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Apparel Series - 

 

Today I launched a series on the apparel industry with an interesting analysis of USA apparel pricing from 1914 and a brief history of apparel.  See below

Let's start with prices.  Conceptually, the price of all manufactured goods depend on the relative prices of raw material, labor and the capital equipment associated with it production.  However, when fashion and styles change, the kinds of clothes people wear change and thus the cost.  Conceptually, casual cloths are less expensive then formal clothes and so to the extent that more and more causal dress replace formal dress, one would expect that "apparel prices" and expense for people in general should go down.   

Data & Interpretation

  • Monthly consumer price data from the US Federal Reserve Bank plotted above right.
  • Relative prices.  Upward trending line means clothing prices increasing faster than general consumer prices.  Downward trending line means the opposite. 
  • For reasons that are perhaps easy to identify but hard to quantify, apparel prices in the US has dropped over 60% since 1972.
  • see discussion.

 

Discussion

It is is difficult to overstate China's impact on the apparel market. 

  • China is the global leader in the production of low-cost, potentially high-quality apparel.  While it is difficult to quantify, there is no doubt that volume of product put into the market place has been a major reason for the 60% relative decline in prices. 
  • China dominance in the industry is truly remarkable.  In 1978, China has 29.1 %of the global market for Textile & Apparel Export.  Twenty years later, in 1997, China had 69.7% of the Global Market for Textile & Apparel Export.  Again, truly remarkable.  "Unit exports" grew at a 17.0% CAGR and  "US dollar of exports" at a  22.2% CAGR.
  • China reestablish full diplomatic (and trade) relations with the USA began in 1978.  However, Hong Kong (when a British Colony) has long been a importer and re-exporter of  Chinese Articles of Apparel & Clothing Accessories.  It is interesting that even during "America's cold war with China", the US was the major importer in Chinese product re-exported from Hong Kong. 
  • Post WWII China Trade History.  China was one of the 23 original signatories of the General Agreement on Tariffs and Trade (GATT) in 1948 signed in the midst of a civil war. On Oct 1, 1949, the People Republic of China was declare and recognized by the Soviet Union the next day.   The Nationalist government after losing to the communist fled to Taiwan and later announced "China" would leave the GATT system, but Beijing never recognized Taiwan decision.  In 1965 Taiwan requested and was granted observer status at GATT sessions. In 1971, Nixon went to China, which lead to China replacing Taiwan at the UN and restoring of full diplomatic relation with the USA.  In 1971, Taiwan's observer status at GATT was revoked this status was removed, following a decision by the UN General Assembly that recognized the People's Republic as the only legitimate government of China.  In 1978, Deng Xiao Ping, as head of the communist party and a reformer, began leading China towards a market economy.  In 1982, Beijing broke the news in would not renew the 99-year lease of Hong Kong.   In 1986, Hong Kong, then a British Crown Colony became contracting party of GATT.   In 1986, China notified the GATT of its wish to resume its status as a GATT contracting party (China was one of the signatory of GATT).  In 1987, GATT established a "working party" on China's status was established under GATT and concerned only China's trade regime for goods.  In 1997, Hong Kong transitioned back to China.  In 2001, China admitted to the WTO.
  • China is a fascinating study.   In 1992, foreign retailers were allowed to compete in China.  The name brands began opening retail specialty stores in China via licenses of franchises.  The early brands included Nike (U.S., 1992),  Esprit (U.S., December 28th 1992), Giordano (Hong Kong, 1992), Stefanell (France, June 1992), Adidas (U.S., Jan. 23rd 1993), Mexx (Holland, 1993), Jeanswest (Hong Kong, May 1993), Liz Claiborne (U.S., April 8th 1994), and Benetton (Italy, October 1994).  Overseas retailers also started establishing department stores - such as Isetan (Japan), Printemps (France), Sincere (Hong Kong), and Shuihing (Hong Kong).  What I find fascinating is how successful China has been in enticed and lures western companies to do business there.  These day it seems like just basic business but back then it was "A brave new world".

Other important factors in why relative prices are in a down trend as follow

  • trend to casual clothes.
  • the invention of the "regional" mall, which essentially improving distribution.
  • explosion growth of big box retailers (Walmart, Target, Kmart) with sourcing directly from low cost production countries.

