Oil, Economics and the Fashion Industry

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I’m not an economist; I’m not even a market watcher. In fact, my stock picks notoriously underperform the Dow and the S&P. So, a January 3, 2015, article in The New York Times by Nelson D. Schwartz about dead shopping malls and how they reflect the nation’s economy should not have captured my attention. But it did, as did the www.deadmalls.com website referenced in the article.

Mr. Schwartz theorizes (with abundant support) it is a clear reflection of the national economy that many A-rated, high-end flagship malls that cater to the wealthy are thriving, while mid-level malls with stores like Sears, Kmart and J. C. Penney as their anchors that serve the working class falter. It’s just another testament to the widening income gap between the haves and the have nots.

Mother-ToddlerDaughter-ShoppingBut that may be changing. Gasoline prices have dropped significantly in the past five months. According to the U.S. Energy Information Administration, the average price for a gallon of gas on March 16, 2015, was $2.45. It was even lower at the end of January, just above the $2 a gallon mark, but it’s still much lower than it was last year, when gasoline prices during the summer hovered around $3.70 a gallon.

What does this mean for the fashion industry? Up to now, the economic recovery has disproportionately aided the wealthy, so it’s no surprise that thriving malls are those that serve the wealthy while dying malls are those that sell to the working class. But with the drop in gasoline prices, working families (at least those whose jobs are not tied to the oil industry) suddenly have some money left over after filling up their tanks. That means that many working class families should have something extra to spend on what would have been an indulgence until very recently, and some of that will be spent on new clothes and accessories.

My completely unscientific expectation (and I reserve the right to be wrong), therefore, is that fashion companies and retailers that focus on middle income brackets will experience a little bump from first (and hopefully second) quarter 2015 sales. Whether this trend will continue into the second half of 2015 and beyond is anyone’s guess, and my crystal ball remains broken. But worldwide overproduction of oil, if it continues, would keep gasoline prices down, and would leave more money in the wallets of many families. That could lead to a little rally for big box retailers and their suppliers.

I’m rooting for an improved economy for everyone.

Credit: Jeremy D. Richardson


Many Happy Returns

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Over the years, retailers have liberalized their returns policies. I have been offered thirty days, ninety days, sometimes one hundred eighty days in which to receive forgiveness if I should change my mind. I have even been quietly assured that, if I sign up as a preferred customer, the returns privilege is open-ended, which I suppose means that you can bring back your bar mitzvah suit after you wear it a second time for your retirement party (as long as you have the receipt). Even if formal policy says no to a return, it may simply be ignored if you are polite about it and willing to accept a store credit as a compromise.

In part to soften customer concerns about the risks of buying online, retailers have made buying from the Internet into a shop at home service, making returns as easy as putting the product back into the box, sticking on a return label and sending it back from whence it came—sometimes at no additional cost. (Shoe purchases seem to be particularly blessed in that way.)

When the goods come from a boots-on-the-ground shopping experience, customers are increasingly becoming their own shop at home services, scooping up whatever looks promising (sometimes in alternative sizes and colors) and making final purchase decisions in the privacy of their own bedrooms. The result of all this back and forth is that is that, depending on the category, returns can equal as much as forty percent of a retailer’s sales—perhaps even more in seasonal spikes.

When an item is marked “final sale,” however, the retailer is saying: “I’ve had enough of all that; I really want this one to move; here it is at a very good price I would never otherwise accept; now take it and don’t ever let me see it again.” We can all understand why a no-returns policy makes sense for underwear. But consider this as well: every luxury retailer has stories about evening gowns returned the day after a well-publicized big event, fragrant with perfume. For the same reason, it is understandable why a jeweler would make returns difficult or even impossible—to avoid, that is, turning into a free lending library for expensive necklaces and bracelets.

So by all means, take advantage of final sale offers. (By definition, it is your last chance to buy the item anyway.) But keep in mind that there is no turning back when you do. Your moment as your own style consultant has come: if you buy it, you own it, so make sure you like it at point of sale.

