California Apparel News

The news at the pump isn’t good.

Rising gas and oil prices are having a negative impact on all sectors of the fashion industry, from company owners to sales reps, and the fallout is likely to spread to retailers in coming seasons.

Corinne Grassini, designer of the Los Angeles–based contemporary line Society for Rational Dress, said the soaring gas prices have taken big bites out of her margin. “In terms of shipping and importing and exporting, gas prices really have affected me,” she said. “We cost everything out months in advance before we ship orders or buy fabric. So, we incur losses that way because the prices went up so quickly and unexpectedly. The allowances we made for those costs just don’t cover.” In future seasons, Society for Rational Dress will accommodate the added costs into its wholesale price, she said.

The average price of gas across the country topped $4 a gallon last week (up 40 percent from January), and analysts are estimating the already record-breaking price could go up by more than 20 cents by mid-summer. The Automobile Association of America, the country’s biggest motoring club, reported gas prices have jumped 28 percent in the last year, up from $3.119 a year ago. Crude-oil prices, hovering around $140 per barrel, are at record levels and not likely to drop anytime soon.

According to the Department of Energy, Californians are paying the most for gas, with the average price for a gallon of gasoline in the state at $4.325, up more than 19 cents from the week prior. A June 10 statement by the Department of Energy indicated high prices are driving down oil consumption more than expected in the industrialized world. Although consumption is expected to fall by 240,000 barrels a day in 2008, the drop in demand is not expected to have a near-term impact on gas prices at the pump.

Jack Kyser, the chief economist at the Los Angeles County Economic Development Corp., said the group doesn’t have hard numbers on how gas prices are affecting California’s business economy. “Anecdotally, however, [high gas prices] do seem to be having an impact,” he said. “In restaurants, people are ordering less-expensive items and not tipping as much. There doesn’t seem to be quite as much traffic on the streets. People are in shock at gas prices, and we can expect a whole bunch of repercussions.”

International trade will also take a hit because of soaring energy prices, Kyser noted. “Shipping via truck, rail, air or ship is becoming much more expensive, as they all have added fuel surcharges,” he said.

For designers, sales reps and retail buyers, the skyrocketing gas prices have incited a large-scale game of hot potato.

Michelle Peschel, co-owner of The Penthouse showroom in the Lady Liberty Building in downtown Los Angeles, said she is cutting down on the number of selling trips and time her sales reps log on the road. “At the same time, a lot of buyers aren’t going to as many shows, so they expect the sales reps to come to them. It’s a Catch-22. Everyone wants to stay off the roads,” she said. In the end, it is worth it to trek out to visit stores, she said, but pre-planning and number-crunching have become a way of life.

“We are dramatically changing the way we travel,” Peschel said. “We used to fly out to Atlanta, rent a car and go exploring on our way up to New York in search of potential new accounts. Now, we edit our samples to keep the luggage as light as possible, we rent the most economical car and we don’t visit stores we don’t have appointments with. Our trips are fewer and shorter, so we do everything to make them count.”

Jeff Jones, a sales rep for custom orders for American Apparel, said gas prices never used to be an issue, even as he put more than 36,000 miles per year on his odometer. “Now it is a big deal,” he said. “I’m still on the road but probably a little less. If I can accomplish something with an e-mail or a phone call, I will.”

Buyers are knocking on the door more than before at California specialty store chain American Rag, according to James Hammonds, the company’s men’s buyer. “The economy is definitely a little sluggish, and it could be that less stores are buying, so we’re finding that reps are still eager to bring the line to us if they think we’ll be interested in buying,” he said. “This season I have had more reps bring Holiday collections out from New York [for collections with no showroom in Los Angeles] than I’ve noticed before.”

For now, retailers seem to be winning the travel tug of war. But as manufacturers pass along some of their added energy costs, stores will carry their share of the burden.

Lova, a menswear line with offices in downtown Los Angeles and in Los Angeles’ Marina del Rey district, has seen the cost of importing fabric jump because of added shipping costs. “We produce in downtown Los Angeles and 99 percent of our fabric is imported, so we’ve definitely taken a hit there,” said co-founder Daniel Murphy. “Moving forward, we’re going to be including that added cost in our pricing.”

Strategies for savings and sales

Every little bit helps.

“It’s insane. I’m spending more than $150 per week on gas,” said Jim Shubin, vice president of sales and marketing at Rubber Duck, a Los Angeles–based boutique shoe brand. To save gas, Shubin said, he has started working from home and bundling errands and meetings to make the most of every outing.

Alicia Estrada, owner of the Stop Staring! line of dresses, said her company has implemented a car pool program. Many of her employees are family members who live in the cities of Long Beach and Lakewood, Calif. “The drive up to our Los Angeles offices can take more than an hour,” Estrada said. “It makes sense to pool our gas money.” As a business, Stop Staring! has felt negligible effects due to the price of gas. “We do 99 percent of our sales at trade shows, over the phone, fax, Internet and e-mail,” Estrada said.

For those sales reps who bite the bullet, the rewards can be immediate. Tom Thomas of the Tom-Tom Sales showroom in the California Market Center said lately he is hitting the road even more. “I suck up the gas cost,” he said. “Fewer and fewer people come to the Mart like they used to. Many stores have gotten rid of the fringe help that allowed owners to leave the store [for buying trips]. They are trimming the fat, so we need to go to them.” Now, Thomas is out of his showroom at least three days each week for trips that take him to places as scattered as PalmDesert, Calif.; Orange County, Calif.; and Arizona. “I’m putting 40,000 miles on my car—but I don’t walk into a store and not get an order.”