Recent Trend

(CHART NOT PROVIDED)

I my opinion, China has been smarter than the capitalist at the game of capitalism.  Driving prices lower, creating new demand with lower prices, gaining large economies of scale and dominant market share.  That said, tremendous international pressure to get the so successful at this new game. 

  • Mainly it a currency game.   America want the Yaun to appreciate against the Dollar so Chinese export will be less competitive in US domestic markets and American products to be more attractively priced in Chinese markets. 
  • Major political pressure resulted in the Chinese "unfixing" the Yaun in 2005.  The Yaun is not necessarily floating, but it had appreciated 17.5% in 4 years.
  • Policy market will focus the debate (as they have in the past) on nominal exchange rate which do not consider the effect of different inflation rated.  Of course nominal exchange rate are meaningless.  As long as US inflation out paces China inflation, the PPP theory of exchange rat says the Yaun will look like it is appreciation, but really it is only exchange rate effect. 
  • That said, I do not expect that prices to continue to fall for the fallowing reason
    • China has gained a dominant global market share of export apparel.  Lower prices will probably not result in gained share and thus makes no sense. 
    • US will continue to force the issue and thus the Yaun is going to rise against the dollar making price perhaps even increase faster than general consumer prices.  

MORE LATER

 

 

About the Author:   

  • Consulting CFO & Advisory Services.    Mr. Barker is an experienced executive and consultant available to work anywhere in the world on a contract basis.  US Citizenship; Japan Resident.  Experienced as transitional senior management or advisor in the M&A setting or troubled company restructuring project. Capable of taking control of company until a more more long term management solution is available.   Also available to do contract research or due diligence used for supporting acquisition or investment decisions or for developing specific corporate strategy. 

  • Background.    Mr. Barker's background includes CFO and acting president of a overseas subsidiary of large US public company; acquisition integration consulting on international transactions; the CFO and acting president of a small San Diego based gaming and US military contractor; Manager of Mergers and Acquisitions for Ernst and Young;  Audit Manager with Deloitte and Touche; as well as employment with investment banks Merrill Lynch and Shearson, Lehman, Hutton.  Formal education includes MBA from University of California, an MS in Engineering from the University of Alaska, and a BS in Mechanical Engineering from University of Washington.  Mr. Barker is a Certified Public Accountant (and Auditor) licensed in the the State of California (USA) and competent in US GAAP, SEC compliance, IFRS and Japanese GAAP.   Industry experience is diverse.   

  • Contact:  All inquiries keep strictly confidential.  Please e-mail for phone contact info.  WallyBarker@Gmail.Com or write 6-5-14 Mikagenakamachi, Kobe-shi Hyogo-ken 658-0054 JAPAN

 

 

 

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References

 

 

 

Introduction

In pre-industrial America, most clothing was crafted at home or by professional tailors or dressmakers from individual measurements taken of each customer. In the early Twentieth Century, the growing urban middle class began to purchase the affordable and fashionable ready-to-wear merchandise which new technology and industrialized production methods had created the means to manufacture.

At the request of the Mail Order Association of America (MOAA), between 1949-1952 the National Bureau of Standards (NBS, now NIST) conducted a comprehensive study of women's body measurements to develop a sizing standard for women's ready-to-wear clothing. Mansfield Lonie of the NBS Commodity Standards Division was appointed Acting-Secretary of the Sub-Committee on Body Measurements for Wearing Apparel Sizes and Measurements of the MOAA Committee on Standards and Terminology. Churchill Eisenhart and Lola Deming, mathematicians in the NBS Statistical Engineering Laboratory, lent their expertise to the project

The project was an unusual one for Bureau staff who were accustomed to analyzing measurements in the hard physical sciences and engineering. Suddenly NBS statistical engineers found themselves thinking in terms of "abdominal extension" and "bust point to bust point" measurements. NBS personnel attended meetings with representatives of organizations such as the Underwear Institute and the Corset and Brassiere Association of America. At these meetings, delicate matters were breached such as, to quote from minutes of an October 21, 1949 meeting, "the subject of 'chubby' sizes…" Other concerns were wrestled with, such as whether to use a one-hip, three-bust or a one-bust, three-hip system.

The resulting standard is still used by manufacturers to make clothing that fits a majority of today's diverse female population. Additionally, more studies are being done to update information and to modernize the standard.

