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 Never a Better Time for Entering Retail

Monday, Dec. 6, 2010

by Bianca Frediani ’12

 
“I believe that the young people of today are at an inflection point … it’s a time when this industry needs young thinking and needs people to change it.” This is only one of the brilliant insights that Vice Chairman of Phillips Van Heusen, Ken Duane, shared during his visit on November 10, 2010.
Duane, a member of the Retail Management Institute’s Advisory Board, was a part of the Retail Speaker Series. He gave a captivating presentation to students, addressing two main topics: Phillips Van Heusen and global sourcing. Duane stated that Phillips Van Heusen is a “company built on the back of a dress shirt … from that it has become the second-largest apparel company in the world.” Phillips Van Heusen licenses brands such as CHAPS/ DKNY, MICHAEL Michael Kors, Geoffrey Beene, and Hart Schaffner Marx. Also, Phillips Van Heusen owns brands such as Van Heusen, Izod, Calvin Kleinn, ARROW, and the recent addition Tommy Hilfiger. Tommy Hilfiger, a dominant force in Europe, was purchased for the price of $3.2 billion. Recent strategic plans have transformed Phillips Van Heusen from a company that had only 11 percent of its business international to now 36 percent of its business international
Tommy Hilfiger had been essentially closed down in the U.S. because it was not thriving here as it was in Europe. Phillips Van Heusen decided to bring it back into the U.S. after purchasing the brand. The key to its future success is maintaining Tommy Hilfiger’s European identity as preppy, young, and fun. The class had the privilege of seeing some of the new Tommy Hilfiger commercials that would soon be airing. The commercials were very entertaining and were successful in portraying the brand’s young and fun identity. It will be fascinating to see how the brand grows here in the U.S. after hearing how it endured in the past.
Next, Duane spoke about the global supply chain. He began by explaining that cotton is at a 140-year high because of a cotton shortage. This is due to various factors such as the recession, the growth of China, and the consumption of developing countries. He spoke about supply cost dynamics and the key issues for global apparel: raw material cost escalation, tight factory supply, competitive country movement, labor wage escalation, and freight/logistics supply and increasing costs. Duane made it clear that the retail industry is struggling with apparel inflation. He declared that at this time next year, prices will be up at least 15 percent. However, directly after describing the dilemmas the retail industry is dealing with, he went on to proclaim, “Never a better time to enter the business.”
He also explained how cost pressures and supply availability are affecting speed to market. The costs of labor and apparel have pushed companies to move to countries such as Bangladesh where costs are lower. Bangladesh produces 25 percent of Phillips Van Heusen’s units. This is part of a strategy to keep costs low and consumers happy. However, Bangladesh poses a problem for distribution because it only has one highway and one port. Phillips Van Heusen decided to take seven Boeing 747s to the one port, loaded them with their products, and brought them back to the U.S. Duane stated that this move added “… a $1.50 to each garment that we brought in from Bangladesh, but we did not want to interrupt supply.”
He concluded with Phillips Van Heusen’s plan to mitigate sourcing. The company will focus on capacity planning, fabric mill planning, greige commitments beginning of season, raw material consolidation needs, and diversity sourcing base.
Although he spoke about global sourcing issues that are plaguing the retail industry, Duane still offered some hope by firmly restating that this is the time to enter the retail business.

 

 

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Never a Better Time for Entering Retail

Monday, Dec. 6, 2010

by Bianca Frediani ’12

 
“I believe that the young people of today are at an inflection point … it’s a time when this industry needs young thinking and needs people to change it.” This is only one of the brilliant insights that Vice Chairman of Phillips Van Heusen, Ken Duane, shared during his visit on November 10, 2010.
Duane, a member of the Retail Management Institute’s Advisory Board, was a part of the Retail Speaker Series. He gave a captivating presentation to students, addressing two main topics: Phillips Van Heusen and global sourcing. Duane stated that Phillips Van Heusen is a “company built on the back of a dress shirt … from that it has become the second-largest apparel company in the world.” Phillips Van Heusen licenses brands such as CHAPS/ DKNY, MICHAEL Michael Kors, Geoffrey Beene, and Hart Schaffner Marx. Also, Phillips Van Heusen owns brands such as Van Heusen, Izod, Calvin Kleinn, ARROW, and the recent addition Tommy Hilfiger. Tommy Hilfiger, a dominant force in Europe, was purchased for the price of $3.2 billion. Recent strategic plans have transformed Phillips Van Heusen from a company that had only 11 percent of its business international to now 36 percent of its business international
Tommy Hilfiger had been essentially closed down in the U.S. because it was not thriving here as it was in Europe. Phillips Van Heusen decided to bring it back into the U.S. after purchasing the brand. The key to its future success is maintaining Tommy Hilfiger’s European identity as preppy, young, and fun. The class had the privilege of seeing some of the new Tommy Hilfiger commercials that would soon be airing. The commercials were very entertaining and were successful in portraying the brand’s young and fun identity. It will be fascinating to see how the brand grows here in the U.S. after hearing how it endured in the past.
Next, Duane spoke about the global supply chain. He began by explaining that cotton is at a 140-year high because of a cotton shortage. This is due to various factors such as the recession, the growth of China, and the consumption of developing countries. He spoke about supply cost dynamics and the key issues for global apparel: raw material cost escalation, tight factory supply, competitive country movement, labor wage escalation, and freight/logistics supply and increasing costs. Duane made it clear that the retail industry is struggling with apparel inflation. He declared that at this time next year, prices will be up at least 15 percent. However, directly after describing the dilemmas the retail industry is dealing with, he went on to proclaim, “Never a better time to enter the business.”
He also explained how cost pressures and supply availability are affecting speed to market. The costs of labor and apparel have pushed companies to move to countries such as Bangladesh where costs are lower. Bangladesh produces 25 percent of Phillips Van Heusen’s units. This is part of a strategy to keep costs low and consumers happy. However, Bangladesh poses a problem for distribution because it only has one highway and one port. Phillips Van Heusen decided to take seven Boeing 747s to the one port, loaded them with their products, and brought them back to the U.S. Duane stated that this move added “… a $1.50 to each garment that we brought in from Bangladesh, but we did not want to interrupt supply.”
He concluded with Phillips Van Heusen’s plan to mitigate sourcing. The company will focus on capacity planning, fabric mill planning, greige commitments beginning of season, raw material consolidation needs, and diversity sourcing base.
Although he spoke about global sourcing issues that are plaguing the retail industry, Duane still offered some hope by firmly restating that this is the time to enter the retail business.

 

Ken Duane
 
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