Children's Apparel

INDUSTRIAL CODES

NAICS: 31-52 Cut and Sew Apparel Manufacturing, including the following six-digit industries: 31-5211, 31-5212, 31-5221, 31-5222, 31-5223, 31-5224, 31-5225, 31-5228, 31-5231, 31-5232, 31-5233, 31-5234, 31-5239, and 31-5291

SIC: 2311 Men's and Boy's Suits, Coats, and Overcoats Manufacturing, 2321 Men's and Boy's Shirts Manufacturing, 2322 Men's and Boy's Underwear and Sleepwear Manufacturing, 2325 Men's and Boy's Trousers and Slacks Manufacturing, 2326 Men's and Boy's Work Clothing Manufacturing, 2329 Men's and Boy's Clothing Manufacturing not elsewhere classified, 2341 Women's, Misses', Children's, and Infant's Underwear and Night-wear Manufacturing, 2361 Girl's, Children's, and Infant's Dresses, Blouses, and Shirts Manufacturing, 2369 Girl's, Children's, and Infants' Outerwear Manufacturing, and 2384 Robes and Dressing Gowns Manufacturing

NAICS-Based Product Codes: 31-52111 through 31-52119100, 31-5211B through 31-5211H100, 31-52121 through 31-52129100, 31-5212B through 31-5212J100, 31-52211 through 31-52215035, 31-52221 through 31-52227001, 31-52231 through 31-52233026, 31-52241 through 31-52243003, 31-52281 through 31-52283159, 31-52285 through 31-52285100, 31-52311 through 31-52319003, 31-52321 through 31-52321015, 31-52321 through 31-52323022, 31-52330 through 31-52330022, 31-52341 through 31-52347001, 31-52391 through 31-52399100, 31-52910 through 31-529102C03, and 31-52991 through 31-52995131

PRODUCT OVERVIEW

Throughout most of history children have either gone without clothing, climate permitting, or dressed in smaller versions of adult clothing. In the western world, children's movements and behavior were restricted by their clothing, a societal tendency described in "Centuries of Childhood," an exhibit at the Kent State University Museum. Infants were wrapped in swaddling clothes, which left them immobile, and toddlers were constrained by adult styles.

In 1762 Jean-Jacques Rousseau published his controversial novel, Emile, which championed childhood as a pure state to be cherished. His ideas created a demand for children's clothing that provided comfort and convenience. By the 1820s, however, the industrial revolution enabled the rising middle class to purchase ostentatious clothing for their children, and the youngsters again found themselves constrained, this time by crinolines, bustles, stays, long hair, and layers of petticoats.

Children continued to suffer with elaborate garments and high-heeled, narrow shoes until after World War I, when dress was simplified for all groups and ages. The growing ready-to-wear industry produced and marketed comfortable, active styles for children. With rising affluence and, in the late twentieth century, with numbers of two-income households increasing, families were willing to spend more on children's clothing.

By the early twenty-first century, the children's clothing industry served a market worth more than $30 billion annually. Some firms such as Carter's and Oshkosh mainly produced children's garments, while many adult clothing companies added children's lines. Teens, meanwhile, provided another lucrative market, pushing to the forefront such labels as Pacific Sunwear, Hollister (the surf-oriented Abercrombie & Fitch brand), and American Eagle Outfitters.

Some style-conscious parents seemed to return to the dress-like-adults model for children, paying high prices for designer clothing such as $200 rhinestone-encrusted Seven for All Mankind flare jeans or Great China Wall hoodies priced from $395 to $595 each.

For most parents, however, price was an important consideration when buying children's clothing. This emphasis on value made the industry particularly susceptible to global market pressures. As with adult apparel manufacturers, most children's clothing manufacturers contracted with offshore firms whose employees were paid a fraction of what U.S. apparel workers would have been paid.

A series of treaties and quota systems tried to protect the domestic textile industry and to promote apparel manufacturing in neighboring countries such as Mexico, but World Trade Organization rules pushed for an end to quotas. Many observers feared that in 2008, when quotas on China were to be eliminated, the apparel industry in many developing countries would be destroyed.

Others argued that two important factors gave a substantial advantage to apparel firms located in the United States and neighboring countries. First, U.S. trade policy supported tariffs which added maximally 30 percent to the cost of Chinese products. Second, Wal-Mart pioneered a lean retailing model that was widely adopted throughout the industry. In this model, retailers replenished their shelves on a weekly basis to avoid overstocks and to keep current with customers' fashion demands. Transportation time and expense, therefore, created a second disadvantage for Chinese products. Whether these factors would be enough to protect the apparel industry in the Americas and the Caribbean would not be known until after 2008.

