SARS Scare: Local Companies Putting Off Trips Overseas

John Inn, head of juniorswear company Bubblegum USA, is no stranger to Hong Kong.

At least four times a year, he and his staff travel from Los Angeles to the former British colony to hobnob with agents, oversee production at Chinese factories, check out new manufacturing sources and tour retail stores in the area to spot new trends.

But these days, the closest Inn and his staff are getting to Hong Kong is on the phone or computer.

“The bottom line is we have suspended all trips planned to Asia,” Inn said. “As much as we want to do more business, I don’t want anyone to risk their life.”

Inn is concerned about severe acute respiratory syndrome (SARS), the pneumonia-like illness that as of April 16 had killed at least 161 people worldwide, mostly in Hong Kong and mainland China.

He is not alone. Few Southern California apparel or retail executives are venturing to Asia, where they fear they could contract the mysterious virus.

The boycott on travel to Hong Kong and mainland China is already affecting the apparel industry, which has seen China become the main clothing factory to the United States.

Delays for production?

Santa Fe Springs, Calif.–based apparel and footwear manufacturer Vans Inc. said in a recent corporate filing that the SARS virus could affect its ability to make and ship products.

Vans noted that most of its contracted factories are located in southern China and its Asian offices are based in Hong Kong.

“Any significant interruption in our ability to send personnel to those areas to inspect and develop product or samples or a high absenteeism rate at the factories or at our offices could have an adverse effect on our ability to finalize, manufacture and ship our products,” the filing said.

At Van Nuys, Calif.–based Cherokee Inc.—which licenses its brands to wholesalers, retailers and overseas manufacturers— the SARS virus has put a crimp in the company’s desire to expand its brand business.

“Clearly, to close deals and develop those relationships, you need the physical, face-to-face part of it,” said Cherokee Chief Financial Officer Kyle Wescoat. “It has pushed us behind in some of the things we are doing.”

As business and passenger travel to Asia drops drastically, airlines are reducing the number of flights between Hong Kong and the West Coast of the United States.

The Hong Kong Airport Authority reported on April 13 that 37 percent of flights at the airport had been canceled and passenger traffic was down more than 60 percent.

Fewer flights mean less cargo space for items shipped in the bellies of passenger planes. Less space means higher air-cargo rates.

“There are starting to be space concerns, and airlines have been raising the [air-cargo] prices,” said Robert Krieger, president of Norman Krieger Inc., a Los Angeles freight forwarder and customs broker. “Cathay Pacific is talking about grounding its passenger flights [from Los Angeles to Hong Kong]. United Airlines a year and a half ago stopped its nonstop flights from Hong Kong to Los Angeles that flew once a day. So it’s going to be difficult to send those small, urgent shipments that we normally put on a passenger flight to get here the same day.”

However, Cathay Pacific said it is operating a full freighter schedule and maintaining passenger flights across its whole network.

Alternatives to travel

With business travel to Asia in limbo, many apparel and retail executives are devising alternative ways of maintaining contact with offshore factories and agents.

Bubblegum’s Inn said the company is planning to invest at least $64,000 to link offices in Los Angeles, New York, Hong Kong and Seoul by a videoconferencing network transmitted thorough a DSL or T1 line. “It is faster than trying to communicate via e-mail, and we can visually solve the problem,” Inn said.

Inn plans to use the money he saves by not sending his design team to Asia for two weeks at a time on the videoconferencing equipment.

Others are struggling to figure out what to do.

“We are corresponding a lot through email,” said Michael Choe, Cherokee’s director of business development, who canceled his plans to travel to Asia in late March. “We have some people we met in Taiwan that we had planned to talk to personally in Shanghai. They would like to meet face to face. But we aren’t traveling. So they have requested a videoconference. We don’t have videoconferencing. So we’re trying to figure out how to do it.”

Executives at Calabasas, Calif.–based John Paul Richard Inc. are not heading overseas either.

“Most of what we’re doing right now is communicating with Hong Kong daily via emails and then phoning them most evenings,” said Ed Redding, the company’s executive vice president in charge of importing and sourcing. “Between e-mails, FedEx and telephones, we’ll figure out a way to do business.”

At womenswear manufacturer Karen Kane Inc., based in Vernon, Calif., executives are deciding that if they can’t go to China, China will come to them.

“One of my [Chinese] agents said he is coming to Los Angeles in May,” said Lonnie Kane, president of Karen Kane. “He said, ’Don’t worry. I’m quarantining myself in my hotel for 10 days.’”