As the UK’s mid-market faces ongoing challenges, supplier Carmel Clothing is looking overseas for new opportunities.
The day before I am due to meet Simon Blayne, the managing director of UK supplier Carmel Clothing, I receive a call asking if we can push the interview back to the afternoon. Blayne has only just arrived back from Florence, where he was running a marathon – his fourth in the past three months.
Blayne is often up at the crack of dawn, running on a treadmill in the office gym, and this focus and drive is reflected in his approach to business. Under his leadership, Carmel’s turnover has increased by an average of 20% annually over the past 10 years and is on track to reach £85m by the end of its current financial year. In its most recent results on Companies House, for the year to 31 December 2017, it made a pre-tax profit of £2.5m on turnover of £78.6m.
In November, Carmel was named Fashion Supplier of the Year at the Drapers Awards 2018. The judges said it had shown “impressive growth” and was “consistently successful in a tough market”.
And although this is undoubtedly a challenging time for suppliers to the UK high street – Carmel used to work with Debenhams and New Look before both retailers had their credit insurance cut – Blayne’s global expansion strategy should ensure the supplier continues to thrive.
Blayne began his career in fashion 25 years ago as a warehouse assistant for a manufacturer called London International Fashions (the business closed in 1997). Fashion manufacturing was in his blood: his late father had owned a factory in east London, which supplied the high street.
“I used to spend my summer holidays running up and down the cutting table,” Blayne recalls. He went on to work for two other factories in production management roles before joining Carmel in 2008 as production director.
Carmel was set up by the Elias family as a skirt pleater on Commercial Road in east London, in 1957. Two members of the family remain in the business today: Esther Marlow – daughter of founder Raymond Elias – is finance director, while her brother, Robby Elias, is sales director. Blayne took over from Marlow as managing director in 2010, when Carmel had about 20 employees, and is now an equal shareholder.
Today, Carmel employs 300 people across five offices, in London, China, Vietnam, Romania and Sri Lanka. It supplies womenswear and childrenswear to retailers such as Arcadia Group and Primark, as well as the big supermarket brands: George, Tu, F&F, and Morrisons kidswear brand Nutmeg.
Carmel produces more than 13 million garments a year, including outerwear, tailoring, blouses, dresses and jersey. Most of its business – 90% – currently comes from UK retailers.
The extent of the challenges facing high street retailers came to the fore this year, as House of Fraser’s administration, the credit insurance cuts at Debenhams and New Look, and the latter’s company voluntary arrangement (CVA) all hit the headlines.
To protect Carmel, Blayne will only work with retailers for whom he can obtain credit insurance.
“I manage risk very well,” he says matter-of-factly. “I exited New Look a long time ago, and I’ve stopped working with Debenhams.”
He insists he would never stay in an “abusive relationship” with a retailer, but he is stoic about the pressure on suppliers in the current climate: “All customers squeeze on price. I don’t believe the pie is any smaller – there are just a lot of new players and you need to remain viable. Like any good business, we need to look inward and ensure we keep costs low by driving efficiencies.”
The supermarket clothing brands are relatively safe customers because they benefit from the footfall of grocery shoppers, and Carmel is also enjoying steady growth with retailers such as Primark, Matalan and Peacocks.
“The low end is where people are shopping now that they’re getting cautious,” Blayne points out.
However, although there are still opportunities in the UK, his main focus is on taking the business global. Carmel already supplies womenswear retailer Portmans, which has more than 90 stores across Australia and New Zealand, and Blayne is in talks with prospective partners in continental Europe and the US.
“At the moment, we’re messing around in a puddle when there’s a big lake to play in,” he says. “How do we deal with the state of the UK retail sector? We globalise. There are lots of retailers that are credit insurable, all over the world.”
Blayne adds that he abhors unnecessary red tape and places a strong emphasis on fluidity within the business, which enables it to react to the changing retail landscape: “If it can be done better, we change direction immediately.”
CEO of sourcing show Fashion SVP Buzz Carter says this approach is sensible in the current climate: “The more he goes international and the more buying power he’s got, the stronger he’ll be. It’s a bold strategy, but it makes complete sense. There’s a shrinking pool of retailers in the UK and pressure on the middle men is only going to get more intense.”
