Fashion "Melting Pot" G-III Diversifies Its Business
By Masha Zager
In the early 1990s, Morris Goldfarb developed a vision of a fully diversified apparel firm. A few years earlier, he had guided his outerwear company - originally founded by his father, Aron Goldfarb, as a leather manufacturer in 1956 - through its first public offering and in 1972 renamed it G-III Apparel Group. To expand the company beyond its niche of moderately priced women's leather outerwear, he had added a men's leather category and textile outerwear, and he was pioneering the fashion licensing of outerwear with NFL team logo clothing.
Because this diversification helped to insulate the company from the caprices of fashion trends, Goldfarb decided that the best guarantee of a healthy business was to diversify still further - to produce a wide range of goods in many price tiers and product categories, for every customer group and every season, and to distribute them through multiple channels.
Over the next decade, G-III pursued fashion outerwear licensing, building up expertise and partnerships with such premier American brands as Jones New York, Sean John, Kenneth Cole and Timberland. Company president Jeanette Nostra explains that, by assigning each brand a VP-level "brand champion" to work closely with the licensor and oversee brand-specific design and sales teams, G-III has learned to develop outerwear lines that "mirror each brand's DNA." As a result, she says, G-III can "amplify the voice of the brand" by adding product categories that were never part of the brand's original assortment.
Flurry of acquisitions, licensing deals adds prestigious brands to portfolio
By the mid-2000s, the company was ready to realize the goal that Goldfarb had envisioned. A rapid-fire series of acquisitions and licensing deals since that time not only added prestigious new brands to its stable (Calvin Klein, Guess?, Ellen Tracy, Tommy Hilfiger and several others) but also allowed G-III to expand beyond outerwear into women's suits and dresses, sportswear and even performance wear. The acquisitions also broadened G-III's retail distribution channels; it now sells licensed-brand, proprietary-brand, and private-label clothing to retailers across the entire spectrum, ranging from Neiman Marcus and Saks, to Macy's and Nordstrom, to JCPenney and Kohl's. "We cover every tier from aspirational luxury to warehouse clubs," Nostra says.
Along with the businesses it acquired, G-III gained increased depth of expertise in management, merchandising, manufacturing and design. For example, David Winn, the president of Winlit Group, stayed on as president of G-III's Winlit division when G-III acquired that company in 2005. This influx of talent, especially in product classifications that were new to G-III, helped make the company's diversification successful.
Two acquisitions in 2008 expanded the company's range still further. By purchasing assets of Wilsons The Leather Experts, G-III gained 116 retail outlet stores in 35 states, an e-commerce operation, and a distribution center. This was the company's first large-scale venture into retail operation; today, the Wilsons Leather stores (now numbering 119) carry both the Wilsons Leather brand and many of G-III's leatherwear brands.
The other major acquisition in 2008 was Andrew Marc, a supplier of luxury outerwear and handbags sold in upscale stores. Nostra says: "While not a new brand, it was an aspirational luxury brand that had been a little jewel for the last 20 years." The brand is known for luxury materials, artisanal details, rebellious style and innovative engineering; it appeals to young, urban, sophisticated customers that Nostra refers to as "global citizens with stylish tastes."
G-III purchased Andrew Marc outright with the aim of adding new categories and retail partners consistent with the brand's lifestyle character. Now, with the purchase of Andrew Marc, for the first time, the company finds itself on the other side of the brand-licensing business, trying to "amplify the brand's voice" by selecting licensees to design and manufacture categories of products outside its core expertise. It has already entered into license agreements for women's footwear and men's accessories.
Acquiring new brands such as Andrew Marc helps G-III keep its brand mix diversified. "All brands have life cycles," Nostra explains. "As we see these tremendous shifts in retail and as we see brands moving to different tiers of distribution, opportunities open up for new brands."
Between Wilsons Leather and Andrew Marc, 2008 brought about what Nostra calls "a dramatic shift for the company." She says, "We are now owners of a brand and a retail chain. The company is operating on a wholesale platform, a retail platform, and ultimately a licensing platform." For the year ending January 2009, total revenues exceeded $711 million, nearly $200 million more than the previous year.
Entrepreneurs at heart
Managing a diversified company may seem like a cultural change for a onetime niche manufacturer, but Nostra emphasizes that the company has stayed true to its entrepreneurial roots. "This company is the American dream," Nostra says. "A young man emigrated to this country with nothing but talent and work ethic, and the company he started was built into this powerhouse rapidly approaching $1 billion in revenue." Although G-III has been publicly traded for 20 years, it is still managed by the founding family; one of the third generation of Goldfarbs joined the company six years ago.
