There are many similarities between the footwear industry and the textile/apparel industries (ITV) in Portugal. Both industries are traditional, “low-tech” and with an important performance in the Portuguese economy. They export more than other Portuguese labour intensive industries and contribute to a very positive trade balance. The Portuguese footwear industry shows an excellent performance in several indicators in the last five years. In two decades, the footwear companies in Portugal made a strategic change in the business model and they started do develop own products and own brands. This performance wasn’t achieved yet by the textile and clothing industry in Portugal. Innovation and cooperation are very important factors in these achievements by the footwear sector and the evolution from private label to own brand has also importance to these results.This  work  is  financed  by  FEDER  funds  through  the  Competitivity  Factors  Operational 
Programme - COMPETE and by national funds through FCT – Foundation for Science and Technology within the scope of the project POCI-01-0145-FEDER-00713

Guedes, Maria da Graça

Marques, António Manuel Dinis Ribeiro

Universidade do Minho: RepositoriUM

 16th AUTEX World Textile Conference 2016 June 8–10, 2016, Ljubljana, SLOVENIA    1    OWN BRANDS AND PRIVATE LABEL IN THE PORTUGUESE FASHION INDUSTRY    António Dinis Marques1, Graça Guedes1 1 University of Minho, School of Engineering, Department of Textile Engineering,  Campus of Azurém, Guimarães, Portugal     ABSTRACT   There are many similarities between the footwear industry and the textile/apparel industries (ITV) in Portugal. Both industries are traditional, “low-tech” and with an important performance in the Portuguese economy. They export more than other Portuguese labour intensive industries and contribute to a very positive trade balance. The Portuguese footwear industry shows an excellent performance in several indicators in the last five years. In two decades, the footwear companies in Portugal made a strategic change in the business model and they started do develop own products and own brands. This performance wasn’t achieved yet by the textile and clothing industry in Portugal. Innovation and cooperation are very important factors in these achievements by the footwear sector and the evolution from private label to own brand has also importance to these results.     Keywords: Own brand, private label, fashion industry and strategy    1. INTRODUCTION   The textile, clothing and footwear industry belong to the “fashion industries”. Indeed, there are many similarities between the footwear industry and the textile/apparel industries (ITV) in Portugal. They are traditional, “low-tech” and labor intensive, with a strong position in the Portuguese economy and represent thousands of jobs. They export more than other Portuguese labor-intensive industries, mainly to Europe, and contribute to a positive trade balance (Table 1). The Portuguese footwear industry shows an excellent performance in several indicators in the last five years. In two decades, the footwear companies in Portugal made a strategic change in the business model and they started do develop own products and own brands, supported by a large and successful international marketing campaign to new foreign markets. This performance wasn’t achieved yet by the textile and clothing industry in Portugal. Innovation and cooperation are very important factors in these achievements by the footwear sector.   The competitive strategies [1],[2] followed by the footwear companies are similar with the strategies adopted by the Portuguese apparel and textile industry some years before [3]. Indeed, Monitor’s report in 1994 [4], coordinated by Michael Porter, highlight the importance of the traditional industries in the Portuguese economy, focused in create value added in the textile and footwear products. Textile and apparel industries (ITV) have a higher production than footwear, but footwear is increasing his production year by year very quickly [5].  The three generic strategies suggested by Porter [1], i) cost leadership, ii) differentiation and iii) focus (in differentiation or in cost) is easily assumed by the Portuguese innovative footwear companies.   