The Fall Of The American Textile Industry And The Bitter Fight For Survival

The phone rang. Our largest customer was on the line to tell me goodbye and that our multi year business relationship was over. As I hung up the receiver, I knew that an era just came to an end. A 20 year career in the US Textile industry was likely over. The mill I represented was foundering like so many others and about to file Chapter 11, a risk my clients could not take. This was Summer, 2005. The industry actually began to unravel 10 years earlier, when businesses suddenly began fighting over a dramatically smaller piece of pie.

It wasn't long after that phone call, that I was packing up my desk and walking out of my office for the last time. In fact, it turned out to be the end of my long run in the industry. I had been working on my next act for several years though, so by the Fall of 2005 I had started with a digital marketing agency in a complete career reset. But that's a story for another day. Today I want to focus on that 10 year battle as the industry contracted, what it taught me, how I navigated, the skills that remain with me and its relevance in today's digital economy.

History

First Hit: Hello, Sam Walton- In many ways the textile industry was one of the first industries to be disrupted. For many decades, the textile mills sold their wares to manufacturers of apparel that had facilities in the US and who in turn sold finished garments to some of the large department stores such as Sears, JCPenney, Macy's and Dillards. But by the mid '80's into the 90's, the explosive growth of the Discounters, Walmart and K Mart was creating massive shock waves in the marketplace, and these players increasingly gained market share at the expense of the department stores. In order to effectively compete and meet the low prices that the Discounters demanded, the apparel manufacturers began looking for ways to dramatically cut costs. Many shut their facilities in the US and began manufacturing in Asia. This delivered a chain reaction up the distribution network. Many of our customers were now packing up for the likes of China, Vietnam, India and other low cost countries. Buying US fabric and sewing garments here did not really make sense anymore both logistically and cost wise as many of the foreign producers were offering 'packages' which included the fabric price. This was a major business model shift and guess what, it caught most of the major players flat footed. US mills saw margins and market share begin to erode.





 


Second Hit: Government Kiss-Off 

In 2001, China was admitted to the WTO and for the first time would be eligible to have its apparel exports removed from quota. In 2002, China's exports to the United States surged by more than 100 percent. Chinese exports of baby clothes surged by more than 2,000 percent, robes by more than 1,500 percent, and knit fabrics by 21,000 percent! Overall, China increased its U.S. import market share of the apparel released from quota from 24 to 86 percent. The US Government decided to focus on the nascent, but much more promising technology industry and in the process pulled the plug on millions of jobs in the US.  The kill shot was the agreement to remove all quotas on Chinese imports beginning in  2005.

Becoming A "Wartime General"

So how do you shift from marketing and selling to customers who have been decades loyal, paid your price, and knew your families to a dramatically new playing field where all bets were off? The answer is: not well at first. Selling was pretty easy up until then, but it was now becoming a battle for survival. Our customers were scrambling, busily pursuing JV's with foreign providers, closing US facilities, and re setting priorities.
In 1994, as a senior exec of a large mill, I became part of a MBO of my division and we spun off into a stand alone company. Not the greatest time to go it alone as it turned out. The particular type of fabric we produced, called greige(undyed) goods was the first area to become commoditized. I reorganized my group in New York, but before we knew what hit us, we were on the ropes, and forced to file Chapter 7 in 1996. The business just vanished and we scrambled to compete.
The experience was painful but enlightening. I got a taste of the new business climate and learned that you can't stand still when the competitive environment is throwing hay makers.  In my next role, I created a battle plan which moved away from the traditional x's and o's and instead became a blueprint for survival. A fresh strategic approach was required and time was short. I focused on stopping the bleeding first, applying rigid cost cuts, then shifting focus on higher margin products which leveraged product innovation and lastly, began making the case against the enemy. As it turned out, the delivery times from Asia were long and commitments were not being met. Our salespeople needed to be armed with this messaging. I used this plan in my next 3 positions and in each case, was able to stabilize the situation, restore profitability and keep the doors open. Here is the essence of the plan:

Game Plan for Survival

Fight! As a business leader, it was up to me to deliver the mindset required for success. It was no longer just about meeting sales goals, but more about keeping our jobs and providing for our families. It was now personal. We were engaged in a bitter global battle for survival and we needed to come to the office every day ready to fight and win. This mindset was critical to making it work.

Cut Costs I had to make tough decisions on headcount and expenses, and it was dictated by our focus and best chance of survival. We asked more from dramatically fewer people. With the market shrinking, we needed to adjust to become leaner and compete.

Product Shift We de-emphasized products that were under the heaviest attack and shifted attention to those that were innovative and provided the greatest value to the consumer.

Revise Pricing Strategy In addition to our higher margin, innovative fabrics, we took a few orders on basic staples at little or no margin to keep the mills running. In the past, we would reject these orders but now understood their importance.

Sell Value Textile Magnate Roger Milliken started a movement in the 1980's called Crafted With Pride In the USA aimed at educating the consumer on the importance of buying American. He was a pioneer and a futurist and seeing danger in the offing, he took the industry's case to the people. In our sales conversations, we needed to paint the picture of the perils of buying from foreign suppliers, so we began to calculate the cost of late deliveries and poor quality(another achilles heel of some of the foreign providers). In today's new digital world, and some 30 years later, demonstrating value remains critical to success.

Conclusion:

The period from 1994-2005 represented one of the biggest challenges in my career. The experience was at times devastating, unsettling, confusing and frightening. But it taught me how to become a leader, how to dig deep, how to recover from setbacks, how to face your fears, how to constantly anticipate change, and how to reinvent yourself, your team and your company.
In 2016, there are elements of the 1990's textile industry beginning to re-appear. Business leaders need to think through what their future looks like in the digital world and begin taking action ahead of potentially cataclysmic disruption. The good news is that there are many examples of companies that have made the transition and re invented themselves, among them IBM, Nokia, Nintendo, American Express and probably the most notable of them all, Apple. So, keep an eye open for what is coming on the horizon. Better yet, lead the way and create the future! Good Luck!