The Los Angeles Area
FASHION INDUSTRY PROFILE
November 2011
The Los Angeles Area Fashion Industry Profile
Sponsored by CIT
November 2011
CIT Trade Finance
CIT Trade Finance is one of the nation’s leading providers of factoring and financing
to the apparel industry. CIT tailors financial solutions that help companies of all
sizes increase sales, improve cash flow, reduce operating expenses and eliminate
customer credit losses. CIT serves apparel companies ranging in size from $2 million
to $1 billion in annual sales that sell to over 300,000 wholesale and retail customers
nationwide. CIT’s internet-based platform provides clients with real-time credit
approvals and comprehensive accounts receivable information. To learn more, visit
www.cit.com/TradeFinance.
Written by Dr. John J. Blank, Deputy Chief Economist, with assistance from Rafael De Anda.
Very special thanks go out to Ilse Metchek, President of the California Fashion Association, for key
guidance and insights. Special thanks goes to CIT for its sponsorship of this report. To California
Fashion Association members, my appreciation for such a vibrant industry to write about.
And with fond remembrance of Jack Kyser, whose spirit permeates this report.
Note: This report incorporates apparel manufacturing (NAICS 315) and textile mills (NAICS 313) data.
Both of these segments in the value chain have a strong presence in the Southland. This report also
includes apparel, piece goods, and notions merchant wholesaler data found in NAICS 4243. Be aware
that a "piece goods and notions" portion of sales located within this wholesale trade category makes up
around 10%. It will not cover the textile products industry, which generally includes home decoration
products such as linen and carpet. Finally, this report does not cover apparel retailing in much detail.
As the premier business leadership organization, the Los Angeles Economic Development Corporation's
(LAEDC) mission is to attract, retain, and grow businesses and jobs in the regions of Los Angeles County,
as well as to identify trends and affect positive change for the local economy. Since 1996, the LAEDC
Business Development team has helped in the creation, retention, and attraction of more than 171,000
jobs in over 1,350 businesses, with a direct economic impact of $8.4 billion.
The Kyser Center for Economic Research at the LAEDC is a key source for current and forecast data on
Southern California's economy. Regular publications include: An Annual and Semi-Annual Economic
Forecast & Industry Outlook, International Trade Trend & Impacts, L.A. Stats, Manufacturing in Southern
California, a weekly e-Edge email series, and a variety of regional and industry level economic reports
such as the one you are about to read. All reports and data are provided free to the general public via
our information website at http://www.laedc.org.
In addition, the LAEDC Economic and Policy Analysis Group offers custom research with expertise in
transportation, the environment, infrastructure, regional trends, and regional industry analysis.
Disclaimer: The opinions, statement, and information that appear in this report are those of the LAEDC
and do not necessarily reflect the views or outlook of CIT. CIT does not endorse or certify the accuracy of
such opinions, statements, and information.
© 2011 Los Angeles County Economic Development Corp., 444 South Flower St., 34th Floor, Los Angeles,
CA 90071. Web: http://www.laedc.org, Tel: (213)-622-4300 or (888) 4-LAEDC-1. Fax: 213-622-710
Table of Contents
Executive Summary ....................................................................................................................................................... 1
Los Angeles Apparel Industry Profile ..................................................................................................................... 2
The Apparel Industry by the Numbers ..................................................................................................................... 5
Overall Employment Facts ....................................................................................................................................... 7
Wholesaler, Manufacturing and Textiles Employment .......................................................................................... 11
Wages and Earnings ............................................................................................................................................... 15
A Demographic Profile of Apparel Manufacturing Workers .................................................................................. 19
Merchandise Prices ................................................................................................................................................ 19
Finance ................................................................................................................................................................... 23
International Trade ................................................................................................................................................ 26
Indirect Impacts ................................................................................................................................................... 29
Los Angeles Apparel Manufacturing: An Industry Under Siege ............................................................................ 31
A Design-driven Industry ........................................................................................................................................ 31
...Dominated by Immigrants................................................................................................................................... 32
Perceptions and Misperceptions ............................................................................................................................ 32
A Truly Global Industry ........................................................................................................................................... 34
Niche Markets in Quick-Turn Merchandise ............................................................................................................ 36
Los Angeles and Orange Counties: Two Distinct Trendsetters .............................................................................. 37
Technology Comes to the Rescue? ........................................................................................................................ 38
Labor Burdens: A Barrier to Job Growth ............................................................................................................... 39
Barriers to Exporting .............................................................................................................................................. 40
The March Towards Free Trade Continues ........................................................................................................... 42
Los Angeles and New York: Friends of Foes? ....................................................................................................... 43
Textiles Manufacturing: Another Sunset Industry ............................................................................................... 44
Topping it Off: Cosmetics, Jewelry and Footwear ............................................................................................... 44
Outlook for Los Angeles’ Apparel Industry ........................................................................................................... 46
Pluses ..................................................................................................................................................................... 46
Minuses .................................................................................................................................................................. 47
Items to watch ....................................................................................................................................................... 47
What Can be Done to Support the Industry ......................................................................................................... 48
Quotes from Vogue on "Made in California" ....................................................................................................... 49
Index of Statistical Tables
Table 1: Companies in California with Revenues of $1 Million and Greater, 2011 ................................... 24
Table 2: Conditions of Financial Stress in L.A. County Apparel Industries, August 2011 ........................... 25
Table 3: Los Angeles Customs District: Textile and Apparel Imports, 2010 .............................................. 27
Table 4: Direct & Indirect Apparel/Textiles Earnings in Los Angeles County, 2008 ................................... 30
Table 5: Direct & Indirect Apparel/Textile Jobs in Los Angeles County, 2008 ........................................... 30
Table 6: Apparel & Textiles Employment In Los Angeles County vs. New York PMSA, 2009 .................... 41
Table 7: Other Fashion-related Industries ................................................................................................. 46
LAEDC - Kyser Center P a g e | 1 Fashion Industry Profile 2011
Executive Summary
Our Key Strengths
- Massive economic impact of apparel on the L.A. economy. Over $40B in L.A. apparel imports, over
$13B in local revenues, and at least $6.0B flowing into local incomes.
- A global industry with durable reasons for being in L.A. in the future --with its powerful combo of
geography and orientation to fast fashion.
- A U.S. fast-fashion industry dominated by L.A retailers like Forever 21 Inc., Wet Seal, and Papaya.
- Enduring popularity of L.A. based design inspired by the sun, light, nature, and easy living.
- A concept of "L.A. Style" constantly propagated by media obsession with Hollywood celebrities.
- L.A. brands and designer names command a price premium, and our wholesalers keep growing.
- Tech helps L.A.'s design shops stay competitive -- shortening product cycles and reducing costs.
- The competitive advantage of L.A.'s textiles industry -- in design, in the ability to diversify product lines,
which involves processes with many layers of expertise, speed, and a willingness to try new things.
Whither Wages and Jobs?
- Export sales and recent global expansions can substantially add to L.A. jobs.
- Stability of wages in the industry in the L.A. area, while China is shifting to higher wage industries.
- A "second migration" to lower wage countries --from China to places like Vietnam or Bangladesh-- is
under way. These country's politics, regulations, and taxes can be dysfunctional, sometimes severely so.
- The L.A. apparel industry of today has greatly improved working conditions from ten years ago.
- Though jobs losses here are disheartening, L.A. is doing much better than national trends.
- Many forms of L.A. employment fall outside the three catch-all's of apparel manufacturing, textiles,
and wholesalers.
Major Stresses
- Globalization.
- Cotton prices have had a major impact on the industry.
- In light of industry financial stress numbers, a key implication: small sized firms in L.A. (below $2M in
revenues) have a greater chance of operating under conditions of financial stress.
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THE LOS ANGELES AREA APPAREL INDUSTRY PROFILE -- 2011
The fashion industry is perhaps the most under-appreciated industry in Los Angeles. It's reach is global.
L.A.'s apparel industry success has long been driven by the pull of design talent; favorable cost
economics; the appeal of casual clothing (particularly denim); the global reach of technology and
fashion; and speed to market. Over $40 billion in apparel imports comes through L.A. ports; local
businesses earn at least $13 billion from just the L.A. County apparel wholesale and manufacturing
businesses; and their workers earn over $6.0 billion in direct, indirect, and induced income. This vibrant
industry still has lots more potential for expansion.
The mere mention of apparel manufacturing, unfortunately, can conjure up very dated images of
sweatshops full of minority women operating sewing machines next to a mountain of cut fabric and
under the eye of abusive bosses. That's not the true picture of the multiple faces within the apparel
industry in today's Los Angeles. Instead, the image should be one of design entrepreneurs and models
in a design studio located somewhere around 9th and Los Angeles; their workers sit near this well-lit
design studio, imagining new clothing designs and sending them electronically to offshore factories, or
to a local contractor; graphic artists electronically draw sketches for the next set of online ads; logistics
experts arrange for merchandise to be shipped to distribution centers or specialized clothing stores
around the world; fashion photographers take pictures against the backdrop of Pacific beaches; fashion
models walk down runways; or freight forwarders electronically sign customs papers for a Chinese
container full of finished merchandise. Furthermore, while local apparel and textile manufacturing jobs
have been declining since 2000, the numbers in wholesaling, i.e. 'jobber' employment, have been
increasing. The most interesting, most remunerative, and locally clustered jobs, ---customer-facing
design work--- are increasing too.
The woes of local apparel manufacturers have not diminished the popularity of L.A. based design
inspired by the sun, light, nature, and easy living. These designs are collectively known as the "L.A.
Style". The design side has continued to stay local and continues to prosper only by interacting with this
fertile local environment. The divergent fates of the various parts in the apparel value chain speak to a
relentless drive towards getting more revenues. First, from greater use of the sophisticated skills,
talents, and customer insights offered by local design entrepreneurs. And then preserving profit
margins -- by utilizing low skill workers to cut and sew ever higher volumes of mass-produced apparel in
far flung regions of the world.
Unfortunately, many people judge the current state of the L.A. apparel industry by using the most
readily available data -- employment. To counter this data, consider this: in a sign of this industry's
enduring importance to the regional economy, total wages earned by the L.A. County apparel industry
have remained stable over the last decade. Fewer apparel manufacturing jobs have come with (and
been caused by) a steady increase in weekly earnings for these workers.
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Variations of Fashion Industry Business Models
Fashion design and the apparel production industry in Los Angeles have taken on a rich variety of
corporate forms. Eleven are worth mentioning by name. An example of a company (or set of
companies) that execute their business strategy using each of the eleven specific corporate forms
follows.
1. Large U.S. Conglomerate with Local Subsidiary - Lucky Brand, Perry Ellis, Warnaco
2. International Corporation with U.S. Brand Entity - Billabong, Speedo
3. Licensee of International Corporation - Jerry Leigh (Licensee of Disney)
4. Manufacturing Exclusively for Retail - Bebe, Gap, Forever 21
5. Separate Divisions of 'Umbrella' Corporation - Roxy for Quicksilver/ Vince for Kellwood
6. Owner/Entrepreneur/Domestic Production -Vertical -- American Apparel, St. John
-Using Contractors -- True Religion
7. Owner/Sales Executive -Joe Jeans, Hard Tail
8. Owner/Designer -Trina Turk, Sue Wong
9. Owner/Production Executive -Hudson, Knit Works, (Private label children's wear developers)
10. Owner/Entrepreneur/Importer - Body Glove, California Dynasty
11. Brand Companies - Entities that solely own intellectual property and license the brands to various
manufacturers. Such entities drove the rise of several prominent brands in recent years, including many
originating from SoCal (e.g. Iconix, Inc. owns Rampage, OP, and Ed Hardy). In L.A. County, the Cherokee
Group based in Van Nuys is a great example.
Many L.A. apparel "manufacturers" actually do not manufacture anything. Brand-less private label
contractors, similar to the Original Equipment Manufacturers (OEMs) and parts supplier relationships in
the auto and computer industries, actually do the cutting and sewing. The manufacturers are legally
responsible for ultimately fulfilling their contracts with retailers, the quality of their products, and their
contractors' labor practices regarding wage and overtime issues. Since contractors can bid for work
orders from many manufacturers, many are highly specialized and efficient at their core competencies.
By using contractors, the manufacturers are also able to adjust the apparel production rates depending
on market demand, structuring cost systems that are more variable and less fixed. (In this report, data
for "apparel manufacturing' refer to both manufacturers and contractors because it's hard to separate
the two in official statistics. We will specify the focus of the particular discussion when appropriate.)
LAEDC - Kyser Center P a g e | 4 Fashion Industry Profile 2011
Looking back at jobs data, apparel manufacturing jobs in L.A. County started a decline around 1996.
The North American Free Trade Act (NAFTA) between the U.S., Canada, and Mexico was a seminal event
for the Los Angeles-centered apparel industry cluster. Implementation of NAFTA on January 1, 1994,
brought the immediate elimination of tariffs on more than one half of U.S. imports from Mexico and
more than one third of U.S. exports to Mexico. Within 10 years, all U.S.-Mexico tariffs would be
eliminated except for some U.S. agricultural exports.
For the L.A. apparel industry, the NAFTA made it easier for apparel manufacturers to make finished
products with cheaper labor. At first, the early apparel outsourced to Mexico was often shipped back
late, service was poor, and fabric quality was not up to par. But the door to a global outsourcing
business had been opened a crack, and that door would be opened wider and wider.
Scroll into 1997, a year tied to the Asian Financial Crisis. After the sudden pullback of capital, import-
export manufacturers located in Asia benefitted from the pull of depreciating Asian currencies against
the U.S. dollar. Collapsing internal demand flattened Asian low-skilled hourly wage profiles across the
region. Some of these Asian workers served globally-sourced apparel contractors.
