Austrade: USA

Austrade New York business development manager Prashanti Kanagasabai offers exporters the low down on the USA TCF market.

What you need to know
The United States is a mature, complex, extremely competitive and highly fragmented market. It is the world's largest importer of clothing, totalling 70 per cent of its apparel and footwear needs, valued at $US86 billion ($A94 billion) in 2006 - $US68 billion ($A74 billion) for apparel and $US18 billion ($A19 for footwear). Americans spend on average $US1,000 - $US1,500 ($A1094 to $1641) per capita on apparel and footwear products, according to a Standard and Poor's survey, presenting many promising opportunities for Australian exporters of apparel and footwear.
Australian designers already selling into this market include: Sass & Bide, Kit Willow, Toni Maticevski, George Wu, Obus, Akira,Kirrily Johnston, Camilla Franks, Camilla & Marc and Josh Goot.

Retail characteristics
The retail and consumer segments of the US apparel and footwear market are diverse and varied. The retail distribution channel consist of department stores, national chains, mass merchants, speciality stores, high-end department stores, off-price retailers, factory outlets and direct mail/mail order companies. Major high fashion centres on the east coast are in New York, Chicago and Boston with the distribution channel including high-end department stores Macy's, Nordstrom, Bergdorf Goodman, Neiman Marcus, Bloomingdale's, SAKS 5th Avenue and Lord & Taylor; National chains such as Mervyns, Sears, K mart, Target and Walmart, speciality stores such as Victoria's Secret, Gap, Banana Republic, Calypso, Searle, Intermix, Linda Dresner, Jeffrey New York, Scoop, Henri Bendel, Barneys, Fred Seagal and Tracey Ross; Off-price retailers such as TJ Maxx, Loehmann's, Marshall's and Filene's Basement; and direct mail order companies Lands' End and Newport News.  

 

Pricing models
In general, the US fashion industry has a standardised system for pricing models, providing an indicative guide for Australian designers to see where their label would fit in this market.
* Moderate - medium-priced, a step above budget. These include a majority of children's wear and labels such as Levi Strauss and Van Heusen
* Better Medium - slightly higher profile lines that are found in Department stores like Macy's and include labels such as Liz Claiborne, Perry Ellis, etc.
* Contemporary - The hottest priced and fastest growing categories which include street wear and trendy fashion-conscious merchandise. Labels include BCBG, Isabel Ardee, Michael Alexander.
* Better Bridge - lower priced or secondary lines of designers which have the look of designer apparel with less expensive fabrics. Labels include Donna Karan, Emmanual Undaro, Joseph Abboud.
* Couture - the highest priced garments mainly comprising original designs, handmade and one of a kind which are around several thousands of dollars.

 

Idiosyncrisies of this market
Timing of product development, production and presentation is critical. There are five to six selling seasons per year in the United States which is quite different to the Australian buying habits.
Other essential features which differentiate the US from other markets are:
* Australian designers and manufacturers need to be aware the US has different sizes to Australia;
* US labelling needs to be in place before exporting, with all apparel items marked with the name of manufacturer, country of origin, fibre content (fibres accounting for more than 5% of the total weight must be identified) and care instructions;
* Approximately 82 per cent of the consumers read care labels and 59 per cent consider care information the most important information on a garment (after size) before making a purchase decision;
* Pricing should be quoted in US dollars, with the retail price usually 2.3 times the wholesale price, however the margins could be three to four times higher depending on the store
* Items to be considered in your pricing model include:- total manufacturing costs in Australia; Specific Vendor Requirements - UPC (bar codes); EDI capability; carton sizes; packaging; hangers; labels; customs duties & customs broker's fees; shipping to USA and other transport costs such as warehousing;
* Also consider the mark-ups along the distribution chain, commissions or incentives for sales reps (10 - 20 per cent on sales), insurance costs and exchange rate fluctuations

What you need to know
Australian designers looking to enter the United States need to ensure they undertake periodic visits to ensure they understand the following:
* Fashion trends and consumer habits of the different cities;
* Retail price points, competing labels and the buying seasons;
* A thorough knowledge of the US market and target customer base (age, profile), existing and emerging fashion/market trends, including key determinants influencing these trends;
* Ensure collections are unique, clearly differentiated, extremely price-competitive and of excellent quality;
* An understanding of labelling requirements, transportation issues, with a defined and credible capacity to supply products and holding a clear view of supply logistics and deliveries;
* Adequate resources to have ongoing representation in the US;
* A small and manageable line while concentrating on creating developing a niche product. Typically the first collections consist of 10-20 pieces in various styles, colours and materials; and
* Quality promotional materials and trademark protection in place.

By Prashanti Kanagasabai