Style File

0



As a student at Northeastern University in Boston, Kenneth Wengrod helped pay tuition by selling jackets emblazoned with the school’s logo. Now, as president of FTC Commercial Corp., he’s helping others get apparel businesses off the ground, especially the smaller, high-growth ones. His factoring operation buys the accounts receivable at an apparel company and takes over the job of collecting the money due a critical process in the fashion world. Wengrod saw the chance to set out on his own after working in the West Coast factoring arms of Bank of Boston, Crocker Bank (since swallowed by Wells Fargo & Co.) and Barclays Commercial Corp. Wengrod was also chief operating officer of Los Angeles-based Rampage Clothing Co., then worked as chief financial officer of Vernon-based Mark Fabrics Inc., now called Meridian Textiles, from 1996 to 2002.



Question: How much do you think people are willing to pay for a pair of jeans?

Answer:

It wouldn’t surprise me if people were willing to pay $1,000 or more. Really, I think they definitely have a ways to go. There won’t be that many people who want to buy that, but somebody is willing. There is a lot of money in this consumption market and people are willing to spend.



Q: So it’s not a fad?

A:

Women have been spending a lot on accessories for a long time and they are looking at this not just as a fad, but as a fashion product. They want it in their wardrobe. Men are also more fashion conscious. We see it all over not just in L.A. or Southern California where we are just more conscious of our looks, but people around the country. They all don’t want to look the same. What they are doing to the denim, with all the finite level of details, people are willing to pay for that.



Q: Is it dangerous for companies to rely on celebrity-driven fads?

A:

You have to keep the exclusivity. All of a sudden, if you find them in every carwash, literally, it is done. Sometimes designers get cold. The idea is not to over-saturate a market with your product and to keep it more exclusive, with people doing these private labels and doing other brands.



Q: So what do you see in your world, which focuses a lot on the boutique manufacturers?

A:

When you look at the retail environment, we are seeing these specialized boutiques sprouting up on Robertson, on Melrose Place, on Main Street in the Santa Monica area. What’s happening is that people want to feel comfortable when they buy in these upper markets, and it gives people a great feeling when they go into one of these stores. They have an assortment of goods. They are unique products, and that is where I see the market going.



Q: Sounds like this is coming from the high end.

A:

The specialized luxury stores and boutiques are going to do very well. Basically, they all look alike in the malls. I think that is what’s driving people out to look and search for products that are unique. That was the problem when the (department stores) got involved with centralized buying, centralized purchasing. They lose that identify.



Q: Explain factoring.

A:

The factor acts as the credit collection department. The factor does the accounts receivable bookkeeping. It guarantees the credit of their customers. Then, if the client or the seller needs to borrow money or draw down, they can draw down or take an advance. It helps emerging companies for several reasons. They don’t have to build a huge overhead. They don’t have to worry about risk in terms of customers going out of business if they want to make sales to these customers. So, it reduces their risk, and it accelerates their working capital, the cash flow, because they can draw down before they actually collect the receivables. And factors generally have the ability to collect quicker than a specific manufacturer because they have the clout in the marketplace.



Q: What are some changes in the factoring industry?

A:

It is getting smaller and smaller with all the acquisitions. We do more traditional factoring. We check the credit, we are not just doing asset-based. There are not too many companies like us, especially in the boutique arenas. When I say the boutique, we have handled companies that are doing $60 million in volume. I also look for good companies that are just forming with good management teams with great designers and merchants to cultivate.



Q: What are some pitfalls that you advise manufacturers to avoid?

A:

The first thing is inventory. The second thing is inventory. The third thing is inventory. I look at inventory as a production sin. Retailers do an excellent job of something called “open to buy.” They plan out. They project. A lot of times companies will buy too much inventory, and they have to sell it off. It has no value, and it affects the company. Overhead is another issue. As they are growing, they will add more people, build more and more of an infrastructure. But when the market turns, they can’t turn it off quick enough. So then this young company comes up that doesn’t have that overhead, they can beat them in price and that is what we are seeing.



Q: What did you learn during your tenure at Rampage?

A:

I learned what not to do and what to do. The most important thing is to control expenses, keep your overhead as low as possible and keep your inventories as lean as possible. I also learned about power branding, about the importance of developing a label. They spent an enormous amount of time not only in the product, but in marketing and creating a demand.



Q: What are the strengths of the Southern California apparel industry?

A:

The preponderance of the business here in Southern California are in the junior markets (for teenagers) and in the missy (for middle-aged women) to a certain extent. Now, there is tremendous growth in the contemporary market.



Q: What do you mean by the contemporary market?

A:

Contemporary markets are a designer-driven, trendy fashion with a higher price point. The items utilize the best fabrics and wash. They are more unique, for instance, than a standard T-shirt that might be at a discount store for $10. For instance, a pair of denim in a discount store can be $20 or $30, while the price of contemporary denim can run up to $600. I would also say that the contemporary markets are still for the mainstream. It is not runway. It is in the middle.



Q: What is the impact of the removal of Chinese textile import quotas on the apparel industry?

A:

What is concerning the apparel industry is uncertainty, so people are moving production. They don’t want to get caught. They are moving production out of China to other areas in Asia. The reality of it is that China has the ability to produce for less, and the U.S. buyers and the world buyers are going to move their production wherever they can get the best price and the best value.



Q: How big a problem is crowding at the ports?

A:

Right now, there is not that much congestion. It will pick up the Fourth of July and go, I believe, to the end of October.



Q: What are people doing to prepare for the summer?

A:

People were trying to divert to Seattle and other ports. We see some of that going on, but there are not too many options. I think people are going to have to add seven to 10 days extra to make sure they get their goods on time, just to be a little bit conservative. We can’t change the infrastructure overnight. We can’t change imports over night. We can divert, and we can do other things.



Q: What do you look for when taking a company as a client?

A:

I look for the potential in people. A lot of times the competitors require minimums. Coming from the inside, the worst thing you can do is push people to create sales. You want to cultivate it. You need sales, you need the orders. Otherwise, you don’t have the revenue stream to cover your expenses. But if you feel like you have to push, you might not make the best business decision. And if you keep your overhead lower, you don’t need as much sales to cover that, so you are not as pressured. That is what I try to work with the companies so they don’t feel as pressured.

No posts to display