HISTORY of READY MADE ClOTHES

Before the American Civil War, ready-made (also called ready-to-wear) apparel existed but its variety was limited. Mainly coats and jackets (known as outerwear) and undergarments were purchased using predetermined sizes. Most clothing was made by tailors or by individuals or their family members at home. 

The Civil War was a pivotal event in the historical development of men's ready-made clothing. At the outset of the Civil War, most uniforms were custom-made in workers' homes under government contract. As the war continued, however, manufacturers started to build factories that could quickly and efficiently meet the growing demands of the military. Mass production of uniforms necessitated the development of standard sizes. Measurements taken of the soldiers revealed that certain sets of measurements tended to recur with predictable regularity. After the war, these military measurements were used to create the first commercial sizing scales for men.

 The mass production of women's clothing developed more slowly. Women's outfits generally continued to be custom-made well into the 1920s. In that decade, factors such as the development of industrial production techniques, the rise of the advertising industry, the growth of an urban professional class, and the development of national markets accessed through chain stores and mail order catalogs, contributed to the success of the women's ready-made apparel industry. Ready-made articles of clothing were portrayed as modern and fashionable during a time when the new consumer industries were rapidly redefining the way Americans viewed mass-manufactured goods. Instead of seeing the purchase of mass-produced clothing as entailing a loss of individuality, American women began to accept the pieces of ready-made merchandise as convenient, affordable, and up-to-date fashion items that could be replaced easily as styles changed.

However, the new ready-made clothing often fit poorly. Each manufacturer created its own unique and sometimes arbitrary sizing system based on inaccurate body data or no body data at all. Garments of widely different dimensions were frequently labeled the same size by different manufacturers. This situation resulted in additional costs for alterations and large volumes of returned merchandise. This, in turn, increased costs for the consumer of ready-to-wear clothing.

In 1937, the U.S. Department of Agriculture prepared to conduct a study of women's body measurements for the purpose of creating a sizing system which the entire industry could follow.

During 1939 and 1940, about 15,000 American women participated in a national survey conducted by the National Bureau of Home Economics of the U.S. Department of Agriculture. It was the first large-scale scientific study of women's body measurements ever recorded. A technician took 59 measurements of each volunteer, who was dressed only in underwear. Volunteers were paid a small fee for participating. The results of the study were published in 1941 in USDA Miscellaneous Publication 454, Women's Measurements for Garment and Pattern Construction. The purpose of the survey was to discover key measurements of the female body - that is the important measurements from which other measurements could best be predicted - and then to propose a sizing system based on this discovery.
 

In the mid-1940s, the Mail-Order Association of America, a trade group representing catalog businesses such as Sears Roebuck and Spiegel, asked the Commodity Standards Division of the National Bureau of Standards (NBS, now NIST )to conduct research to provide a reliable basis for industry sizing standards. NBS agreed, and punch cards holding the USDA survey results were transferred to NBS at its request for reanalysis. (While the women's apparel sizing standard is the focus of this exhibit, NBS also reanalyzed USDA data for teenage girls and children, resulting in other standards.) The USDA data was augmented by data received from the Research and Development Branch of the Army Quartermasters Corps during World War II when measurements were taken of 6,510 WAC personnel.

From January 1949 until April 1952, the NBS Statistical Engineering Division made analyses for the Commodity Standards Division. NBS statistical engineers conducted frequency and correlation analyses with the body measurement data so that they could devise the shortest possible, useful size notations for garments, which would accommodate the greatest number of female consumers without alterations. The resulting commercial standard was distributed by NBS to the industry for comment in 1953, formally accepted by the industry in 1957, and published as Commercial Standard (CS)215-58 in 1958.

The sizing designations recommended in the published standard combined a bust size number (in even sizes from 8 to 38) with one of three letters - tall (T), regular (R), or short (S) - indicating height, and with a symbol to indicate hip girth: either slender (-), average (no symbol), or full (+). For example, a tall woman with a size 14 bust who was slender in the hips would be considered size 14T-. This combination of signifiers would place the consumer into one of four trade classifications: either misses', women's, half-sizes (shorter women), or juniors'.

Adjustment in the size scales were made to compensate for the effect of what were referred to in the standard as "foundation garments," meaning support bras and girdles.

Since commercial standard CS215-58 was published, its importance has been debated time and again. At first, the industry was eager to adopt the new standard, and major companies such as Sears, Roebuck and Montgomery Ward began labeling their products with the new government sizes. In September 1971, the recommendation in CS215-58 was updated and republished with the new designation Voluntary Product Standard.

