs, sometimes restricting buyers' purchases to a shrinking list of approved suppliers. Others, including Allied and Federated stores, concentrate buying decisions in the hands of teams that purchase goods for all departments in a chain. This means a few buyers purchase extremely large quantities.

Akhil Shah, president of Shah Safari, says that where his company may have dealt with a department store chain with 20 stores in the past, "today you're dealing with . . . a company that has 60 stores."

Then there's what some manufacturers consider the bane of their existence, the private label. As retailers look for ways to gain more control over their merchandise and boost profit margins, they're turning more frequently to these "house brands," even developing divisions to turn out clothing similar to brand apparel.

It's just another indicator to apparel companies that times have changed. This year, instead of Preline, UnionBay is hosting a low-key gathering for about a dozen buyers, none from major department store chains.

But it won't be the same.

"No parties, no yachts," says Gary Smalley, UnionBay's senior vice president of sales and marketing. "That was the '80s." --------------------------

MAJOR PLAYERS

GENERRA -- U.S. employees: 130. -- Annual sales: $100 million. -- Major labels: Generra Collections, Bluestone.

UNIONBAY -- U.S. employees: 190. -- Annual sales: $175 million. -- Major labels: UnionBay, UnionBay Juniors, UnionBay Kids, UnionBay Young Men, ReUnion, Supplies, Legal Jeans, Sergio.

M'OTTO -- U.S. employees: 45. -- Annual sales: $30 million. -- Major labels: M'otto, Red Eraser.

SHAH SAFARI: -- U.S. employees: 100 (est.). -- Annual sales: $120 million (est.). -- Major label: Shah Safari.

INTERNATIONAL NEWS: -- U.S. employees: 30 (est.). -- Annual sales: $10 million (est.). -- Major labels: International News, Razzy Jeanswear.

PACIFIC TRAIL: -- U.S. employees: 150 (est.). -- Annual sales: $100 million (est.). -- Major labels: Pacific Trail, Lookout, Inside Edge, Cornice, Pierson.

FAST CLOTHING: -- U.S. employees: 40 (est.). -- Annual sales: $10 million (est.). -- Major labels: Fast, Easy.

Pogo & Co. -- U.S. employees: 13. -- Annual sales: $2 million. -- Major label: Pogo & Co. Cutter & Buck. -- U.S. employees: 20. -- Annual sales: between $9 million and $15 million. -- Major label: Cutter & Buck.

920 East -- U.S. employees: 10. -- Annual sales: $5 million (est.). -- Major label: 920 East.