MARKET

The retail market for children's clothing—for children younger than 12 years of age—was worth $30.6 billion in the United States in 2005, according to market researcher Mintel International. This was a 13 percent increase in sales since 2002. The infant and toddler market was expected to reach $18.4 billion in 2010, according to Packaged Facts, a division of MarketResearch.com. This estimate is based partially on U.S. Census Bureau statistics that predict that the number of children under age 2 will increase 5 percent to 8.2 million by 2010, and the number of children aged 2 to 5 will increase 3.7 percent to 15.9 million. The number of women of child-bearing age is also projected to increase, to 60.5 million in 2010 and 62.7 million in 2020.

The U.S. teen population is expected to grow from 32.4 million in 2000 to 33.5 million in 2010. This group has substantial discretionary income, averaging $1,500 per year at age 12 and increasing to nearly $4,000 per year at age 16 to 17, according to a report on the teen market prepared by the Magazine Publishers of America. In this report, clothing topped the lists of what teens planned to buy next and what they had bought last in 2003. The number of clothing stores catering to teens increased substantially.

According to the U.S. Census Bureau there were 6,558 children's and infants' clothing stores with sales of almost $7.1 billion and 24,539 family stores with sales of $63.9 billion in 2002. As is true of the entire clothing industry, most children's and teen's clothing is imported. The statistics in the Census Bureau's 2002 Economic Census do not include a specific category for children's clothing. Instead the categories are as follows: Men's and Boy's Cut and Sew Apparel Manufacturing, Women's and Girls' Cut and Sew Apparel Manufacturing, and Infants' Cut and Sew Apparel Manufacturing. The shipped value of all cut and sew apparel manufacturing for men and boys was $11.6 billion; for women and girls, 18.8 billion; and for infants, $315.3 million, in 2002.

According to the U.S. International Trade Commission, the United States imported $70.9 billion of cut and sew apparel in 2006 and exported a fraction of that, $2.6 billion. Cut and sew apparel is produced by firms that buy the fabric and cut and sew garments from it, as opposed to those companies that both knit cloth and make clothing from the resulting material. Imports of clothing in 1998 totaled $48.7 billion and exports totaled $6.1 billion. For infants' apparel, imports totaled $2.27 billion in 2006, and exports totaled $28 million. In 1998, $1.4 billion was imported and $205 million was exported. Figure 57 presents an overview of the U.S. apparel industry, including accessories, from 1997 to 2006.

Back-to-school sales represent a substantial portion of the children's clothing market. The Census Bureau reports that $7.1 billion was spent in family clothing stores during August 2006, a month second only to December in clothing sales.

Total 2007 back-to-school shopping was projected to be $18.4 billion in a survey by BIGresearch, conducted for the National Retail Federation. According to this study, families with school-age children were expected to spend an average of $563.49, a 6.9 percent increase from $527.08 in 2006. Of that, $231.80 was expected to be spent on clothes and accessories, with the remainder being spent on footwear and electronics.

KEY PRODUCERS/MANUFACTURERS

Most of the apparel companies that serve men and women, also have children's apparel lines. In addition, there are a few major companies dedicated to children's clothes. One of the best known of these is Carter's, a $1.3 billion marketer of Carter's and OshKosh branded apparel for babies and young children. The company reports on its Web site that it sells on average ten products for every child born in the United States. It markets its clothing as "adorable, comfortable, easy to care for, and very affordable." Carter's has the largest share in the baby apparel market. OshKosh clothing is made for children ages 2 to 7 years.

Carter's

Carter's markets its products in department and specialty stores, as well as in its own chain of more than 180 retail stores. In 2003 the company launched the new brand, Child of Mine, which is sold exclusively at Wal-Mart. Carter's was founded in 1865 by William Carter, who knitted mittens in his kitchen. The Atlanta, Georgia, company went public in 2003. In 2006 the company reported $1.34 billion in net sales.

Tween Brands, Inc.

The company changed its name from Too, Inc. in July 2006 to reflect its focus on tweens—children from 8 to 18 years of age—as its core customers. Retail sales in 2006 were $883.7 million. Tween Brands became an independent company in 1999 after it separated from The Limited, the parent company of Victoria's Secret. The Limited established Limited Too independent stores and departments within its own Limited stores for sales to this age group.

Tween Brands sells its products at Limited Too and Justice stores. At the end of 2006 Limited Too had more than 722 stores in 46 states and Puerto Rico, with a few international franchise stores. These stores sell apparel, swimwear, sleepwear, underwear, footwear, lifestyle, and personal care items for active tween girls. The newer Justice chain focuses on moderately priced sportswear for tween girls. The first Justice store opened in 2004, and by the end of 2006 there were 159 Justice stores across the United States.

The company, however, had low sales in 2007, which led to disappointing per-share earnings and lower projections running through 2008. Company officials blamed delays in back-to-school dates and a shift in the Texas and Florida sales tax holiday, but Wall Street analysts suggested stiffer competition from discount and chain stores and fashion mistakes led to low sales in denim and casual bottoms in the volatile tween market.

The Gap, Inc.