David Aaker [6] considers the three strategies identified by Porter and adds two more: synergy and quick-response. But the increase of global competitiveness requires from the  16th AUTEX World Textile Conference 2016 June 8–10, 2016, Ljubljana, SLOVENIA    2  companies the conditions to reach competitive advantages and conquer new markets and opportunities. Own products, own collections and own brands are differentiation strategies that the companies follow step by step in order to change the strategy from private label to own brand production regime.              Table 1. World Top 15 Exporters in 2014 (Value)   Rank Country Value (millions USD $) World Share (%) Average Price ($) – (Rank) Export Markets  (Top 3) 1 CHINA 53 837 40,5 4,44 (15º) USA/Japan/Russia 2 VIETNAM 12 200 9,2 16,09 (12º) USA/France/Gwermany 3 ITÁLY 11 138 8,4 50,92 (1º) France/Germany/USA 4 BÉLGIUM 5 566 4,2 24,50 (4º) France/Netherlands/UK 5 GERMANY 5 166 3,9 22,62 (6º) France/Netherlands/Poland 6 INDONÉSIA 4 761 3,6 20,88 (8º) USA/Belgium/Germany 7 HONG KONG 4 014 3,0 16,65 (11º) USA/China/Japan 8 SPAIN 3 540 2,7 22,07 (7º) France/Italy/Germany 9 NETHERLANDS 3 295 2,5 19,99 (9º) Germany/France/UK 10 FRANCE 3 095 2,3 31,74 (3º) Italy/Germany/Spain 11 ÍNDIA 2 610 2,0 13,08 (13º) UK/USA/Germany 12 PORTUGAL 2 452 1,8 31,88 (2º) France/Germany/Netherl. 13 U K 2 079 1,6 12,83 (14º) Germany/Ireland/Netherl. 14 ROMANIA 1 374 1,0 24,01 (5º) Italy/Áustria/Germany 15 SLOVAKIA 1 226 0,9 17,20 (10º) Germany/Áustria/Poland   2. RESEARCH METHODOLOGY   The paper analyses seven cases of the Portuguese footwear industry: Felmini, Savana, Centenário, Procalçado, Kyaia, Soze/Dkode and Aco. The research methodology followed was qualitative and the strategy for data collection was the case study (multiple case studies), as suggested by Yin [7]. A number of cases between four and ten works normally well [8]. CEOs and other important directors were interviewed several times during the field research. The qualitative data was analysed with the MAXQDA software. Other sources of data were used in order to help the research [8] and gather critical knowledge to develop the present paper. The sectorial organizations (APICCAPS, CTCP and CITEVE) were also interviewed during the research and gave important advices and suggestions to the researcher. To select these seven companies, mainly SMEs, were used the purposeful or intentional sampling [9]. The logic and the power of purposeful or intentional sampling is based on the selection of cases that are rich in information for in-depth study of a particular phenomenon, and on which can be drawn from relevant information and central to the purpose of the investigation [8]. There are several strategies to select the footwear companies using the intentional sampling. The maximum variation strategy and the sampling with criteria are the  16th AUTEX World Textile Conference 2016 June 8–10, 2016, Ljubljana, SLOVENIA    3  most appropriate to the present investigation [10]. The good collaboration between the researcher and the footwear companies CEOs was critical to the results achieved.     3. RESULTS  The process of development of new products, new collections and new brands is complex and requires skills and significant resources. Time, experience and know-how are critical to complete the tasks and necessary steps to accomplish the processes. A minimum of ten years working in private label regime is very common before start the development of own brands. To start own products and own collections is necessary less time. Usually the companies develop own products and new approaches to produce “a shoe” in a particular method, according the know-how and technology that exists in the company.  There is a link between the economic performance of the companies and the production regime adopted: own brand versus private label. The figure 1 shows a “planetary model” where is clear the relations between private label, own brands and “ratio turnover/number of workers”.     Figure 1: “Planetary Model” own brands versus private label  The green circle around the sphere shows that all the companies have own collections, whatever the production regime adopted.  