You can’t profiteer out of cheap labour
Simon Blayne, Carmel
To support its global sales operation, Carmel has expanded its team in Vietnam and, a year ago, set up the office in Sri Lanka.
Sri Lanka is a member of intergovernmental association SAARC (South Asian Association for Regional Cooperation), and has European Union Generalised Scheme of Preferences Plus status, which allows Carmel to trade duty free into the UK on fabrics that originate from the country. Other SAARC nations include Bangladesh, Bhutan, India and Pakistan.
Ethical sourcing is “extremely important”, Blayne says, so he avoids sourcing from certain developing countries: “In some of these places, the children have to work so the family can eat. It’s a very different culture. There’s no government funding, no schooling, no healthcare, no clean water – you can’t go there and profiteer out of cheap labour. [Factories in] Vietnam and Sri Lanka are ethical and compliant.”
Anusha Couttigane, principal fashion analyst at Kantar Consulting, says: “In light of the recent parliamentary inquiry into sustainability, supply chain transparency is something suppliers need to be on top of. Many retailers are accelerating their commitments when it comes to traceability, which puts suppliers under pressure, too.”
Blayne adds: “It’s important to understand the difference between commodity [basics] and fashion, and we have positioned ourselves accordingly [as a fashion supplier]. We constantly innovate, and we cannot do that in less developed countries.
“My job is to create new things every day. Commodity vendors play a high-risk game because the retailer could do it themselves. We only supply fashion, because you can’t copy someone who re-invents the wheel every day.”
The only reason price points are the way they are is because people build huge infrastructures
As well as expanding on a global scale, Blayne expects growth to come from Carmel’s increased flexibility and speed to market. Carmel now holds large fabric stocks in both Vietnam and Sri Lanka.
“That means I predict the colours – but we do that anyway – and put them into basic fabrics, which I hold in warehouses,” Blayne explains. “That will give us a lead time of nine weeks once I’ve got it operating smoothly. The normal turnaround time in Sri Lanka is 13 weeks, and in Vietnam is 16 weeks.”
Technology is also helping to speed up operations. Carmel has been working with software platform Optitex since 2016 to create 3D patterns on digital avatars. This allows the teams to make decisions before having to commit to cutting any fabric samples – and therefore save the time and cost of sending the samples between factories and buyers.
“We can invite anyone around the world into a virtual fit session,” says Blayne.
Meanwhile, he has been exploring the idea of an own womenswear brand, which he intends to launch next year: “I already have a vertical set-up – the natural thing for me is to become a brand.
“We’re weighing up the pros and cons. Do I want it connected to the business, or not? There are different ways of doing it: you can set a brand up and run off the back of existing websites, but that’s no different from what I do anyway, except with a slightly better margin. For me it makes more sense to build a brand with a fully functional website and its own identity, and manage the stock myself. I know what all the trends are, I would just need to do the marketing.”
He acknowledges that there is a lot of competition in the womenswear market, but argues that Carmel could cut through the noise: “We have the knowledge and experience of price points, fabrics and styling. It would be ethical, compliant and good quality, and we wouldn’t be too greedy about the margin. The only reason price points are the way they are is because people build huge infrastructures and overheads. I already have the infrastructure.”
While he works on the own brand launch and worldwide growth strategy, Blayne will also keep a close eye on the existing UK side of the business. He predicts that 2019 will belong to the discounters, and that online players will become more present on the high street as new, more flexible leases replace the outdated long-term leasing model.
He also expects more retail casualties: “Nobody has a right to survive without a viable business model. It will be survival of the fittest.”
At such a turbulent time for UK fashion retail, Blayne’s rules are simple: “Don’t trade outside cover, reinvent the wheel every day, make sure you stay relevant in terms of price points, and manage risk by building scale.”
But he is not just a risk manager. Like any good marathon runner, he is disciplined and keeps moving forward: “The natural thing, when things get tough, is to panic, but you need to get creative and come up with solutions. I never sit there with my head in my hands.”