A strong push came from higher U.S. hourly wages and regulations too. In 1997, as just an example,
California enacted AB 633. This state law said that brand holders have joint liability with contractors for
issues like age discrimination and OSHA requirements, and for worker's compensation. Taking both the
push and pull factors in combination, and an already strong cost advantage found new traction. The
L.A. apparel industry shifted more and more labor-intensive production offshore to Asia, specifically to
China.
During this extended migration of activity, many L.A. apparel manufacturing firms could only stand and
watch as cheap imports flooded our ports. Some capitulated and closed their domestic factories and
moved production outside the U.S. Quicker turnaround, smaller volumes, and more frequent design
output have been the only tactics industries facing intense import competition from places like China
could employ to survive. Using these tactics, half the L.A. apparel manufacturing base has been able to
stay local.
During the mid to late 1990s, China also implemented a second five-year central plan to further develop
its market economy. This phase of plans opened China's coastal cities to greater import-export trade.
More and more, China's manufacturing and assembly operations participated in globally-sourced
industries -- aka operations like apparel and textile manufacturing. Soon, Chinese activities sunk more
deeply into the global manufacturing fabric. And this meant they captured the bulk of the U.S. market.
On December 1, 2007, under WTO rules, quotas on apparel shipped from China to the U.S. were dropped.
Apparel import volumes to the U.S. from China took another step up. But interestingly, manufacturing
the basic low profit margin items in apparel lines in China began to compete with other Chinese
industries for the services of expert sewing -- causing a rise in apparel manufacturing wages in China.
LAEDC - Kyser Center P a g e | 5 Fashion Industry Profile 2011
In 2009, the Commerce Department's Office of Textiles & Apparel (OTEXA) listed the top five suppliers
to the U.S. as follows:
Apparel to U.S.
Textiles to U.S.
1. China
1. China
2. Vietnam
2. Pakistan
3. Bangladesh
3. India
4. Honduras
4. South Korea
5. Indonesia
5. Mexico
Moving forward to data available in 2011, and you see the global apparel manufacturing industry looks
to generate $316 billion in export revenues. Major apparel producing countries in terms of export
revenues are China, Italy, Germany, Turkey, India, and Bangladesh according to the United Nations. The
major textile exporting countries include South Korea and Vietnam. Major companies include Youngor
Group (China), Armani (Italy), MOL Magazalari (Turkey) and Gokaldas Exports (India).
China accounts for 34% of the global apparel market, having seen its export revenues double over the
last decade. The Chinese apparel manufacturing industry includes about 18,000 companies, with a
combined annual revenue of about $200 billion, according to the National Bureau of Statistics of China.
However, China's wages are rising as its workforce shrinks, due to strict family-planning policies.
Apparel workers are also going into other Chinese industries, who compete for their skills by offering
better wages, hours, and working conditions. China now faces lower-skilled, lower-paying jobs moving
offshore. This so-called "second migration" is occurring to countries such as Bangladesh, Cambodia,
Indonesia, Laos, and Vietnam, according to apparel trading agent Li & Fung. Bangladesh and Cambodia
have the lowest wages in the world.
Today, rising wages in China and rising energy costs worldwide have combined to force up apparel
manufacturing and shipping costs tied to the mainland Chinese economy. In the last couple of years,
forces in market-driven growth increased the demand for labor and increased energy use. The overall
effects of prosperity have driven upwards a range of other Chinese costs too -- at a rate greater than in
the U.S. In 2011 and into 2012, "all-in" comparative cost advantages are starting to not be as wide.
China is focusing its next five year development plan to 2015 on creating success in high wage industries
like energy conservation & environmental protection, biotechnology, alternative energy, and new
materials. High end manufacturing is also a top goal.
Industry by the Numbers
The apparel marketing business is highly competitive, based on both price and fashion.
Small integrated manufacturers rely heavily on trade shows and personal contacts to market products to
merchandise buyers. Larger companies have a sales force. The profitability of a customer order
depends largely on its size. Many manufacturers depend on a few large customers for the bulk of their
LAEDC - Kyser Center P a g e | 6 Fashion Industry Profile 2011
business. Under some supply agreements with larger retailers, customers can cancel orders or return
unwanted inventory. To secure these orders, manufacturers often cut prices.
Materials typically account for 65% of apparel manufacturing costs. Although some textiles must be
bought from a single supplier, most textiles are available from numerous sources. Fabric imports have
increased steadily for several years, which includes large increases from China.
1
Several types of manufacturers exist.
Integrated manufacturers design and market their own clothing brands, and make
products both in their own manufacturing plants and in those of independent
contractors. Many clothing designers market their own brands, but contract out the
actual garment production.
Licensees operate their own manufacturing plants and market clothing under
license from the brand owner.
Contract manufacturers may have long-standing relationships (but not actual
contracts) with designers and marketers, or may use brokers to get new business.
Contract manufacturers get business on their ability to produce goods at low cost
and on time. Poor quality work is typically returned to the sewing manufacturer for
reworking or is discounted. The manufacturer placing the order typically owns and
supplies the materials used by contractors.
Despite attempts at greater automation, most apparel is still sewn using specialized sewing machines.
Equipment is bought from makers like Yamato or Juki. Computer systems have had a limited effect on
the manufacturing side of the industry, although computerized machines may be used to produce
patterns and cut materials. To compete effectively for the best contracts, domestic apparel
manufacturers have moved to greater automation, specialty production, and superior service.
The operations of most apparel manufacturers are similar. Designs for a piece of clothing are converted
into cloth patterns along with a plan for the sewing steps needed to produce the product. Cloth is cut in
various sizes (typically four or six sizes) in a cutting room (or cutting plant), and is then sewn (or "made-
up") into finished items by individual workers at sewing stations, in a series of assembly-line steps that
may require special sewing equipment. Finished goods are pressed, inspected, and packaged for
delivery.
Many manufacturers cut fabric in the U.S. and then ship it overseas for sewing into final garments. Such
operators benefitted from the NAFTA and CAFTA treaties. Exporting non-Chinese textiles into China is
difficult as best. China will not accept cut fabric for sewing, unless the textiles used are sourced in
China.
1
Industry Profile: Apparel Manufacturing, First Research, Copyright 2011, Hoover’s Inc., May 16, 2011.
LAEDC - Kyser Center P a g e | 7 Fashion Industry Profile 2011
Machinery that satisfactorily replaces worker's hands has been elusive, because of the soft nature of the
materials being handled. Some standardized articles made from stiff material, mainly jeans, can now be
sewn by semi-automated machinery that requires workers only to position the material. Because of the
different skills and equipment needed to produce different types of clothing, manufacturers usually
develop a specialty.
Overall Employment Facts
A collapse in L.A. County apparel establishments took down its manufacturing employment. Looking
back to the year 2000, and you see textile mill employment in L.A. County started its decline, spurred by
a steep rise in energy costs. For the past ten-plus years, the number of establishments in both apparel
manufacturing and textile mills in L.A. County has declined, year-after-year. See below:
When we looked at the three apparel industry sub-segments in the five county area during a four year
period from 2004 to 2008, (textile mills NAICs 313, apparel manufacturing 315, and apparel wholesaling
4243), we found total employment averaged 100,000 workers. The average number for establishments
in the five county area was around 6,400 firms. This implied that an "average" L.A. regional apparel firm
is small; employing around 15 workers.
0
100
200
300
400
500
600
0
1,000
2,000
3,000
4,000
5,000
6,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Number of Establishments in L.A. County
Apparel Mfg.
Textile Mills
Source: California Employment Development Department
Apparel Firms
Textile Firms
LAEDC - Kyser Center P a g e | 8 Fashion Industry Profile 2011
Profitability in individual companies depends on efficient operations and the ability to secure contracts
with clothing marketers. Annual revenue generated to the average company is about $115,000 per
production worker. Small companies can compete effectively with larger ones by specializing in a
particular type of apparel manufacture. The same is true for wholesalers. There are economies of scale
in manufacture. As a sewer gets up towards the 500th pair of jeans, the level of expertise keeps rising,
and output per unit of time increases with it. Making apparel is labor-intensive, making sure profitability
is closely tied to labor costs. Which is why manufacturers move operations to countries with lower
wages. With respect to apparel wholesaling, fewer employees are needed, as no production is required.
As the subsequent chart shows, most L.A. apparel employment is in very small firms -- one to four
employees.
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
From a 1996 Peak, LA County Lost Apparel Mfg. Jobs. Then in
2000, the Loss of Textile Mill Jobs
Apparel Mfg.
Textile Mills
Source: California Employment Development Department
Apparel Jobs
Textile Jobs
0 10 20 30 40 50 60 70
Wholesalers
Apparel Mfg.
Textile Mills
Further up the Value Chain, there is little in the way of
economies of scale and capital intensity, as evidenced by the
proportion of small 1-4 employee firms
Proportion of Firms with 1-4 Employees (%)
Source: U.S. Census, 2009 County Business Patterns
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Even though jobs losses here are disheartening, L.A. is actually doing much better when compared to the
national trend.
While apparel industry employment has fallen across the United States, the share of employment
captured by the L.A. and Orange County apparel industry has increased. In 2002, for example, L.A. and
Orange County accounted for a 24% share of U.S. apparel manufacturing jobs. In 2009, this proportion
rose. Over 33% of U.S. apparel manufacturing jobs were located in L.A. or Orange County; over 20% of
apparel, piece goods, and notions merchant wholesalers were found here; and almost 7% of all textile
mill jobs. All of these proportions have risen, year-after-year, over the last decade. See below:
Additionally, many forms of L.A. employment in apparel fall outside the three broad catch-all categories.
For example, L.A. apparel industry experts count 1,050 independent fashion designers operating solo;
another 2,771 workers are employed in their independent showrooms; and then 1,240 textile reps and
another 865 home-based agents and brokers are out working on commission. Another bucket of L.A.
workers can be found in a range of ancillary activities like: packaging, labeling, and other support roles
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Firms
Total Wages
The Los Angeles Apparel Industry Makes up over 19% of all
L.A. County Manufacturing Firms, and over 7% of Total Wages
Source: U.S. Census County Business Patterns
0% 10% 20% 30% 40%
Textile mills
Apparel manufacturing
Apparel, piece goods, and notions
merchant wholesalers
LA and Orange County Apparel Industry
Share of Total U.S. Employment - 2009
Source: Dept. of Commerce, 2009 Country Business Patterns
LAEDC - Kyser Center P a g e | 10 Fashion Industry Profile 2011
(220 positions); in custom computer programming (69 positions); in fulfillment support services to
imports (1,100 positions); in consulting services (130 positions); in commercial rental (240 positions);
and in specialized local freight (560 positions). There are around 750 apparel educators teaching in 14
different institutions in the five county area too.
The subsequent table summarizes.
Related Industry Segments
# of Employees
# of Establishments
Independent Fashion Designers
1,050
1,050 (contracted consultants)
Independent Showrooms
2,771
888 (all categories)
Textile Reps
1,240
1,240 (wholesale trade agents & brokers)
Home-based Agents/Brokers
865
517 (no office address)
Outside Services
220
55 (packaging, labeling, support)
Technology
69
22 (custom computer programming)
Fulfillment
1,100
12 (support services to imports)
Labor Compliance
130
4 (consulting services)
Equipment Leasing
240
4 (commercial rental)
Educators
750
21 (teachers and administration
Distribution
560
6 (specialized local freight)
Grand Totals
8,995
3,802
Source: California Fashion Association
Including these activities means adding 8,995 workers operating in 3,802 establishments. This takes the
overall jobs tied to the apparel industry near to 110,000 workers. And the number of total
establishments is likely to be over 10,000.
A significant number of contract workers are not captured by official surveys too.
With rising worker's compensation and health insurance costs, some may think employers might be
tempted to hire contract workers instead of having them on permanent payrolls. While this may be
true, the reality is far more complex. Many workers, especially those who are fast and skilled,
constantly look for better opportunities among different contracting firms. Some do this so they can fill
up all the work hours they care to put in. As a result, the workforce is very fluid in the cut-and-sew
section of the apparel industry. Under these circumstances, benefits such as an employer-financed
(wholly or partially) health insurance program are difficult to manage. Job counts are no easier to
capture.
Contract workers cannot work from their homes. Home sewing is only allowed for craft items like
household-used knitting and pillows. Retailers face fines under California law if they buy sewn apparel
from home sewers. The practice of using home labor for commercial apparel manufacturing is illegal,
because power sewing machines are dangerous to children. Contractors who give work to home labor
will be punished along with the laborer. Not surprisingly, there have been no California Dept. of Labor
Standards and Enforcement (DLSE) violations in seven years.
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Wholesaler, Manufacturing, and Textiles Employment
The data show us a genuine industry cluster exists in Los Angeles County!
Locating near other firms offers the chance for free information to spill over more often, to easily share
paid resources, and keep design trends up-to-date. In recent years, L.A. County accounts for 86% of the
apparel manufacturing employment and 84% of wholesale merchant employment in the five county
area. The apparel industry (excluding retailing) is one of the larger industries in the Los Angeles five-
county area.
Los Angeles County has the largest job count. With a steady distant second at 12% of apparel
manufacturing jobs, Orange County has a smaller base focused on surfwear and activewear. Orange
County has gained share in jobs over recent years, due to the acceptance of the surfer style. L.A. has a
classic manufacturing cluster surrounding the Fashion District in downtown Los Angeles. In the case of
Orange County, the industry is spread out.
Wholesale apparel data
Defining a wholesaling job is as much about what it is not, as what it is:
No design
No manufacturing
No production
No technical specs.
Just activity involved in the purchase and re-sale of completed apparel.
Wholesale apparel merchant jobs are more dispersed within the five county area. Ventura, San
Bernardino and Riverside Counties collected about 6% of apparel wholesale numbers. In recent years,
Orange County collected 10%.
