Fashioning a Defense to Imports, Recession

When Emilio Bole asked a local subcontractor how much she would charge to sew a bridal gown based on a sample brought from China, the answer meant the end of business as usual at Bole’s Simi Valley company.

The price was far higher than what it would cost to have the work done overseas. In fact, the U.S. sewing price alone came to a whopping 50% of the cost to have the entire dressmaking process handled in China, including fabric, patterns, sewing and shipping, Bole said.

The chief executive of Florencia Fiume Inc. has watched with concern as cheaper imports elbowed aside his U.S.-made formal gowns and dresses in the last 12 months.

“At this moment I realize, if you can’t beat them, join them,” said Bole, who runs the company with his wife, Marta Ardizzone de Bole, owner and chief designer.

Since then, he has been busy exploring ways to turn around the fortunes of the 11-year-old company, including shifting manufacturing to China as well as importing entire lines of formal gowns and accessories designed and made there.

It’s been a difficult transition.

During the heady days of the late 1980s, Florencia’s fortunes soared upward with the economy. The glittering parties of the era called for racks of the pouffy cocktail dresses and sparkling evening gowns in which Florencia specialized. Ardizzone de Bole found that her experience in lingerie design was paying off as consumers sought in party dresses the corset look popularized by pop star Madonna. Within a few years, Florencia’s annual sales had grown to $3 million.

By 1997, sales had deflated to one-third of that, pummeled by the recession, customers’ changing tastes and growing sensitivity to price, and the growth in the number of cheaper imported gowns. The company shifted from cocktail and party gowns to informal bridal dresses. (“We assumed they still had to get married,” said Bole.) The switch stopped the slide in sales but didn’t bring needed growth. Florencia, which had always been small, had to lay off all but one employee this year.

Executive Adapts Marketing Techniques

By the time consultants Jean Gipe and Paul Miner, both from the Apparel Technology and Research Center in Pomona, visited Florencia’s warehouse and office this summer, Bole had begun to fight back. He was trying out new marketing techniques developed after he took a series of classes for entrepreneurs, as well as investigating new sources of supply. His marketing experiments included writing a regular marketing newsletter aimed at his 800 bridal shop and boutique customers; switching to individual product-information sheets, a more timely and flexible tool than his annual catalog; and a monthly dress giveaway.

Although it is too early to tell if his efforts will regain the company’s lost momentum, Gipe, director of the apparel center and a professor at Cal Poly Pomona, was impressed with Bole’s approach.

“He has obviously put a lot of thought into it and has come up with some very real possibilities of things he could pursue that could eventually pay off for him,” she said.

Gipe and Miner, a 20-year apparel industry veteran and production manager at the apparel center, encouraged Bole to continue his efforts to diversify his product line and offered support for his plans to expand his customer base with future catalog, department store and Internet sales. They also recommended that he use his analytical skills to create a short-term strategic plan as a framework for the changes ahead.

The ability to confront and deal with shifting market conditions in an analytical manner is an important survival skill for small-business owners, said Gipe. That ability helped Bole realize that despite positive feedback on his new marketing techniques, the company’s existing product line was still losing steam.

Customer Reaction Supports Changes

Complicating the situation was his wife’s differing assessment of market conditions. Unlike Bole, she did not blame the company’s designs for stagnant sales. Bole’s first trips to China and Hong Kong earlier this year were spurred in part by the belief that he would have to go outside the company to find the new looks he felt Florencia customers wanted, and to provide garments at a price they were willing to pay.

Customer reaction to the new stretch velvet dresses, crocheted tops and clean-lined mint and champagne-colored gowns this summer was strong enough to convince his wife of the need to expand Florencia’s product line, Bole said. He’s relieved she agrees, but said he was determined to forge ahead if she had remained unconvinced. Doing business with China is no longer optional, he said. Even if Florencia began to generate a markedly wider variety of designs in-house, Bole believes he still would have had to use overseas manufacturers. The price pressure on U.S. apparel makers is too great, he said.

It’s reached the point where Florencia’s U.S.-made informal bridal gowns are more expensive than the formal gowns competitors are importing from China, Bole said. So, in August, Florencia received its first samples of formal bridal gowns from a Chinese apparel maker.

