The phone rang. Our largest customer was on the line to tell me
goodbye and that our multi year business relationship was over. As I
hung up the receiver, I knew that an era just came to an end. A 20 year
career in the US Textile industry was likely over. The mill I
represented was foundering like so many others and about to file Chapter
11, a risk my clients could not take. This was Summer, 2005. The
industry actually began to unravel 10 years earlier, when businesses
suddenly began fighting over a dramatically smaller piece of pie.
It
wasn't long after that phone call, that I was packing up my desk and
walking out of my office for the last time. In fact, it turned out to be
the end of my long run in the industry. I had been working on my next
act for several years though, so by the Fall of 2005 I had started with a
digital marketing agency in a complete career reset. But that's a story
for another day. Today I want to focus on that 10 year battle as the
industry contracted, what it taught me, how I navigated, the skills that
remain with me and its relevance in today's digital economy.
History
First Hit: Hello, Sam Walton-
In many ways the textile industry was one of the first industries to be
disrupted. For many decades, the textile mills sold their wares to
manufacturers of apparel that had facilities in the US and who in turn
sold finished garments to some of the large department stores such as
Sears, JCPenney, Macy's and Dillards. But by the mid '80's into the
90's, the explosive growth of the Discounters, Walmart and K Mart was
creating massive shock waves in the marketplace, and these players
increasingly gained market share at the expense of the department
stores. In order to effectively compete and meet the low prices that the
Discounters demanded, the apparel manufacturers began looking for ways
to dramatically cut costs. Many shut their facilities in the US and
began manufacturing in Asia. This delivered a chain reaction up the
distribution network. Many of our customers were now packing up for the
likes of China, Vietnam, India and other low cost countries. Buying US
fabric and sewing garments here did not really make sense anymore both
logistically and cost wise as many of the foreign producers were
offering 'packages' which included the fabric price. This was a major
business model shift and guess what, it caught most of the major players
flat footed. US mills saw margins and market share begin to erode.
Second Hit: Government Kiss-Off
In
2001, China was admitted to the WTO and for the first time would be
eligible to have its apparel exports removed from quota. In
2002, China's exports to the United States surged by more than 100
percent. Chinese exports of baby clothes surged by more than 2,000
percent, robes by more than 1,500 percent, and knit fabrics by 21,000
percent! Overall, China increased its U.S. import market share of the
apparel released from quota from 24 to 86 percent. The US Government
decided to focus on the nascent, but much more promising technology
industry and in the process pulled the plug on millions of jobs in the
US. The kill shot was the agreement to remove all quotas on Chinese
imports beginning in 2005.
Becoming A "Wartime General"
So
how do you shift from marketing and selling to customers who have been
decades loyal, paid your price, and knew your families to a dramatically
new playing field where all bets were off? The answer is: not well at
first. Selling was pretty easy up until then, but it was now becoming a
battle for survival. Our customers were scrambling, busily pursuing JV's
with foreign providers, closing US facilities, and re setting
priorities.
In 1994, as a senior exec of a large mill, I became
part of a MBO of my division and we spun off into a stand alone company.
Not the greatest time to go it alone as it turned out. The particular
type of fabric we produced, called greige(undyed) goods was the first
area to become commoditized. I reorganized my group in New York, but
before we knew what hit us, we were on the ropes, and forced to file
Chapter 7 in 1996. The business just vanished and we scrambled to
compete.
The experience was painful but enlightening. I got a
taste of the new business climate and learned that you can't stand still
when the competitive environment is throwing hay makers. In my next
role, I created a battle plan which moved away from the traditional x's
and o's and instead became a blueprint for survival. A fresh strategic
approach was required and time was short. I focused on stopping the
bleeding first, applying rigid cost cuts, then shifting focus on higher
margin products which leveraged product innovation and lastly, began
making the case against the enemy. As it turned out, the delivery times
from Asia were long and commitments were not being met. Our salespeople
needed to be armed with this messaging. I used this plan in my next 3
positions and in each case, was able to stabilize the situation, restore
profitability and keep the doors open. Here is the essence of the plan:
Game Plan for Survival
Fight! As
a business leader, it was up to me to deliver the mindset required for
success. It was no longer just about meeting sales goals, but more about
keeping our jobs and providing for our families. It was now personal.
We were engaged in a bitter global battle for survival and we needed to
come to the office every day ready to fight and win. This mindset was
critical to making it work.
Cut Costs I had to
make tough decisions on headcount and expenses, and it was dictated by
our focus and best chance of survival. We asked more from dramatically
fewer people. With the market shrinking, we needed to adjust to become
leaner and compete.
Product Shift We
de-emphasized products that were under the heaviest attack and shifted
attention to those that were innovative and provided the greatest value
to the consumer.
Revise Pricing Strategy In
addition to our higher margin, innovative fabrics, we took a few orders
on basic staples at little or no margin to keep the mills running. In
the past, we would reject these orders but now understood their
importance.
Sell Value Textile Magnate Roger Milliken started a movement in the 1980's called
Crafted With Pride In the USA
aimed at educating the consumer on the importance of buying American.
He was a pioneer and a futurist and seeing danger in the offing, he took
the industry's case to the people. In our sales conversations, we
needed to paint the picture of the perils of buying from foreign
suppliers, so we began to calculate the cost of late deliveries and poor
quality(another achilles heel of some of the foreign providers). In
today's new digital world, and some 30 years later, demonstrating value
remains critical to success.
Conclusion:
The
period from 1994-2005 represented one of the biggest challenges in my
career. The experience was at times devastating, unsettling, confusing
and frightening. But it taught me how to become a leader, how to dig
deep, how to recover from setbacks, how to face your fears, how to
constantly anticipate change, and how to reinvent yourself, your team
and your company.
In 2016, there are elements of the 1990's
textile industry beginning to re-appear. Business leaders need to think
through what their future looks like in the digital world and begin
taking action ahead of potentially cataclysmic disruption. The good news
is that there are many examples of companies that have made the
transition and re invented themselves, among them IBM, Nokia, Nintendo,
American Express and probably the most notable of them all, Apple. So,
keep an eye open for what is coming on the horizon. Better yet, lead the
way and create the future! Good Luck!