80%
85%
90%
95%
100%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
In Terms of Apparel Manufacturing Jobs,
Orange County Has Grown its Share
Ventura
San Bernardino
Riverside
Orange County
Los Angeles
Source: U.S. Census, 2009 County Business Patterns
LAEDC - Kyser Center P a g e | 12 Fashion Industry Profile 2011
Apparel merchant wholesaling in L.A. County remains a cyclical business. Revenues grow with the
overall strength in the U.S. economy; slip back when it declines; and recover along with the rest of retail
sales.
Apparel wholesale jobs stayed in a very modest growth mode over the last ten years too -- adding +1,000
jobs in L.A. County from peak to peak.
Wholesaling employment benefits from both import and export activities. Small lot jobbers are in sync
with the fastest growth end markets, i.e. specialized retailers selling contemporary women's clothes.
Demand is mostly regional -- in California and Western states -- but a substantial national and
international traffic happens. L.A.'s large local market is one reason why apparel wholesaling firms
continue to prosper, even as L.A. County apparel manufacturing and textile employment declines
dramatically.
Third party logistics (aka "3PL's") are another source of L.A. County jobs for this industry
2
.
The very geography of L.A. and its proximity to Asia creates a natural driver of growth in the industry.
Shipments from Asia are weeks faster to Long Beach than to the East Coast. This allows an apparel
manufacturer to maintain better liquidity through faster inventory turns. Furthermore, a growing
number of apparel companies from around the United States are using 3PL's based in L.A. These 3PL's
receive containers, break them down, and then do the type of prep work normally done in the
company's own warehouses (i.e. hang tags, garment bags, hangers, and re-boxing). Then, they ship to
the wholesale customers. Very often the 3PL has access to the company's internal inventory
management and electronic data interchange (EDI) systems, which makes it a seamless process. These
shipments are booked as revenue for the wholesaler, wherever they may be located. But they
contribute directly to the apparel industry in L.A.
A concentration of trade facilitators in the immediate L.A. area --customs brokers, freight forwarders,
and trade attorneys-- make interaction with the 3PL’s easier for Los Angeles based importers too.
2
Attributed to Eric Fisch, Vice President, Commercial Banking and Sr. Apparel Analyst, HSBC in Los Angeles, CA.
80%
85%
90%
95%
100%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
In Terms of Apparel Wholesaler Jobs,
Orange County has Grown its Share
Ventura
San Bernardino
Riverside
Orange County
Los Angeles
Source: U.S. Census, 2009 County Business Patterns
LAEDC - Kyser Center P a g e | 13 Fashion Industry Profile 2011
In addition, the nearby Mexican maquiladoras (maquilas) apparel operations have improved in terms of
quality and labor force skills in recent years.
While one's initial inclination would be that this arrangement has drained jobs in SoCal, in many cases it
is the opposite. These lower wage apparel jobs would have gone to Asia, not California. What the
maquila's have fostered is growth in wholesaler jobs in SoCal, where they anchor due to the proximity to
the border. Because of the mechanics of the duty free program (goods need to originate in the U.S.,
have value added in Mexico, and then return to U.S.), apparel companies located in the rest of the
country do not utilize it. This has helped to foster growth in SoCal wholesalers.
Over the last cycle, L.A. County and Orange County showed a modest consolidation in the number of
wholesale firms.
At its peak in 2001, 19,600 workers at 2,500 firms were busy in L.A. County apparel wholesaling.
In the next wholesaling peak reached in early 2008, L.A. County recorded 20,700 people in a
smaller number of just 2,360 firms.
In 2001, Orange County had 3,000 wholesaling jobs at 300 firms.
At the next peak in 2008, Orange County offered 2,850 jobs at just 240 firms.
Stronger apparel wholesaling firms (still quite small in most cases) have been able to grow modestly;
often at the expense of firms who exited the market over the last ten years.
Wholesale apparel activity across California's counties is more dispersed than apparel manufacturing.
10,000
12,000
14,000
16,000
18,000
20,000
22,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Avg. Annual Employment of
Apparel Wholesalers
Shows an Increase Beginning in 2004
Apparel Wholesalers
Source: U.S. Census, 2009 County Business Patterns
Wholesale Jobs
LAEDC - Kyser Center P a g e | 14 Fashion Industry Profile 2011
See the subsequent chart to confirm:
Apparel manufacturing data
Using 2009 data, L.A. County apparel manufacturing jobs came in at 48,000 workers within 2,600 firms.
Over the last decade and more, L.A. County apparel manufacturing saw both jobs and establishments
cut in half. In Los Angeles County, the peak for apparel manufacturing activity came with 105,300 jobs
scored in 1996. The peak for L.A. County apparel manufacturing establishments came two years later in
1998 at 5,300 firms. Since then, in every consecutive year, both the L.A. County job and establishment
counts have fallen. Increasingly, consolidation and restructuring efforts have been to cut losses.
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Los Angeles, CA
Orange, CA
San Diego, CA
Alameda, CA
San Bernardino, CA
Ventura, CA
San Francisco, CA
Santa Barbara, CA
San Mateo, CA
Santa Clara, CA
Contra Costa, CA
Riverside, CA
Santa Cruz, CA
Marin, CA
Sacramento, CA
Napa, CA
San Luis Obispo, CA
Imperial, CA
Apparel, Piece Goods, & Notions Wholesaler Jobs in
California are mostly located in L.A. County, though
distribution is widely spread in nearby counties
Source: U.S. Census, 2009 County Business Patterns
0 10000 20000 30000 40000 50000
Los Angeles, CA
Orange, CA
San Francisco, CA
San Diego, CA
Alameda, CA
San Bernardino, CA
Santa Clara, CA
Marin, CA
Sonoma, CA
Ventura, CA
Sacramento, CA
San Mateo, CA
Contra Costa, CA
Yolo, CA
Kern, CA
Apparel Manufacturing Jobs 315:
L.A. County Leads the way in California
Source: U.S. Census, 2009 County Business Patterns
LAEDC - Kyser Center P a g e | 15 Fashion Industry Profile 2011
Textile mill data
Textiles mills in Los Angeles County performed under similar stress over the last decade. The 2009 data
put this sub-segment at 7,600 jobs and 290 firms. Again, a cut in half. Textiles mill employment in L.A.
County reached its peak in 1998 and 1999. At that time, these mills offered 14,300 jobs at 510 firms.
Wages & Earnings
Paradoxically, the average level of wages increased in recent years. More highly skilled specialty jobs
remained in the U.S. factories, while lower-skilled, lower-paying jobs moved offshore.
Annual performances of wages & earnings in L.A. County offer a good vantage point.
Since 2000, U.S. Census data show apparel manufacturing workers have taken home rising weekly
earnings in L.A. County. In 2011, an average apparel manufacturing worker is making over $600 a week.
In 2000, that same worker earned $400 a week. Putting in 40 hours each week in today's L.A. County
means L.A. County cut and sew apparel manufacturing jobs may pay $15 for an hour's worth of work.
And today's apparel wholesalers earn close to $900 a week. This is $22.50 an hour. In 2000 in
comparison, apparel wholesalers operating successfully in L.A. County pulled in $650 a week offering the
same services.
The subsequent chart shows this relentless upward increase...quite clearly!
0
200
400
600
800
1000
1200
1400
1-4
5-9
10-19
20-49
50-99
100-249
250-499
500-999
1000 or
more
Apparel Manufacturing 315 jobs in
L.A. County are in small firms (1-4, 5-9, & 10-19 employees)
Number of Firms
Source: U.S. Census, 2009 County Business Patterns
LAEDC - Kyser Center P a g e | 16 Fashion Industry Profile 2011
A private set of wholesale and apparel manufacturing data adjust these findings somewhat: According
to Dun & Bradstreet data drawn in August 2011, NAICs code 4243 for apparel wholesale jobs came in at
29,454 (42% of the cluster). NAICs for apparel manufacturing came in at 39,382 jobs (58% of the total
for the cluster) for a total of 68,836 jobs (roughly the same total number of jobs as the government's
data). This means several thousand higher-paying wholesale jobs in the Dun & Bradstreet database are
counted within apparel manufacturing jobs in the U.S. government's database.
Could higher-paying wholesaling jobs be masquerading as apparel manufacturing jobs? The Bureau of
Labor Statistics in May 2011 put the national average for apparel manufacturing jobs at $11.69 an hour,
versus the $15 an hour we calculated from the government data for L.A. County. A notable differential.
More than anything else, rising domestic (and locally-determined) hourly labor costs forced L.A. County
manufacturing and contracting firms to form relationships with outside suppliers. Mostly in China, but
also in a range of countries such as South Korea, Vietnam, Mexico, India, and Indonesia. Over the last
ten years, the rise in L.A. County hourly apparel manufacturing wages has been relentless.
Why?
In this region, the remaining L.A. apparel manufacturing and textile mill employment opportunities have
become increasingly specialized. Workers are also increasingly surrounded by larger numbers of better
paying jobs in service industries. These two effects have been seen across the United States economy
in all regions. Finally, increases in minimum wages have been implemented, forcing up the rest of
hourly pay scales with it. California’s minimum wage is $8.00 per hour (set January 1, 2008), while the
federal minimum wage is $6.55 per hour (set July, 2008).
Two charts below provide additional facts on the overall strength of L.A. County apparel industry wages
& earnings.
First, the total L.A. County apparel wage bill:
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Average Weekly Wage
L.A. County Average Weekly Wages
Apparel Wholesaling Pays Much Better
Apparel Wholesaling
Apparel Mfg.
Textile Mills
Source: U.S. Census, 2009 County Business Patterns
LAEDC - Kyser Center P a g e | 17 Fashion Industry Profile 2011
Second, L.A. County apparel wage data shown as the percent of all L.A. County private industry:
The BLS Quarterly Census of Employment and Wages (QCEW) offers annual salary data in the three sub-
industries in SoCal:
1. Using first quarter of 2011 data, L.A. County textile mill jobs paid $28K a year. Orange
County jobs paid $24K a year. Nationally, such jobs paid $30K a year.
2. Apparel manufacturing jobs? L.A. County paid $24K a year and Orange County paid
$27K a year. Nationally, "cut and sew" jobs paid $24K a year.
3. L.A. County wholesale apparel jobs? They paid $46K a year. Orange County jobs paid
$57K a year. Nationally, wholesale apparel jobs paid $52K a year.
Los Angeles County has kept a cost advantage in all three major areas of the apparel industry.
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Total Wages of L.A. County Apparel Industry
Textile Mills
Apparel Mfg.
Apparel Wholesalers
Source: U.S. Census, 2009 County Business Patterns
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
L.A. County Apparel Industry Total Wages
(as Percent of All Private Industry Wages)
Source: U.S. Census, 2009 County Business Patterns
LAEDC - Kyser Center P a g e | 18 Fashion Industry Profile 2011
L.A. County is a cheaper place to hire apparel workers. Orange County is a bit cheaper
to hire textile workers.
See subsequent chart for a summary comparing L.A. County and U.S. pay:
Looking for still another take on this industry?
Consider the American Apparel & Footwear Association's "2011 Salary Survey and Job Market Report".
Their 2000 respondents came from across the United States, with 90% of people working in apparel and
footwear firms of greater than 10 employees. 36% of respondents worked at the really big apparel and
footwear firms -- i.e. those above 1000 employees.
Their 2000 jobs fell into the following categories.
34% Design & Technical Development
14% Sales & Marketing
13% Production & Product Development
13% Planning and Merchandising
13% Retail, Ecommerce & Store Level
5% Operations & IT
1% Transportation & Logistics
1% Customs, Trade, & Compliance
Source: 24/Seven and American Apparel & Footwear Association, 2011
79% of respondents were female. 53% were single. 77% had no children at home. 67% had some
college attainment.
0 10 20 30 40 50 60
Textile mills
Apparel manufacturing
Apparel, piece goods, and
notions merchant wholesalers
Showing Los Angeles County has a cost advantage, U.S. worker pay
levels are higher in all three apparel industries
US Pay
LA Pay ($000)
Source: BLS (QCEW)
LAEDC - Kyser Center P a g e | 19 Fashion Industry Profile 2011
The median fashion and retail salary at the big U.S. companies was $70,000. At the top of the economic
totem pole in these big corporate apparel and footwear firms, the survey showed a SVP of Design could
make $390,000 a year; a Fashion Director up to $430,000 a year. The median compensation for a SVP
of Production/Sourcing individual made $260,000 a year. Entry level Associate Designers were paid a
median salary of between $40,000 and $50,000 a year. The same level of compensation was earned by
entry-level Purchasing/Sourcing Assistants.
A Demographic Profile of Apparel Manufacturing Workers
Demographic data from Census 2000 provide another glimpse into the apparel manufacturing sector.
(Census 2010 data are still not available.) Unfortunately, we are unable to distinguish between apparel
"manufacturers" and "contractors", which do most of the actual production work. Most data being
discussed here are likely from apparel manufacturing contractors.
Hispanics (81%) and Asians (16%) dominate the ranks of production workers.
Roughly two-thirds are women.
The results from the Census's 5-Percent Public Use Microdata Sample (5% PUMS) for the Los Angeles
five-county area affirm some of the perceptions about the apparel manufacturing industry. Most
workers did not complete high school and do not speak English proficiently. Over three-quarters are
non-citizens but may have permanent residency status and thus employment authorization. They work,
on average, 40 hours per week. Technical personnel, which includes engineers, computer
programmers, and mechanics are still dominated by minorities, but they tend to have a higher
educational attainment.
For comparison, consider the demographics of Designers & Researchers. Only 31% are Hispanic, 64%
have a college degree, and just 22% are non-citizens. Top Managers? 18% are Hispanic, 52% have a
college degree, and 25% are non-citizens.
Merchandise Prices
Like the computer industry, the apparel industry has had to do battle with falling prices for its products.
Falling average prices in the apparel sector have been caused by the shift of production to lower-cost
locales, changes in retailing, and a general acceptance of a more casual appearance for both workplace
and social occasions.
