Bernardo Fashions' Pollack: Managing Growth Conservatively
By Kathleen DesMarteau, Apparel
bernardo Fashions LLC has taken the outerwear market by storm with its lines of machine-washable suede, leather and faux shearling fashions, which are sold under the Bernardo and Arctic River brands and private labels across a wide realm of distribution channels, from department stores to chain stores to catalogs.
Retail sales at the privately held, New York, NY-based firm, founded in 1989, have grown from $10 million to $12 million three years ago to about $150 million today under the leadership of president Stuart Pollack.
Apparel caught up with Pollack recently at the firm's Seventh Avenue headquarters, and asked him about his company, its products and his expectations for the future.
APPAREL: Who is your target consumer for your machine-washable outerwear?
POLLACK: Somebody who is controlling money in a pattern. Somebody who pays the rent, rather than living for free like a daughter or a son. The question of washability becomes the key to a whole purchase. Our consumer starts probably at age 24 or 25. . [Nordstrom] sells our goods in the Narratives department, which targets a consumer from about age 25 to 50 or 55. We thought, in the beginning, that the [washable] goods would appeal more to the budget-minded customer, and that the Nordstrom customer would not be that customer. But that's not true. I guess $50 is $50 to whomever you're talking to.
APPAREL: How did you overcome skepticism among consumers that your products could be successfully machine washed, and in some cases, machine dried?
POLLACK: We had to get the customer convinced. We came up with the idea of talking to Woolite Fabric Wash. And what started off as a little conversation created a worldwide co-marketing effort by both Bernardo and Woolite. . Among consumers, the trust in Woolite is fantastic. When we put the Woolite hangtag on our products, we immediately increased sales around 35 percent because the customer trusted the product. That was about three years ago, and that really began the evolution of the product.
APPAREL: What growing pains did you have, and how did you cope with them?
POLLACK: I have the best team anywhere. The idea was not to grow in the number of people that worked here. The idea was to hire the best people. That's what evolved. [Prior to Bernardo's major growth period], we probably had 13 people here at our corporate headquarters, not counting personnel at our warehouse. Today, we have all of 18. The caliber of people is extraordinary. I'm extremely conservative. And while this growth is actually quite phenomenal, none of my budget estimates or cash flows ever reflected this kind of growth on a year-to-year basis. I just had to keep going back and redoing my cash flows and redoing my bank presentations three, four, five times a year to be able to finance the growth of our company. But the real key to this whole thing? It's OK to have an extraordinary product, but if you don't tell anybody about it, you have nothing. This is where my advertising agents at [Creative Marketing Plus] have been superb.
APPAREL: How do you expect your launch of machine-washable and -dryable wool/cashmere blend outerwear to affect business this year?
POLLACK: It's going to be a test year. I expect to ship about 15,000 to 75,000 units, and that's only to a select customer, to evaluate the consumer's reaction. . We're not looking to hit a homerun this year. We're looking to see actual sales rebounds. Good sales in retail. Good consumer reaction. And also we have to build a production base.
APPAREL: Can you describe your sourcing strategy?
POLLACK: Sure. We trust no one. So we don't use independent agents. We have a very strong sourcing team. We have a joint venture office in Hangzhou, China [near Shanghai]. . And we have a factory in China that when we started three to four years ago had 600 employees and as of today has 7,000.
APPAREL: Is this a joint venture factory?
POLLACK: We control the production, we control what goes in there, we have a financial involvement, but it's not a true joint venture. We're putting on lines of additional production, but right now that factory produces about 525,000 garments a month. . [At the end of February], we put online a new complex that is about an hour and a half away from the first complex. It will produce another 170,000 units a month, and boost our employees to somewhere between 9,000 to 10,000. It's the largest leather manufacturing complex not only in China, but I believe in the world.
APPAREL: Where do you produce your faux-faux garments - the lines made with no real animal leather or fur?
POLLACK: Faux-faux is in Vietnam. We combine European fabrication, European prints, European looks, fairly expensive fabrics, with a low-cost manufacturing base in Vietnam, and sell throughout the marketplace at all consumer levels.
APPAREL: Why Vietnam?
POLLACK: Right now there are two reasons. There's no quota. Now that can change. But even if it changes, the needle is very good there. . And the labor costs are extremely competitive. Vietnam is where China was 15 years ago. The year 2005 will remove all quotas worldwide except for maybe some dealing with China. . You have to find the best make, the best needle, the best hands, because the price is going to be very competitive on a worldwide basis.
APPAREL: How do you maintain confidentiality when it comes to your processing techniques?
POLLACK: We sign confidentiality agreements with all our factories, with all the people we work with. But even then, the reality is that in this market, someone is always behind me. Someone is always chasing after us. But it's very hard to take on a new industry leader. Why should a retailer go to somebody that's not truly known? By continuously improving the product, by continuously introducing new products, and with our worldwide exclusive deal with Woolite, which nobody can touch, we've managed to keep an air of exclusivity and an air of being ahead. And we are. But do people chase us and nip at our heels every day? You bet.
APPAREL: When it comes to the processing, is there a connection between what makes your leather and suede washable and what makes your new cashmere blends washable?
POLLACK: No. They each involve different treatments, different chemicals and different approaches. The challenges are different. To make suede washable, you have to treat it in a manner so that it holds the oil in the skin. . With leather, you have to completely change the [molecular] construction to keep the moisture in the skins. . With cashmere, you have very fine fibers. If you use something too harsh, then you destroy it. . It's been a trial-and-error development process that has been difficult.
APPAREL: What's next for Bernardo Fashions?
POLLACK: We're licensing men's outerwear this year with Excelled-Reilly/Olmes . and we're working on a children's license. . We have a lot of room to grow. One of the interesting things this year, which is really quite fantastic, is that one of our major retailers put one of our jackets in the basic stock. Think about it. A washable suede jacket in basic stock that every two weeks is automatically replenished. It's done very, very well. It means that the product is no longer just a fashion product.
APPAREL: How did your company handle this replenishment? Were you ready for it?
POLLACK: This is a bottom-line business. ... We choose our customers, and we choose who we do business with. We don't do business with everybody. We don't go jumping into things. We write small programs for certain retailers. Let them taste it: the success. . Once we've gotten the success, then we go over the programs with them. We try to minimize the risk to the retailer and minimize the risk to ourselves.