However, with the passage of time, the standard became outdated. Both American men and women were becoming heavier. Whereas the average woman's figure once came a little closer to approaching the hourglass shape of the fashion magazines, she was now becoming more pear-shaped, with a thicker waist and fuller hips. At the same time that the average woman's body was changing shape, manufacturers discovered the advantage of appealing to women's vanity. They began selling bigger clothes labeled with smaller size numbers.

The Department of Commerce officially withdrew the commercial standard for the sizing of women's apparel on January 20, 1983. Currently, only pattern companies continue to use the traditional sizing standards.

In recent years, many different agencies have recognized the problems associated with the purchase of women's clothing and the need for a new, more modern sizing standard

NIST began work once again on the problem in the 1990s, and published several reports such as Y. Tina Lee's "Body Dimensions for Apparel" (1994). The report compiled data from various studies into a "preliminary set of body dimensions… as a basis for the development of the information model for ready-to-wear pattern making…" and the development of new or improved sizing standards." However, no new standard has been released yet.

Technology in body scanning as a means for taking body measurements is being developed by a non-profit company called the Textile Clothing Technology Corporation, or [TC]2. Used to "achieve unique coverage requirements of the human body," the system uses white light to take measurements more efficiently and with fewer errors than a person could manually. Learn more about the TC2 body scanner

In fact, the United Kingdom used the new system in the late 1990s to conduct a national sizing survey of 11,000 people in about four months. The data analysis portion of the project is underway currently, and a new sizing standard for the U.K. is expected to be announced soon.

Plans are being made for the United States to conduct a similar survey of at least 12,000 people in the next few years. [TC]2 has requested authorization to use a Federal grant to begin the survey. If you're interested in participating in the U.S. National Sizing Survey, visit Size USA to register.

Commercial standards, developed by industry with the technical and secretarial assistance of the Commodity Standards Division of the National Bureau of Standards (now NIST), were voluntary standards used to establish grades and qualities of specific commodities. In the words of Commercial Standard 215-58, later superceded by Women's Voluntary Product Standard PS42-70, they were "commodity specifications voluntarily established by mutual consent of…producer, distributor, and consumer and should not be confused with any plan of government regulation or control." Those in agreement with the specifications were meant to follow the standards as closely as possible and to use the standards as something resembling trade customs, rather than as rules or laws. When a Commercial Standards program was established in October of 1927 under I. J. Fairchild, it supplemented the Bureau's Simplified Practice program, another cooperative effort with industry, which was meant to eliminate waste by standardizing size and type. Each commercial standard was subject to constant revision and possible removal as conditions changed over time.


 

 

  • 1600s  Denim fabric available.
  • 1764  Spinning Jenny Invented by Thomas Highs, an obscure artisan in Sweeden, one of many true genius of the Industrial Revolution.
  • 1767  Spinning Jenny invented by James Hargreaves, improve on THomas Highs work with larger and more spindles
  • 1775  Mechanized Textile Loom invented, Richard Arkwright made improvements in the textile loom, took out a patent for a new Carding Engine. Arkwright's machine included a cylinder carding engine, incorporating a crank and comb mechanism. The comb moved up and down, removing the carded fibers from the doffing cylinder in a "continuous filmy fleece".
  • 1801  Jacquard Loom Invented, Joseph Marie Jacquard  the first machine to use punched card. These punched cards controlled the weaving, enabling an ordinary workman to produce the most beautiful patterns in a style previously accomplished only with patience, skill, and hard work.
  • 1849  Safety Pin   Walter Hunt
  • 1846  Sewing Machine investd by Elias Howe.
  • 1873  "Riveted Denim Pants" Inented by Jacob Davis and Levi Strauss, Later known as Blue Jeans
  • 1873  Earmuffs invented
  • 1893  Shoe fastener, hook-and-eye, invented
  • 1905   "clasp locker"  fasteners were being used in the apparel industry, but they weren't considered practical.
  • 1913  Zipper invented by Gideon Sundback
  • 1929  Sunglasses Sam Foster
  • 1946  Bikini Swimsuit  Louis Reard
  • 1946  Disposable Diapers invented Marion Donovan
  • 1948  Velcro invented George de Mestral
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