“If this economic crunch keeps coming down in the Orient and if Hong Kong and China are forced to devalue their money, then the garments are going to become even cheaper,” Bole said. “Basically, I am seeing that I have to become more of a service company than a manufacturer.”

Gipe and Miner recommended that Bole build a short-term strategic plan, in addition to the overall business plan he began work on in his entrepreneur class.

“Since he is really changing his product and doing basically a full circle, he needs to have a short-term business plan to track how he is doing right now,” Miner said.

The questions Bole will have to address to create a short-term plan are similar to those needed for a standard three-to-five-year plan, they said. A shorter-term plan, though, will require more flexibility and the ability to make quick changes if results during the company’s transition don’t meet expectations.

“Your biggest question, and always kind of the hardest one to pin down, is ‘What do I want to see happen with my business?’ ” said Gipe. Too many business owners can’t get beyond the vague desire to “have a big company” and “make a lot of money,” she said. A good plan will show “how fast you want to get there and, if you want to get there fast, what are the steps and essential elements that need to be in place to make that happen.”

Bole and other business owners can further focus their business plans by deciding if their product is a niche item or has more general appeal, Gipe said. “Then, what does that mean in terms of where would people find my products . . . so I can sell to the greatest potential that product has.” As Bole has discovered, a smart business person will continue to evaluate his or her assumptions about their products and customers and frequently review the product mix to find the successful blend of “what you want and what you feel you have to have,” Gipe said.

Laying Groundwork for Expansion

As part of Bole’s review of Florencia’s direction, the chief executive is looking at ways to win additional sales from existing customers and evaluating his distribution options.

Although the company used to sell to J.C. Penney and has been knocking on doors at Nordstrom, Gipe cautioned that it might be a struggle for the company to supply the volume needed by a large retail department store chain.

“At the moment, he seems to have a very viable customer base, and there is a lot to be done in expanding and developing and enhancing and improving the potential to do business with those stores, and that [is] more in line with the size of the company,” she said.

The consultants also discussed with Bole the possibility of selling to a television shopping channel such as QVC or Home Shopping Network, catalog sales and the pitfalls of Internet sales. The company may not yet be prepared to sell direct to end users through a retail catalog, but it might consider supplying its gowns and accessories to well-established catalog companies, Gipe said.

The consultants encouraged Bole to continue to research Internet sales opportunities but suggested he tread lightly if he decides to sell Florencia products directly to consumers online. Such a move would undercut carefully cultivated relationships with bridal shops and boutiques. An alternative, which Bole is already considering, is to sell some of his new products under a different label directly to consumers.

Bole is convinced he can’t ignore the potential of Internet sales. He has found that college-age brides frequent his Web site as they shop around for dresses.

“I am trying to lay the groundwork for something new,” Bole said of his efforts this year. “At this moment, we are on shaky ground. Hopefully, with all the changes and new dresses at better prices, we will come back to solid ground.”

Bole’s willingness to candidly assess the company’s situation will help him do a better job meeting customer needs, the consultants said.

“He is one of those individuals who doesn’t have a problem with saying: ‘This does not work. . . . What can we do about it?’ ” said Gipe. “So he’s definitely ahead of the game.”

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This Week’s Company Make-Over

Name: Florencia Fiume Inc.

Headquarters: Simi Valley

Type of business: Bridal gown and special-occasion dress designer, manufacturer and importer

Status: Private corporation

Owner: Marta Ardizzone de Bole

Chief executive: Emilio Bole

Founded: November 1987

Start-up financing: $160,000 in personal savings and family loans

1997 sales: $1 million

Employees: 1

Customers/clients: Boutiques and bridal shops

Main Business Problem: Competition from cheaper imports, changing consumer buying habits and in-house design limitations have cut sales to one-third of pre-recession levels.

Goal: Focus company on a new niche in order to profitably grow to previous size.

Recommendations:

Continue to diversify product line.

Create a short-term strategic plan.

Expand customer base.

Meet the Consultants

Jean Gipe is director of the Apparel Technology and Research Center and a professor at Cal Poly Pomona.

Paul Miner, a 20-year apparel manufacturing veteran, is production manager at the center.