A special, final and heartfelt warning: if you are a guy with a wife or girlfriend who examines what you wear as if your reputation and hers depended on it (How, you may ask, would I know of such a guy?), you had better bring her along, just to be sure. If she first sees it when you bring it home and on the spot offers an opinion along the lines of, “What were you thinking? Take that thing back!” it is no time for your response to start with, “Uh…”

Credit: Alan Behr


Keeping Control Over Your Brand

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In the movie A Hard Day’s Night (1964), unscrupulous menswear marketers lure George Harrison into their office, there to assure him that the two new shirts they put into his hands are essential to his self-esteem. When George says the goods are frightful, the head marketer comforts his team that, “within a month, he will be suffering a violent inferiority complex and loss of status because he isn’t wearing one of these ‘nasty’ things.”

The point was that the guiding spirits of the generation of the 1960s formed up against the commercialism and consumerism that were behind marketers’ attempts to pass off “nasty” goods as status symbols for insecure youth. How times have changed. Someone with a device in his pocket that pitches out brands and branding stories faster than summer rain drenches a field views branding and the commercial motives behind it in a much more positive light. Brands ignite consumer interest as never before, and brands win when they have good stories to tell—stories that create interest and become viral once consumers are engaged. Brands are, after all, nothing but good will with consumers, and once that is obtained, the message is spread most effectively by consumers imitating each other and aspiring to what each other has. The bad news that follows from the good is that consumers, in exchanging with each other messages about brands they know, are becoming as important in the control of a brand’s destiny as the brand’s owner—and its marketers.

For that reason, never has the creation and the protection of strong trademarks been more important for the fashion business. The value of the trademarks is applied directly to the bottom line in the form of good will. There are terrific fashion brands that own little else but their trademarks and related domain names—not the factories that make the clothes, not the stores in which they are sold, not even the photocopy machines in the corporate office. What they have are strong trademarks protected throughout the areas of current use and expected operations. The moral of the story: work with your trademark lawyer to develop, as early as possible, a solid and workable trademark protection program, and then stick to it by carefully searching and analyzing all new prospective trademarks and by registering them promptly as soon as the anticipated need arises. What have you to lose by not doing that? Only everything you may have.

Credit:  Alan Behr


Do More But Restrain Yourself Too

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Luxury, being the thematic opposite of necessity, must be at least as much about what you desire as what you need. Building a brand to fill that role requires both diligence and self-restraint.

A luxury brand and its products should be readily identifiable as superior to both existing and aspirational customers. That is not to say that that non-luxury brands and their products do not require legal protection; we are simply recognizing that the luxury premium adds a new class to the market—those aspirational customers—whose perceptions and desires are vital to the future of brands in the luxury sector. For that reason, and many others, it is particularly important for luxury brands to work with counsel to identify and protect all the important proprietary elements that are capable of being protected. That includes protection, where appropriate, by trademark (and trade dress) registration, design patent registration, and—something rather unique to the United States—copyright registration.

With few exceptions, it is generally better to err on the side of more rather than less when it comes to registrations. Styles and style names that will only be in the catalog for a season or two are usually not worth the trouble, but anything of medium to long-term consequence to the bottom line and brand value almost certainly is. In these posts, we will go into more detail about various forms of legal protection, but a key guideline is this: once each season, have a look at what engages the public with your brand and your products and how that engagement might lead you to adjust your legal protection program. There is probably no more important work that marketers and counsel can undertake together in order to make your protection program both thorough and cost-effective.

This year, the International Trademark Association held its annual meeting in Hong Kong, giving the world’s intellectual property lawyers the opportunity to congregate in an important commercial city where branding is all. Once a playground for bargain hunters for, consumer electronics and rapidly cut and stitched men’s suits, Hong Kong has become a destination for consumers of luxury goods. Indeed, I cannot remember seeing another city in which almost any international luxury brand I can think of had more than one boutique. What was particularly interesting this time is that, for various reasons, visitors from the mainland were uncommonly absent, with the result that, in every store in which I had a look, the sales floors were empty of patrons. That may be a temporary problem, but it raises a bigger question: as surely as luxury is about something greater than necessity, it is also about relative inaccessibility; it is an experience over and above the ordinary that is made all the more desirable by its very lack of ubiquity. When luxury is everywhere, can it start to look commonplace? The risk is that new entrants will have a chance to succeed (in no small part due to their newness and limited production) in poaching customers sated by what has become too familiar. That may be healthy for the marketplace but not for you if you have a valuable brand.

There are no perfect formulas, of course, but here is a general reflection that might well apply when protecting a luxury brand and its products: under law, more is better; when preserving the reputation of a luxury brand and its products in a business sense, less may sometimes indeed be more.