The Gap had revenues of $16 billion and 150,000 employees in 2006. The company was founded as a retail store in 1969 in San Francisco, California, by Doris and Don Fisher. In 2007 it had more than 3,100 stores selling the Gap, Banana Republic, Old Navy, and Piperlime brands of clothing, as well as the GapBody, GapKids, and babyGap brands. The Fisher family continues to control approximately one-third of the stock.

Gap is known for stocking its stores with its own brand of casual clothes for men, women, and children, featuring mainly T-shirts, jeans, and khakis. Banana Republic features urban chic clothing, while Old Navy is a budget merchandiser. All Gap products are private label, designed in-house, and manufactured by contract companies. The company states on its Web site that all factories selected to produce Gap products must meet the company's "Code of Vendor Conduct," with particular attention given to such issues as child labor and working conditions. Gap reported that the company terminated business with 23 factories, about 1.1 percent of the total, in 2006 for code violations.

Hanesbrands, Inc.

Headquartered in Winston-Salem, North Carolina, Hanesbrands separated from Sara Lee Corporation in 2006. The company has approximately 50,000 employees and had $4.7 billion in net sales in fiscal 2005. Hanesbrands produces T-shirts, bras, panties, men's underwear, childrens' underwear, socks, hosiery, casual wear, and activewear. Company brands include Hanes, Champion, Playtex, Bali, L'eggs, Just My Size, Barely There, and Wonderbra. According to the company, its brands can be found in eight out of ten American households. In terms of sales, its T-shirts, fleece, socks, men's underwear, sheer hosiery, and childrens' underwear hold first place in the U.S. market. Its bras and panties are in second place.

Hanes Corporation is the outgrowth of two firms, each founded by a Hanes brother. J. Wesley Hanes established Shamrock Hills, a manufacturer of men's hosiery, in 1901. In 1902 Pleasant Hanes formed the P.H. Hanes Knitting Company and introduced men's two-piece underwear. Shamrock Hills changed its name to Hanes Hosiery Mill in 1910 and began to manufacture women's hosiery. The two companies merged in 1965 to form the Hanes Corporation. In 1971 Hanes Corporation acquired Bali Brassiere Company and Pine State Knitwear Company. The Just My Size brand for full-figured women was launched in 1984.

Levi Strauss & Co.

Levi Strauss was founded in 1853 by Bavarian immigrant Levi Strauss, and shares of the company are still held privately by family members. Its stock is not traded in the United States, but Levi Strauss Japan, a company affiliate, is publicly traded in that country.

Levi Strauss, which has its headquarters in San Francisco, California, is the leading manufacturer of jeans and casual pants, with sales in 110 countries and more than 10,000 employees worldwide. Its brands include Levi, Docker, and Levi Strauss Signature. Net revenues for 2006 were $4.19 billion.

The company reports that it was the first global company to develop and implement a supplier code of conduct, and for 15 years it has monitored the employment practices of its contract suppliers. In 2006 it introduced a new program to help suppliers build management systems and capabilities that will enable them to meet these standards.

The VF Corporation

Headquartered in Greensboro, North Carolina, VF is one of the world's largest clothing companies, with more than 53,000 employees and annual revenues greater than $6 billion in 2005. It primarily manufactures jeans and sportswear. Its 40 brands include Wrangler, Lee, Riders, Rustler, North Face, Vans, Reef, Napapijri, Kipling, Nautica, John Varvatos, Jansport, Eastpak, Eagle Creek, Lee Sport, Majestic, and Red Kap.

VF Chairman and CEO Mackey J. McDonald told Apparel magazine in 2006 that the company was in the midst of transforming from a "category" apparel business to a "growing lifestyle brand" company, and that this change had resulted in three consecutive years of record earnings, with 2006 expected to be a fourth.

VF's history began with the Reading Glove and Mitten Manufacturing Company established in Pennsylvania in 1899. In 1919 the company began making undergarments and changed its name to Vanity Fair Mills. After acquiring the H.D. Lee Company in 1969, Vanity Fair Mills changed its name to VF Corporation. When Blue Bell Inc., with brands such as Wrangler and Jansport, was acquired, the VF Corporation became the largest publicly held apparel company.

Polo Ralph Lauren

Polo Ralph Lauren reported annual sales of $3.3 billion in 2005, 3.75 billion in 2006, and $4.3 billion in fiscal year 2007. The company began in 1967 with a collection of neckties by designer Ralph Lauren, who, as of 2007, continues to control most of the company's voting stock. In the twenty-first century the company designs and markets apparel, accessories, fragrances, and home furnishings, outsourcing production to a worldwide group of contract manufacturers. The company's brand names include Polo, Chaps, Lauren, and Club Monaco, which are sold at approximately 290 retail and outlet stores in the United States and at licensed stores around the world. Polo Ralph Lauren brand clothing is a favorite of many teens.

