The V Word
Posted on August 30, 2012 by
By David Gill
With the September New York Home Fashions Market about to unfold, textiles vendors are hoping that this market week keeps the business growing, as it has since the beginning of this year.
The key to the business in 2012, vendors said, has been the value equation--the tricky formula that combines a product's quality with its price. Value-priced and -marketed goods have produced strong results for the vendors, they said, as long as they are successful in communicating the value "story" to retailers and consumers alike.
To some extent, but certainly not all the way, these value stories have taken the industry out of the price rat race, in which they offered the cheapest goods possible at the lowest price. "Value-focused product, with the right combination of quality and price, has been a prime driver for textiles sales, particularly as cotton prices have come down," said Keith Sorgeloos, president and CEO of Home Source International.
In fact, the decline of the cotton prices has, to some extent, helped the industry out of the commoditization trend that prevailed for decades. From a high of more than $2 a pound early in 2011, cotton prices have fallen to nearly 70 cents a pound in recent weeks.
This development has enabled value to be elevated as a driver for the textiles industry and has reduced the impact of cotton prices on the business. "Cotton pricing is not really an issue any longer," Sorgeloos said. Quoting reports from the Cotton Council, Cotton Inc. and the Memphis Cotton Exchange, Sorgeloos predicted that cotton pricing should range between 60 cents and 80 cents a pound for the next few years.
Value-based marketing and the economy's slow progress upward have put some backbone into consumers as far as shopping for textiles, said Beth Mack, president of sales and merchandising for Hollander Home Fashions. Because the value stories have shifted the shopper's focus slightly away from price, "we are seeing higher-ticket items with strong sales due to innovation and quality," Mack said.
The ebbs and flows of consumer confidence continue to exert a huge influence on the business. "Consumers are dictating retail's success and failures based on their confidence levels," Mack said. "It has been a difficult market to predict. It still falls back on value."
Consumer confidence and the economy are among the factors cited by George Matouk, president of John Matouk & Co., for the upward tick in the company's sales since the beginning of 2012. In Matouk's view, the luxury consumer (a prime Matouk target) has been "healthy. There have been some fits and starts with them, but usually soft periods have been followed by periods of optimism."
For these reasons, Matouk's business has been strong throughout the year. "Sales aren't booming, but have been positive and growing," Matouk said. "It seems that for the first time in several years, the economic environment has been cooperating. Raw-materials prices are down and the dollar is strong."
Consumers have had something to do with a strong gain in sales by Royal Heritage Home since the beginning of the year, according to President and CEO Jeff Tauber. "We are currently ahead 17 percent in 2012," Tauber said. "The main drivers have been our fashion bedding placements and the obvious consumer spending pickup." For the balance of this year and into 2013, fashion bedding and Royal Heritage's still-developing business in allergy-relief products (see separate story) will continue to fuel the business.
For other vendors, it's more difficult to predict how the textiles industry will fare for the rest of this year and into the early part of 2013. "The economy is still a bit stagnant, so cautious optimism seems to be the keyword as the economy slowly improves--and I do mean slowly," Sorgeloos said. "The fourth quarter will be an interesting telltale sign of how we go into 2013, especially once the election results are determined in early November."
Matouk expressed a more somewhat positive viewpoint about business going forward. "The outlook for the rest of the year is very good," he said. "The deeper ties between consumers and the leading brands will be key to growing sales in a consistent way, especially during uncertain economic times."
And a centerpiece in those connections between consumers and brands will be the value stories those brands have to tell. Matouk said, "The winners in the textiles industry will be those companies that tell a value story and back it up."