There are only one company that works exclusively to private label (Centenário), but this company produces high quality shoes with special leathers and skins (alligator, snake, Brazilian fishes, etc.). Also uses a complex process to produce their shoes (Goodyear system) that differentiates the company from other competitors. It works almost exclusively  16th AUTEX World Textile Conference 2016 June 8–10, 2016, Ljubljana, SLOVENIA    4  to a customer in Netherlands. This company shows the best “ratio turnover/number of workers” of the sample.    Other two companies (Aco and Savana) that works mainly to private label show the lower “ratio turnover/number of workers”. This fact is recognized by their administrators and is pressing them to make efforts to increase the percentage of own products in the turnover of these companies.  There are only one footwear company in the sample that works exclusively own brand products: Felmini. It sells Felmini shoes mainly to Italy and competes with Italian brands in this sophisticated market. The “ratio turnover/number of workers” is 73.460 euros and the brand is fourteen years old. Over almost thirty years Felmini worked in private label regime (since 1973 till 2001), but after hiring a design team to produce the collections, the sales of Felmini shoes (own brand) are increasing year by year. Table 2 shows the general data of the footwear companies analysed during the research. There are some differences between all of them, but the ratio “turnover/Nº workers” is quite different between companies as it was explained before.       Despite this be known, only few footwear companies are going to this stage of their business model. Similar position is followed by the textile/apparel companies.   Table 2. General data of the seven footwear companies analysed   YEAR 2013 FELMINI SAVANA CENTENÁRIO PROCALÇADO KYAIA SOZE ACO Foundation Year 1973 1988 1941 1973 1984 1976 1975 Turnover (Million €) 13,443 8,954 9,187 21,0 56,0 10,0 33,49 Nº workers 183 142 74 296 620 160 741 Ratio “Turnover/Wrk.” (€/Worker) 73.460 63.050 124.150 70.950 90.320 62.500 45.200 Number Pairs/Year 300.169 440.437 174.841 5.500.000 (soles) 1.000.000 - 1.491.050 Exportation Value (Million €) 13,028 7,880 9,064 10,5 50 9 28,658 Year of creation of own brand 2001 (Felmini) 2007  (Telyoh) - 1990 (For Ever) 2006 (WOCK) 2013 (Lemon Jelly)  1994 (Fly London) 2010 (Softinos) 2002 (DKode) 1975 (Aco) % Own Brand  100% 10% 0% 60% 90% 60% 10% % Outsourcing 1% 50% 4,3% 24% 25% - 30%   4. DISCUSSION  Footwear industry and textile/apparel industries have many similarities. They are traditional, “low-tech”, with low barriers to entry and with a strong competition in the global context, and they also have a long tradition in the Portuguese economy. They are in clusters well defined in the north of Portugal, with a strong commercial relation with the Inditex Group [12]. They work in private label regime and sometimes in exclusivity to this group or his brands (Zara, Massimo Dutti, Stradivarius, Pull & Bear, etc.). But is this a good and sustainable situation for the future of the Portuguese companies?  16th AUTEX World Textile Conference 2016 June 8–10, 2016, Ljubljana, SLOVENIA    5  The Portuguese ITV industry shows in 2014 a very positive situation. All the economic and social indicators are improving (table 3) and the forecasts to 2015 are also very positive. But Spain remains the more important supplier and customer of the Portuguese ITV industry.         Table 3. General data of ITV (Portugal)   2010 2011 2012 2013 2014 Production (millions €) 5.640 5.770 5.647 6.028 6.407 Turnover (millions €) 5.815 5.983 5.838 6.296 6.654 Exports (millions €) 3.844 4.167 4.127 4.288 4.620 Imports (millions €) 3.419 3.467 3.116 3.343 3.608 Employment 137.264 132.133 124.329 124.147 127.901  The footwear industry starts to say “no” to this strategic dependence of the Spanish market. The table 1 shows that France, Germany and Netherlands are in the top 3 of Portuguese footwear importers and there isn’t a commercial dependence of one or two major customers in these countries. There is a different road to go in order to increase the economic sustainability and competitiveness of the fashion industry and the footwear industry is making its way.    