Fruit of the Loom

Headquartered in Bowling Green, Kentucky, Fruit of the Loom is a vertically integrated manufacturer of underwear and casual clothing. The company, which spins its own yarn, weaves or knits its cloth, and manufactures the finished clothing, was acquired in 2002 by Warren Buffet's Berkshire Hathaway. Fruit of the Loom is America's biggest seller of men's briefs, and it sells a variety of other underwear for men, women, boys, and girls. Additional products include T-shirts, activewear, casual wear, and children's clothing. Its brands include BVD, Munsingwear, and Gitano, as well as Fruit of the Loom.

The company was formed from two firms: B.B.&R. Knight brothers and Union Underwear. B.B.&R. Knight Brothers textile company was established in Rhode Island in the mid-nineteenth century. The brothers called their quality broadcloth "Fruit of the Loom," and that name was patented in 1871. As more women began buying ready-made clothing and linens, the retail market for cloth declined, and in 1928 the company began to license the brand Fruit of the Loom to clothing manufacturers. At about this time, Jacob Goldfarb established the Union Underwear Company. In the late 1930s he purchased a Fruit of the Loom license and began heavily promoting the name.

Union Underwear was acquired by the Philadelphia & Reading Corporation in 1955. The company had become the dominant producer of Fruit of the Loom products, and in 1961, Philadelphia & Reading acquired the Fruit of the Loom name to protect its use of the brand. The company acquired the BVD trademark in 1976 and began marketing this brand to upscale stores. A series of expansions and acquisitions followed. Until the 1990s Fruit of the Loom manufactured most of its products within the United States, but at that time it began moving its production out of the country. Fruit of the Loom now has more than 60 manufacturing and distribution companies around the world.

MATERIALS & SUPPLY CHAIN LOGISTICS

Material Inputs

Materials used by the apparel industry consist largely of fabric, both woven and knitted, as well as smaller quantities of items such as buttons, zippers, and elastic. While the apparel manufacturing industry in the United States has largely been supplanted by lower-cost off shore contract firms, the textile industry continues to be an important source of U.S. manufacturing employment. While an apparel manufacturing enterprise can be set up in a third-world country with little capital investment beyond a few sewing machines, textile mills require larger capital outlays, more advanced technology, and employees who understand how to use the technology.

A study published by Competitiveness Review in Winter 2006 and titled Regional Trade Pacts and the Competitiveness of the U.S. Textile Industry, reported that the industry from 1989 to 2001 was the third largest manufacturing industry in the United States, but that it was under severe pressure from foreign competition. Census figures show that in 2002 there were 3,932 textile mills in the United States, shipping $45.65 billion worth of products. The industry employed 269,064 workers.

Both textile and apparel manufacturing have been the subject of a series of contentious trade negotiations. The phasing out of the Multifibre Arrangement of 1974 put severe pressure on both industries by the end of the twentieth century. Pressure increased in 2002 when China joined the World Trade Organization and a series of safeguard quotas were due to expire in 2008.

The importing of textiles into the United States resulted in job losses, with as many as 100 plant closings in 2001 alone. The industry responded in two ways in the first decade of the twenty-first century. First, textile manufacturers achieved higher productivity with technology upgrades. Second, regional trade pacts led to realigned markets. Regional partnerships, encouraged by the trade agreements, cut transportation time and costs and built markets for U.S. textiles. Neighboring countries could ship apparel into the U.S. duty-free as long as the products were made with U.S.-produced fabric or yarn under the North American Free Trade Agreement (NAFTA), Central American Free Trade Agreement (CAFTA), and the Caribbean Basin Initiative (CBI). U.S. textile imports in real dollars doubled from $5 billion in 1989 to a little more than $10 billion in 2001. U.S. textile exports increased from $2.83 billion in 1989 to nearly $9 billion in 2001.

U.S. International Trade Commission data on textile mills do not correlate directly with the data used in the Regional Trade Pacts and the Competitiveness of the U.S. Textile Industry, nonetheless, they can be used to show that in the years from 2001 to 2006, the U.S. textile industry was holding its own. Textile imports increased from $6.34 billion in 2001 to $7.36 billion in 2006. Exports kept up with the rising value of imports, increasing from $7.37 billion in 2001 to $8.52 billion in 2006.

The effects of these changes on the apparel industry are complex. Protecting U.S. textile production would seem to drive apparel costs up, but supporters of the trade policies note that the agreements have allowed the industry to contract with companies in neighboring countries where labor costs are lower and then import the finished goods without paying any tariff. In addition, having garments made in nearby countries such as Mexico with lower transportation time and costs, not only saves money on shipping; the arrangement supported lower-cost, just-in-time inventory systems.

Other issues relate specifically to the material used in the production of children's clothing. Children's sleepwear sold in the United States must be made of flame-resistant material that self-extinguishes if a flame causes it to catch fire. In fact safety issues of all kinds receive particular attention when they involve children's clothing. In 2006, for example, Wal-Mart removed some brands of children's clothing that was made in China after they were found to contain a cancer-causing dye.

