Rough Times in the Rag Trade

By Alexander L. Taylor III

Coping with the New York blackout was easier than fending off imports

The break in a 68-year-old water main and the subsequent power outage that threw more than half of New York City's garment district into darkness for three days earlier this month could have been a disaster for the industry, coming as it did in the midst of the crucial "market week" for next winter's holiday and resort wear. But the tenacious and long-beleaguered garment-makers treated the blackout as just one more obstacle to be overcome. Manufacturers moved goods by flashlight and held showings in rented rooms. Loyal buyers unable to place orders booked return visits. Even the garment workers union helped out by allowing employees to put in an extra hour a day without charging overtime.

By last week the usual traffic jams, clutter and noise had returned to Seventh Avenue, or Fashion Avenue as the industry likes to call it. Predictions that the blackout would immediately cost the district some $500 million in lost sales, half the season's total, were put aside. The latest estimate is that losses ultimately will reach only about $30 million. "This is a very resilient industry," said Eli Elias, executive director of the New York Skirt and Sportswear Association. "I guarantee you, in 30 days you'll never know there was a blackout."

Perhaps not. But the industry's quick recovery masks some underlying troubles. The garment trade, which shipped $19.5 billion worth of women's and children's apparel last year, has never been weaker. Since 1973, at least 600,000 jobs have disappeared, leaving fewer than 1.9 million. Low-wage producers in the Far East and Latin America are gobbling up American markets like a Pac-Man run amuck. Hardest hit among U.S. manufacturers is Manhattan's Seventh Avenue, which has the largest share of domestic apparel sales. It is beset by relatively high labor costs, exorbitant rents and a panoply of other problems that come from doing business in the heart of a huge city.

New York is also being challenged by a host of new American fashion centers. Other big cities, many in the Sunbelt, have set up markets that are siphoning off a growing share of sales. So while New York was still coping with the aftereffects of the blackout last week, Atlanta was celebrating. The Atlanta Apparel Mart is the first stop after New York on the August fashion tour for many women's wear manufacturers, and customers were placing orders in Atlanta that they could not make in New York. Said Bob Edelstein, regional sales director for Crazy Horse, a sportswear maker: "Many buyers I would normally see in New York, I'm seeing in Atlanta."

On the first day of the show, which coincided with the third day of the blackout, attendance was up 70% from a year earlier. By the time the show was over, the Apparel Mart figured it had added as much as $75 million to its usual $350 million in sales for the season. The one-time windfall could also produce some long-term gains. Having seen Atlanta for the first time, some of the buyers suggested they would be coming back and cutting down on their New York trips. Says one insider: "Face it, a lot of these people don't like New York in the first place. The hustle, the crime and the bad image plague the city. For them, discovering Atlanta is like finding a life raft."

Dallas began its resort wear show last week too and hoped for a big increase in business, until it was drenched in rain from Hurricane Alicia. Still, Neiman-Marcus decided to shop at the show in its own city rather than make a second trip to New York after the power failure. Usually a distant second place to Seventh Avenue, California is emerging as a major design and manufacturing center. Once limited mostly to bathing suits and sportswear, it now turns out a wide range of garments from blue jeans to couture originals. The California garment industry employs some 145,000 people, two-thirds of them in Los Angeles. Its sales, $3 billion last year, are growing at an annual rate of 12%. By contrast, U.S. retail sales of women's and children's clothing, the mainstay of the Manhattan garment district, increased only 4% last year.

California designers have developed their own styles, noted for their creativity and novel use of pastel colors. Manufacturers meanwhile reap the advantages of cheaper and more abundant space, a large supply of foreign labor and a fast-growing customer base.

Nonetheless, the West Coast fashion industry has trouble shaking its feelings of inferiority. California has a shortage of trained workers such as patternmakers and sewing machine operators to turn out quality garments. Specialty items, such as fancy buttons and exotic fabrics, are often in short supply. California buyers sometimes shun local designers in favor of more prestigious labels from New York or Paris. Even the designers find themselves looking over their shoulders. Says Maddy Le Mel, co-owner of t.h.e. design house in Los Angeles: "I couldn't exist without frequent trips to New York. The best sales reps are there, and the better models are there."

One problem shared by the entire American fashion industry is imports. Since 1973, the amount of clothes shipped from abroad (excluding lingerie and hosiery) has grown from 28.2% to an estimated 50% of U.S. production.

Even in sluggish 1982, the value of foreign-made apparel increased almost 10% and totaled $7.1 billion. Longtime suppliers like Taiwan, Hong Kong and Korea are being joined by new ones like Sri Lanka, Malaysia and parts of the Caribbean and Mexico. Since all these countries have access to the same machines and patterns in this low-tech business, their cheaper wages allow them to drive down costs. The typical garment worker in China makes 16-c- an hour; in Taiwan 57-c-, and in Hong Kong slightly more than $1. President Sol Chaikin of the International Ladies Garment Workers Union contends that his members "are not fat-cat steelworkers or auto workers." Their average wage is just over $5 an hour. The move to foreign goods has been accelerated by the renewed popularity of private-label merchandise. Retailers like New York City's Lord & Taylor and Houston's Sakowitz have become disenchanted with designer products because the widely available garments have lost much of their exclusivity. Halston's name, for example, now appears on J.C. Penney's dresses. Even worse, designer clothes frequently turn up in discount and off-price stores that are multiplying like fried-chicken outlets. By promoting their own label, retailers can guarantee exclusivity as well as protect their profit margins. Since the manufacturer's name is not important, the private-brand goods are often made overseas.

Lower production costs do not necessarily translate into cheaper price tags on the rack. According to Chaikin, department stores have been taking higher and higher markups on their clothes. Twenty years ago, stores added only about 65% to the wholesale list price; today the margin exceeds 100%. Chaikin contends that imported items are marked up even higher so that they sell at the same prices as domestically made goods.

The American garment industry has been frustrated in its efforts to halt imports. In deciding a fortnight ago to allow Chinese shipments to grow about 3% a year, the Reagan Administration gave Peking only half the amount that it had wanted, but further angered U.S. manufacturers nonetheless. Complains Mac Levy, executive director of the New York Coat and Suit Association: "The Administration hasn't done anything but hurt us all along the line."

To compete, some U.S. garment-makers are turning to illegal sweatshops, where they employ undocumented aliens who earn about $1 or $1.25 an hour. Such operations already account for an estimated 10% of all women's and children's clothing. Since many manufacturers contract out 90% of their cutting and sewing operations to smaller shops, they may be using illegal labor without knowing it. Or they may not want to know. With transactions off the books and final costs low, sweatshops are a good deal for everyone except the workers.

It is tempting to compare Seventh Avenue with that other fabulous Manhattan invalid: Broadway. But while a few new hits could restore the sparkle to Broadway, the garment district faces more serious trouble. Its attempts to compete with foreign manufacturers on the basis of cost seem doomed to failure. Few other U.S. industries have been able to succeed against those countries in the production of mass goods. It may be that Seventh Avenue would do better by concentrating on such higher-priced goods as tailored suits and evening gowns, where it can add style and value. Then it could leave the production of such inexpensive items as T shirts and designer jeans to low-wage producers abroad.

-- By Alexander L. Taylor III.

Reported by Adam Cohen/New york, with other bureaus

With reporting by ADAM COHEN This file is automatically generated by a robot program, so viewer discretion is required.