Classic menswear and womenswear brand Tommy Hilfiger expects to improve its product quality after selling its sourcing operation to Hong Kong conglomerate Li & Fung.
The label has operated its own sourcing offices in Hong Kong, Taiwan and South Korea since its inception two decades ago, reaching a volume of US$703 million (£362m) for the year to March 31 2006. These offices will now be absorbed into Li & Fung's network of more than 70 offices in 40 countries, including 19 in China.
Tommy Hilfiger chief executive Fred Gehring told Drapers: "There used to be a real concentration of suppliers in Hong Kong and having an office there was a competitive advantage. But in the past 10 years the world of sourcing has moved on. Mainland China and India are major regions now in the supply chain and we couldn't attain the required level of coverage on our own."
The resulting economies of scale should help the brand trade up in terms of quality and positioning, Gehring added. "We expect it to benefit the buying volumes and economy of scale. The major advantage will be not to make stuff cheaper, but to make it better," he said.
Li & Fung will pay US$247.8m (£127.5m) for the business at the end of March. In the past year Li & Fung has also acquired the sourcing arms of German retail group KarstadtQuelle and US brand house Oxford Womenswear Group.