More and more apparel has been sold at value retailers (e.g. Wal-Mart and Target) and "wholesale
clubs" (e.g. Costco and Sam's Club) instead of department stores too. Mid-income consumers have
become more value-oriented in recent years, and discount chains upgraded their offerings to attract this
huge segment of the population. In some cases, chain stores licensed designer brands and have taken
LAEDC - Kyser Center P a g e | 20 Fashion Industry Profile 2011
over manufacturing responsibilities. Now, some once-hot designer brands are available at very low
prices through these stores.
Until 2008...
In the last three years, there has been a visible increase in apparel prices in Los Angeles.
Apparel making markets have experienced the effects of a rise in oil and of commodity prices such as
cotton and linen. These costs have yet to be passed on to consumers. Also, there is accumulating
evidence coming in from Asia, over a period of many years, that rising labor costs need to be passed on
too. Today, the rate of inflation in China is a key focus for domestic apparel makers.
A subsequent chart shows just how explosive cotton prices have been in the United States. Cotton prices
for export are 250% in this export index, while they used to be 100% just two years ago. It also shows a
cooling cotton price trend started in the first half of 2011. The U.S. South and California are some of the
world's biggest exporters of cotton.
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Retail Apparel Prices Rise in Los Angeles
Source: U.S. Dept. of Labor, Bureau of Labor Statistics
0
50
100
150
200
250
300
350
400
2006
2007
2007
2007
2007
2008
2008
2008
2008
2009
2009
2009
2009
2010
2010
2010
2010
2011
2011
Cotton Export Indices Show Surging Prices
Source: U.S. Dept. of Labor, Bureau of Labor Statistics
LAEDC - Kyser Center P a g e | 21 Fashion Industry Profile 2011
More globally, cotton prices spiked to $2.30 per pound in 2011 because of bad crops; brought on by
inclement weather and increasing world demand. They recently fell to around $1.05 per pound. In
addition, rising globally-set oil prices boosted prices for petroleum-based products such as nylon and
polyester. Raw materials make up a small fraction of the cost in an finished garment. But when the
underlying input price moves are this strong, they are felt. These rising costs could be passed on to
consumers.
Cotton prices have had a major impact on the industry. Towards the end of 2011, many wholesalers
are only beginning to realize their impact. They committed to purchase cotton months ago when cotton
prices were highest. The run-up in prices made the textile mills in Asia more conservative, forcing
wholesalers to pre-pay for cotton. This high-priced cotton is the raw material in goods they are now
delivering to retailers. Many retailers have also been aggressive in requesting price reductions that
mirror the recent reductions in cotton prices. This further pressures wholesalers. The combination of
these factors has caused both profit margin and cash flow issues for them.
In the following two charts, we show the Textile Mill and Apparel Manufacturing Producer Price Indexes
(PPIs). PPIs measure the average change over time in selling prices received by domestic producers for
their output.
Effects from higher cotton prices can be seen at the textile producer's price level of the value chain.
From 2010 to 2011, Textile Mills increased prices from 115 to over 130 in PPI index terms. A +13%
increase. Previously, increases had been +2% to +3% annually.
See the subsequent chart:
The PPI for Apparel Manufacturers captures the effect of higher labor costs. The year-on-year increase
had been close to +1%. It picked up notably in 2011, most likely from higher labor costs in China. The
PPI for Apparel Manufacturers did not show any change from rising input prices like cotton.
See the subsequent chart:
90
95
100
105
110
115
120
125
130
135
2004
2005
2006
2007
2008
2009
2010
2011
PPI Textile Mills - Shows the Effects of Cotton Prices in 2011
Source: U.S. Dept. of Labor, Bureau of Labor Statistics
LAEDC - Kyser Center P a g e | 22 Fashion Industry Profile 2011
These data show most textile mills are partly passing on cotton and other commodity price increases.
Most apparel manufacturers are passing on a part of rising labor costs to customers too. But some
apparel manufacturers are cutting costs by re-engineering fabric blends, making laces and trims in-
house, and streamlining use of embellishments such as appliqués, bows, beading, and piping. A similar
type of material substitution is likely at some textile mills, using less expensive textiles and trims.
As another subsequent chart shows, the U.S. profit per dollar of sales before income taxes for "Apparel
and Leather Products" rested at 10% in the five quarters up to the end of March 2011. At 10%, the
apparel industry pre-tax profit margin remains close to average U.S. non-durable manufacturing profit
margins. Textile Mills earned a 4% pre-tax margin. In comparison, Computer and Electronic Products
makers earned a 23% pre-tax margin.
At the base of the value chain (apparel manufacturing), the flat quarterly profit profile doesn't show any
effects from higher costs. The effect of rising costs has not been dealt with visibly.
Yet!
96
98
100
102
104
106
2004
2005
2006
2007
2008
2009
2010
2011
PPI Apparel Manufacturing -
Some Evidence of the Pass Through of Material Costs in 2011
Source: U.S. Dept. of Labor, Bureau of Labor Statistics
0
2
4
6
8
10
12
1Q 2010
2Q 2010
3Q 2010
4Q 2010
1Q 2011
Percentage of Profit Per Dollar of Sales Before Income Taxes -
Apparel and Leather Products are Close to the Overall Mfg. Average
Source: U.S. Census Bureau
LAEDC - Kyser Center P a g e | 23 Fashion Industry Profile 2011
Looking towards the end of the value chain, there was very visible price discounting in women's and
girl's apparel prices at department stores around the peak of the 2008 financial crisis. In 2010, price
rises at department stores recouped some of the 2008 era discounts on offer to move merchandise.
See the subsequent chart to confirm:
Retailers at the end of the value chain are facing down a difficult choice: Between cutting their profit
margins, or passing on price increases to their already stressed customer base. It remains to be seen if
further price increases at retail due to higher cotton prices can be made successfully.
Finance
Revenue for many apparel manufacturers is seasonal, because spring and fall are the prime selling
seasons. Contractors are essentially financed by manufacturers they work for, with partial payments as
shipments are made. Manufacturers often have financing needs for both receivables and inventory.
Payments from large buyers and payments to foreign contractors may be via letters of credit.
The lack of equipment finance is a major issue in Los Angeles. Finance availability keeps modernization
for local manufacturing at bay. Equipment financing needs have decreased in recent years as more
manufacturers use foreign contractors. Due to the loss of the California manufacturer's tax credit in
2003, brand owners are also no longer incentivized to finance new equipment for their contractors.
Overall, apparel in the U.S. remains a challenging business -- net income earned is about 1% of revenues.
It is 0.9% for smaller firms. However, strong entry figures in difficult economic times provide ample
evidence that sizeable returns are available to L.A. based apparel companies with good design ideas,
strong management, and well-crafted business models. In 2009, at the depth of the last downturn, we
had a +6.9% increase in the amount of apparel-making companies registered with the California DLSE.
A breakdown by California county of apparel manufacturing (NAICS 315) and textile mill (NAICS 313)
companies and revenues shows L.A. County and Orange County are clear leaders. Counting all 2011
500
550
600
650
700
2001
2001
2001
2002
2002
2003
2003
2003
2004
2004
2005
2005
2006
2006
2006
2007
2007
2008
2008
2008
2009
2009
2010
2010
2011
2011
Dept. Store Women's and Girl's Accessories Price Index
Evidence of Cooling in Recent Months...
Source: U.S. Dept. of Labor, Bureau of Labor Statistics
LAEDC - Kyser Center P a g e | 24 Fashion Industry Profile 2011
apparel and textiles operations in California, 994 companies earned above $1 million in revenue. Of that
number, L.A. County had 692 companies and Orange County had 96 (summing up to 80% of the total).
See the subsequent table:
Table 1: Companies in California with Revenues of $1 Million and Greater, 2011
Apparel Manufacturing (NAICS 315) and Textile Mills (NAICS 313)
County
Total
Companies
Total
Revenues
($ millions)
Total
Employees
Average
revenues
($ millions)
Average
employees
Los Angeles County
692
$4,882
44,906
$7
65
Orange County
96
$1,256
13,355
$13
139
Riverside County
7
$28
366
$4
52
San Bernardino County
5
$20
280
$4
56
Ventura County
14
$82
1,065
$6
76
Alameda County
19
$1,319
1,465
$69
77
Contra Costa County
6
$33
392
$5
65
El Dorado County
1
$1
20
$1
20
Fresno County
5
$10
90
$2
18
Humboldt County
2
$7
111
$3
56
Imperial County
1
$2
20
$2
20
Kern County
2
$5
39
$3
20
Marin County
2
$5
39
$3
20
Merced County
1
$2
40
$2
40
Monterey County
2
$18
259
$9
130
Napa County
1
$1
4
$1
4
Nevada County
1
$1
2
$1
2
Sacramento County
2
$6
51
$3
26
San Benito County
1
$1
17
$1
17
San Diego County
40
$421
6,453
$11
161
San Francisco County
26
$4,508
17,769
$173
683
San Luis Obispo County
3
$5
58
$2
19
San Mateo County
7
$30
426
$4
61
Santa Barbara County
5
$31
112
$6
22
Santa Clara County
7
$16
125
$2
18
Santa Cruz County
3
$27
102
$9
34
Solano County
1
$3
25
$3
25
Sonoma County
4
$10
111
$3
28
Tuolumne County
1
$1
14
$1
14
Other (Unknown
location)
37
$1,589
13,566
$43
367
Grand Total
994
$14,320
101,282
$14
102
LAEDC - Kyser Center P a g e | 25 Fashion Industry Profile 2011
Note: San Francisco is the home of Levi-Strauss, with revenue of $4.4 Billion.
Source: Hoover's
Dun & Bradstreet data, also captured in 2011, show the amount of financial stress evident among the
apparel wholesalers (4243), the apparel manufacturers (315), and the textile mills (313) in L.A. County.
In 2011, as a result of very competitive market conditions in L.A. County, fully 45% of apparel
wholesalers, apparel manufacturers, and textile mills operate under significant financial stress.
In this industry, 25% of revenues in L.A. County are earned in conditions of financial stress too.
In light of these numbers, a key implication emerges: a small sized firm in L.A. has a greater chance of
operating under conditions of financial stress. Less product and process diversification, lower access to
credit, and other issues appear relevant.
See the table below:
Table 2: Conditions of Financial Stress in L.A. County Apparel Industries, August 2011
Risk
Level
1
2
3
4
5
Unclassified/
Bankrupt
Total
4243 Apparel
Wholesalers
Firms
19
844
1447
1670
143
68
4191
($ millions)
Revenues
$304
$1,436
$2,301
$1,360
$213
$22
$5,635
Risk
Level
1
2
3
4
5
Unclassified/
Bankrupt
Total
313 & 315
Apparel
Manufacturing
Firms
27
455
885
961
138
69
2535
and Textile
Mills
Revenues
$412
$3,619
$1,639
$960
$197
$556
$7,383
Risk
Level
1
2
3
HIGH
RISK/4
HIGHEST
RISK/5
Unclassified/
Bankrupt
4243 Apparel
Wholesalers
Firms
0%
20%
35%
40%
3%
2%
Revenues
5%
25%
41%
24%
4%
0%
313 & 315
Apparel
Manufacturing
Firms
1%
18%
35%
38%
5%
3%
and Textile
Mills
Revenues
6%
49%
22%
13%
3%
8%
Source: Dun & Bradstreet
As the data in both tables show, the L.A. apparel industry is largely small and middle-market companies.
Many are managed by owner-operators. They have a great deal of their own capital invested in their
business. This is one of the driving forces behind why such companies turn to a form of financing called
LAEDC - Kyser Center P a g e | 26 Fashion Industry Profile 2011
factoring. Privately-owned businesses generally do not want to risk additional capital by extending large
amounts of credit to their retail customers.
Factoring is an agreement between a factoring company and the suppliers of goods, typically to the
retail industry. A small, owner-operated apparel manufacturer supplying clothes to a women's dress
retailer is a classic example. The factor purchases the accounts receivable from a supplier (the small
apparel manufacturer in this case) and assumes responsibility for a retailer’s financial inability to pay
(the women's dress retailer in this case). This financing activity combines:
Credit protection and advice.
Accounts receivable bookkeeping, including electronic invoice and payment processing.
Collections, cash management, and lockbox processing.
Accounts receivable financing.
Factoring helps companies of all sizes, from start-ups to mature companies:
Improve cash flow.
Eliminate credit losses.
Reduce operating expenses.
Expand working capital financing through advances.
Improve management information through online reports.
Major international banks focus their marketing efforts for factoring services on the larger apparel firms,
i.e. those above $ 2 million in annual sales. If a firm is smaller than $ 2 million, a smaller, locally-based
factor picks up the business. These smaller, locally-based factors tend to charge much higher
commission rates, due to the greater risks their clients face.
International Trade
The U.S. imports the bulk of apparel sold domestically. In 2010, the U.S. imported $71.4 billion worth of
apparel, with $40.6 billion arriving through the Los Angeles Customs District.
Since most imports come from Asia, a significant portion passes through the Los Angeles Customs
District (LACD), which includes the twin ports of Los Angeles and Long Beach, Port Hueneme, LAX,
Ontario International, and McCarran Field (Las Vegas). Of the top source countries for apparel imports
to the LACD, China was by far the largest with $24.8 billion in 2010 (our definition of "China" includes
Hong Kong and Macau for reasons to be explained in the Foreign Competition section). It is followed by
Vietnam ($4.4 billion), Indonesia ($2.7 billion), Bangladesh ($1.2 billion),Thailand ($760 million),
Philippines ($700 million), India ($620 million), Taiwan ($280 million), and South Korea ($120 million).
In 2004, when we last did this report, China accounted for 1/3 of apparel imports coming through the
L.A. area's seaports and airports. In 2011, China accounted for 2/3 of apparel imports with six times the
dollar value of 2004. Vietnam, Bangladesh, and India did not receive mention in 2004. Now, they stand
as number two, number four, and number six.
