Tech Companies See New Round of Growth Ahead
Some apparel-technology companies are breathing a sigh of relief as new breeds of hardware and software applications spark interest with manufacturers and retailers. It may not be the forefront of another tech boom, but the upswing is a welcome change for many companies that have weathered tough times during the past 18 months.
Industry leaders such as Tolland, Conn.–based Gerber Technology Inc. and Bordeaux, France-based Lectra have seen improved numbers on their balance sheets. So have smaller companies such as San Francisco–based Freeborders Inc., which markets product development solutions. Lectra, which saw a loss last year, just released results showing a profit of 1.5 million euros for the first half of 2002. Gerber’s profits climbed 27 percent. Freeborders’ year-to-date bookings increased 21 percent, and its secondquarter bookings were up 45 percent.
These results echo what is happening with the tech industry in general. Tech-heavy NASDAQ has grown 13 percent since Jan. 1. Fueling this growth are companies such as Amazon.com Inc., which added apparel to its merchandise mix last year and saw its stock price rise 59 percent this year, and Yahoo! Inc., whose stock value has climbed 53 percent this year.
Detail-oriented
The signs for continued tech growth are strong. But this time around, apparel-technology executives are predicting a tighter, more specialized market. Apparel companies and retailers are buying more micro-managed applications than macro-oriented products.
“There’s pressure to provide quick ROI [return on investment],” said Scott Friend, chief executive officer of Cambridge, Mass.–based ProfitLogic Inc., which supplies pricing-optimization software to retailers. “We’ve seen a ramp-up over the past 18 months really, and this counters the reality of what other tech companies are doing.”
Friend said the recent warming to technology could be linked to the fact that companies are seeing more technologies in the marketplace that produce results. ProfitLogic’s pricing- optimization programs can improve gross margins from 5 to 10 percent, he said.
“They’re also seeing enough brand names doing it, so it’s hard to ignore,” he added.
Bloomingdale’s Inc., Gap Inc. and Marshall Field’s have purchased ProfitLogic’s pricing-optimization package, which uses mathematical analytics to project the best times to clear out items or maintain product prices.
Freeborders, which markets product lifestyle management (PLM) software has a slate of new clients, including Mossimo Inc., Polo Ralph Lauren Corp., Oxford Industries Inc. and Pringle of Scotland Ltd.
“A lot of these companies have done what they could with sourcing and bringing prices down, so this is the next logical area to look at to improve their margins,” said Dave Knutsen, senior vice president of marketing for Freeborders.
Los Angeles–based Tukatech Inc. has also attracted bigname clients, including Nike Inc. and Kohl’s Corp. Earlier this year, the company entered into a joint venture with Justwin Technologies Inc. to supply its product development management (PDM) and collaborative commerce applications to the apparel industry.
Tukatech Chief Executive Officer Ram Sareen said these tangible solutions, which allow customers to see immediate results, will drive technology growth in the future.
Tukatech’s TukaWEB division converts CAD files and makes marker copies for $10 to $20 each. The company plans on implementing Justwin’s products over the Internet, as well.
“Why would you pay a patternmaker $70 to $80 an hour and then pay to have your patterns sent overseas for more money when you can get it done in hours?” Sareen questioned. “Saving four to five days in this industry is like saving a lifetime.”
Others are getting more specific in their purchases. The Neiman Marcus Group Inc. is implementing a Web-based customer-analysis application from Burlingame, Calif.–based Coremetrics Inc. The application gathers information about the areas of Neiman’s Web site, www.neimanmarcus.com, that individuals visit and produces lifetime-experience profiles that support marketing campaigns.
Even industry leaders such as Gerber and Lectra are seeing growth in line extensions, from traditional CAD products to applications such as Gerber’s WebPDM and Lectra’s visual merchandising solutions. Such growth is perhaps the result of domestic companies focusing local efforts on design and marketing instead of manufacturing.
Freeborders client Paul Fusco, chief information officer of J. Crew Group Inc., agreed.
“In terms of IT strategy, we’re squarely focused on product development,” Fusco said. “We expect to see gains across the board, from productivity improvements through supporting top-line revenue growth.”
The outlook remains positive, according to researchers. Spending on supply-chain integration will increase by 12 percent this year, according to a study recently completed by The Yankee Group of Atlanta. The report said “supplychain masters” such as Wal-Mart Stores Inc. are prompting suppliers to adapt to the technologies they subscribe to.
Another indication of renewed interest in technology can be found in the leasing market. Projections made by research firm R.S. Carmichael & Co. Inc. of White Plains, N.Y., show that leasing of tech products will reach $28 billion by 2005, based on a 6.5 percent average annual growth rate from 2003 to 2005.
“Retailers are shifting from being technology-phobic to technology- centric as key business strategies are becoming increasingly underpinned by technology,” added researcher Jeff Roster of Bedford, N.H.–based Gartner Inc.