Morris Goldfarb - the second generation and the CEO since 1972 - encourages managers in each division to behave entrepreneurially and pursue the strategy appropriate for their particular business. Similarly, designers are assigned to work on specific brands and adopt the tastes and viewpoints of those brands. There is no characteristic G-III look or typical G-III customer; design and marketing is always geared to the brand.
"There's no cookie cutter, no 'you have to do it this way,' " Nostra says. "We are all encouraged to make sure that we're leaving no stone unturned, we're staying on top of trends and in touch with customers - that we're reactive and proactive at the same time. ... All the cultures have blended together, and we are enriched by it because we learn from each other. It's almost a melting pot ... blending together and it is working."
A diversity of lifestyles, one unified back end
Behind the scenes, however, the company's support operations are fully integrated. All divisions use the same computer systems, the same distribution centers, the same financial system and the same overseas sourcing. (The bulk of the company's products are sourced in Asia and along the Pacific Rim; certain product categories and styles have special requirements and are sourced where a particular fabric or skill set is found.)
Offices in Chengdu and Hangzhou, China, with 150 staff performing quality control, merchandising and sourcing functions, are shared by all brands and categories.
Integrating back-office functions serves two purposes, according to Nostra: First, the resulting economies of scale make the company more efficient, and second, best practices can easily be promulgated across the company.
A good example is this summer's revamping of the Andrew Marc web site, which added more content and made it easier for consumers to shop for the entire range of Andrew Marc products, from the iconic leather jackets to newer categories such as dresses, women's bags, and men's accessories. "Because it's a techie brand, we embraced technology," Nostra says. "We looked for a fusion of function and fashion."
The new site sells in-season goods on a buy now, wear now basis. It tells the Andrew Marc story through web-only videos, seasonal fashion advice, the brand's latest ads, blurbs about new products and trends, and short pieces about places, people and ideas that are important to Andrew Marc customers.
G-III is still making sure the new site delivers on customer expectations and delving into Google Analytics to understand in detail the site's marketing effectiveness. It will then use what it has learned from the site to launch e-commerce sites for more of its divisions. In addition to e-commerce, the Andrew Marc division is also paving the way for G-III's social-media presences on Facebook and Twitter.
Andrew Marc leading the way in e-commerce, BI
The "edgy" Andrew Marc business led the other divisions not only in the use of e-commerce and social media, but in the use of business intelligence software. Nostra says the company's sportswear businesses were the most savvy in terms of management; in 2008, G-III adopted Sky IT Group's SKYPAD business intelligence software to help give all of its divisions actionable information that could bring them to a similar level of management sophistication. Prior to being acquired by G-III, Andrew Marc had used another analytical sales tool, and, because of this history, it was the first division to go live with SKYPAD, and will train the other divisions.
SKYPAD analyzes, summarizes and presents information from the supply chain to store sales in formats adapted for various levels of management. The dashboard feature shows senior management, including Nostra, how all the divisions are faring in comparison with each other. Division-level managers can easily drill down to specific categories or styles, while sales teams can view analyses at the door level.
"If doors are not performing, we can actually do something about it," says Camille Williams, vice president of merchandising for Andrew Marc. "Do we need to change the assortment? Give more to some stores and less to others? Tell our coordinators to make sure something is on the floor? Sometimes we send a coordinator out to see why a product isn't moving, and within a week they tell us it wasnâ't on the floor. ... Or, we might work with retailers and say: 'One style is not performing well, we'll take it back and give you some that are working better.' "
The analysis is useful to retailers, too, Williams says, adding: "They only have so much time - if sales and planning can look at the information and give them feedback, it makes their business more successful. ...They appreciate that we're working with them. It becomes more of a partnership."
In addition to week-to-week adjustments, SKYPAD is helping the company plan ahead. Nostra explains: "To do a merchandise plan for the coming season, you look at performance by classification, fabrication, price and rank, and then you build a merchandise plan that can replicate the successes of the previous year."
Are more acquisitions in the offing, and will G-III continue diversifying even further? Not just yet, Nostra indicates. "I don't think our CEO will ever say he's arrived at where he wants to be," she says. "But right now, we have a lot of balls in the air. We're just going to execute on what we have, and prepare for the next project."
Masha Zager is a New York City-based free-lance writer who specializes in business and technology.
systems at a glance
* Business Intelligence: Sky IT Group
* e-commerce: Proprietary development
* Product data management: Gerber Technology
* Sourcing: Proprietary development
* Warehousing/distribution: Proprietary development, based on ACS