LAEDC - Kyser Center P a g e | 27 Fashion Industry Profile 2011
(Note: trade data for the L.A. Customs District do not reflect actual production or consumption in the
SoCal area. It is the most comprehensive data available, and we feel it does provide a good picture of
the overall trend. For L.A.-Canada and L.A.-Mexico trade, however, the data are severely skewed
because much trade passes through border customs districts like San Diego and Seattle. According to
industry insiders, Mexico is the second largest source of L.A.'s apparel imports behind, who else, China).
For textiles (not textile products such as carpets, rugs, etc.), China was also the largest source of imports
at $687 million (out of a total of $1.7 billion in textile imports to the LACD), followed by South Korea
($297 million), Taiwan ($172 million), Japan ($121 million), Indonesia ($91 million) and India ($78
million). Italy ($51 million) was the first European country to reach the top textile import list.
See the table below:
Table 3: Los Angeles Customs District, Textile and Apparel Imports in 2010
Country
Total
Textiles
Apparel
($ Value)
($ Value)
($ Value)
World
40,595,746,183
1,656,551,261
38,939,194,922
China
25,477,525,781
686,840,071
24,790,685,710
Vietnam
4,421,128,517
27,565,293
4,393,563,224
Indonesia
2,816,255,708
91,492,316
2,724,763,392
Bangladesh
1,190,147,379
145,084
1,190,002,295
Thailand
803,662,413
44,028,732
759,633,681
India
707,044,559
78,058,578
628,985,981
Philippines
698,329,905
1,171,788
697,158,117
Taiwan
451,559,679
172,090,837
279,468,842
South Korea
417,602,893
297,102,849
120,500,044
Japan
127,369,986
121,034,086
6,335,900
Hong Kong
94,953,193
3,208,088
91,745,105
Macau
36,188,562
36,188,562
Singapore
35,590,786
66,572
35,524,214
Asia
37,277,359,361
1,522,804,294
35,754,555,067
92%
92%
92%
Source: USATradeonline.gov
Textiles: 50 (Silk, Including Yarn), 51 (Wool and Animal Hair), 52 (Cotton, Including Yarn), 54 (Manmade Filament), 55 (Manmade Staple
Fiber), 58 (Spec. Wov Fabric), 60 (Knitted or Crochet)
Apparel: 61 (Apparel Articles and Accessories, Knit or Crochet), 62 (Apparel Articles, Not Knit), 64 (Footwear, Gaiters)
A stark difference exists between these two lists. Top apparel importers are very low wage countries. In
comparison, textile making is both capital and technology intensive. So, top textile importers are higher
wage, higher education, and more developed Asian economies. Driving home this point, the list of top
LAEDC - Kyser Center P a g e | 28 Fashion Industry Profile 2011
textile importers includes the wealthy country of Italy. Italy has a strong tradition of making textiles.
Comparing the two lists suggests Asia is now two regions within itself -- a poor, lesser developed one --
and a well developed one much like Italy.
Top consumers of L.A. apparel exports (a total of $870 million in 2010) were Japan ($178 million) , China
($97 million), South Korea ($92 million), the United Kingdom ($64 million), Belgium ($55 million), and
Australia ($41 million). A large portion of U.S. exports are shipped by air, a sign these are often high-
value, time-sensitive merchandise. What's being exported? Anything from swimwear to designer
dresses to Dodger's shirts.
U.S. exports of textiles ($3.16 billion in 2010) may return to the U.S. after a few weeks as finished
products. China was the number one destination in 2010 at $1.78 billion, followed by Indonesia ($238
million), Vietnam ($191 million), South Korea ($160 million), and Taiwan ($112 million). Interestingly,
the 2010 list includes the telling supra-low wage destinations of Bangladesh ($75 million), Guatemala
($63 million), and Pakistan ($58 million). Many apparel items now indicate the source of the material
besides the location of sewing and packaging. For many products, the fabric source is more important
than where the product is actually stitched together. Also, exports to Mexico are under-reported for the
same reason mentioned above.
A final item to report: Rising export and import apparel prices in 2010 and 2011. The following charts
show an articles of apparel and clothing accessories import price index, and two indexes (export and
import) for cut and sew apparel manufacturing. All three apparel price indices rise strongly -- around 7
to 8 percent-- from early 2010 to mid-2011 in a direct response to higher cotton, oil, and wage prices.
90
95
100
105
110
115
2001
2001
2001
2002
2002
2003
2003
2003
2004
2004
2005
2005
2006
2006
2006
2007
2007
2008
2008
2008
2009
2009
2010
2010
2011
2011
Harmonized System Import Price Index-
Shows a Rise for Articles of Apparel and Clothing Accessories
Source: U.S. Dept. of Labor, Bureau of Labor Statistics
LAEDC - Kyser Center P a g e | 29 Fashion Industry Profile 2011
Indirect Impacts
Like all industries, the real economic impact of the apparel and textile industries goes beyond the
immediate jobs in these industries and the paychecks they generate. For every job created, there are
multiplier effects in terms of either earnings or additional jobs.
When a worker takes home a paycheck, he spends a portion of it. Part of his or her spending becomes
other people's income, and they in turn spend a portion of what they make. Different industries have
different average indirect effects on earnings, which are indicated by earnings "multipliers". The
differences come from the different spending patterns of workers in various industries. For instance, a
highly educated computer engineer may make a lot of money but also invest a large portion of his
earnings, while a factory worker may be forced to spend most of his income. Their purchases are also
different, and that means their spending in effect goes to different people who spend their incomes
differently, and so on. Therefore, different industries in different regions have different multipliers for
earnings.
Using L.A. County's multipliers, one can see the real impact on earnings more than doubled for the
industries in this report. While the direct, documented payroll in apparel & textiles in 2008 was $3.0
billion, it generated another $3.0 billion in indirect earnings and thus accounted for $6.0 billion in total
90
95
100
105
110
115
120
2005
2006
2006
2006
2006
2007
2007
2007
2007
2008
2008
2008
2008
2009
2009
2009
2009
2010
2010
2010
2010
2011
2011
NAICS Cut and Sew NAICS Export Price Index
Source: U.S. Dept. of Labor, Bureau of Labor Statistics
95
100
105
110
2009
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2011
2011
2011
2011
2011
2011
NAICS Cut and Sew Apparel Manufacturing Import Price Index
Seeing Some Inflation Recently
Source: U.S. Dept. of Labor, Bureau of Labor Statistics
LAEDC - Kyser Center P a g e | 30 Fashion Industry Profile 2011
earnings. This means that if all the jobs under this analysis went away, L.A. County would lose $6.0
billion in total income for its population. And this does not include the added 10% of well-paid workers
in other apparel functions outside these three NAICs codes.
At the five county metro area in 2008, we estimated direct and indirect earnings totaled $7.8 billion
3
.
Looking at the issues in terms of jobs is another way of determining the total impact of the apparel and
textiles industries.
The documented employee count in these three NAICs codes was 84,801 in 2008 (a pre-recession year
that is the best proxy for 2011). Their earnings and spending generated another 74,184 "indirect" jobs
for the region. The total L.A. County employment impact was around 158,985 jobs -- not a small
number by any measure.
Table 5: Direct & Indirect Apparel/Textiles Jobs in Los Angeles County, 2008
(Total change in number of jobs due to change in jobs in apparel manufacturing)
Industry\Impact
Direct
Indirect
Estimated Total
Apparel Manufacturing -315
55,029
47,319
102,348
Apparel, Piece Goods, and Notions Wholesalers
- 4243
20,669
20,353
41,022
Textile Mills - 313
9,103
6,511
15,614
Total of these three industry codes
84,801
74,184
158,985
Note: Job multipliers from LAEDC, 2011; overall two digit wholesaling multiplier used as substitute for apparel
wholesaling.
Sources: Ibid.
At the five county metro area for 2008, we estimated total employment impact at 203,533 jobs.
3
Earnings and jobs estimates for the five county Los Angeles area derived from additional LAEDC multipliers, 2011
Table 4: Direct & Indirect Apparel/Textiles Earnings in Los Angeles County, 2008
(Total change in household earnings due to change in apparel manufacturing earnings, in U.S. dollars)
Industry\Impact
Direct
Indirect
Estimated Total
Apparel Manufacturing -315
$1,791,419,070
$2,045,621,436
$3,837,040,506
Apparel, Piece Goods, and Notions
Wholesalers - 4243
$947,040,928
$662,171,017
$1,609,211,945
Textile Mills - 313
$263,455,414
$251,942,412
$515,397,826
Total of these three industry codes
$3,001,915,412
$2,959,734,865
$5,961,650,277
Note: Earnings multipliers include the original earnings; overall wholesale multiplier used as substitute for apparel
wholesaling
Sources: Multipliers -- LAEDC 2011
Earnings and jobs -- U.S. Dept. of Commerce, Bureau of the Census, 2008 County Business Patterns (i.e. pre-recession
figures).
LAEDC - Kyser Center P a g e | 31 Fashion Industry Profile 2011
L.A. Apparel Manufacturing -- An Industry Under Siege
Normally, the apparel industry would be considered a "sunset" industry for an advanced economy.
Apparel manufacturing is a labor-intensive industry with low barriers to entry in the form of a low level
of up-front capital investment. As a result, it is often one of the first manufacturing industries to be
established in an underdeveloped country where low labor costs make them more price competitive. So
based on simple common sense, industries like apparel manufacturing would not survive in a high-cost
environment such as Los Angeles.
But this has not been the case...
The U.S. fast-fashion industry is dominated by local Los Angeles retailers such as Forever 21 Inc., Wet
Seal, and Papaya. They have conditioned shoppers to see fashionable apparel on store shelves much
sooner than in the past. It may take three to four months to get a new item from China. In Los Angeles,
fast-fashion firms can get the fabric in a couple of weeks, have the apparel made in three weeks, and get
it to the stores in five weeks.
4
A Design-driven Industry...
In reality, the modern apparel industry is far more than just manufacturing. It is a highly sophisticated
industry involving fashion & market research, brand licensing/intellectual property rights, design,
materials engineering (which is often classified under "textiles" rather than "apparel"), product
manufacturing, marketing, and finally, distribution. Of these steps, the value-added of manufacturing
can be a large part in accessories or a small part in high-fashion couture products. Los Angeles, with its
strength in entertainment and design, is able to maintain its competitive advantage in product design
and marketing. In some cases, it is also able to sustain its manufacturing capacity for the high-value,
high-fashion, quick-turn orders.
What is the primary source of the strength in L.A.'s apparel design base?
A large part of the strength is the amorphous concept of "L.A. Style", which is propagated by constant
media obsession with Hollywood and entertainment celebrities. The perception of Los Angeles as one
of the centers of fashion (along with New York, Paris, and Northern Italy) continues to support the
demand for things designed in and reflective of Los Angeles. Even as Los Angeles loses traditional
apparel manufacturing to Central America and East Asia, it's reputation as the source of fashion is
growing. Every entertainment award broadcast and the nightly "Access Hollywood" news-shows
reinforce the perception that "L.A. is fashion" even though there's no concerted effort to promote the
"L.A." brand.
4
Alexa Hyland, Fit for L.A., Los Angeles Business Journal, August 8, 2011, Vol. 33, Num. 32.
LAEDC - Kyser Center P a g e | 32 Fashion Industry Profile 2011
Do You Know These Local Brands?
o 7 for All Mankind - jeans
o A.B.S. by Allen Schwartz - women's wear
o Adriano Goldschmied for Koos
o Barbara Lesser - women's wear
o BCBG Max Azria - women's wear
o Bebe - women's wear
o Becca - swimwear
o Forever 21 - (highly diversified)
o Frederick's of Hollywood - (highly diversified)
o Karen Kane - (highly diversified)
o Lucky Brand - casual men's and women's wear
o Manhattan Beachwear - swimwear
o Max Studio - (Leon Max)
o Paris Blue - jeans
o Self Esteem - casual women's wear
o Single Dress - women's wear
o Sue Wong - women's dresses
o Tadashi Shoji - eveningwear
o Trina Turk - (highly diversified)
o True Religion - (highly diversified)
o Vince - (highly diversified)
...Dominated by Immigrants
Interestingly, many of the contracting firms are owned by minorities, especially Asian entrepreneurs
(Korean-American apparel firms even have their own association). Their workers are also mainly of
minority origin: Hispanics and Asians. This is an industry where non-skilled immigrant workers can learn
basic skills and move up the ladder within or outside the apparel industry.
Perceptions & Misperceptions
The local apparel industry suffers from many misperceptions that surround it. The L.A. apparel industry
of today has greatly improved working conditions from the apparel industry of ten years ago. Stringent
self- and government monitoring help ensure that "exploitation" occurs very rarely. Furthermore, the
old-style "cut & sew" jobs have largely disappeared. In their place are shops that work closely with
designers and fill low-volume, quick-turn orders that command much higher prices and hence higher
profit margins. Sending such orders to offshore factories is simply not economical, especially in terms of
time. A "Made in the U.S.A." label still commands a prestige factor that designers and retailers must
consider when focusing on high-margin merchandise.
LAEDC - Kyser Center P a g e | 33 Fashion Industry Profile 2011
Design Programs at Local Colleges
Los Angeles is perceived as a leader in the field of fashion design, which helps its specialty design
schools such as the Fashion Institute of Design & Merchandising (FIDM) and Otis College of Art and
Design attract the top candidates to its design programs. In all, there are 14 private and public
undergraduate schools with programs dedicated to apparel design and merchandising. These schools
also draw many foreign students and minorities, and they add not just diversity but also international
flavors to these programs. Many of their graduates stay to work in this area, which further reinforces
the competitiveness of the region's apparel design industry.
