U.S. mills find ways to grow
By Gary Evans and Joan Gunin -- Furniture Today, April 27, 2008
High Point — Despite finding themselves under siege by foreign producers, some U.S. fabric manufacturers are finding they can survive — and even thrive — in the face of intense global competition.
This is good news for an industry that has seen itself go from a rock-solid base of two dozen or more mills down to about half that number — in a reduction that seemed to happen at breakneck speed. Now, some domestic fabric producers are surveying the landscape and finding the future is not so glum after all.
Not that the shakeout hasn't left a trail of victims, including the bankruptcy and recent closing of two of the top three mills — Quaker and Joan. And a long list of other U.S. mills have had to shutter plants here and move much if not all of their production offshore, mostly to China.
Industry sources indicate that imports may account for 80% or more of the fabrics used by U.S. upholstery makers.
Figures from the U.S. Census Bureau, while dated, point to the decline. In 1997, for instance, some 665.5 million square yards of upholstery fabric were produced domestically. By 2002, domestic production dropped to 449 million square yards, and it fell again to 284 million square yards by 2004. More recent figures could not be found, but it is common knowledge that the declines have been even more dramatic in recent years.
According to Roger Berkley, president of Weave Corp. and chairman of the National Textile Assn.'s Upholstery Fabrics Committee, imports have "sucked away" sales of lower-end and mid-range fabrics "so what we see is that we have to be more focused on the upper end, which is a smaller segment of the industry.
"We see people are unhappy with China but they don't see a lot of alternatives — particularly in those price categories," added Berkley, referring to lower-end fabrics of $4.50 to $6 per yard and middle-end fabrics in the $9 and $10 price points.
Some mills that have maintained their domestic operations are beginning to see some of their old customers returning. These furniture producers have grown tired of slow delivery, fabrics that all look alike and quality problems from their Chinese suppliers, executives at the U.S. mills say. In addition, the weakening of the dollar, the reduction of Chinese subsidies and the shifting of export priorities to nations with stronger currencies are all having an impact.
Mid-to-high-end jacquard resource Valdese Weavers has sustained double-digit growth for all but one year (2001) in the last 20. The company, established in 1935, has continued to grow its business by offering speedy service and fashion-driven products, said President and CEO Mike Shelton.
"We offer an absolute commitment to quality and service that our customers count on us for," said President/CEO Mike Shelton.
At this month's High Point Market, Shelton and other fabric executives noticed renewed interest in domestically sourced fabrics.
"Some of our furniture customers who have tried offshore production and have gained experience now understand the true costs of doing business with a value structure that they previously did not really understand," Shelton said. "Every element of value that you can describe is different doing business offshore than it is here — quality, service, transportation costs ... All of the things that our customers have come to expect from us are not truly available in the same manner from a half a world away."
Price is only one component of value, he added. "All of the other things that go into their costs, they are now beginning to understand."
While Valdese remains one of the largest domestic mills, it launched its own offshore business division, Valdese International Products, three years ago. Today, the operation accounts for 7% of the company's sales.
The reasons for initiating the offshore unit were two-fold. First, the offshore division enables Valdese to import and sell as piece goods products "we don't choose to make or don't have the capability to make such as a dupioni silk or velvet," said Shelton. And second, it enables Valdese to offer cutting-edge designs for mid-market furniture producers that have established cut-and-sew infrastructures in China.
"We guarantee the quality and delivery of the fabric to the cut-and-sew user on behalf of our domestic furniture customer," Shelton said.
Despite what he calls "the worst cycle in 20 years," Murray Engle, who with Carl Stonbraker operates Chambers Fabrics, said he sees new opportunity on the horizon for domestic fabric sources.
"We think we are in the beginning of an important shift in the way we market product," Engle said. "The last several years, we have turned everything into a commodity, with $200 (fabric) sofas from China, suede microfiber and knitted velvet on half the upholstery on the retail floors."
In response, Engle said, Chambers is going back to basics, emphasizing great design, color and innovative merchandising. "This is a tremendous opportunity for Chambers," said Engle. "We are investing in the best designs and marketing people in the industry."
Engle said the gap between China's costs and those of U.S. mills is shrinking every week due to fluctuations in the exchange rate. "Domestic sources have an advantage when it comes to speed to market," he said. "(At Chambers), we can work on a special order and have it developed and woven in a week or two."
John Kay, president of STI, which produces a full line of jacquard and dobby upholstery fabrics woven and finished in the United States, was pleasantly surprised by the renewed interest in domestic sourcing that he saw at this month's market.
"We saw that in a significant way this last furniture market," Kay said, citing a large Mississippi manufacturer that he does business with as an example of the changing mindset.
"It was one of our top customers five years ago," he said. "Over the last three years or so, they mostly bought suede and other items from China and very little from STI. We had a great market with them at this show."
Asked why STI is doing well in this very tough business environment, Kay said, "There's really no secret. We have a very efficient plant and a very focused product line. And we're trying to live within these disciplines and stay competitive with China."
STI also delivers its goods in four to six weeks. "But we've got the ability to produce fairly large orders faster than that," Kay said. The usual delivery time from China, according to several sources, is about 12 weeks.
Obtaining goods in a timely fashion from China and other Asian sources can be a challenge, said Carrie Bleile, vice president of merchandising for upholstery manufacturer Flexsteel, which sources about 50% of the fabrics it uses from offshore. The fact that U.S. sources are in a position to deliver goods faster, thus, can be an advantage, but not always, she added.
"If I do a good job of forecasting and keeping the flow of merchandise from China, then there isn't necessarily an advantage," Bleile said. "It's a learning curve to get the lead times good from China. Is so, then it is fine and the prices are fabulous."
Although the price points are certainly very different, domestic mills provide good backup in emergencies, she said. As for the quality of Chinese fabrics, some is good, some is not, she said.
Norman Coley, president of upholstery manufacturer Lee Inds., thinks domestic fabric sources don't take full advantage of their strong suit of geographic proximity to upholstery makers by providing consistently fast delivery on orders.
"It's our priority to keep it domestic as much as we can. But the disappointing fact of that is that (mills) are not doing much better than the importers in terms of delivery.
"In my opinion," he added, "their real competitive advantage is being No. 1 in service and they haven't gotten there. They've always got an excuse — their yard suppliers aren't delivering or it's off color or defective. If I were in their seat, I would be delivering the next day."
But in the end, it's all about style, according to Coley. "We can buy fabrics based on service but we really buy what we love. And that doesn't always mean the best service."
"We see the furniture manufacturers trying their best to do business domestically," said Weave's Berkley. "The bloom is off the lure of some of the cheap goods (from China) because it turns out all the goods coming out of China look the same."
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