Table 4. General data of footwear industry (Portugal)   2010 2011 2012 2013 2014 Production (millions €) 1.283 1.511 1.824 1.797 1.884 Number of companies 1.245 1.324 1.322 1.399 1.430 Exports (millions €) 1.297 1.541 1.600 1.735 1.846 Imports (millions €) 425 467 403 422 449 Employment 32.132 34.509 34.624 36.889 37.781     5. CONCLUSIONS  The fashion industry in Portugal is going to a new approach and a new direction. Private label regime has an enormous importance in the Portuguese industry. But some companies are changing their business models to produce own products, own collections and own brands. Needs time but is critical to keep the competitiveness of the Portuguese fashion industry. The difference in the economic results is very clear and requires from the  16th AUTEX World Textile Conference 2016 June 8–10, 2016, Ljubljana, SLOVENIA    6  companies a strategic option to prepare these organizations to design, produce, promote and sell own products with Portuguese brands. The sectorial organizations are working with the companies to create and promote a new image to the fashion industry. In the last three years APICCAPS launched a campaign called “Portuguese Shoes: The Sexiest Industry in Europe” to promote the international image of the footwear industry and to entry in new markets. MICAM is the most famous international footwear Fair where the Portuguese industry shows why the “Portuguese Shoe” is competing side by side with the “Italian Shoe”. Design, there are; Quality, there are; Know-how, there are; Brands and marketing, it is not enough. Own brands, design and marketing are necessary to add more value to the fashion products and to compete in the most important world markets. Let´s do it.    ACKNOWLEDGEMENTS   “This work is financed by FEDER funds through the Competitivity Factors Operational Programme - COMPETE and by national funds through FCT – Foundation for Science and Technology within the scope of the project POCI-01-0145-FEDER-007136”     6. REFERENCES  [1] Porter, Michael E. Competitive advantage: creating and sustaining superior performance. New York: The Free Press, 1985. [2] Porter, Michael E. The competitive advantage of nations. Chippenham and Eastbourne: Palgrave MacMillan,1998.  [3] Marques, A. Inovação como Fator de Competitividade da Cadeia de Valor da Moda. Escola de Engenharia, Universidade do Minho. Guimarães: Uminho, 2015. PhD Thesis. [4] Monitor Company. Construir as vantagens competitivas de Portugal. Lisboa: Edição Forum para a Competitividade, 1994. [5] APICCAPS. World Footwear Yearbook 2015. Porto: Publicações APICCAPS, 2015. [6] Aaker, David. Developing business strategies. New York: John Wiley & Sons, Inc, 1995. [7] Yin, Robert K. Case Study Research: Design and Methods. London: Sage Publications, 2009.  [8] Saunders, Mark et al. Research Methods for Business Students. London: Financial Times Prentice-Hall, 2009. [9] Hill, Jimmy and McGowan, Pauric . Small Business and Enterprise Development: Questions about Research Methodology. International Journal of Entrepreneurial Behaviour and Research. 1999, Vol. 5, Issue 1, pp. 5-18. [10] Patton, Michael Q. How to Use Qualitative Methods in Evaluation. California: Sage Publications Inc., 1987. [11] Fan, C.L.Y. Internationalisation of the Spanish fashion brand Zara. Journal of Fashion Marketing and Management: An International Journal, 2009, Vol. 13, Issue 2, pp. 279-296.     16th AUTEX World Textile Conference 2016 June 8–10, 2016, Ljubljana, SLOVENIA    7  Corresponding author:  Antonio MARQUES 2C2T,Textile Department, University of Minho Campus Azurém 4800-019 Guimarães Portugal Phone: 00351253510283 Mobile: 00351918204280 E-mail: adinis@det.uminho.pt  Co-author(s): Graça GUEDES 2C2T,Textile Department, University of Minho Campus Azurém 4800-019 Guimarães Portugal Phone: 00351253510299 Mobile: 00351933269026 E-mail: mgg@det.uminho.pt  _________________________________________________  SENDING THE PAPER  Use the name and surname of the corresponding author to identify your soft-copy file, e.g.  Surname_Name_full_AUTEX16.doc.   Please send your paper to: autex2016@ntf.uni-lj.si    

Own brands and private label in the portuguese fashion industry

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Own brands and private label in the portuguese fashion industry

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