▫ Art Center College of Design
▫ California Polytechnic University, Pomona
▫ California State University, Los Angeles
▫ California State University, Northridge
▫ El Camino College
▫ Fairmount College
▫ Fashion Institute of Design & Merchandising
▫ Long Beach City College
▫ Los Angeles Trade Technical College
▫ Mt. San Antonio College
▫ Otis College of Art & Design
▫ Pasadena City College
▫ Santa Monica College
Sometimes the apparel industry actually benefits from misperceptions. "Designed in Los Angeles" is
seen as a statement of cutting-edge fashion, even though most labels indicate the location of
manufacture (and sometimes that of headquarters of the brand). Only industry insiders who go to the
trade shows and the "Marts" really know what's designed locally and what's not. Some designer labels
play to the entertainment factor by hiring Hollywood-style models to represent their merchandise in
paid advertisement. Also, what celebrities wear to award shows are often perceived as designed in Los
Angeles, even though it's just the show that's in Los Angeles. In truth, some are not designed locally, but
this connection helps link the idea of "celebrity fashion" with Los Angeles.
The L.A. Fashion "Marts"
To know the story of Los Angeles' apparel industry, one must understand the role of the "Marts".
Behind the façade of these ordinary-looking office buildings is the heart of the Los Angeles' fashion
industry. These are the physical marketplaces for designers, manufacturers, wholesalers, and retailers
to meet and connect. Most of their "shows" are not open to the general public, with special public
events where one can purchase sample items.
LAEDC - Kyser Center P a g e | 34 Fashion Industry Profile 2011
Marts in L.A. have two distinct characteristics: They are open 52 weeks a year, and potential buyers
can visit any time. Other marts around the country are only open during designated "market" times.
Surprisingly, New York, which also has a sizable apparel industry, does not even have a main mart.
There are four main marts in Los Angeles: California Market Center (formerly the CaliforniaMart),
Cooper Design Space, The Gerry Building, and the New Mart. They're located at the four corners of
Los Angeles St. and 9th St. in Downtown L.A. Now that's industry clustering!
What's inside each individual building ranges from mundane to cutting-edge. One can find the latest
fashions before it even becomes fashion. Some large retailers also have "buying offices" where
representatives of designers and manufacturers can go and showcase their latest offerings. At these
marts, interested parties mingle and deal. Billions of dollars of contracts are awarded annually thanks
to the interactions inside these marts.
It takes a trip to one of the marts, and perhaps to a trade show within, to appreciate the
sophistication of the industry. There are products that outsiders would not have imagined, such as
"predictive services". These experts forecast trendy colors and styles for the next two years, so
designers and buyers can plan accordingly. No predictive services expert can ignore what's going on
in L.A. Because L.A. leads in youth trends and grabs more attention -- thanks to the Hollywood
connection.
A "Market Week" is a week of fashion shows. It's also a time to attract more distant buyers and press
from all over the world. Given L.A.'s reputation as a major center of the latest fashions, Market
Weeks (held five times a year) and Textile shows (twice a year) are a great time to promote L.A.'s
fashion industry. Unfortunately, they do not get the local media attention they deserve. Often, L.A.
residents are largely uninformed about the significance of the marts and their special activities.
A Truly Global Industry
If globalization allows all countries to benefit from their comparative advantage, then L.A.'s apparel
industry can be upheld as a poster child of this trend.
In Los Angeles, long gone are the large factory floors full of sewing machines. Today, the division of
labor is based on each region's cultural strength and economic realities. Now a piece of a garment can
take a very long journey before it reaches the customer's closet. The design work, including the
necessary market and trend analysis, can be done in Los Angeles. Marketing efforts through various
channels begin immediately, if needed. The design may be modified slightly during the marketing
phase. The design is then sent overseas to contract factories in Central America, Asia, or Africa. These
factories may source fabric from the U.S. or elsewhere. When finished, the merchandise is most often
shipped back to the name-bearing "manufacturer", which in turn ships the orders to retailers'
distribution centers or wholesalers all around the world. Surplus inventories are also sold to certain
discounters and close-out retailers such as Big Lots and Ross.
LAEDC - Kyser Center P a g e | 35 Fashion Industry Profile 2011
In concluding, apparel and textiles manufacturing is a dynamic, fully global market space. It's a value
chain that touches all countries, so it interacts with governments. Their politics, regulations, and taxes
can be dysfunctional, sometimes severely so, particularly in the developing countries. This can present
serious governmental challenges to businesses -- wholly different than in the United States.
Inspect the World Economic Forum insights into important apparel and textile countries from 2010 ...
Ranking the Five Most Problematic Factors for Doing Business in 2010
Turkey
Vietnam
Tax Rates
Inflation
Inefficient Government Bureaucracy
Access to Financing
Tax Regulations
Policy Instability
Inadequately Educated Workforce
Foreign Currency Regulations
Foreign Currency Regulations
Inadequate Supply of Infrastructure
Pakistan
Bangladesh
Government Instability/Coups
Inadequate Supply of Infrastructure
Corruption
Corruption
Policy instability
Inefficient Government Bureaucracy
Inadequate Supply of Infrastructure
Policy Instability
Inefficient Government Bureaucracy
Access to Financing
Indonesia
South Korea
Corruption
Inefficient Government Bureaucracy
Inefficient Government Bureaucracy
Policy Instability
Inadequate Supply of Infrastructure
Access to Financing
Policy Instability
Restrictive Labor Regulations
Access to Financing
Tax Regulations
China
Sri Lanka
Inflation
Tax Rates
Access to Financing
Tax Regulations
Inefficient Government Bureaucracy
Inflation
Policy Instability
Inefficient Government Bureaucracy
Corruption
Policy Instability
United States
Tax Rates
Inefficient Government Bureaucracy
Access to Financing
Tax Regulations
Inflation
Source: World Economic Forum
LAEDC - Kyser Center P a g e | 36 Fashion Industry Profile 2011
Niche Markets in Quick-Turn Merchandise
Product differentiation is very significant to the apparel business, perhaps more so than any other
business.
Brand and designer names command a premium based on their reputation. (The joke is that the "L.V."
lettering on a Louis Vuitton handbag accounts for 95% of the bag's value, but this may not be far from
the truth.) Exclusivity also counts. Two women wearing identical dresses at the same party can be a
true nightmare. Therefore, designs with limited production runs also command a high price tag -- as
fewer customers share the design cost. It is in this kind of environment that the Los Angeles' apparel
industry finds a niche -- the market for low-volume, high-fashion merchandise that has a very short
concept-to-product time. These garments require high-quality materials, agile manufacturing
capabilities, a close working relationship between the factory and the designer, and quick turnaround.
The Los Angeles industry cluster is able to bring together such synergies.
Just how fast is the turnaround in this market? From concept to product, these production runs may be
as short as just a few weeks. Once people forget what Anne Hathaway wore at the last Oscars, the
perceived value of her dress drops exponentially. Therefore, the "knock-off" must get to the market
quickly. Some firms may also place the initial order with local contractors at the same time they place
the larger order with overseas firms. This allows them to capture the higher-priced retailers early on
and use the mass-production goods that come months later to sell to the mid-priced markets.
Another potential niche market is that of re-orders. Some firms underestimate the demand for a certain
style and need additional production fast. If they go through the overseas channel, the style may
become a bit out-of-fashion by the time the products arrive. Also, the quantity needed may not be large
enough to cover the extra overhead involved in overseas sourcing. Thus, developing the capabilities to
adjust production runs quickly is crucial for local firms seeking a piece of the re-order market.
California Fashion Manufacturing (CFM) has started a website that lists contact information and the links
to designers, suppliers, and other Southern California apparel-related companies.
The website will be listing brands, producers, and services who qualify for the "Made in California"
distinction. Basic listing of contact info is free, with listing of a link to a company website free for
members of the California Fashion Association (CFA) and available at a fee for non-members. The goal is
to assist the development of opportunities for strategic alliances with Southern California apparel brand
managers and local industry specialists.
LAEDC - Kyser Center P a g e | 37 Fashion Industry Profile 2011
L.A. & O.C. -- Two Distinct Trendsetters
Although Los Angeles and Orange Counties are economically integrated like two Siamese twins, they do
have their own distinct personalities and hence niche apparel markets. Los Angeles County is strong in
"contemporary" apparel, while Orange County is famous for its surfwear and activewear.
One example of the contemporary style in Los Angeles County is Forever 21. In January, 2010 Forever 21
opened a new 85,000 square feet retail clothing store in Cerritos, California in L.A. County. Being one of
the largest, this store is designated as the chain's flagship store. The retail chain has expanded
internationally recently. The first European Forever 21 store opened in Birmingham, U.K. in late 2010.
The grand opening of the London flagship store occurred in July 2011, with punters queuing up in the
early morning. The store is located near the Bond Street underground station.
Forever 21 focuses on the latest Los Angeles fashion trends and gets them to market quickly. It's
management and employees attend fashion shows and other events to spot the latest trend, and they
stay in close communication with their customers to find out what they want. By staying connected
with the L.A. design scene, it is able to identify hot fashion trends and act on them quickly. The product
cycle is so short in this part of the industry that it relies on a network of domestic suppliers rather than
foreign manufacturers.
The History of Forever 21
The chain, originally known as Fashion 21, was intended for mostly middle-aged women. It was founded in Los
Angeles, California in 1984 by Korean American Do Won Chang (Hangul: 장도원) and his wife, Jin Sook (Hangul:
진숙).
The first Fashion 21 store opened in 1984. It was located at 5637 N. Figueroa St. in the Highland Park district of Los
Angeles. The store was only 900 square feet. It is still in operation and bears the chain's original name. Trendy
designs seen in South Korea were sold and targeted to the Los Angeles Korean American community. However,
people from many other ethnics and nationalities began noticing the trend-setting fashion designs, and the store
became increasingly popular. By the end of the first year, sales had risen from $35,000 to $700,000.
Fashion 21 eventually expanded at the rate of a new store every six months and changed the Fashion 21 brand
name to Forever 21. In 1989, Forever 21 opened its 11th store and first store located in a mall, at the Panorama
Mall which is in Panorama City, California. Forever 21 increased its presence by expanding the average size to
5,000 square feet per store. Since then, Forever 21 has been running specialty stores in major mall locations
nationwide.
In 1995, the chain opened its first location outside of California, which was at Mall of the Americas in Miami,
Florida. Adding new stores every six months, Forever 21 had reached a total of 40 stores by 1997. Creating its own
prototype store in Northridge Fashion Center, Forever 21 has employed its proprietary design concepts to all its
stores since then. By this time Forever 21 also increased its average size to 9,000 square feet per store in prime
spots of top tier malls.
(excerpt from wikipedia)
Wikipedia contributors, Forever 21, Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Forever_21
(accessed September 27, 2011.) Verified with Forever21.com/Company/History
LAEDC - Kyser Center P a g e | 38 Fashion Industry Profile 2011
Orange County may feel it's under the shadow of its big sibling to the north. But it has its own unique
strengths in the apparel sector.
The apparel retailer Tilly's is a worthy Orange County topic. Their corporate office and distribution
center are located in Irvine and their first retail store was built in Los Alamitos in 1982. It's retail stores
are hot among the young and among active adults. While Tilly's customers may not all skateboard, surf,
or ride motocross bikes, they like to be associated with such "California-lifestyle" activities. Wearing this
trendy activewear or surfwear makes a statement about one's personality.
Tilly's sells branded merchandise such as Volcom, Quiksilver, Billabong, O'Neill, and Hurley for men,
women, and children. At the end of 2011, it's 120-stores in 11 states also sold accessories; shoe brands
like Vans, Nike, PF Flyers, Fox, DC Shoes; and different brands of sandals. Offering one of the largest
assortments of brands and merchandise allowed Tilly's to become an expert in inventory control, and to
benefit more certainly from any shift in fashion trends.
In both markets, the key is to be ahead of the fashion curve, which twists and turns quickly in both the
contemporary and the activewear sectors. The Southland's strength in these two sectors is a shining
testimony to its creative environment and design talents.
Technology Comes to the Rescue?
Technology is playing a major role in helping L.A.'s design shops to stay competitive -- by shortening
product cycles and reducing costs.
Computer-aided design and manufacturing (CAD/CAM) products and services help designers to
quickly turn their concepts into prototypes and samples.
Advanced computer-aided videoconferencing allows better communications between designers,
manufacturers (which are often located overseas), and retailers, and this helps improve product
creation and shortens the product cycle (the design-to-shelf time).
Computerized shipping services allow manufacturers and retailers to control product flow
(including customs clearance) and reduce delays, uncertainties, and inventory costs.
Supply side management technology (PLM)
Together, these new technologies help designers, manufacturers, and retailers cut costs and maintain
competitiveness.
But large capital investments can be very burdensome for smaller contractors. First of all, new
machinery is often very expensive and requires some training. Secondly, some firms are nervous about
investing when their own business outlook is uncertain, especially during harsh economic times.
Therefore, some firms find it difficult to invest in new equipment even though long-term savings may be
substantial.
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Another option for small firms is to rent facilities at shared-service technology centers (see the box
below on The Fashion Project Cafe).
An example of Technology at work in fashion design: Located at the nexus of 9th and Los Angeles, The Fashion
Project Cafe solves production problems for start-up, small, and larger companies.
Powered by the latest Tukatech software and conveniently located in the lobby of the California Market Center,
this two year old center offers computer-aided project solutions -- from initial pattern-making to short run
production. The "X-factor"? A fashion designer can access an exclusive three dimensional animated fit model, to
gauge fit and fabric behavior immediately, without the time and expense of making a sample and using a fit model.
Once the optimum pattern is achieved, the fashion designer can have actual samples made.
A fashion designer can also have access to the widest variety of apparel industry information products available
anywhere in the world, including the complete PANTONE swatch service and the PANTONE color matching lab.
There are no real barriers to keeping firms in developing countries from utilizing these advanced
technologies to their advantage. They may not have to invest in the latest equipment. Instead, they can
go for second-tier equipment whose costs have dropped, because of the introduction of newer
machines. Some countries also have activist industrial policies that provide financial assistance to their
producers.
