Columns

New York’s Garment District: Then and Now

By Amirthan Sothivannan, AIMS360

 

For over a century, New York City’s Garment District has defined the American fashion industry. Having served the apparel industry for over 35 years, we’ve seen major shifts recently. Manufacturing jobs in the area—once numbering over 150,000—are slowly disappearing as production moves overseas. Moreover, the neighborhood no longer consists of just boutiques, showrooms and factories; vacant spaces are converted into apartments, office buildings and retailers.

AIMS360 spoke with Megan Freedman, owner of Latitude Showroom New York, and Randa Allen, a fashion consultant at Allen Enterprises Inc., to learn more about the district’s unique positions and challenges. “We’re finding [that] as far as apparel goes,” Freedman remarked, “it’s hard to put in orders, it’s slowing down and there’s no stores.”

Also, buyer behavior is evolving at every level. We’re seeing less buyers traveling to trade shows and showrooms, as remote shopping becomes more and more convenient. We’re seeing buyers expecting to receive orders quickly with the rise of e-commerce. We’re seeing buyers be more frugal: since the 2008 recession, they’ve had less money on credit cards to spend.

Most luxury and big-name brands have weathered these changes without major issues. They’ve reached consumers by investing in e-commerce, marketing heavily, and overproducing apparel. Major retailers such as Macy’s and Calvin Klein have dominated for decades.

Meanwhile, small fashion businesses and boutique stores try to find ways to work around industry changes by:

  • selling at discounted prices
  • having some online presence
  • opening up inventory
  • seeing their wholesale customers when possible.

In addition, the effects of the stronghold of e-commerce giants like Amazon have gained more and more traction, and we’re noticing greater surpluses of EDI drop ship orders from our client brands. “Everyone wants to drop ship now because of how big Amazon grew,” said Greg Dunbar, AIMS360 Support Representative. “Before, the focus was more on EDI orders to department stores like Bloomingdale’s, Neiman Marcus, Nordstrom and Macy’s.”

The rise of rent prices also affect small businesses. A 1987 zoning law required landlords in the area to keep industrial and office space at a one-to-one ratio. As the industry condensed to other locations, landlords could keep this ratio and meet rising demand for office space. But district redevelopment has driven up rent prices for industrial space.

Small fashion businesses are chasing sales aggressively to make up rent costs. As sales dwindle, businesses are having to gauge how much rent they can afford to pay for a spot in the district. Companies are moving offices to cheaper locations in a bid to stay afloat. Across New York, the mom-and-pop shops are disappearing, and big box stores are taking their place.

This isn’t unique to consumer sales. We’ve also reached out to a domestic production manager who’s been working in the industry for over 30 years.

“It’s a weekly business instead of a daily one,” he said. “I used to ship 12 million [domestic units] a year. Now, we do 1 million.”

The New York garment industry was once busy due to local mills and fabrics. As they began to disappear, the demand for domestic production started to slow. When the 2008 recession hit, domestic business almost ground to a halt completely.

Outsourcing has also transformed the domestic production landscape. Domestic manufacturing is great for mixing fabrics and creating simple trendy clothes. But it’s not optimized for complex items like button details, trims and materials.

“Domestic business was great for chasing trends,” he said. “If you purchase four months in advance, you pay more domestically, but the turnaround time is faster since it’s local”.

Retailers also go to domestic producers to cover seasons where overseas production slows. The Lunar New Year, when Chinese offices and factories close for almost a month, is one such season. Retailers push domestic businesses for better prices, comparing them to overseas businesses.

His trend design and development company does its own cutting and contracts its own sewing. But overhead costs such as rent and wages are increasing. Rent for the average factory has nearly doubled. Employee wages have risen from $7-8 per hour to $13-15 per hour. He now pays about $10,000 a month for their showroom and workspace, a $4,000 increase from their initial rent prices.

Even with cost-cutting strategies, domestic manufacturers generally charge $5-6 per piece. But according to Allen, chargebacks, freight costs and other supply chain costs make the risk greater. With higher employee wages, higher overhead cost and lower revenues, one mistake can push a company over the edge and out of business.

“When the business isn’t doing so well anymore and now we have higher employee wages, it shouldn’t be a surprise so many fashion businesses have closed,” he said.

New York has struggled to revitalize the garment industry and balance other corporate demands. Some, such as Nomiki Konst, advocate for rent protections for small businesses. Others suggest the city should build a new apparel district elsewhere in the city.

On December 20, 2018, the New York City Council acted on the district’s concerns. The Garment District rezoning bill removes the 1987 zoning restrictions. Landlords can now fix building violations and get office certificates of occupancy. But garment makers are not doomed.

The City Council is also implementing several subsidy programs for local fashion businesses:

  •   The Council is introducing a new Industrial Development Agency program. 
Landlords who grant long-term affordable leases to fashion tenants will receive tax 
credits from the city.
  •   It is investing $14 millions in an existing grant program for the district. The grants 
help fashion manufacturers buy new equipment, train employees, or renovate 
facilities.
  •   The City Council is committing up to $20 million to purchase a building in the 
district. This building will permanently house fashion manufacturers, charging below-market rent prices.

The New York fashion industry has evolved over the last 40 years, and it is set to enter another era. The fashion capital of North America has fallen on hard times—but it is not out for the count.

 

Amirthan Sothivannan

AIMS360

empower@aims360.com

310-361-5710

Sign Up for Newswire



Advertisements