California Apparel News

Albert Han is an astute student of shopping habits. He analyzes foot traffic at malls. He counts how many shopping bags people are toting and what stores their paths cross.

He crunches shopping-center numbers to see where apparel is selling well, and then he decides where to place one of his stores.

Han is the chief financial officer of Foreign Exchange, a low-key Los Angeles apparel retailer that opened its first store in late 2007 and now has 14 outlets in its growing stable of trendy boutiques, which will expand to 20 by the end of the year.

But the one thing Han doesn’t do is advertise. There are no big billboards looming over freeways touting the mix of men’s and women’s clothing geared for consumers primarily in their 20s and 30s. There are no splashy magazine ads with sexy models lolling on the beach or cavorting on a grassy meadow. The company relies on its Facebook page and YouTube videos to get the word out. Consequently, Foreign Exchange still isn’t a household name.

“I prefer to fly below the radar,” said Han, standing outside a recently opened Foreign Exchange store located next to the new Nordstrom at the Los Cerritos Center in the Los Angeles suburb of Cerritos, Calif. “I prefer to have 30 stores under our belt and be better established before we start doing publicity.”

Flying below the radar makes the chain an unknown quantity to many retail analysts and experts who follow the comings and goings of various clothing stores.

“It doesn’t ring a bell,” said Liz Pierce, an analyst who researches retail and apparel stocks such as Joe’s Jeans Inc., The Wet Seal Inc. and Hot Topic Inc. for Roth Capital Partners, an investment bank in Newport Beach, Calif.

“They are extremely off the radar,” said Nikoleta Panteva, an industry analyst covering the fashion supply chain for IBISWorld Inc., which compiles market reports and research analysis from its headquarters in Santa Monica, Calif.

“I can’t place them,” said Jeffrey Van Sinderen, specialty retail analyst for B. Riley & Co. in Los Angeles, which provides research to institutional investors on retail chains such as Pacific Sunwear of California, Bebe Stores Inc., Volcom Inc. and Zumiez Inc.

Taking a low-key attitude is an unusual tactic for a growing retailer ready to launch a store Aug. 6 across from Bloomingdale’s at the new Santa Monica Place in Santa Monica, Calif.

But in many ways, this is the latest business model being followed by burgeoning boutique chains. Australian retailer Cotton On is quietly marching into Southern California shopping centers without a whisper of publicity, relying on social networking and word of mouth to make a splash. The Aussie company, whose fast-fashion stores look like a toned-down version of a Gap store, has eight locations in the United States and a goal of debuting 100 stores across the country in the next few years. International image

Foreign Exchange is relying on word of mouth and its new e-commerce site as well as the Internet to announce store openings and promotional campaigns. Its latest campaign is called “Crossing Cities,” where graphic T-shirts selling for $14 have different images representing cities around the world. It underlines the company’s retail theme of “Unity Required,” or unifying different cultures.

“We have styles, cultures and fashion from all over the world under one roof,” said Han, whose father, Philip Han, is one of the principals in Foreign Exchange. “We wanted to bring an eclectic vibe to the stores.”

Foreign Exchange is catering to the person who might have outgrown Forever 21 but is still looking for bargains. Items are trendy and have a European feel. In one store window, the female mannequins were dressed for a day in St. Tropez, with cute navy-blue and white dresses in a sailboat print topped with distressed denim shirts. Floppy straw hats rounded out the outfits. The male mannequins were attired in brown and beige cotton knee-length shorts and woven shirts layered over knit tops.

Most prices are between $30 and $60. For example, a spaghetti-strap woven top with a lace cutout back was selling for $39 while a trendy, studded purse went for $44.99. But some items, such as premium-denim jeans, can cost as much as $150.

Silhouettes are not super-slim or small, which is often the case for many retailers appealing to a younger crowd.

When Foreign Exchange opened its first stores, most of the merchandise was imported from around the world. But as the company mushroomed, it decided to do its own private label. Now about 60 percent of the merchandise is created by a team of 10 Foreign Exchange designers who source from around the world.Study plan

Han said the Foreign Exchange concept was years in the making, including studying the market. “We saw a niche in the industry,” he said. “We wanted to do something fresh and unique.”

The company knew it could not compete with Forever 21 or H&M, and it isn’t aiming to be a fast-fashion clothier. Neither does it want to take on Gap Inc. or J. Crew. “If I had one retailer to model myself after, it would be Zara,” said Han, who worked as a financial associate with Prudential Financial for three years before joining his family’s business.

The chain’s merchandise is popular with customers because of its sophisticated styling, trendy looks and reasonable prices.

“It’s kind of different. It has an urban chic feel to it,” said Baylee McGowen, a 17-year-old customer from nearby Lakewood, Calif. “Forever 21 prices are more reasonable, but there are a lot of things you find here that no other stores have, which makes it worth shopping here. The dresses and things have different styles, more lace and floral with an edgier feel that is already built in so you don’t have to do it yourself.”

Lissa Gutierrez was walking out of the store with a Foreign Exchange bag dangling from her hand. “I just love all the new styles that they have,” she said. “For me, someone in their 30s, it still gives us a fresh look that is trendy but not too ’teenagey.’”

Customers such as Gutierrez are helping the chain to grow. While Han would not reveal company revenues, he said the retailer has grown by at least 30 percent a year. Most of that is through new store openings.

In 2008 Foreign Exchange opened five stores, in 2009 it unveiled three stores and this year it is adding 11 stores. Almost all of them, which range between 6,000 square feet and 7,000 square feet, are in shopping centers up and down the southern half of California, from San Diego to Fresno.

But Han is on the lookout for new locations in Northern California and neighboring states. And shopping centers are receptive, unlike in 2007, when good real estate was hard to find.

“We’re positioning ourselves for the future,” he noted. “When the economy pops, we’ll be there.”