Thus, in order to stay in business, firms in L.A. have to compete using their greatest strength -- creativity.
Labor Burdens: A Barrier to Job Growth
The L.A. apparel industry of today has greatly improved working conditions from the apparel industry of
ten years ago.
With most of the industry's biggest profits earned via strong brands that stand for quality, there is a
huge incentive to closely monitor any and all workplaces. Many U.S. companies, mostly in the apparel,
footwear, and toy industries, have created codes of conduct for their suppliers. But with the apparel
and footwear industries creating an ever-expanding production chain and a global web of contractors
and sub-contractors, labor abuses are difficult to police.
In an attempt to prevent labor exploitation (recall the 1994 situation in El Monte), the State of California
has labor regulations that specifically target the apparel manufacturing industry (the aforementioned AB
633). The concept of "joint liability" became law in 2001, making the brand-carrying manufacturers
equally responsible for wage and hour issues within their contractor's shops. This is meant to force
manufacturers to monitor their contractors more closely. Starting in 2003, manufacturers are also liable
for the worker's compensation payments of their contractors. One positive conclusion? Retailers feel
safer using California manufacturers.
On the other hand, these two laws make manufacturers more nervous about having production done in
California. Some of these jobs went underground (i.e. not registered with the State). Yet this doesn't
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mean such factories can exploit their workers. Workers can still report any labor violations to the
proper authorities. The net result? With the higher regulatory costs here, manufacturers can only
produce the higher-margin lines in California. These are typically the small quantity, quick-turn
garments. There may still be undocumented workers exploited by rogue contractors. However, this is
not a problem just for the apparel industry. It's a general social problem that covers other labor-
intensive manufacturing, service, and construction sectors.
In 2009, the Dept. of Homeland Security instituted further rules. The I.9 ruling requires the firing of
experienced sewers and cutters without proper documentation. If social security numbers don't match,
the authorities can fire workers. American Apparel lost 1400 employees in one day. No industrial
training program is in place for companies to hire unskilled unemployed workers to replace them.
Barriers to Exporting
In today's world, and rapidly growing into the future, L.A.-based apparel suppliers have a lucrative,
massive, and new source of apparel consumers to ship to in China and other wealthy urban markets
throughout Asia. Penetration rates of "Made in California" clothing are low and consumer interest is
high.
Export sales and recent global expansions can substantially add to Los Angeles jobs.
For example, American Apparel retail operations in Canada, Europe, and Asia remain its most profitable.
Many apparel companies have also created overseas subsidiaries in low tax jurisdictions such as Ireland
and Hong Kong. They use these entities as sales vehicles globally. Goods are sourced from Asia and then
shipped directly to these offshore entities. The revenue never hits the books of the U.S. entity, causing
an under-representation of the true economic impact of California companies selling abroad. Sales
abroad lead to more design, accounting, marketing etc. jobs in L.A., as smaller companies will not
typically create an administrative staff abroad until sales grow substantially.
But there are several barriers to the export of L.A. apparel, including both tariff and non-tariff barriers.
Plus the local industries' own lack of experience in exporting hinders progress.
Apparel manufacturing is an industry found in many developing countries, so some developing countries
have special tariffs to protect their domestic factories from foreign competition. The U.S. has not been
as aggressive on barrier removal for apparel as it could, according to industry insiders. The multi-lateral
negotiations available through the WTO may be the answer to this problem. However, other countries
will surely put up a fight if they believe their own apparel industries are threatened. In reality, many of
L.A.'s potential exports are items that do not compete directly with their local products (e.g., swimwear
from Quiksilver). L.A.'s merchandise may be less of a threat to them than they realize.
Certain barriers to importing U.S. apparel products are not explicitly sanctioned by foreign governments.
In many cases, they are just part of the accepted local business practices. For instance, sometimes it is
hard to get shelf space at some foreign retailers, because they have long-term relationships with existing
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suppliers/wholesalers. If those suppliers refuse to carry the merchandise for a variety of reasons, the
exporting manufacturer does not have access to retail shelves. Some larger manufacturers invade
foreign countries with their own retail stores. But this is not an option for smaller manufacturers with
limited financial resources. It is always safer to test the market by going through existing retail channels
at first, but many manufacturers find that option to be extremely limited. Perhaps there can be a
cooperative effort to establish an "L.A." branded retail channel in some countries. Thus far, this idea
hasn't gained much traction. Another idea is to get U.S. big box retailers in those countries (e.g., Wal-
Mart or Target) to provide shelf space. This appears defunct. To keep prices down, discount chains
source locally.
Finally, many firms in L.A. simply are not very knowledgeable about exporting. The lack of export
expertise in some companies may partly be the result of the U.S. being a large enough market to tackle
on its own. Some firms are too busy supplying U.S. retailers to pay attention to exporting. In addition,
some may be overly concerned with the documentation needs or creditworthiness of foreign buyers
(Three solutions: export factoring, trade credit insurance, or work closely with a freight forwarding
company). When these companies finally get an export order, some may find that they are ill-prepared
for issues such as trademark protection. Some firms do not realize that their names may have already
been "registered" by someone else until they try to export. Other firms also have to deal with their
tarnished brand names caused by low-quality imitators using their trademarks illegally.
A disproportionate number of apparel export agents are in New York, even though the industry in L.A. is
bigger. One of the reasons for this trend is historical -- New York has more headquarters of large
multinational apparel firms. Given the large number of international trade assets around L.A., improving
the export capabilities of L.A.'s fashion industry should not be difficult. While getting a precise count of
export agents is difficult, a comparison of apparel & textiles employment in Los Angeles County and the
eight-county New York PMSA show that New York has more jobs in apparel wholesaling and a much
higher wholesaling-to-manufacturing ratio. Since a lot of wholesaling activity is trade-related, this is an
indirect way of showing the relative strength of New York in trade-related services for apparel.
Table 6: Apparel & Textiles Employment -- Los Angeles County vs. New York PMSA, 2009
Industry\Impact
L.A.County PMSA
New York PMSA
Apparel Manufacturing -315
48,112
17,103
Apparel, Piece Goods, and Notions Wholesalers -
4243
19,794
49,996
Textile Mills - 313
7,653
3,621
Total of these three industry codes
75,559
70,720
Apparel wholesaling-to-manufacturing ratio:
0.41
2.92
Source: U.S. Dept. of Commerce, Bureau of the Census, 2009 County Business Patterns
In 2010, the Federal government announced The National Export Initiative (NEI). The NEI will help meet a
goal of doubling exports over the next 5 years by working to remove trade barriers abroad, by helping firms
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-- especially small businesses -- overcome the hurdles to entering new export markets, by assisting with
financing, and in general by pursuing a Government-wide approach to export advocacy abroad, among
other steps. L.A. sourced apparel hopes to benefit from this initiative.
The March Towards Free Trade Continues
The U.S. Office of Textiles and Apparel (OTEXA) monitors the import and export of apparel. In
addition, the U.S. Dept. of Labor regulates working conditions under the Fair Labor Standards
Act (FLSA) and can make unannounced inspections.
The World Trade Organization (WTO) Agreement on Textiles and Clothing lowered many tariffs
on apparel. Under the WTO, import quotas on textiles and apparel products were lifted in 2005,
except in the case of some specific categories of items from China. Quotas on some Chinese
products (e.g. gloves, bras, and sleepwear), euphemistically called "safeguards", were not lifted
until 2008. (A few other non-WTO members saw later removal dates, including Vietnam,
Bangladesh, and Cambodia.)
President Bush signed into law the U.S./Central America - Dominican Republic Free Trade
Agreement (CAFTA-DR) with five countries in Central America. Under this program, CAFTA-DR
entered into force for El Salvador on March 1, 2006, Honduras and Nicaragua on April 1, 2006,
Guatemala on July 1, 2006, and the Dominican Republic on March 1, 2007. These agreements
built on the 1995 implementation of the North American Free Trade Agreement (NAFTA) for
Mexico and the Caribbean, and the May 2000 passage of the African Growth and Opportunity
Act (AGOA).
President Obama concluded free trade agreements with South Korea, Columbia, and Panama.
Some manufacturers remain justly concerned about the ongoing flood of cheap imports into the U.S. that
can kill the remaining high hourly wage domestic jobs in apparel and textiles. But the current quota
system was breached long ago. Manufacturers can ship fabric and textiles (if not nearly finished
products) to a quota-free or quota-available country for final assembly. Some merchants go as far as
setting up factories in Third World countries to literally circumvent the quota system. This practice,
called "transshipments", helps to fuel the opposition to more free trade agreements with other
countries.
Despite their advantage in labor costs (which are around 1/4 the costs of Mexican labor), Chinese
exporters are also getting export tax rebates (currently 17% across-the-board) from their government,
which helps to subsidize their exports (their rationale: to offset the value-added taxes imposed by
foreign governments). During the Asian financial crisis, over a decade ago, the Chinese government
initiated these export tax rebates to help exporters, in a successful attempt to avoid having to devalue
its currency. With the U.S. and other developed countries demanding China continually re-set its
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currency peg towards purchasing power parity, and the country facing budget pressures and inflation,
reducing the export tax rebates can serve two causes at the same time. However, taking away rebates
will likely not offset their cost advantage and bring relief to U.S. producers. The market-determined
differential is simply too large.
Eventually, importers, retailers, and consumers benefit from lifting quotas and other restrictions.
Importers and retailers can consolidate suppliers to just a few countries, if they choose.
A Key Point:
Any further reduction of trade restrictions can only further reinforce the need for U.S. apparel
manufacturers to continue to move into design-based and/or other high-end merchandise.
L.A.'s design-based apparel industry can fare much better than other areas that are not design-driven.
This region's strength must be promoted and exploited, just as the Italians found a niche in designer-
based automobiles, eyeglass frames, and shoes.
L.A. & N.Y. -- Friends or Foes?
Two areas in the U.S. can really claim to be centers of fashion year-round: New York and Los Angeles.
While L.A. (and its sibling Orange County) has a claim to be the leader in contemporary wear,
activewear, and surfwear, New York is strong in women's outerwear, tailored clothing, and high fashion.
L.A. has developed fast fashion, while New York has not been a player. Both areas are facing various
cost pressures and trying to survive with design-based production and filling the needs of niche markets.
In October of 2011, New York also took notice of unfavorable trends in U.S. apparel manufacturing and
developed a fresh strategy to support its industry. The NYC proposals bear repeating in this LA report
5
:
Pitch "Made in NYC " Labels: In the U.S., a growing number of consumers want to know where the products they buy are made.
So, develop a successful "Made in NYC" campaign. Reduce or eliminate a sales tax for goods bought in New York
City.
Market the District: Improve and program physical spaces within the district to help maintain the critical mass of
fashion businesses needed to keep this neighborhood the city’s fashion center. Enliven the neighborhood with the creativity and
energy that is hidden behind building walls. Widen sidewalks in heavily populated areas , and jazz up the area's dingy sidewalks.
Make getting street permits for street closings easier, and then hold fashion shows outdoors.
Consolidate Manufacturing: Today, manufacturing tenants face an uncertain future. A lack of affordable space is one
critical issue. In an effort to secure affordable space, manufacturing tenants should be consolidated into several buildings. The total
building capacity of the nine buildings with the most amount of occupied manufacturing space would be
5
Municipal Art Society (MAS) of New York, "Fashioning the Future: NYC's Garment District", October 2011
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sufficient to host the total amount of manufacturing space within the NYC garment center zoning district, approximately
1.34million square feet. In addition, use vacant space for pop-up shops and provide financial incentives for
entrepreneurs.
Update Zoning: Zoning needs to clearly express the economic development priorities for this area, and should only be amended in
concert with a broader plan and commitment to grow the fashion industry and provide security for garment
manufacturers. If a mechanism can be created to protect the amount of manufacturing space that exists today in the Garment
District, then a relaxing of the zoning to introduce other uses should be carefully examined. Tax credits for
relocating to the area are suggested. Tax increment financing for the re-zoned areas was another idea.
Explore Tariff Reduction: A U.S . Foreign Trade Zone is a government-designated, restricted-access site used as an import/export
financial management tool. This regulatory mechanism allows foreign and domestic merchandise to be admitted for storage,
assembly, processing, and manufacture, while reducing or eliminating duties on imports and exports. There are also
foreign trade sub-zones for companies with manufacturing facilities outside the foreign-trade zone area.
Companies seeking sub-zone status must apply to the federal government through the NYC Economic Development Corporation
(NYC EDC).
Many of these ideas could be equally compelling in today's L.A. apparel industry.
The two areas should stop seeing each other as competitors, but as partners who face the same tidal
wave. The future of the U.S. apparel manufacturing sector depends on the health and growth of firms in
both Los Angeles and New York.
Textiles Manufacturing -- Another Sunset Industry?
Just as the apparel industry in Los Angeles is sustained by a strong design base and a niche market in
contemporary and quick-turn merchandise, its sister industry, textiles manufacturing, also has found
extended life in niche markets. Textiles manufacturing is highly mechanized and far more capital-
intensive than apparel manufacturing, but it is not difficult to transport the factory to a cheaper
location. It is energy-intensive and thus a location with high energy costs and unreliable supplies is
often avoided. There are environmental concerns (i.e. from dying and washing) involved with textiles
manufacturing, which make it less viable for advanced economies with stringent regulations.
The competitive advantage of Los Angeles' textiles industry is in design; in the ability to diversify product
lines, which involves processes with many layers of expertise; speed; and a willingness to try new things.
Once a basic design is created, it has to be turned into a repeat pattern with the final color choices.
Different repeat patterns and color choices can be made, so the basic design can yield many different
complete designs. Years later, the same basic design can be given different colors and emerge as a new
design again.
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Our L.A. specialty is in knitting. There are approximately 2,000 knitting machines whirling away in L.A.
today. Down considerably from the high, but still a large number. Earlier, a number of Korean knitting
companies de-camped with their machines to Honduras, benefitting from the CAFTA.