Supply Chains

Apparel has one of the most complex supply chains of any industry. Clothes are consumable products that are replenished regularly, but are dependent on fashion trends and seasons of the year. Apparel vendors must forecast trends and quantities weeks or months before the clothing is due on the retailers' shelves, factoring in manufacturing time. Forecasting trends and quantities was difficult when working with domestic factories, but in the twenty-first century, clothing companies often contract with a number of factories in several different countries. Communication difficulties are exacerbated by time zone differences. Forecasts now must take into account shipping and customs processing as well as manufacturing times.

Public attention on the working conditions in factories producing products under contract for large global firms rose during the late 1990s and the early years of the twenty-first century. Some companies have been severely criticized for the working conditions in factories run by the companies with whom they contract. Several companies have adopted codes of vendor conduct in an attempt to address this problem. In addition to vendor codes of conduct, companies are including other working condition clauses into the contracts with manufacturing subcontractors. Gap Inc., for example, is attempting to manage its supply chain so that factories are not forced to require excessive overtime to meet last-minute orders or changes.

Other complications can include bureaucratic chaos and/or inadequate infrastructure in a developing nation. India, for example, in the early 2000s was trying to develop a healthy manufacturing export industry, however, a substandard infrastructure system needed to be repaired. Some government officials stated an investment of $450 billion was needed between 2007 and 2012 to accomplish this. Only 2.4 million kilometers of India's roads were paved in 2007, and more than 1 million were unpaved. Drivers often had no rear-view mirrors and seat belts and communications systems were rare. Most rail lines, moreover, were old.

In 2007 India was spending 14 percent of its gross national product on its logistics system, compared to 8 percent in developed countries. These funds were raised by taxes, which drove up costs for Indian businesses.

Major carriers such as FedEx, UPS, and DHL began investing in India, thereby providing managerial expertise and allowing small businesses in the country to connect with the global economy. Services such as FedEx, however, concentrate on shipments of high-value goods with a critical need for speed to market, including high fashion apparel. When costs are critical, countries where transportation is fast and inexpensive have an advantage.

Still, it appears that major clothing companies will continue to consider India and other developing nations for apparel contracts even after quotas are removed from clothing made in China. Although Chinese products are often the least expensive, many buyers want to diversify their supply chains. In addition to the political risks of depending on China for all of their products, the buyers are also aware that terrorist attacks, hurricanes, earthquakes, and epidemics such as SARS can all disrupt supply lines.

DISTRIBUTION CHANNEL

The distribution systems used to get clothes from where they are made to the retail outlets from which they are sold has experienced many changes in recent decades. One of the largest U.S. shakeups of this distribution channel came in August 2005 when Federated Department Stores acquired the May Department Stores, which included Macy's and Bloomingdales. This and other consolidation deals increased competition in the apparel business because they resulted in fewer stores and less shelf space, while at the same time retailers were filling more of that space with store brands.

In 2007 clothing was being sold in department stores, specialty stores, discount stores, mass merchandisers, and warehouse clubs. The apparel makers also marketed products in their own retail stores and factory outlets, in catalogs, and on the Internet.

Cotton Incorporated, an industry group, conducted a Global Lifestyle Monitor survey in 2006, which included a survey of 4,000 U.S. consumers aged 15 to 54. The survey showed that U.S. consumers spend an average of $918 per year on apparel, buying 27 percent from department stores, 22 percent from chain stores, 19 percent from mass merchandisers, and 14 percent from specialty stores. When asked what was the most important factor when buying clothes, 77 percent said price.

In 2003 Chain Store Guide, a division of Lebhar-Friedman, conducted a study of 123 retailers operating 40,000 stores in 346 markets. The study concluded that discount apparel retailers had made dramatic gains in market share, accounting at that time for $70.2 billion of an estimated $182 billion apparel market. Wal-Mart held 24.6 percent of the discount market. Other major discounters were T.J. Maxx/Marshalls (10.1%), Target (8.4%), Old Navy (7.8%), Kmart (6.1%), Ross (3.8%), Charming Shops (3.2%), Burlington Coat Factory (2.7%), American Eagle Outfitters (1.9%), and Value City Department Stores (1.7%).

Harvard Business School conducted a study of the textile and apparel industries in 2000 to look at the potential of e-commerce. That study, supported by the Sloan Foundation, reported 1999 retail channels for an apparel and accessories business estimated at $179.8 billion as follows:

• Discounters, 20.5 percent
• Specialty stores, 22.4 percent
• Department Stores, 19.1 percent
• Major chains, 16.2 percent
• Off-price retailers, 6.5 percent
• Factory outlets, 3.7 percent
• Catalog, 9.6 percent
• Online, 0.6 percent
• Unreported, 1.4 percent

That study stated that the apparel industry could be segmented historically in several ways. When considering cost, a large segment of the industry competes on low cost, buying goods from distant suppliers and cutting costs by ordering and shipping in large lots. Such clothing was generally sold through mass merchants such as Kmart or Wal-Mart or at lower-end specialty stores and was a substantial part of the children's clothing market. Other firms chose higher costs for better quality and more fashionable goods. These companies generally sold through department stores or high-end specialty stores.

