Hi, I’m Jack Plunkett. Today we’re going to talk about the Apparel and Textiles Industry. Obviously a massive, global industry, much of it fueled by cross-border trade. Let’s start with China. China has for decades been the world’s largest exporter of textiles and apparel, but China is changing thanks to a slightly shrinking workforce in China, and rising demands for wages and better working conditions, China is finding itself paying more and more to workers and therefore manufacturing in China itself is becoming less and less competitive. China is very wisely moving upmarket in the types of things it manufactures. Now I’m not saying that China will stop being an apparel over textiles manufacturer, that’s not true. But a lot of offshore manufacturing is moving to lower cost nations such as Bangladesh, Pakistan, certain places in Africa, and that trend will accelerate over the long term. Spain has become a real powerhouse in manufacturing of apparel, where a handful of companies specialize in what’s called, “fast fashion”. Fast fashion is designing clothing that’s going to be very modestly priced, and getting items from the design desk, through manufacturing and into the retail stores around the world in sometimes as little as 4, maybe even 3 weeks. Very fast indeed. Consumers pay for the latest fashions that come out of these designers, but they’re around the shelves and on the clothing racks for a very short period of time, then the newest thing comes along. Fast fashion is revolutionizing the apparel business and that is largely headquartered in Spain, also to some extent in Japan, and Spain has become a big manufacturer of fast fashion items. Another comment about manufacturing is worker’s rights have become a really hot subject. It’s been under consideration in consumer’s minds for a long time, but relatively recent, terrible disasters in clothing factories in third world nations where hundreds of people were injured. Maybe even thousands of people injured over relatively short periods of time when buildings collapsed and other terrible things happened, has really brought to light new standards that many big companies are trying to impose on the offshore shops where they have some of their clothing made. This of course is driving costs up. Let’s move on to retailing. The retail business has always been tough. Problems include, big competitive forces, lots of people trying to compete to take your customers away from you. Very high real estate costs – high rent in some places. Sometimes high advertising costs, but it’s become much worse, frankly in recent years. Certain things are turning the retail industry upside down in terms of selling clothing in particular. A lot of apparel purchasing has moved online. Even Amazon has plans to become a very very dominant player in apparel retailing through the Amazon websites. It already owns one of the world’s biggest shoe selling sites, that being Zappos, which it acquired a few years ago. Stores, physical stores are a losing business to the Internet at a really rapid clip. Meanwhile, consumers frankly are less interested in spending vast amounts of money on clothing than they were a few years ago, and they’re less willing to go in debt to buy that clothing. So really high quality, long lasting clothing and clothing that have very reasonable prices are a great appeal to consumers all around the world. There’s also the luxury side. The luxury market continues to do reasonably well around the world and always will. But the solid core, middle class, broad apparel market is really under a squeeze and that’s been hard on specialty apparel retailers, it’s hard on department stores which primarily have evolved from becoming stores that sell lots of different types of merchandise to stores that really specialize in clothing. Retailing is a tough business. Another big factor that is turning the retail/apparel business upside down is what’s called direct-to-consumer selling. So there are now dozens, hundreds of really powerful websites that go to manufacturers, have clothing made for them and then sell it directly to the consumer online at prices about half or even 60% of what consumers are used to seeing at retail stores. Let me say that again. Websites with very low overhead going to fine quality clothing manufacturers, ordering what they need and selling it directly to the consumer, bypassing wholesale distributors, bypassing retail stores. Companies like Everlane. We’re going to see really rapid continued growth for the long long term in this direct-to-consumer selling, over the Internet, low overhead, high quality. Very, very, very hot. So to sum up, the apparel industry is under a lot of pressure on a lot of fronts. Rising wages and rising costs in manufacturing centers like China, worker’s rights considerations in offshore centers like Bangladesh, retailers really suffering from tough competition and from the Internet, while eCommerce and direct-to-consumer selling are growing very rapidly. Meanwhile, consumers are demanding more quality clothing for their money and at lower prices. A tough business but we all have to have clothing to wear. It’s going to be really interesting to see what happens over the long-term. These are the basic trends you’ll need to keep an eye on. Now for more information about the Apparel and Textiles Industry, be sure to see our almanac on that related subject, which is republished every year, and our fabulous Apparel and Textiles Industry Research Center at Plunkett Research Online. Thanks, I’m Jack Plunkett.