SOUTHERN CALIFORNIA ENTERPRISE : Word-of-Mouth Power : Knitwear Maker Turns Around by Selling Directly to Clients

Brenda French sells sweaters like hot cakes. Actually, more like Tupperware.

The West Los Angeles knitwear manufacturer peddles her high-end goods not through department stores or specialty retailers, as she once did. Instead, French sells her line, called French Rags, out of the homes of some of her best customers in affluent suburbs across the country.

And she’s earning more than during her days in some of the most fashionable stores around.

But only a few years ago, French’s knits were a stitch away from disappearing. Some of her best department store customers were on the wane, leading to slow-payment and other problems. Her company’s overhead was enormous and growing. Labor problems developed.

That French Rags overcame all this is a testament to trying something different when the old ways don’t work and to listening to the people who wear the clothes, French says.

“I think the worst thing you can do in business is be resistant to change,” said the 54-year-old native of Manchester, England, an area known for its knitting. “I knew enough to trust the customer.”

Until the late 1980s, Brenda French was like many apparel manufacturers. She employed hundreds of people in a cavernous factory to produce clothing that sold in retail stores. Now she operates on a much smaller scale, selling her knit sweaters, dresses, skirts, coats and other items through “trunk shows”--a term that derives from the old-time salesman’s method of traveling around the country selling products out of a trunk.

Fashion industry fixture Marjorie Deane, publisher of the respected Tobe Report trade publication, called French “very adventuresome for taking the goods to the customer.”

And yet French’s approach is “retailing as it should be,” Deane said. “Shopping should be fun, and Brenda does make it fun. Her customers feel very cosseted and comfortable.”

Still, the change was not entirely voluntary.

French, who learned to knit in grade school, began small in 1978 making scarves at home with yarn she bought at Woolworth. Her many retail contacts, accumulated during 16 years of working for different manufacturers in various merchandising and production roles, snapped up the scarves and begged for a sweater to go with them.

French obliged, dyeing the yarn in her kitchen sink. The sweaters caught on, and more and more pieces were eventually added.

French found a factory and brought in knitters. As business boomed, she found a larger factory and brought in more knitters. The yarn no longer came from the local dime store, but from an agent who introduced her to a special rayon yarn that she still uses. The yarn produces knit garments that don’t cling and, therefore, are flattering to a more mature figure.

Sales approached $10 million and French Rags were featured in such well-known stores as Neiman Marcus, Saks Fifth Avenue, Bloomingdale’s and Bonwit Teller. The company employed 300 people in a 25,000-square-foot factory in West Los Angeles.

But it all began to unravel.

Department stores started to look like the dinosaurs of retailing in the mid-1980s. As their problems mounted, they made life more difficult for suppliers like French. Stores were slow paying their bills and used any excuse to return merchandise that didn’t sell immediately, she said.

Retailers became disenchanted with her knits, and French became disenchanted with retailers. Most stores insisted on hanging her knits instead of displaying them folded on shelves and, as a result, the clothes would become stretched out of shape after only a few weeks away from the factory, French said. Plus, retail mark-ups put some of her garments close to the $1,000 mark.

“It really drove me crazy,” French said, adding that department store buyers had no idea what the customer wanted. “I thought, how can I continue to do business with these morons?”

Managing her large work force was an increasing headache. An unsuccessful attempt was made to unionize. Falling sales turned into layoffs.

Finally, in 1989, French was dumped by her factor, which is a financing company that is commonly used in the apparel industry to collect accounts receivable.

French was seriously considering going out of business as sales dipped below $1 million. Then a customer from New York called because she could no longer find French Rags. The customer suggested showing the line in her home and promised to invite all her well-heeled friends.

“I said, is this what I’ve come down to? The Tupperware party?” French recalled. “But I learned that in business you should never not do something because you don’t think it’s classy enough. I said, yes, this makes business sense.”

French had hoped to attract 20 women to that first informal trunk show. Many more showed up and she sold about $80,000 worth of merchandise in five days. And better yet, these customers paid upfront.

Then a woman in Chicago volunteered to host a trunk show, followed by another and another. French now has 60 agents around the country who make a 15% commission selling to relatives, friends and social contacts in their tony communities. Sales have rebounded to $5 million, and the company is more profitable than ever thanks to lower overhead, fewer middlemen and no inventory other than yarn, French said. The only stores that now carry French Rags are her West L.A. factory outlet and a shop in the Eldorado Hotel in Santa Fe, N.M.

But the huge factory and work force have not come back. French now relies on computerized machines and a small crew of hand knitters. She employs about 85 people who produce everything, except the yarn, in a 15,000-square-foot factory.

The clothes cost between $85 and $565--not bargain basement items, but relatively inexpensive for custom garments.

It works because her prosperous and busy customers are no longer interested shopping as a sport as they were in the 1980s, French said. They make an appointment, try on the samples and order the garments in the colors and lengths they want. And they like that her slimming fashions don’t change radically every year, she said.

“It’s all sort of evolved around common sense and what the customer’s needs are,” French said.

Among her famous customers is Hillary Rodham Clinton, who sported French Rags in cover shots on Newsweek and People magazines. The path to the White House was not that unusual for French: It came down to word of mouth. The First Lady heard about French Rags from Texas Gov. Ann Richards, another loyal customer.

“Women are terrific gossips and we always pass on good news,” French said. “I guess I’ve benefited from that.”