Credit: Alan Behr

Photo Credit: Iskciedlam (Creative Commons)


Flame Retardants: U.S. States Consider Ban of Use in Children’s Products

Tris phosphate, otherwise known as 2-chloroethyl (TCEP), a flame retardant sometimes used in children’s products and many other consumer products, is in the crosshairs of various state legislatures. In early 2014, Canada banned the manufacture, import or sale of products made with TCEP intended for children under three years of age. Maryland, New York and Vermont have also banned certain TCEP products.

Fire-RubberDuckyIn early May 2014, Maryland updated its Tris ban by prohibiting another flame retardant when used in children’s products, Tris phosphate or 1, 3-Dichloro-2-propyl (TDCPP), at more than 0.1% concentration by weight. The act goes into effect on October 1, 2014.

According to laboratory studies cited by the U.S. Department of Health and Human Services’ Agency for Toxic Substances and Disease Registry in 2009, TCEP may be harmful to humans, poses a low to moderate hazard to aquatic organisms and has the potential to bioaccumulate in the environment.

The banning of flame retardants in children’s products illustrates the friction between making products safer from certain dangers (in this case, fire) at the cost of exposing consumers to other dangers (such as carcinogens). There is already a long list of toxic chemicals that have been banned, or for which bans are under consideration, at the State level. SaferStates.Org identifies 112 separate State laws or bills to ban toxic chemicals in effect on September 19, 2013.

That Tris and other toxic chemicals are being regulated at the state and even the municipal level has created a hodgepodge regulatory scheme. Manufacturers who sell products throughout North America must engineer their products to comply with the strictest existing standards. This presents an enormous challenge because it is often difficult to determine which standard is both applicable and the strictest, and because the standards are constantly in flux, with many legislatures seeking to tighten existing restrictions at any given time. As a result, the standard relied on by a manufacturer on the product’s production date may no longer be in effect by the time the product reaches store shelves.

Harmonization of consumer product safety standards would likely be a relief to manufacturers, but would require Congress to implement federal standards preempting the hodgepodge scheme that exists today.

Credit: Jeremy D. Richardson


Federal Trade Commission Amends Labeling Rules for Wool and Fur Products

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Apparel manufacturers take notice – the Federal Trade Commission (FTC) has been busy amending labeling rules for wool and fur products.

WOOL PRODUCTS LABELING ACT UPDATE:

According to the FTC, changes to the Wool Products Labeling Rules clarify and update the rules under the Wool Products Labeling Act of 1939, provide more flexibility to industry, and align several provisions with recent amendments to the Textile Fiber Products Identification Act Rules.

The Wool Products Labeling Rules require that labels on wool products identify the manufacturer or marketer, the country of origin (where the product was processed or manufactured), and fiber content. They incorporate the Wool Products Act’s new definitions for cashmere and very fine wools, clarifying descriptions of products containing virgin or new wool, and allowing certain hang-tags disclosing fiber trademarks and performance even if they do not disclose the product’s full fiber content.

The FTC last modified the Wool Products Labeling Rules 2000 (in 2006 the Wool Products Labeling Act was amended by the Wool Suit Fabric Labeling Fairness and International Standards Conforming Act).

The changes will become effective on July 7, 2014.

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FUR PRODUCTS LABELING ACT UPDATE:

The FTC says the Fur Products Labeling Act updates the Fur Products Name Guide, provides businesses with more flexibility in labeling, incorporates provisions of the Truth in Fur Labeling Act of 2010, and conform the Fur Products Labeling Act’s guaranty provisions to those governing textile products.

When the changes go into effect, the Fur Products Labeling Act will prohibit misbranding and false advertising of fur products, and require labeling of most fur products. Specifically, manufacturers, dealers, and retailers will be required to label products made entirely or partly of fur.

The labels must disclose: (1) the animal’s name as provided in the Name Guide; (2) the presence of any used, bleached, dyed, or otherwise artificially colored fur; (3) that the garment is composed of, among other things, paws, tails, bellies, sides, flanks, or waste fur, if that is the case; (4) the name or Registered Identification Number of the manufacturer or other party responsible for the garment; and (5) the fur’s country of origin. In addition, manufacturers must include an item number or mark on the label for identification purposes. Labels must measure 1.75 inches by 2.75 inches, must disclose information in a set order, and cannot include non-FTC information on the front of the label.

The changes will become effective on November 19, 2014.

Credit:  Jeremy D. Richardson