KEY USERS

With the occasional exception of a baby on a blanket or a toddler who sheds garments on a summer day, all children wear clothing. Tweens and teens are often the ones who purchase the clothes that they wear, funded by part-time jobs, spending money from parents, or gift certificates from relatives and friends. Parents generally buy clothing for younger children, but many higher-priced items also come from relatives and friends. Parents also often receive generous quantities of clothing for newborn babies as gifts.

ADJACENT MARKETS

The fabric and apparel industries are closely tied, with U.S. government trade policy attempting to create markets for the domestic textile industry by allowing apparel imports from neighboring countries as long as the garments use U.S.-made thread or fabric. Wholesale fabric purchases by apparel manufacturers are also important to the textile industry.

A wide range of children's accessories can be considered adjacent to the children's apparel market because they compete for the clothing dollar. One indication of how these products compete can be seen by studying back-to-school sales figures. The National Retail Federation's (NRF) 2007 Consumer Intentions and Actions Back-to-School survey showed that families with school-age children expected to spend an average of $563.49 per child. Of that, $231.80 was intended for clothing and accessories, $108.42 for shoes, $94.02 for school supplies, and $129.24 for electronics or computer-related equipment.

From June 2006 to May 2007, children's footwear sales rose 9 percent over the preceding 12 months to $5.72 billion, according to the NPD Group, which conducted a study for the NRF. As is the case with apparel, far more children's footwear and accessories are manufactured abroad and imported than are manufactured in the United States. In the case of footwear, calculations by the U.S. Trade Commission show that in 2006 U.S. firms exported only $340 million worth of footwear, but the country imported $18.7 billion. In fact, the American Apparel and Footwear Association (AAFA) lobbied in 2007 to have tariffs removed, particularly on children's and lower- to moderately-priced shoes, saying the tariffs cost U.S. footwear companies $1.9 billion in 2006 to protect a "manufacturing industry that no longer exists."

Similar statistics are available for many other categories of accessories. In 2006 the United States imported $18.7 billion of hosiery and socks and exported $340 million. In 2002 the shipments of 166 U.S. hosiery and sock mills were valued at $348 million. In the men's and boys' underwear and nightwear category, 2006 figures show that the United States imported $2.45 billion and exported $309 million. For women's and girls' lingerie, imports totaled nearly $5.37 billion, while exports were only $279 million.

RESEARCH & DEVELOPMENT

The Competitiveness Review's article concluded that "product innovation is a key to counteracting shrinking export markets … The recent use of nanotechnology, shuttleless looms, and robotics in textile manufacturing and the creation of 'smart' fabrics are examples of ways to counter global competition." To help the apparel and textile industries survive in a highly competitive global environment, research and development is conducted both by non-profit industry and education centers and by individual companies.

Cotton Inc., for example, is a non-profit industry group funded primarily by U.S. cotton producers. At its research center in Cary, North Carolina, it deals with all stages of cotton production. Its agricultural research has improved farming practices to enable the production of more cotton on less land. Other initiatives look at issues such as harvesting and ginning of cotton, fabric development, dyeing, and finishing. The organization monitors the global textile marketplace, advances in textile chemistry and processes, and consumer attitudes. Initiatives in 2006 included new programs to convince both Chinese customers and college-age Americans of the benefits of wearing cotton clothing. In response to concerns about global warming and sustainability, another new program attempted to educate the public about improvements in cotton growing that reduce its environmental impact.

Supply chain management is a central concern of the Textile Clothing Technology Corporation, or [TC]², also located in Cary, North Carolina. [TC]² is a not-for-profit organization that operates a demonstration center for leading edge technologies and a research facility for emerging technologies and business processes in the sewn goods and related soft products industries. At its demonstration center, sewn products are developed in a totally digital environment that often eliminates the need to make a physical sample and reduces cost, risk, and time when compared with the traditional product development process. Digital textile printing makes mass customization possible, bypassing the screen making process and enabling quick changes to color or design elements before printing. To enable custom fitting, the organization has also pioneered body scanning technology using white light.

The Harvard Center for Textile and Apparel Research, funded by the Alfred P. Sloan Foundation, conducts studies of how technology is transforming the way retailers plan and order merchandise as well as how manufacturers forecast demand, plan production, and manufacture and distribute their products.

Clemson Apparel Research is another university center that studies the textile and apparel industries. It describes itself on its Web site as a "premier national resource for high-performance textiles and related materials research and applications." In one program, the center developed BalancedFlow, which addresses supply chain issues with software that is designed to minimize the number of "days required to convert money invested in inventory into new money … [coming from consumers] at the end of the supply chain."