Energy costs hit the industry hard in years past. Most of the lost jobs have not come back, even though
the cost of energy, particularly natural gas, has dropped significantly from the highs. (Looking forward,
things look much less bleak. Domestic natural gas supplies are now projected to rise dramatically, due to
the use of hydraulic fracturing (fracking) technology, which basically pumps water into gas-rich areas to
push out more natural gas.) The textiles industry is seeing contraction now, but labor costs play a small
part in this trend. Energy supply and cost issues, along with some environmental regulatory concerns,
are the issues on the minds of most local textile manufacturers.
Topping It Off -- Cosmetics, Jewelry, and Footwear
A few other fashion-related industries in Los Angeles also have their own industry clusters.
Cosmetics manufacturing has over 7,000 workers in the Southland. Big names include Max Factor,
Merle Norman, Neutrogena and Hard Candy. Many of these are probably office jobs such as sales and
marketing. They are listed under manufacturing because that's the classification of the corporation in
general. Cosmetics wholesaling data is not available, but it is likely significant, due to all the trade-
related activities and domestic consumption in the area. One boost to the cosmetics industry comes
from the entertainment industry and its sometimes unique makeup needs.
The jewelry industry has a significant cluster around Hill St. and Broadway, just to the east of the
Downtown Financial District. The Jewelry District has many retailers and wholesalers engaging in deal-
making. Many smaller retailers and wholesalers rent booths from the various jewelry marts. It's quite a
sight to see bazaars full of merchants selling diamonds, gold chains, and other precious stones.
Bargaining is acceptable at many shops, and buyers should come knowing the current market prices for
precious metals and stones.
Just upstairs in many unimposing building in and around the Jewelry District are many jewelry designers,
manufacturers, and wholesalers. These are places where the real big deals are generated. While some
firms choose to have their mass production done elsewhere, others have their whole production lines
local in order to maintain quality control and provide speedy service. Of course, nearly all designers and
manufacturers have small shops making samples or special custom orders. Low prices are not the
central focus of most jewelry buyers, and thus local skilled craftsmen face less competition than their
apparel counterparts. Local employees often go to trade shows in Las Vegas or elsewhere, showcasing
their designs and signing up orders.
No fashion is complete without the proper footwear (sandals are likely for surfwear & swimwear), and
it's also a significant business in L.A. Like cosmetics, a lot of these "manufacturing" jobs are really
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supporting jobs in sales and marketing. Three shoe trade shows happen in L.A. every year (called
Transit). They get bigger and bigger each year.
Because L.A. is also a major center for marketing/advertising, this is also where much of the advertising
materials (e.g., magazine photo shoots, TV commercials, etc.) in support of all the fashion-related
industries are created.
We visited the employment data in Table 7 (below) eight years ago in December 2003. Comparing data
from that report to this current one, L.A. jewelry manufacturing (3,223 to 1,180) and wholesaling jobs
(5,840 to 4,935) have fallen off. In turn, L.A. footwear wholesaling jobs have picked up dramatically
(1,913 rising to 4,058), while L.A. footwear manufacturing fell off (1,393 to 630).
Table 7: Other Fashion-related Industries
L.A.
Orange
Riverside
San
Bernardino
Ventura
Cosmetics
32562 Cosmetics Manufacturing
6,502
207
250
10*
165
Jewelry
339911 Jewelry Manufacturing
42394 Jewelry Wholesaling**
Total
1,180
4,935
6,115
80*
668
748
10*
23
33
49*
82
131
5*
20*
25
Footwear
3162 Footwear Manufacturing
42434 Footwear Wholesaling
Total
630
4,058
4,688
118
1,012
1,130
n/a
20*
20
n/a
75*
75
n/a
69
69
**Note: includes watches, precious stones, & metals.
* estimated from number of establishments data
Source: U.S. Dept. of Commerce, Bureau of the Census, 2009 County
Business Patterns
Outlook for L.A.'s Apparel Industry
Pluses
The apparel industry cluster in Los Angeles is very visible and geographically identifiable. The
"Fashion District" to the east of the Downtown is also supported and promoted by local
authorities and has its own Business Improvement District (BID). Even the real estate owners in
the district are pro-actively working together to define the Fashion District for the region.
Perception can become reality if it's propagated relentlessly. L.A. is increasingly seen as the
fashion capital of the U.S. Marketing efforts should focus on that perception and keep pushing
the idea to the general public.
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The design talent coming out of L.A.'s schools is one of the greatest assets of the fashion
industry. Some of these students come from faraway places and are attracted by both the real
assets (i.e. the schools themselves) and by the perception about L.A. Furthermore, it is also
easier for young designers to get attention in L.A. than in New York because the industry is less
structured.
There's also tremendous interest in the "L.A. Style", an amorphous concept that's open to
interpretation. Los Angeles has the strength in contemporary designs, partly because L.A. helps
define what's hot and what's "in". In recent years, Orange County has also established itself as a
center for surfwear and activewear design.
Fresh ideas in retailing are sprouting from Los Angeles as a reaction to retail consolidation
(Forever 21, Love Culture, Papaya). Large national retail chains engage in "matrix purchasing",
which favors existing, large suppliers. In response, some manufacturers (A.B.S., BCBG, Guess,
True Religion) are going vertical, opening retail shops, which are major and risky investments.
MAGIC has moved to Las Vegas, which certainly impacts convention revenue in L.A. But L.A.'s
apparel businesses dominate the show. Of the approximately 4000 companies displaying their
wares at the 2011 show, almost a quarter were from L.A. Any sales booked at the show become
sales in L.A.
Access to seaports and airports needed for distribution (to the lower 48 states and to Hawaii
and Alaska) is also an advantage for Los Angeles. The Pacific Rim (not just East Asia but also
Central America) is the center of apparel manufacturing in the world. L.A. is effectively the
capital of apparel design and marketing in the middle of this "Ring of Sewing Machines".
Minuses
With new, young designers seeking to enter this business, and more and more specialized
women's clothing buyers coming in from out of state and often outside the country, the need to
refresh the LAX airport terminal and the downtown Fashion business improvement district (BID)
becomes more important than ever.
The lack of major, public-accessible L.A. fashion shows means lower public awareness of the
strength of this local industry. The Men's Apparel Guild in California (MAGIC), is the nation's
largest apparel show. Their first shows were put on by Palm Springs, CA. One MAGIC show was
held in downtown L.A.. The organizers then moved MAGIC to Las Vegas because the Los
Angeles Convention Center was not big enough.
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Most media coverage focuses on the trendy runway shows, which do not really showcase the
more mainstream saleable designs. The real action is found in pre-selling at the showrooms in
the marts.
Not many local high school students know about the abundant opportunities in apparel design
and marketing, and thus fail to take advantage of the available educational resources here.
They end up choosing college majors with limited career opportunities (e.g., history) and miss
out on the vast opportunities in apparel.
There are barriers to exporting, and some government and business cooperation is needed to
overcome such barriers. One possibility is to create retail channels focusing on the "L.A." brand.
Another is to get cooperation from American retailers operating overseas. Finally, our own
export capabilities need to be enhanced.
Items to Watch
What are the key forces in today's apparel landscape versus 6 or 8 years ago?
First, there are now much higher oil prices driving up transportation costs, higher cotton prices driving
up textile material costs, and a rising overall picture of inflation in China that includes a rising price for
apparel contracts originating from this country. Some of this Chinese inflation relates to rising internal
wage costs. This continues to push more manufacturing and textiles business into lower wage countries
like Vietnam and Bangladesh. This "second migration" is unlikely to offer much breathing room via labor
costs to California textile and apparel manufacturers. The rest of the effects on today's complicated
global apparel supply chains are worth pondering.
Second, parts of China are now "developed". This means there is a large class -in the millions- of middle
income consumers. Ditto for Singapore, Taiwan, and South Korea. By 2015, about 27% of China's
households will be upper-middle-class or better, according to McKinsey and Co., up from 10% in 2005.
Urban coastal cities offer huge new markets for quick-turn and "Made in California" apparel.
The effort to find a way through red tape to successfully display and sell product in Asia could be
worthwhile to more and more SoCal designers. Consider this quote from a recent Wall Street Journal
article, "Like their peers in Japan and China, Korean women love luxury items. Here’s one way to gauge
just how much: there’s a secondhand market for Chanel and other brand-name paper shopping bags."
Third, Prêt-a-Porter (off-the-rack) clothing is now being made in the couture design centers of Europe.
The idea of producing casual clothing to compete with SoCal brands will keep pressure on the industry
coming from this direction as well.
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What Could be Done to Support the Industry?
Marketing, marketing, and more marketing of the "L.A." or "California" brand. Successful
marketing generates additional demand and boosts the intrinsic value of the merchandise. A
strong, proprietary local brand also means it's not something that can be easily transferred to
another location. Intense marketing also brings in more buyers to local market weeks, which
will generate a variety of additional spending and tax flows (e.g., meals, hotels, limo services,
etc.)
A successful apparel business requires more than just great designers. It needs top-notch
management talent also. More colleges should consider offering apparel-related business
management and merchandising studies, not just apparel design.
Introduce local high school students to the opportunities in the apparel industry through
"reality-based" programs such as the Regional Occupational Program (ROP) in high schools.
Once they see the process of fashion design and merchandising, some might be hooked!
The apparel community should work to upgrade the impact of "Market Week" so it get more
publicity and use it to educate the residents about the importance of the local fashion industry.
Fashion is a big business in L.A., so let's make market weeks a big deal around here. This will
help strengthen L.A.'s reputations as the center of fashion in America.
Quotes from Vogue on "Made in CA"
"The vintage clothing available here is unlimited...from thrift stores to flea markets...always golden." -
Johnson Hartig, Libertine Designer
"In California I have the peace and space to be and to think. Just looking at the ocean keeps everything
in perspective, and the immense sky allows me to breathe." - Tom Binns
"I get inspired by being outdoors, and being on the West Coast makes that all very accessible year
round--from hiking trails and marinas to outdoor yoga." - Laurie Stark, Chrome Hearts Designer
"When people think of Los Angeles, they tend to think of only the Hollywood glamour...We are just two
girls who love fashion, but are down-to-earth, and so are our designs." - Scarlett Chorvat & Alison
Renner, Shimmi Designers
"There are so many muses here from actors to models to artists to musician -- all very different from
one another, but they all represent California girls." - Mary Pierson, VP of Design, J Brand
"I grew up on the Venice Canals, which is sort of an artist's enclave a few blocks from the beach. It's a
really creative, artistic community, and I feel like my jewelry reflects this." - Irene Neuwirth
LAEDC - Kyser Center P a g e | 50 Fashion Industry Profile 2011
"The biggest misconception I have heard about California is that everyone lives near the beach and only
wears flip-flops, so by default, it's assumed all I design are sandals!" - George Esquivel
"There is nothing better than paying local artisans well for their art. I love the idea that The Elder
Statesman has created its own little local industry." - Greg Chait, The Elder Statesman Designer
"I've recently started working with craftsmen outside my industry, such as special-effects prop masters
and car-part manufacturers, to make certain accessories for the collection. The opportunities if you
think outside the box of typical 'fashion' production are endless here in Los Angeles." - Raven Kauffman
"The warm Southern California climate allows us to practice ecological responsibility. Both of our
downtown spaces have many, many windows, so sunlight warms and brightens the space without much
need for artificial heat or light sources." - Christini Kim, Dosa Designer
"I am inspired by old Hollywood architecture. My favorite is John Woolf. Bob Evans owns one of his
homes where I play tennis." - Margaret Maldonado, L'Agence Designer
"There is nothing better than living and working in a charming 1940s beach bungalow that is minutes
away from yoga, bike rides, surfing, and walks by the ocean." - Suzanne Donegan, Mannin Designer
"From the vintage fabric collector who works out of his Venice bungalow to the inspiring collection of
pieces at Palace Costume, I have definitely found an endless source of inspiration in California." - Andrea
Lieberman, A.L.C. Designer
"The warm California light does incredible things to stones, making them really glow and come alive. I
always design in natural light, which in California is sublime." - Liseanne Frankfurt, LFrank Jewelry
Designer
"Living in California makes me see in full color. Nature is a huge influence: the sun, the light, the
ocean... the open sky, a sense of freedom." - Nina Garduno, Free City Designer
"The beach inspires me the most--the color palettes, the organic shapes of nature I find there." - Kendall
Conrad
"In Los Angeles, experimentation with new ideas is welcome, and the ability to approach fashion from a
nonconventional angle becomes a trigger for resourcefulness and innovation." - Juan Carlos Obando
"Most people believe that all fashion comes out of New York and Paris. While much of it does, the best
denim is designed and produced right here in L.A. -- it's the denim capital of the world!" - Serge Azria,
CEO and Creative Director, Current/Elliott
"I have a true Southern California wardrobe: Flip-flops, cute dresses, and jean jackets are my staples." -
Jennifer Meyer
"Having grown up in France and spending a lot of time in Europe, I find that in L.A., more than anywhere
else, denim is a part of the everyday wardrobe." - Jerome Dahan, Founder and CEO, Citizens of Humanity
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"I think freeway driving in L.A. is great. I love it early mornings, on the weekends, without so much
traffic, just like it was fifteen years ago." - Gregory Parkinson
"California is a melting pot of every walk of life. There's a constant creative energy because everyone
showcases their uniqueness in an everyday runway show." - Robert Keith, Hoorsenbuhs Designer
"I grew up in Brooklyn, and I was a lifeguard because I loved the dream of being at the pool all day
hanging out with gorgeous girls. That is the epitome of California." - Jeff Lubell, True Religion CEO &
Founder
"It has been the most rewarding and intriguing part of our brand to be "Handmade in California!" -
Marjan & Maryam Malakpour, Newbark Designers
"Waking up to blue skies, sunshine, and the ocean inspires me to create beautiful things." - Monique
L'Huillier
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