The importance of supply chain technology to VF Corporation was acknowledged in July 2006, when Mackey J. McDonald, chairman and CEO, told Apparel magazine that the company's supply chain organization and technology group played important roles in the company's future goals for growth. He said that VF had already implemented a common systems platform across several of its fastest-growing brands and that it planned to implement that common platform across the entire organization.

Radio-frequency Identification (RFID) tags on merchandise help manufacturers and retailers keep track of products during shipping and receiving and make possible automated replenishment of stock. Another way for manufacturers and retailers to track the needs and preferences of customers is through market research.

CURRENT TRENDS

Trends come and go in children's clothing at a rate that pressures retailers to constantly refresh their assortment and presentation. Teens, in particular, can keep abreast of the international style scene on Web sites such as Hypebeast and HighSnobiety. As for younger elementary school children, many want to dress like their older brothers and sisters.

Piper Jaffray, an investment firm, conducts a biannual "Taking Stock with Teens" survey. In the 2007 survey, teens were asked to rank apparel and footwear brands. Footwear companies Nike, Puma, Steve Madden, Adidas, Nine West, and Reebok all made the most trendy list. Polo Ralph Lauren rated highest among apparel brands, with Ralph Lauren Rugby particularly popular with younger buyers. Guess was next, boosted by its provocative, sexy black and white ad campaigns.

The next three apparel companies were board sports—surfing, skate boarding, snow boarding, and wake boarding—companies with surfer backgrounds. Quiksil-ver of Huntington Beach, California, markets boardshorts and wet suits, as well as snow gear such as jackets, goggles, and ski pants. In apparel, Roxy started with a swimwear line, then added sportswear and denim. It was the first surf apparel company to market a women's line. Volcom, another California company with appeal to the surfing, skateboarding, and snowboarding markets, sells a range of sportswear which the company says incorporates "distinctive combinations of fashion, functionality, and athletic performance."

The last apparel company on the list was Fossil, of Richardson, Texas, which began selling watches and now sells a full line of apparel and accessories. As teen girls went back to school in the fall of 2007, the favored jeans had a variety of leg shapes from wide to skinny, mainly in dark shades of blue. High waists were back, replacing low-rise in many cases. The look was basic and clean, largely without patches, embellishments, or holes. Jeans were matched with bright printed tops in plaids, polka dots, and stripes. Hoodies were seen as a must-have addition, not sloppy, oversized hoodies suitable for gym clothes, but form fitting garments in bright colors with graphics. Dresses were also popular: printed maxis, mini dresses, sundresses, sweater dresses, and babydolls. Boys, who tended to look to MTV and extreme athletes for styles, were wearing layered tees, distressed denim, and polo shirts.

Elementary school children were also asking for hoodies. Girls were favoring colorful prints and plaids, skinny or wide-leg jeans, and dresses. Boys were looking for straight, skinny or slim fit jeans with back-pocket details; patterned fleece jackets; layered tees; and long-length plaid shirts.

In another trend in early 2007, clothing manufacturers and retailers were concerned that climate change was beginning to change purchase patterns. An unusually warm January in 2007 cut into outerwear sales, but cold weather eventually made an appearance and helped stores dispose of their winter merchandise. Manufacturers responded by introducing more crossover styles as well as transitional coats and jackets with removable liners and outershirts and outervests designed for layering.

Environmental concerns fueled another trend: sustainable fabrics. The Organic Exchange, a nonprofit organization, reported in early 2007 that global sales of organic cotton products jumped from $245 million in 2001 to $583 million in 2005. The group projected that sales would reach $2.6 billion by the end of 2008. NPD reported in June 2007 that 18 percent of customers surveyed said they were interested in buying eco-friendly products compared to only 5 percent in 2000.

Sama Baby, for example, founded in 2006 in Jacksonville Beach, Florida, sells organic cotton clothing for children 0 to 2 years old. Its garments are produced in India using certified organic cotton and earth-friendly dyes. Babies R Us has organic cotton items for sale on its Web site, and Wal-Mart has its own line of organic baby clothes under its George brand.

Even mainstream firms such as Levi Strauss have made use of the organic trend, introducing in 2006 a sustainable jeans line called Levi's Eco, with jeans made from organic cotton and waistband buttons from coconut shells. Reinforced stitching replaced metal rivets, and the hangtag was made from recycled board.

In 2007 Paxar launched a line of eco-labels to market to companies that make eco-friendly garments. Meanwhile, Patagonia, an outdoor apparel manufacturer that uses only organically grown cotton, received property tax abatements from Nevada for building a "green" distribution center with greatly reduced energy and water usage and improved storm water management.

The rapidly changing manufacturing environment spawned other trends. Global competition and pressure for lean manufacturing were on the minds of a group of industry executives who met with WWD magazine in 2006. Most reported that they would be consolidating production with fewer suppliers, focusing on those who were performing best. The goal would be to develop long-term collaborative relationships with these suppliers to meet the demands of retailers who wanted quality goods and who wanted to quickly bring in the hottest looks that would result in more full-price sales.

"We have to abandon some of our old habits," said Bob Zane, senior vice president, Liz Claiborne, Inc. "This is not the time for country-of-the-month sourcing. This is not the time for factory-of-the-season sourcing, and this is not the time for bargain hunting."

Zane was one observer who thought China would be in a dominant position after 2008. He said that with the emergence of China as a manufacturing power and the coming elimination of quotas on that country, the apparel business would soon look more like the footwear business. Chinese shoe factories are geographically close to material suppliers, employ tens of thousands of workers, including product development specialists, and have transparent pricing so buyers could know what each step of the process costs, he said.

TARGET MARKETS & SEGMENTATION

The clothing market for children 0 to 12 years of age was estimated at $30.6 billion by Chicago market research firm Mintel in 2006. In addition, the teen market was growing rapidly early in the first decade of the 2000s because the number of teens was increasing and these teens had substantial discretionary income. Manufacturers and retailers count on a number of strategies for targeting children and teens.

Much of the children's market is in the value category, with the average parent spending about $250 per year on a child's clothing in 2006, Mintel said. Many mothers want to buy clothing on sale, and large numbers of them shop at discount stores.

Vertis Communications, which tracks consumer behavior, stated in 2006 that 27 percent of adults with young children, 28 percent of adults with children aged 8 to 11, and 30 percent of adults with children aged 12 to 17 said "best value" was the most important consideration when selecting a store. Other considerations included "has clothes that fit me," "carries brand names I want," and "can get clothes for the entire family at one place." "Carries latest/trendy fashions" totaled 2 percent or less for the three age groups.

In the Mintel survey, mothers named Wal-Mart or Target as their preferred destination, with Old Navy next. GapKids, The Children's Place, Sears, JCPenney, and Kohl's also ranked in the top ten.

A small but growing group of parents, however, were buying high-priced clothing for their children. Child magazine was launched in the mid-1980s as the first parenthood magazine dedicated to fashion. By the early 2000s, there had been a growth in children's fashion, with celebrities such as Mary-Kate and Ashley Olsen and Hilary Duff designing children's clothing lines. Many women's apparel labels also began making children's clothing for mothers who wanted to dress their children in the brands they knew. Two-income families wanted to give their children the best, paying high prices even for premium pajamas.

Licensed apparel from popular movies sells well in children's clothes. Both Hasbro and Marvel introduced major apparel programs in 2007 for Transformers and Spider-Man 3. Products were available at mass to mid-tier retailers, including Wal-Mart, Kmart, Target, Sears, Kohl's, JCPenney, Federated, and Dillards, with prices ranging from $4 to $50.

In an effort to use blockbuster summer movies to reach the teen market for back-to-school shopping in 2007, JCPenney contracted with Screen Vision to produce 60-second movie theater spots. The ads promoted apparel items, including a new denim line, CP7.

Another factor supporting growth in the children's clothing market in the early 2000s was the growing racial and ethnic diversity of the U.S. population. Racial segments of the U.S. population that tend to have larger families, Hispanics, for example, are growing at a faster rate than are those with declining family size, Caucasians.

A rapidly growing market segment for men, women, and youths is plus-size clothing. The U.S. Center for Disease Control reported in 2002 that 16 percent of children 6 to 19 years of age were overweight. In 2007 just-style reported that while U.S. apparel sales growth had slowed to around 3 to 4 percent per year, the plus-size market was expected to grow at least 10 percent per year, reaching $62 billion in 2012. Deb Stores, which cater to junior women and are popular with teens, now offer plus-size departments in more than half of their stores.

Seasonal targeting is another way in which the apparel industry promotes its goods. As for most retail industries, Christmas is the biggest selling opportunity of the year, and this holds true for children's clothing even with a large percentage of their parents' gift dollars going for toys, games, and electronics. In October 2006, the NPD group conducted a survey that showed that 65 percent of customers were planning to buy clothing for Christmas gifts, and that 64 percent had done so in 2005. By mid-December 2006, the NRF reported that 47 percent of shoppers had bought clothing.

RELATED ASSOCIATIONS & ORGANIZATIONS

American Apparel and Footwear Association, http://www.apparelandfootwear.org

Clemson Apparel Research, http://car.clemson.edu

Cotton Inc. http://www.cottoninc.com

The Harvard Center for Textile and Apparel Research, http://www.hctar.org

National Retail Federation, http://www.nrf.com

[TC]² (Turning Research into Reality), http://www.tc2.com

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see also Athletic Shoes; Men's Apparel; Shoes, Non-Athletic; Women's Apparel